Friday, March 30, 2007
Wonderful pie chart
All of this should also be used to beat down the taxers. The tax and the debt should be smaller because government should be smaller. But not because of debt worries.
The power of the market economy is manifested in many ways. It explains our increasing wealth and welfare (and longevity). And it does this in spite of widespread ignorance and politics -- and their mutual affinity.
Thursday, March 29, 2007
Parking, pricing, politcking
Don manages to relay much of this in the compact space of an op-ed in today's NY Times.
Tuesday, March 27, 2007
Better than the panic button
But what is one to do when every political hack, show biz celeb and network news drone cites a "scientifc consensus" that we are now in a climate change crisis? Read S. Fred Singer and Dennis T. Avery's Unstoppable Global Warming Every 1,500 Years.
Yes, the evidence for warming is complex and discerning cause and effect is (to say the least) complex.
"The Earth is warming but physical evidence from around the world tells us that human-emitted CO2 (carbon dioxide) has played only a minor role in it. Instead, the mild warming seems to be part of a 1,500-year climate cycle (plus or minus 500 years) that goes back at least one million years. " (page 1)
"The next climate event that deserves real concern is the next Big Ice Age. That is inevitably approaching, though it may still be thousands of years away. When it comes, temperatures may plummet 15 degrees Celsius, with the high latitudes getting up to 40 degrees cooler ..." (p. 17)
"Nothing in the Earth's climate history confirms CO2 as a strong driver of climate change." (p. 57)
"It is sheer fantasy to suggest that a huge majority of scientists with expertise in global climate change endorse an alarming interpretation of the recent climate data. In fact the footnoted studies in this book include hundreds of climate-change authors whose work argues against the alarmist view of climate change." p. 65
"Human society should attempt to put binding constraints on human emissions of greenhouse gases only if the advocates of man-made warming can demonstrate three things:
1. That the greenhouse gases are certain to raise global temperatures significantly higher than they rose during previous natural climate warming cycles.
2. That the warming could severly harm human welfare and the ecology.
3. That rational human actions could actually forestall such overheating." p. (29)
An so it goes. Well worth a read -- before reaching for the panic button.
Monday, March 26, 2007
It was only a movie
So I do not know whether the item below is someone's idea of a joke or just politics as usual. Disregarding any plausible (or Constitutional) notions of the proper role for the U.S. Congress, one of the members now wants federal funding for "computers that think but don't have any ambitions".
It was just a movie, for heaven's sake. And, what if these folks had anticipated the internet?
The follwing is via WSJ.online, from The National Journal (gated).
Legislating HAL and the Terminator
Is there a sensible way to legislate for runaway computers,
such as in the movies “2001: A Space Odyssey” or “The Terminator”? Even though
most scientists believe thinking machines are at least 20 years away, some
legislators and officials are pondering how to prepare humanity for them.
Rep. Brad Sherman (D., Calif.) is pushing an amendment that
would commit some research money to computers that think but don’t have any
ambitions. His effort failed in 2005, but Neil Munro, writing in the National Journal, thinks it has a good chance of passing in a Congress controlled by Democrats (subscription required).
Ray Kurzweil, a high-tech inventor, thinks higher machine intelligence is more
likely to occur through humans linking their brains to electronic devices. His
vision has gained support from the federal government. The National Science
Foundation and the Commerce Department issued a report endorsing the promise of
that vision though nanotechnology, or microscopic machines. Mihail Roco, who
oversees the government’s nanotechnology research efforts, says the government
should protect “the right of each individual to advance” toward a merger with
Mr. Sherman says the strangeness of the topic shouldn’t
distract from its seriousness. “It’s easy to laugh and say that’s weird, but if
you’re thinking about the future, you’re thinking about stuff that’s going to be
different,” he says. — Robin Moroney
Sunday, March 25, 2007
More good news
There are many tasks that the best deduction machines (computers) cannot do. And there are many induction machines (people) willing and able to do them. And software and the internet can now link buyers and sellers around the world. In a world market, such as this, prices will be low.
Interestingly, too low for the tastes of writer Jason Pontin. (He does not divulge what a "fair" wage would of should be.) More interestingly, business models can now evolve that fully exploit the possibilities.
COMPUTERS still do some things very poorly. Even when they
pool their memory and processors in powerful networks, they remain unevenly
intelligent. Things that humans do with little conscious thought, such as
recognizing patterns or meanings in images, language or concepts, only
baffle the machines.
These lacunae in computers’ abilities would be of interest
only to computer scientists, except that many
individuals and companies are finding it harder to locate and organize the
swelling mass of information that our digital civilization creates.
The problem has prompted a spooky, but elegant,
business idea: why not use the Web to create marketplaces of willing human
beings who will perform the tasks that computers cannot? Jeff Bezos, the chief executive of Amazon.com, has created Amazon Mechanical Turk, an online service involving human workers, and he has also personally invested
in a human-assisted search company called ChaCha. Mr. Bezos
describes the phenomenon very prettily, calling it “artificial artificial
“Normally, a human makes a request of
a computer, and the computer does the computation of the task,” he said.
“But artificial artificial intelligences like Mechanical Turk invert all
that. The computer has a task that is easy for a human but extraordinarily
hard for the computer. So instead of calling a computer service to perform
the function, it calls a human.”
Mechanical Turk began life as a service that Amazon itself
needed. (The name recalls a famous 18th-century hoax, where what seemed to be a
chess-playing automaton really concealed a human chess master.) Amazon had
millions of Web pages that described individual products, but it wanted to weed
out the duplicate pages. Software could help, but algorithmically eliminating
all the duplicates was impossible, according to Mr. Bezos. So the company began
to develop a Web site where people would look at product pages and be paid a few
cents for every duplicate page they correctly identified.
Mr. Bezos figured that what had been useful to Amazon would be valuable to other businesses, too. The company opened Mechanical Turk as a public site in November 2005. Today, there
are more than 100,000 “Turk Workers” in more than 100 countries who earn
micropayments in exchange for completing a wide range of quick tasks called
HITs, for human intelligence tasks, for various companies.
PriceGrabber.com, a comparison shopping site, uses Mechanical Turk to match images to the product pages. “Harnessing the power of this enormous, decentralized work force allows us to obtain images for a wide variety of items in a fraction of the time it would have taken to
do it ourselves,” said Sagar M. Jethani, PriceGrabber’s director of content development and community.
Mechanical Turk’s customers are corporations. By contrast, ChaCha.com, a start-up in
Carmel, Ind., uses artificial artificial intelligence — sometimes also called
crowdsourcing — to help individual computer users find better results when
they search the Web. ChaCha, which began last year, pays 30,000
flesh-and-blood “guides” working from home or the local coffee shop as much
as $10 an hour to direct Web surfers to the most relevant resources.
Amazon makes money from Mechanical Turk by charging companies
10 percent of the price of a successfully completed HIT. For simple HITs that
cost less than 1 cent, Amazon charges half a cent. ChaCha intends to make money
the way most other search companies do: by charging advertisers for contextually
relevant links and advertisements. ....
Friday, March 23, 2007
The old politics were not good for N.O. before the storms of 2005 and they have also failed ever since. No surprise there. But how can the area catapult its way out of years of pre-Katrina failure and many months of post-Katrina foul-ups? Racial politics is a staple and is only made worse by the federal involvement and the federal money. One of our suggestions is to allow N.O. neighborhoods to secede and to privatize.
We know that most people prefer competition over monopoly. They grasp all of the benefits that come from openness and choice. But when it comes to their choice of local governments (including school districts), most settle for limited choice – only insofar as they are willing and able to pull up stakes and move to another jurisdiction. Much more choice (and competition) would be available to them if local governments were subject to the threat of neighborhood secession.
There is no good reason for this not to be. There are few if any economies of scale in the provision of government services. Consider public schools. There were 67,355 school districts in the U.S. in 1952 but there were 13,506 districts serving many more students in 2002. Does anyone argue that any scale economies were achieved? By most measures school quality is down and the diseconomies of greater bureaucratization must get some of the blame. The charter school movement represents a belated response to the problem along with more home-schooling and growing support for school vouchers.
Most city officials embrace the idea of grass-roots citizen participation, citizen groups, community involvement, neighborhood activism, etc. Yet, many of these same people oppose the right to secession. In Los Angeles in 2002, after much wrangling in Sacramento, San Fernando Valley (SFV) voters were finally allowed to vote on whether they wanted to secede from the City of Los Angeles. A slight majority of them did vote to secede but they were overruled by the anti-secession vote in the rest of the city. Opponents argued that SFV residents should stay and support their fellow LA citizens via their taxes sent to City Hall. But this sort of redistribution has little to show except an ever more corpulent LA bureaucracy.
No one knows how the new New Orleans will or should look and it is essential for planners and officials to recognize the unknown as a future of opportunities. Open-endedness and competition are the most promising seeds from which recovery from months of post-hurricane trauma and confusion -- and years of pre-hurricane dysfunction -- can be overcome.
Tuesday, March 20, 2007
The good, the bad and the ugly
In a better world, the doomsday people would read this stuff. In the interim, it's great fun for the rest of us.
The book is full of data, wonderfully presented and explained. The "theory" to explain all of the good fortune is Goklany's "Cycle of Progress" (shown as a schematic on page 91). The box between "Economic Growth and Wealth" and "Technology" is labeled "Human Capital: Education, Research and Development." Although Goklany mentions it often, he has nothing in this cycle about institutions -- which coevolve with all of these.
But institutions must also include cities, the engines of growth that are such because they (can) facilitate successful entrepreneurial activity. The qualifier is there because cities can also decline and stagnate.
Big city politics and politicians are usually the problem. Unfortunately, we have many examples of this. Today's saddest U.S. example must be New Orleans.
Monday, March 19, 2007
The start of something bad
The first discusses how planners are weighing wich way to zone large parts of downtown LA, industrial or residential? The second describes a three-dimensional model of a nearby area, on public display, that let's children move the pieces around to evoke various possbile plans or "solutions".
The first discusses consultants' studies and cites numbers of acres, jobs, rents and wages in the area. It says nothing about how these strands can be used by planners and politicians to decide anything. It sidesteps the point that central planning on this scale is impossible and simply politicized.
What ends up on the ground will be underutlized and a waste if there is no demand (we have many examples of this; I just spent some time walking around the underground plaza at L'Enfant Plaza in DC but many big cities now have one of these) or builders will push successfully for something that might work but at great expense in terms of lawyers, consultants and hearings (more waste).
The three-dimensional models plant a bad idea and are the start of something bad.
Developers, industry battle for L.A.'s heart
By Cara Mia DiMasa, March 19, 2007
The old warehouse at the corner of Industrial and Mateo streets in downtown Los Angeles had seen better days when Yuval Bar-Zemer and his partners at the Linear City development firm bought it in 2002. The 1924 structure, in a rundown section of downtown, was a World War II-era bomb shelter and later a toy factory. It was being used to store the plush shells of stuffed animals.
The developers transformed it into 119 live-work units, with a rooftop pool and other communal amenities. They dubbed the new space Toy Factory Lofts. On the building's ground floor are a pub-style restaurant, a high-end grocery store and a health club.And this weekend, the developers finished work across the street converting the former West Coast headquarters of the Nabisco company into 104 live-work condo units.
But what might seem like a tale of urban renaissance is actually at the center of a fierce battle brewing in downtown L.A. that pits the shiny new downtown against the gritty version that has long existed in the heart of the city. Developers like Bar-Zemer are pushing Los Angeles to radically rezone the city's industrial core to allow residential development. They argue that the change would create a new type of neighborhood, one that would mix light industry with condo living and live-work lofts — spaces where artists, architects and others can operate businesses and sleep at night — and would ultimately create more jobs and tax revenue for the city. The city Planning Department and some community activists, however, are resisting the heavy lobbying. They say the industrial zones provide solid jobs for the working class and boost L.A.'s economy."In the rush to build some downtown fantasy, we should be careful not to destroy the things about downtown that actually work," said Joel Kotkin, an urban planner who has written extensively about L.A.'s economy. "The industrial stuff actually works: It employs a lot of people, there's a low vacancy rate, and being at the center of a transportation hub really matters."At stake is the future of the city's industrial land — and not just in downtown. About 8% of the city — or 19,000 acres — is zoned for industrial use, mostly properties used for manufacturing, storage, distribution and other commercial operations.
Although the debate now centers on the vast tracts around downtown, where the largest concentration of the industrial land is located, the proposed changes could have a ripple effect elsewhere, including Hollywood, the Westside and the San Fernando Valley.
The debate goes beyond issues of planning, zoning or architecture, say most people familiar with the discussions, and centers on the very nature of what a city is supposed to be, and who it should be for. "We need as a city to move away from our 1950s-era suburban-model approach to zoning and instead devise land-use regulations that combine uses, to create jobs and housing on one site at one time," said Kate Bartolo, senior vice president of development for the Kor Group, which is developing a number of projects downtown, including the conversion of the former Barker Bros. furniture warehouses in the industrial district into condos and retail space. The debate exemplifies how the economics of revitalization are rapidly changing Los Angeles.As the boom in downtown residential real estate moves into the industrial district, aging factory spaces are suddenly worth more if converted into lofts. That's because large industrial living spaces are selling for a premium, costing $500,000 or more for each unit.Because of this, many owners of industrial businesses are conflicted, because they see the economic benefits of residential conversion.A city report placed the price of land for residential uses downtown at roughly five times that of industrial land. If the industrial land downtown is rezoned, city officials say, that value could rise even more sharply. At the same time, however, the city found that the industrial district around downtown supports 64,000 jobs, most of which pay around $19 to $24 an hour (though some developers say those numbers are somewhat inflated).For more than 100 years, downtown has been the heart of industrial L.A. — ever since the Southern Pacific Railroad opened L.A.'s first rail depot there in the late 1800s.As the city grew, so did the district, and brick buildings began to dot the nearby landscape, built to handle the vast number of goods coming into the region. By the 1920s, national firms began locating their West Coast branches in the city center, said Greg Hise, an associate professor of urban history at USC's School of Policy, Planning and Development. Today, though, the downtown warehouse district is a tangled mix of industry and neglect. The district's streets are, quite literally, crumbling, riddled with cracks, the skeletons of old rail lines and wheel-size potholes. Few of the area's loading docks, built decades ago, can accommodate modern semi trucks. Still, with their fences lined with barbed wire and graffiti, most of the district's low-slung buildings are occupied, home to cold storage facilities, produce companies, toy storage and more. City officials say that the vacancy rate for downtown's industrial land hovers around 1%, and that demand for certain-sized parcels can't be met by the current supply.
River project is child's play -- and more
A gallery invites visitors of all ages to tinker with models of L.A.'s much-maligned waterway to illustrate their visions.
By Bob Pool, March 18, 2007
Inspiration was flowing like the Verdugo Wash after a five-day rainstorm for Alex Dann.
"Where's the zoo?" he asked, sizing up the table-size tableau in front of him. "Over there? Cool."
The 7-year-old Tarzana boy was at a downtown Los Angeles art gallery Saturday, poring over an exhibit called "Five Models Afloat." A moment later, he was participating in it.
He carefully studied the 4-foot foam-board square, which was divided into thirds by a bright blue plastic slash that depicted the Los Angeles River where it is joined by the Verdugo Wash at the Glendale-Los Angeles border.
One part of the square was covered by a miniature "mountain" molded out of window screen material to represent the Hollywood Hills. The other two, depicting flatland areas, were grids marked with a series of green swatches.
Dotting the areas around the swatches were tiny movable structures formed from small blocks of wood, Lego pieces, parts of toys and objects such as toothpaste caps.
Alex moved a wood-block figurine resembling a high-rise apartment house away from the edge of the river. He was asked if he had ever seen the real Los Angeles River and what it was like."Yeah, I've seen it. It's a sewer," he replied as his mother, Holly Dann, blanched."Well, it is," Alex said, standing his ground.The pair, along with father David Dann and 11-year-old sister Abby, had stopped at the gallery while shopping downtown.
The three-dimensional scene Alex was working on is a representation of one of five points along a 32-mile stretch of river for which officials have launched long-range plans to beautify the waterway and make it appear more natural.
Los Angeles officials, consultants and the Army Corps of Engineers spent two years conducting formal public workshops seeking ideas for the rehabilitation of what is now a mostly concrete-lined flood channel. Last month, they issued a draft report suggesting that a $2-billion makeover over the next 50 years could replace industrial land along the banks with park space. The steep concrete walls could be landscaped and rebuilt with step-like channelization.
Sunday, March 18, 2007
Almost. Today's NY Times real estate suppement (Key) includes: "Subsidized Houses for Rich People ... In Santa Barbara, life is so expensive that a six-figure salary qualifies you for affordable housing."
The article is also a must-read, with plenty of seemingly unintended self-parody. A local reporter notes, "This is good for Santa Barbara. Rich people are great, and it's interesting to live with CEO's. But there are middle-class people who are great, too."
Saturday, March 17, 2007
Man bites dog
More Mass Hype
The US transit public relations machine is at it again, this time claiming significant ridership increases from 2005 to 2006. Finally, they have restored the 1957 level of ridership. By comparison, in 2006, car use was more than any year in history. In fact, since 1957, commuting by car has doubled. Transit says that ridership increased nearly three percent. In fact, annual increases have averaged nearly as much for 10 years, yet transit's share of urban travel has fallen nearly 20 percent during the period. Why? Because, even in an era of unprecedented gasoline prices, urban car use has grown more rapidly. People leaving their cars for transit makes good press. It just isn't true.
Here's the press coverage:
Riders crowd public transit systems
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Ridership on public transportation jumped to the highest level in nearly five decades in 2006 as high gas prices and expanded bus and train service enticed people to park their cars.
More than 10 billion trips were taken on buses and rail lines last year, the American Public Transportation Association says in a report to be released Monday.
That's up 2.9% from 2005 and the highest level since 1957. Ridership rose three consecutive years through 2006 and increased 28% in the 10 years since 1996.
The rise in 2006 came as gasoline prices increased, coming within pennies of the all-time record, not adjusted for inflation, reached following Hurricane Katrina in 2005. "Certainly, a lot of the growth last year was with the high gas prices," APTA President William Millar says.
But Millar says a number of other factors, such as increased road congestion and improved transit service, were also likely in play. Ridership was up 4% in the fourth quarter from the same period a year earlier, even though gas prices had fallen from their earlier peaks, APTA says.
Kim Little, 51, of Tulsa started taking the bus to work in May. While she expected it to be a temporary solution to higher gas prices, she has stuck with the bus.
"I just love it, I absolutely love it," says Little, who works in human resources for the city of Tulsa.
Not only is she saving gas money, but taking the bus for her 13-mile trip to work has cut commuting stress. Plus, she's made some new friends: "I've met some great people on the bus. That's been a fun, unexpected benefit."
The increase in ridership has put some strains on local transit systems. Around the USA, systems say they are trying to find ways to reduce crowding:
•Salt Lake City. The number of trips taken on Salt Lake City's light rail rose 14% in 2006 to a record. The rising demand led the Utah Transit Authority to buy 29 used rail cars from San Jose, Calif. Officials haven't had time even to paint the new cars that have gone into service. Instead, they plastered stickers over the old labeling to get the cars on the rails as soon as possible.
"They're not pretty," spokesman Justin Jones says. But "it's a ride and people don't mind."
•Washington. Ridership on Metrorail in the nation's capital rose 5.3% to a record in the 2006 fiscal year, which ended June 30. The transit system is buying new cars to meet passenger demand.
•San Francisco. The number of trips on the Bay Area Rapid Transit train system also rose to a record last year. BART also has been increasing the number of cars, lengthening trains in the system.
•Tulsa. Ridership rose 17% on local buses and 43% on park-and-ride bus service last year. Tulsa Transit has added a bus on one route and is considering adding a commuter rail line, spokeswoman Cynthia Staab says.
Friday, March 16, 2007
Consumer-oriented higher education
Lawrence M. Kahn writes about "Cartel Behavior and Amateurism in College Sports" in the Winter 2007 Journal of Economic Perspectives (gated).
"Big-time college sports programs appear to extract rents from revenue-producing athletes by limiting their pay and requiring them to remain amateurs. These rents are spent on facilities, nonrevenues sports, and possibly head coaches' salaries. On average, the two big revenue sports of men's basketball and football run a surplus; however, college sports as a whole -- including the nonrevenue sports -- report operating losses. Some evidence suggests, although not unambiguously, that college sports have positive indirect effects on public anf private contributions. Moreover, sports success appears to generate interest by students that may lead to a modestly stronger student body. In this consumer-oriented era for higher education, universities need to maintain their appeal to future applicants, many of whom are future alumni or future voters for state legislatures, and having successful sports programs may be one way to do this. The popularity of college sports events and of schools with big-time athletic programs suggests that the idea of amateurism may have some market value. Arms race considerations suggest that society may gain from some spending limits on college athletics. From an efficiency point of view, these societal gains would have to be weighed against the losses caused by movement down the supply curve of star atheletes."
Paradox resolved. Exploitation, inefficiency, politicized anti-trust status and "consumer-oriented ... higher education"
Wednesday, March 14, 2007
Neither seems to have stopped (who else?) Google, Intel and Oracle from providing shuttles by which employees can get to and from work. A recent NY Times piece tells the story.
Give these employees internet access on the bus and two wonderful things happen: they like the ride and they get to work working.
Just imagine, transit that's attractive and without huge public subsidies. (Hat tip to David Yarden.)
Tuesday, March 13, 2007
Good news and bad news
GDP and (all other accounting conventions) invite controversies. Some of them pop out when applied to cities. In "Superstar Cities" (NBER WP 12355), Gyourko, Mayer and Sinai cite these places' explosive house price growth and report that it is due to the scarcity of housing, the growing number of high-income households and the fact that they (naturally) outbid the less affluent in preferred neighborhoods. But some fast-growing cities (notably Phoenix and Las Vegas) remain outside the "superstar" class because they have been able to add enough housing to dampen house price increases. Living in the "superstar" places has become a luxury good. The less affluent put up with long commutes or try their luck elsewhere.
Regulation creates artificial scarcities that push up prices that help the "superstars" to shine when ranked in terms of GDP or by economic researchers.
GDP accounting practices have long incited discussions of "goods" and "bads" and how they are handled. Here is another. Cities are essential "engines of growth" because they are congenial to entrepreneurial activities. Bottlenecks that originate in politics (notably land market regulations) inevitably detract from this. High land rents are evidence of good news (on the demand side) as well as bad news (on the supply side).
Sunday, March 11, 2007
Market signals for planners
Left alone, private developers create "lifestyle centers" by the thousands that fulfill the functions of centers -- and have eclipsed the downtown. If there is going to be a main urban center, it will not be as dominant as downtown interests dream about. Markets are signalling the nature of the best forms of development for the auto-oriented world.
The examples cited in the article show that market signals in this realm cannot be ignored.
Wednesday, March 07, 2007
"Fever pitch of apathy"
The "governance" that follows is not a pretty thing to watch.
Voters reach fever pitch of apathy
Yes, there was an election; however, nobody really cared
BY BRENT HOPKINS, Staff WriterLA Daily News
The cabbie's cigarette concerned him more than the future of his city.
On Tuesday, when Angelenos had a chance to vote for city and school board leaders, the most local of politics, the man in the yellow taxi - and just about everyone else - didn't bother to show up.
Only 7 percent of the more than 1.7 million eligible voters took the time to vote.
"Voting? Huh?" the cabbie said, mesmerized by the smoldering butt between his fingers. "Look, I'm very busy right now. I don't have time to talk about that."
Los Angeles voters, some red-faced, said they were too busy, too tired, too unaware or too uninterested to go to the polls. They had the chance to influence local politicians who theoretically have the most influence over their lives, and they did ... other stuff.
Maybe it was the negative campaigning. Or the fact that the previous election came only in November and there's another in May. Or the lack of much competition. Or the fact that the most hot-button citywide issue was whether to amend the City Charter over school board elections. ...
Monday, March 05, 2007
Dan Klein takes up the discussion of distinctions in his new post. The label "Economist" can mean many things to many people. But it is more than odd when there is lopsided attention to market failure as opposed to government failure. Both can, of course, occur but the former is more often facilitated than ameliorated by the latter. Something is amiss when some very smart people miss this simple fact.
Flexible labor markets are best
Byond outperforming the Japanese and Europeans, the U.S. economy endured a recession, a terrorist attack, a tech bust, a housing almost-bust, an oil shock and a war. Where are these in the numbers cited? There is amazing resilience in the U.S. economy.
A related point is made by Clair Brown, John Haltiwanger and Julia Lane in Economic Turbulence: Is a Volatile Economy Good for America? In short, Joseph Schumpeter had a better handle on modern capitalism than Lou Dobbs, Pat Buchanan, Ross Perot -- and many others.
The book is data-rich and makes its points the old fashioned way, by carefully processing large data files and laying out quite a few measured conclusions.
Saturday, March 03, 2007
Pigou Club (more)
I have two problems with the standard analysis. First, the "equity" argument is much more complex than many writers suggest. If road pricing gets us away from the status quo (jobs programs that leave HOV lanes and rail transit in their wake), then I am not at all sure that the change to pricing is "inequitable".
Or pricing means that the new revenue stream finances even more pork -- in which case, no one can tell the result.
So, how will they handle the equity argument in Monaco?
Today's WSJ lead editorial (parts below) recounts how cap-and-trade involves politics. And how that's a big problem.
Cap and Charade
(WSJ March 3, 2007; Page A8)
The idea of a cap-and-trade system for limiting carbon-dioxide emissions in the U.S. has become all the rage. Earlier this year, 10 big American companies formed the Climate Action Partnership to lobby for government action on climate change. And this week the private-equity consortium that is bidding to take over Texas utility TXU announced that, as part of the buyout, it would join the forces lobbying for a cap on carbon emissions.
But this is not, as Lenin once said, a case of capitalists selling the rope to hang themselves with. In most cases, it is good old-fashioned rent-seeking with a climate-change patina.
Start with the name. Most of those pushing this idea want you to think about it as cap-and-trade, with emphasis on the trading part. Senator Barbara Boxer touts all the jobs that would be created for people trying to game the system -- er, save the planet. And her colleague Jeff Bingaman calls cap-and-trade "market based," because, you know, people would trade stuff.
But for that to happen, the government would first have to put a cap on CO2 emissions, either for certain industries or even the economy as a whole. At the same time, it would allocate quotas for CO2 emissions, either based on current emissions, or on energy output, or some other standard. If a company then "over-complied," which means it produced less carbon dioxide than it was allowed to under the rules, it could sell the excess allowance to someone else. That someone else would buy the right to produce CO2 if doing so cost less than actually reducing emissions.