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Halfway to the CAFE

It would be lovely if, when we passed certain rules and regulations, we had procedures in place to review their performance and effectiveness. Today, we sit at the halfway point between the issuance of new CAFE standards as part of the 2009 “Stimulus” package, and the year 2025, the target date for new vehicle fuel economy standards. Remember, the  “law” said that the average fuel economy of the new vehicle fleet should be 54 miles per gallon just 8 more years from now.

  • How close to that goal have we gotten in the 8 years since the legislation was written?
  • Have we evaluated whether or not the CAFE legislation has led to other outcomes not intended by the program?
  • What has been the cost of achieving the CAFE improvements to realize fuel savings (and emissions?) goals relative to other ways of doing it.

Of course, economists have and continue to study these questions. Have the policymakers done it? I’d love to see the Congressional review of this.

(EDIT: note as evidence that I have totally absconded from the news circus, I had missed this when putting the foregoing sentences together).

You’ll notice that the Department of Transportation doesn’t report the ACTUAL data. After digging around on the EPA site, we find this: in 2015, CAFE for actual cars sold was 24.8 miles per gallon. The EPA gleefully cites this as a 5.5mpg improvement since 2004. Well, suppose we double that pace, that gets us to 35 mpg by the year 2028, only 19 mpg short of the goal and 3 years late.

I am sure there will be a lot of accountability when the program does not meet its goals. Lest you think this is harmless symbolism, please do go find the auto workers who lost jobs due to the increased tenure in used cars this creates, and please do find us the families struggling to make their car payments, or all of the people who end up … well, enough for now.

It seems to me that most anti-market voices actually DO understand and appreciate the “virtues” of competition. My sense is that they only see the force of competition working in some places and not others. Think of the fears that some people have from open immigration. Think of the fears people have with the “deskilling” of the American labor force (or the implied worry that all of the new innovations are skill biased). What do these have in common? The commonality is a fear that “competition” among lots and lots and lots of workers is going to drive down wages and working conditions. Implicit in this view is that the institutions on the other side of the market, in this case firms, are going to benefit a great deal from this competition.

I wonder, then, why there is not much more focus on expanding competition among firms in order to improve working conditions and to make the products we get cheaper and better. And we don’t. Just think of the discussions surrounding medical care in the US. Almost the entire conversation is about providing subsidies for consumers of medical care and about how we pay for the care we get (single payer?). But virtually none of the discussion would involve deregulating the supply side in order to promote competition.

So, folks tend to be taking the idea and using it when convenient and discarding it when not. Do you know what would solve this problem? Competition in the world of ideas – but that is sort of lacking too.

  1. Global warming (or climate change or whatever I am supposed to call it) is real.
  2. Doubling of CO2 concentrations should increase temperatures by 1 degree C absent feedback.
  3. The “expert” consensus on the ECS is something between 1.5C and 4.5C, but really, it is hard to nail down a precise answer.
  4. CO2 concentrations have increased by over 120ppm since 1880. Most of this is surely due to human emissions.
  5. Average global temperatures (ignore the challenges and variation issues) have increased over 0.8C-0.9C over the time period of 1880-today (for fun, compute the implied climate sensitivity here, virtually no one does this simple exercise).
  6. Half of the temperature increases have come from the 1950s, with half coming before (mass industrialization really picked up after WW2).
  7. Scientists expect that over half of the late-20th century warming is due to humans. For sake of argument, say ALL of it is. So, the 0.2 to 0.3 of warming at start of period to WW2 happened in a time of much lower industrial activity, the rest in a time of increased human activity.
  8. Humans continue to emit not only CO2, but also other GHGs, and global CO2 concentrations can be reasonably expected to rise, and quite considerably, over the next century.
  9. This additional warming will cause sea level rise, ocean acidification, changes in growing patters, insect vectors, water vapor concentrations, more intense storms (though not more frequent), as among the most widely accepted causes.
  10. These changes will impose real financial and human costs, but not equally so, they will be different in different parts of the world.
  11. There is tail risk – in both directions, that is really hard to model.

Without going into detail on any of that, I would argue that this is the accepted climate consensus (actually, what is popularly referred to as consensus is much more limited than this, but let’s just go with it).

OK, so what is the reason I am writing all of that? Well, it seems that no matter how many zillions of times you make all of the above clear, you are accused of being a gun-toting, bible-bashing, world-hating Republican who doesn’t even believe the planet is warmer today than in the past. I kid you not. It is quite literally not possible to speak of anything except insane catastrophe and massive original-sinism on this topic.

So, where am I going here? Well, given all of this, I am definitely of the opinion (hopefully folks will grant me the possibility that it is informed via many years of study of both the climate stuff and doing the economics) … that …

  • It’s not going to kill you
  • It’s just not that big a deal (I can write 100s of pages on this)
  • On the other hand, even if the costs of unabated climate change are “not that big a deal” … SO TOO are the costs of well-crafted policies (folks will conveniently ignore that I wrote the latter part).
  • If climate change is going to kill us all, it is going to be because we let the far more serious risks that we are used to end up wreaking huge amounts of damage. Just to remind people, the number of suicides in China each year are anywhere from 100,000 to 250,000. The number of young children who die of diarrhea each year exceeds 800,000. The number of people around the globe who die from indoor and outdoor air pollution is 7 million. The number of people around the globe who die from infectious diseases is 10 million. There is not a single climate scenario that gets global annual deaths from climate change (for fun, ask exactly HOW climate change is expected to kill people) anywhere near being relevant in comparison to the latter numbers on this list. The World Health Organization uses a very high estimate that over the next century, climate change will kill an additional 250,000 people per year. My reading of the literature is that nowhere near that number will happen, but just go with it and place it in perspective. This is saying that around the globe, even as billions of people emerge from poverty, and even as the siren call of warning about climate has been sounded year after year after year after year, we are going to having 250,000 people dying in storms, droughts, floods and starvation over and above the baseline levels of suffering. EVEN IF you do not want to challenge any of that, and it is very challenge-able, that number (and enacting policies to reduce it by directly dealing with climate change) is simply not very large when compared to the myriad global risks we already face and also the potential risks that are out there such as global pandemics, biological and nuclear warfare and the like.
  • The point is, that climate change is real, can be costly, will not impact people equally … YET, it is just not going to be a “big deal” (yes, go ahead, feel free to interpret that out of context), And no, that doesn’t mean that smart and aggressive policies ought not be followed now – for I believe there are several good no-regrets policies out there. But it is high time for folks to stop telling my kids that they have destroyed mother earth, that this is the gravest threat humanity has ever faced, and that we are doomed. We know how that movie ends.

If I did not have to spend dozens of hours of my life making these points, maybe I’d have a few minutes to actually put the work in to finish the climate economics book – it is sorely needed.

In 1950, Venezuela had the 4th largest income per capita of any country on Earth, two spots ahead of Canada in rankings and 25 spots above Japan.

While our hearts and sympathies are clearly with the victims of Hurricane Maria and Irma in the islands, the devastating impacts of Hurricane Hugo are daily, ongoing, relentless and continuing. Some hurricanes are “easier” to recover from than others.

 

Autumn

Season of mists and mellow fruitfulness,
   Close bosom-friend of the maturing sun;
Conspiring with him how to load and bless
   With fruit the vines that round the thatch-eves run;
To bend with apples the moss’d cottage-trees,
   And fill all fruit with ripeness to the core;
      To swell the gourd, and plump the hazel shells
   With a sweet kernel; to set budding more,
And still more, later flowers for the bees,
Until they think warm days will never cease,
      For summer has o’er-brimm’d their clammy cells.
Who hath not seen thee oft amid thy store?
   Sometimes whoever seeks abroad may find
Thee sitting careless on a granary floor,
   Thy hair soft-lifted by the winnowing wind;
Or on a half-reap’d furrow sound asleep,
   Drows’d with the fume of poppies, while thy hook
      Spares the next swath and all its twined flowers:
And sometimes like a gleaner thou dost keep
   Steady thy laden head across a brook;
   Or by a cyder-press, with patient look,
      Thou watchest the last oozings hours by hours.
Where are the songs of spring? Ay, Where are they?
   Think not of them, thou hast thy music too,—
While barred clouds bloom the soft-dying day,
   And touch the stubble-plains with rosy hue;
Then in a wailful choir the small gnats mourn
   Among the river sallows, borne aloft
      Or sinking as the light wind lives or dies;
And full-grown lambs loud bleat from hilly bourn;
   Hedge-crickets sing; and now with treble soft
   The red-breast whistles from a garden-croft;
      And gathering swallows twitter in the skies.
– John Keats

Were I to run for a serious elected office, among my policy positions would include:

(1) Eliminate all favorable employer tax treatments for health insurance. In other words, raise the taxes employees and employers pay on the income they pay their workers. The obvious reason to do this, and even the hated GWB proposed it a decade ago, is to put the individual/non-employer-based health insurance market on equal footing with the employer market. Further, the enormous implicit subsidies this provides to health insurance “consumers” both increases the use of scarce health care resources which drives up costs and limits accessibility to others in a world where policymakers and health activists utterly refuse to think of expanding access on the supply side. The second thing this does is target taxes to the rich. Go read Picketty and others who worry about inequality – the sorts of programs they advocate to make income distributions more equal and tax systems more progressive are things like free college and inheritance taxes. Both of these would utterly fail to achieve their goals. On the other hand, it is surely the “rich” who disproportionate benefit from the deductibility of health insurance from income taxation. People who work are richer than people who do not. And the more you earn in the labor market, the larger your health insurance benefits are to be. But, go see how folks respond to proposals to “tax health care”, which of course is the bastardization / telephone game we get in any conversation people seem to have.

(2) Eliminate all tax deductions for charity. Again, think of this from a progressive tax system perspective. Who benefits from these sorts of programs? The rich and wealthy and high income folks are the ones making the largest charitable donations, and therefore benefit the most from the tax system here. Furthermore, a considerable share of tax free funding is ending up NOT benefiting the poor. I just gave money to the Cornell Lab of Ornithology, and while I find this to be a worthy cause, my taxes are lowered and rich, old white guys are better assured of having nice walking trails and bird habitat to enjoy in their long retirements (also long retirements that poor people, who pay into social security, also do not get to enjoy, but that is a story for another post).

To be quick, what we have here then is that we should raise taxes on employer provided health care, we should raise taxes on charities (indeed, I would eliminate them entirely, for more reasons than the above) and in doing so we would make the tax system more progressive, we would put a dent into our annual budget shortfalls, we would reduce the distortions and resource misallocations that happen by treating different “goods” differently, and based on our understanding of health insurance and charity, these proposals would very likely NOT have an adverse impact on people’s access to health care (it would improve it) or the amount of actual, real, charitable activity that happens in the US.

But to advocate these positions, ironically, seems to paint one as a dogmatic, anti-government ideologue. I kid you not. Go ask some people what they think of reducing the favorable tax treatment to charities and study their responses. What’s going on here? YMMV on the various stories, I’ll share mine in the future.

EDITED TO ADD: Note that I understand the challenges with the post title. You can absolutely be a free-market dogmatist and have a wide-ranging series of views on various forms of taxation, so perhaps a better presentation would have been something like being an antigovernment dogmatist not being free-market, these are not the same thing.

Even in a casual conversation, 2, 3 and 6 happened today and yesterday. Joy.

 

My eyes tend to gravitate toward climate and labor market issues, so I encounter the following two “arguments” all of the time.

(1) There are those who present global temperature data in the following way: “if you look at global temperature records, the rate of temperature increase around the planet has either slowed or paused entirely since 1998. In either case, the temperature changes over that time period lag far behind what almost any climate model predicted for this time period.”

Now, this upsets some people. Why is beyond me, because I certainly hope global temperatures do not continue to increase. A response to this is often, “you are cherry picking the data. There was a huge ENSO event (El Nino) in 1998 which drove global temperatures to be abnormally high, so comparing the temperature record starting only at that point is misleading”

Wintercow happens to agree with this.

 

And then we have:

(2) The real value of the minimum wage has declined by a lot since the late 1960s, and as a result we must therefore raise the current minimum wage to $15 per hour.

Now, this upsets some people. Why? Because the real value of the minimum wage was at an all time high in the late 1960s as compared to the overall wage level in the economy. Why this happens to be the “just” or “correct” level for a minimum wage is no different than saying that 1998 is the “correct” baseline from which to measure temperature anomalies.

 

What is interesting is that the folks who tend to be angry at the sentence uttered in (1) are those themselves uttering the sentence in (2). Similarly the folks that are uttering sentence (1) are likely to be those who are angry at those uttering sentence (2). Now, obviously, both are cases of data cherry picking (even if justified), and I would argue you can’t have it both ways. Either selectively choosing starting points for your data series is bad or it is not, but you can’t pick and choose which starting points to cherry pick from, correct?

Note, per usual, none of the above is intended to demonstrate the “rightness” or “wrongness” of either position, it is rather another exercise in consistency and Kahan’s insights about politically motivated reasoning.

You may want to compare and contrast the expected economic impacts of these two things. I would inform you about Global Warming, but I do not want the fires of Hades to engulf me for daring to do so, you’ll just have to go take some climate expert’s word for what the economic impacts will be. In the meantime, it looks like extreme cases of antibiotic resistance would result in a global loss, in 2050, of up to 3.8% of global GDP. That is not small. Or it is. It depends.

  1. To appreciate the state of the “debate”, replace every use of the term “climate change” in a debate with “Genetically Modified Organisms.”
  2. If an economist dares to speak on climate change, lighting bolts will descend upon her from the heavens and the fires of Hades will engulf her from below
  3. If you see the word consensus, you are almost surely going to be hearing about a position that is not in debate, even among hardened skeptics. The word has become a useless cudgel.
  4. In a game pitting people’s preferences to worry about “Anything else important” vs. “climate” … climate is going to lose, even when it ought not to
  5. The environment is suffering because of climate change, in more ways than one
  6. Perhaps we can sum it all up with the usual, Climate is not about climate

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