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We’re headed for a backpacking trip near here sometime in the next week. My one and only time seeing the northern lights was on a nighttime boat ride in Boothbay Harbor about 15 years ago. It’s like some great god took a great handful of colored pixie powder and tossed it up into a windy and magnetized sky.

HT to the New York Outdoors blog and photo credit of course to Johnathan Esper.

Did I say fracking? Sorry, I must be imbibing in too much of Wintercow’s Milk-Pail Ale. I meant … GREEK YOGURT

So let’s get this straight, tens of millions of gallons of acid whey being dumped (yes dumped) into the environment, without regulations, and allowed to do so before “careful study” of the impacts on health and the environment were underway is perfectly cool. Now, it’s pretty clear that the stuff cannot legally be dumped, but the same is true of fracking fluids. We are using the same language here as the fractivists use in their writing and speaking. What’s different?

For every three or four ounces of milk, Chobani and other companies can produce only one ounce of creamy Greek yogurt. The rest becomes acid whey. It’s a thin, runny waste product that can’t simply be dumped. Not only would that be illegal, but whey decomposition is toxic to the natural environment, robbing oxygen from streams and rivers. That could turn a waterway into what one expert calls a “dead sea,” destroying aquatic life over potentially large areas. Spills of cheese whey, a cousin of Greek yogurt whey, have killed tens of thousands of fish around the country in recent years.

That seems to me to be more evidence of the harm of yogurt production than of fracking. People end up creating giant holding tanks,just like for fracking fluids (pollution lagoons actually) of acid whey mixed with manure, and that is allowed to sit openly and attract harmful disease spreading insects and seep into our precious groundwater, and we sit idly by while big business, to the tune of $2 billion per year, is allowed to wreck the environment. 

But Greek Yogurt is a healthy product. It’s nice. It’s also made by many home-yogurt makers. And we Greek Yogurt eaters are not the fat people we hate, nor are they overwhelmingly the evil Fox News watching numbskulls out there. Nope. Greek Yogurt eaters are salt of the earth. We cannot possibly be responsible for spoiling the earth. Not at all.  And ya gotta love this part:

Greek yogurt companies trying to keep up with exploding consumer demand in the last few years didn’t have a good plan to deal with the ocean of whey they were producing. Now they’re racing to find solutions, all the while keeping mum about the results, if there are any: the yogurt industry is highly secretive and competitive.

I was listening to a talk the other day excoriating fracking companies for not disclosing what was in their chemical slurry. Two points of relevance here. First, the “bad stuff” in fracking fluids makes up a far smaller share of the total fluid volume than does the “bad stuff” in yogurt by-products.  Second, there seems to be as much evidence that whey does harm to the environment than anything in fracking fluids, despite what activists tell us about “possible carcinogenic effects” of trace amounts of the nasty stuff in the fluids.

Given the toxicity of whey, and the demonstrated damage it can do to the environment, and the corporate profit-seeking run amok, I hereby propose a moratorium on yogurt production in New York State until further research is conducted on the environmental and health impacts of acid whey, and until yogurt producers demonstrate a continued record of safety in handling such nasty stuff. And by the whey, how much land and water is required to raise the cows to support this industry? Focusing on the acid whey alone does not tell the full picture of the environmental horror generated by the yogurt industry. Hundreds of millions of tons of manure leach into our soils and water. Hundreds of thousands of acres of land used for feedstock and for grazing. Hundreds of thousands of tons of the “disasterous” methane gas emitted into the atmosphere, further causing tornadoes and the death of polar bears. Yet fracking is banned and we celebrate and help market New York State’s yogurt producers. Yes, New York State is open for business, but only if you are one of the politically and emotionally favored groups out there. It all stinks worse than acid whey. 

HT: to my mom for the article.

A site I enjoy reading is John Hanger’s. Like many others, Mr. Hanger claims to be non-ideological, but no one really can adhere to that standard. I can’t. But I don’t pretend to and I do try my best to be honest about when I AM being that way and when I am trying NOT to be. In today’s post, Mr. Hanger is celebrating the “success” of the Department of Energy’s $34 billion loan program to fancy renewable energy companies. Read his post. I stick in below my comments. Before reading it, the most enjoyable part of my weekend was hearing Steven Chu’s commencement address at the U of R (Dr. Chu is a Nobel Prize winning physicist who famously run the DoE for nearly 5 years as Energy Czar). It was rather uninteresting but he did make it clear he was aware that he was criticized for failures of some of his loan programs at DoE, but defended that as being an example of good science – for example, Edison failed thousands of times before his inventions turned out to be successful. We are not having a Philosophy of Science exchange here, but I found such a discussion hilarious as he delivered his address a mere 50 yards from the Solar-Dok – a failed environmental project if there ever was one, and a project that of course can’t even be considered part of the scientific process. I am sure he meant something else. In any case, here is what I wrote in response to the “success” of the DoE loan program: (by the way, isn’t it remarkable that news releases from the government itself are now considered to be “fair and balanced? – the timing on that is awkward, no?)

Mr. Hanger, I do enjoy your commentary a great deal, but this piece is venturing into “Fox-newsish” propoganda as well. Whether none or some or all of the loans are paid back to DOE is not really the correct way to evaluate the success or value of the $34 billion program.

There are really two major problems with such an analysis. First of course is that if we are to measure the loan program under the guise of economic stimulus, we’d have to run fancy macro-econometric models to ask just how much stimulus was had for that. Economists and pundits on both the left and right have no way to tell you whether in fact it was good, bad or otherwise – the system of equations is, what we call, Underidentified. But that doesn’t stop partisans of either side from claiming they are right.

Second is more important and directly related to your post. Assuming we all agree on the purpose of these loans, which of course is debatable, and that the purpose is to deliver new energy sources and cleaner energy sources, we must ask two important questions: at what cost? and what has been crowded out to do this?

These are not idle questions. Do we know, for example, how much of the $34 billion in loans was piled onto other explicit and implicit guarantees? For example, how many companies had other deals for the required purchase of their product? Surely that number exceeds zero and there is a cost to this. But more important, when these companies pay back these loans, do we know how they were doing it? Is it because revenues from those companies skyrocketed? Or are we simply counting refinancings as loan repayments. After all, the nation is awash in credit availability, or so we are told, and it seems to be the case that very low interest funding can be had from a variety of sources. Would we call the DOE loans any more of a success than if a homeowner initially took out a teaser rate ARM and was able to refinance it with another mortgage? I don’t know, and simply pointing to a loan “being paid back” surely doesn’t help us understand this.

Irrespective of the financing of these programs, repayment of the loans tells us nothing about how much we are effectively paying for each unit of energy produced, or each unit of emissions reduced. Do we know on the loan portfolio, on average, how much per ton of carbon reduced we are spending? If that number is $20 per ton it may appear to be a good deal. But is it $80 per ton? $800 per ton? It is interesting that Tesla is cited as an example of success – do we know whether the production of the batteries and the all-in cost of the Tesla cars actually mean an improvement for the environment? And surely if they are powered by wind and solar they get better effective mpg than conventional cars, but what if they are driven in West Virginia?

There are two additional issues required to be reconciled before declaring this a success. What has the institution of these $34 billion in government loans and guarantees done to private credit flowing to R&D and energy innovations? Is there ANY crowd-out? Has anyone studied this? Or is this a free-lunch? And what does the possibility of future government picking of winners through the DOE do to private funding of innovation in the future?

Then there is the issue of the central planning of energy research. Surely there is a role for government funding of basic R&D, but it does not appear to me that funding particular technologies would qualify under this standard, or at least not the way we did it. Two questions arise. First, wouldn’t some version of $34 billion in prizes, or better yet, patent buyouts, be a more effective way to encourage these investments? Can a loan program honestly be said to be successful without appealing to this counterfactual? And of course, there comes the issue of central planning itself, how do we know that the allocation of the $34 billion through this politically directed process is superior to the way investment would have been selected had it been done on the virtues of prices, profits and losses.

And finally, there is an issue that we teach our economics students about regularly – that we are not to confuse good outcomes with good decisions, and similarly that we are not to confuse bad outcomes with bad decisions. Let’s take a particularly common illustration of this error. Folks who remain healthy for years and years and years have been known to tell me that, “buying health insurance was a stupid idea since I never used it.” Of course, this is not really correct. The purpose of health insurance is to protect you from unmanageable and unpredictable outcomes. These are risks with somewhat known probabilities. Just because you don’t actually get sick does not mean it was dumb to pay for protection. Similarly, if you are offered the chance to take a gamble that in 9 out of 10 cases you owe a bookie $100, and in 1 out of 10 cases you win $50, if you end up winning the $50 this is not an illustration of a good decision. The expected value of the gamble is MINUS $85. Just because the sun shone on your butt for a day doesn’t me you were smart.

Much of this is of course not easy to measure, but before we slam the Fox News crowd and before we declare the loan program a success, surely a “fair and balanced” approach that is not “ideological junk” would suggest that these are important issues to resolve?

In our 5 year old son’s homework a little while back:

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Well, at least they ask a critical thinking question at the end,

This, by the way, is VERY MUCH worth reading. I basically start and end every serious conversation I have with others by asking, “Can you explain why you believe that?” And you know how that usually goes.  There are of course a couple of flaws with relying on this line of questioning. See the pages I scanned in above for example. If someone actually answers the question, “Can you explain why you need to recycle?” and the answer you are given is a matter of simple logic, like, “Trash doesn’t disappear,” we are back to where we started – meaning we have to have an actual examination of the veracity of that observation, an examination of whether or not this is a problem, and so on. I suspect securing humility in belief is a lot harder than Sunstein makes it sound.

That question is a bit on the dramatic size, but I found this paper to be fascinating:

Adjusting Measures of Economic Output for Health: Is the Business Cycle Countercyclical?
by Mark L. Egan, Casey B. Mulligan, Tomas J. Philipson  -  NBER Working Paper #19058

Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health.  Discussed shortcomings have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle.  This paper proposes new measures of the business cycle that incorporate monetized changes in health of the population.  In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how NDP measures treat depreciation of physical capital.  We examine the macroeconomic fluctuations in the United States and globally during the past 50 years, taking into account how depreciation in health affects the cycle.  Because mortality tends to be pro-cyclical, fluctuations in standard GDP measures are offset by monetized changes in health; booms are not as valuable as traditionally measured because of increased mortality, and recessions are not as bad because of reduced mortality.  Consequently, we find that U.S. business cycle fluctuations appear milder than commonly measured and may even be reversed for the majority of “recessions” after accounting for the cyclicality of health.  We find that adjusting for mortality reduces the measured U.S. business cycle volatility during the past 50 years by about 37% in the United States and 46% internationally.  We discuss future research directions for more fully incorporating the cyclicality of unobserved health capital into standard output measurement.

 

In other new research, it does not appear that having a computer in the home improves learning outcomes.

 Experimental Evidence on the Effects of Home Computers on Academic Achievement among Schoolchildren
by Robert W. Fairlie, Jonathan Robinson  -  NBER Working Paper #19060

Computers are an important part of modern education, yet many schoolchildren lack access to a computer at home.  We test whether this impedes educational achievement by conducting the largest-ever field experiment that randomly provides free home computers to students.  Although computer ownership and use increased substantially, we find no effects on any educational outcomes, including grades, test scores, credits earned, attendance and disciplinary actions.  Our estimates are precise enough to rule out even modestly-sized positive or negative impacts.  The estimated null effect is consistent with survey evidence showing no change in homework time or other “intermediate” inputs in education.

In “denier” news, the most likely estimate is 1.3C (that’s about 2.3 degrees Fahrenheit). There is absolutely NO consensus on climate sensitivity. “Alarmists” spend a great deal of time torching enormous straw men (see the 97% consensus stuff from Cook for fun) that suggest reasonable people “deny” that CO2 is a greenhouse gas, or that humans have added to the stock of CO2 in the atmosphere. That is not where the real meat of the argument is, but when you don’t actually have a good argument, you end up torching straw men. The real meat lies in what exactly climate sensitivies are, and beyond that, how sensitive our health and economies are to those temperature changes. As I’ve said repeatedly, not only is there not a consensus on that, I’d argue we simply know close to nothing about it.  File this last piece under. “The Most Underreported and Misstated Argument Ever.”

Did you ever wonder why we say congratulations to everyone who graduates. That’s a bit odd. In any event, a hearty congratulations to the students who took themselves and their education seriously for four years, and who used this time to think hard, to make great friends, to begin a lifelong journey of learning, and who do have a higher purpose in their lives than pleasing themselves. You know who you are, or at least you folks are too humble to admit it. I would like to leave my students with the following thought upon graduation. I hope they don’t come away from learning with me thinking that I know much of anything, or have answers to many things, or even that the world I would prefer to live in would in any way resemble some kind of utopia.

No. 

My hope is to have (help? develop?) students who don’t take words at face value; who are not ruled solely by emotion; who understand how to make an argument (or at least know that they should try to); who think hard about why they believe what they believe and do not believe; who are good to others; and so much more. I leave you with one of my thoughts from Hayek that have impacted me in my journey through life. And please don’t mistake this for an idolizing of Hayek. I certainly admire and respect him, but that’s where it has to end.

Godpseed to you.

Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom. 

If we are to be generous to the ideas of those who are concerned about obesity in America, you would argue that there are two reasons for the worry. First, people might reasonably be concerned about the impacts of your obesity on them. In other words, there are external costs of obesity that the obese themselves are not taking into account when making health choices for themselves. You might be tempted to argue that these costs include psychological ones – that the larger the share of the population is obese, the more acceptable obesity is, which increases the chances that I myself may fall into the obesity trap. Your mileage may vary with that story, but there it is.

A second approach would be more standard economics fare – that being obese imposes true costs on people that they do not account for when they make health decisions for themselves. So, when a potentially obese person is thinking about downing an extra bucket of fried chicken, they do not consider the fact that when they walk down the sidewalk in the future there will be less room for everybody else. Some folks may even be forced near the curb and their chances of getting hit by a car or falling down a sewer grate are much larger. Since these folks never had a say in their displacement on the sidewalk, you might justify an intervention in obesity on those grounds. That conclusion does not follow despite what some intermediate microeconomics textbooks may preach to you.

However, these are rarely the two reasons people use to justify a “concern” for the obese or better stated, a concern for the issue of obesity. And as such, if we want to have an adult discussion of what to do about obesity, we need to be honest about the fact that we are largely making value judgments or that our concern is a consequence of other interventions that we’ve chosen to make. On the latter, it’s pretty clear that some people are concerned about obesity because, to paraphrase something I hear time and again, “we all pay for it.” Well, that can only mean that when someone is obese, they get sicker more often than a non-obese person, but it also means that when they get sicker the costs of treating them are larger, and that the overall medical costs of obese people are larger than non-obese people. Now, as we’ve explored before, this is NOT at all obvious. Despite the fact that my wife works on an ICU floor where nearly all of her patients have problems related to obesity, that tells us little about the right probabilities to look at – not all sick people are obese. It may very well be the case that being obese makes you die sooner than otherwise. It may very well be the case that the chronic diseases that afflict the obese are less costly to treat than the chronic diseases most of us are going to end up getting. So, just saying “obesity is costly” is merely a starting point at best. And remember, this is ONLY an issue if for some reason we are all forced to pay for the medical expenses of each other.

You might say that this point is not just germane to things like ObamaCare, Medicaid, Medicare and the VA. But you’d be wrong. Private insurers are not stupid. They have actuaries. If the obese are more costly to treat over their lifetimes, premiums would raise to reflect that. But of course, we’ve managed to regulate insurance in such a way as to make that impossible. So we’ve really converted “private” insurance into a de facto public “insurance” program that resembles prepaid medical care more than it does insurance.

A second reason people nominally claim to care about obesity is the idea that “we are just trying to prevent people from hurting themselves.” In other words, this is the traditional paternalistic justification for involvement in anything. I’d note that there is little economics here, and in fact little analysis done to justify the claims. To see why, let’s ask a few questions about obesity. Do you think folks that are obese or overweight are unaware of it? Is it plausible that they continue in their daily lives as their clothes get more tightly fit, as their cars get less comfortable, as they get more out of breath from walking, etc. and not notice it? Not at all plausible. Or how about this? Do you think folks that are overweight are unaware of the potential health risks from being overweight? Is it the case that “society” is silent on the risks of diabetes and heart disease? Do Cheerios not advertise that they are heart healthy? Do health food stores not exist? And what, exactly, is being taught in schools for 13 years about health? That being obese is great? Sorry folks, totally implausible.  How about this? Do you think that folks who are obese delude themselves into thinking that their wages and job advancement are improved by their condition? That when being compared to a fit person, someone who is obese thinks they have a better chance of securing a job as a delivery person, or a lawyer, or any number of jobs? Finally, do you think that the obese are somehow led to believe that they are deemed attractive by the majority of society? Do you think they believe they are the envy of society? I’ve got an ice cube to sell you if you believe any of this. Of course not. The obese are the object of jokes, scorn, ridicule, magazine covers, and much more. They are the subject of this very article. This is not revolutionary.

So, what, I ask, could possibly be the reasons folks concern themselves with obesity? I’ll suggest three. First is that it is simply something to talk about. I use to pooh-pooh those kinds of insights until I started working professionally on a college campus. Or visiting McDonalds for early morning coffee. But people need something to Bullshit about. They really do. And this seems something that is interesting to bullshit about. Like the weather.

Of course, I don’t think that is the primary reason folks are whooped up about obesity. The second reason is that we are all “getting revenge” for getting stuffed in lockers in high school. What do I mean by this? Well, about the only thing I can see in common in the obesity literature is the “holier than thou” attitude of many of the authors. They simply have a need to feel superior. They have a need to tell people what is good for them. They have a need to impose their view of the world on others. Please do try to convince me otherwise. And this is not unique to the obesity crusade, but many other crusades as well.

Finally, from reading student paper after student paper, and from reading magazine article after magazine article, it’s pretty clear to me that there is a huge anti-corporate “bias” at play here. The narrative is delicious. “McDonalds is making us fat!” Big Agriculture is pushing modified corn sugar. Big food companies are pushing unhealthy processed foods on all of us. And so on. Leave aside the issues of individual autonomy and sovereignty for the moment. But these sorts of arguments do seem to cause a tin ear like sound to me. After all, almost everything I read these days starts with the same claims. Except just replace the “unhealthy foods” with some other axe to grind like “treats workers poorly” or “discriminates” or “wrecks the planet” or “drains money and the life from local communities.” Our concern about obesity is simply another charge in the pre-ordained case against markets, capitalism or their ugly children the corporations. No analysis needed.  Don’t remind folks that if people wanted to eat lettuce, “big corporations” would make record profits trying to sell us lettuce. Don’t remind folks that “corporations” are actually made up of people just like you and me. Your neighbor works for a corporation. Your dad and mom. Your friends. Is it some nameless faceless rich white guy in a castle emanating a social arrangement from his perch that is doing all of this nefarious stuff?

Like I said, I went to McDonalds the other morning. They made some profits selling me a salad. How absolutely evil.

 

Bizarro World

(1) Hedge fund manager supports minting of the trillion dollar coin (I think he’s advocating two of them or more).

(2) The IRS should be abolished.

(3) Homeland Security clamping down on Bitcoin. This, like the Health Care Law, is yet another Trojan Horse for the government to intervene or ban anything that can be deemed a “threat” to National Security. Pretty soon they’ll be closing down sites like mine too.

 

(4) Is Congo growing?

Did you know that the NET price of attending a public community college is lower today than it was in 1991? Well, it is (see Figure 9). You are probably better off sending your kids to the local community college for two years to get their core courses out of the way, and then send them off to be indoctrinated to the tune of $60k per year for only two years.

 

This interesting piece describes how progressives and conservatives seem to be aligning against the Common Core state standards.

Without commenting on the Common Core itself this little marriage helps me really understand the challenge I have as an economist and someone who appreciates voluntary association and private property rights. People have no clue what “capitalism” is. It appears from this piece that piles of foundation money and corporate money coupled with government imposing one-size-fits all testing standards on all schools (my supposedly “Catholic school” abides by the standards) is what infuriates opponents of the Common Core. And that, it appears, is what they call capitalism.

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