As far as what Patrick and Scott Brown say in the piece regarding following the “rules” by standing when the President enters and otherwise showing deference for the position, I’ll just say phooey. I’ll let Herbert Spencer cast some aspersions for me:

Of the political superstitions lately alluded to, none is so universally diffused as the notion that majorities are omnipotent. Under the impression that the preservation of order will ever require power to be wielded by some party, the moral sense of our time feels that such power cannot rightly be conferred on any but the largest moiety of society. It interprets literally the saying that “the voice of the people is the voice of God,” and transferring to the one the sacredness attached to the other, it concludes that from the will of the people, that is of the majority, there can be no appeal. Yet is this belief entirely erroneous.

Suppose, for the sake of argument, that, struck by some Malthusian panic, a legislature duly representing public opinion were to enact that all children born during the next ten years should be drowned. Does any one think such an enactment would be warrantable? If not, there is evidently a limit to the power of a majority. Suppose, again, that of two races living together — Celts and Saxons, for example — the most numerous determined to make the others their slaves. Would the authority of the greatest number be in such case valid? If not, there is something to which its authority must be subordinate. Suppose, once more, that all men having incomes under 50 pounds a year were to resolve upon reducing every income above that amount to their own standard, and appropriating the excess for public purposes. Could their resolution be justified? If not, it must be a third time confessed that there is a law to which the popular voice must defer. What, then, is that law, if not the law of pure equity — the law of equal freedom? These restraints, which all would put to the will of the majority, are exactly the restraints set up by that law. We deny the right of a majority to murder, to enslave, or to rob, simply because murder, enslaving, and robbery are violations of that law — violations too gross to be overlooked. But if great violations of it are wrong, so also are smaller ones. If the will of the many cannot supersede the first principle of morality in these cases, neither can it in any. So that, however insignificant the minority, and however trifling the proposed trespass against their rights, no such trespass is permissible.

When we have made our constitution purely democratic, thinks to himself the earnest reformer, we shall have brought government into harmony with absolute justice. Such a faith, though perhaps needful for this age, is a very erroneous one. By no process can coercion be made equitable. The freest form of government is only the least objectional form. The rule of the many by the few we call tyranny: the rule of the few by the many is tyranny also; only of a less intense kind. “You shall do as we will, and not as you will,” is in either case the declaration: and if the hundred make it to the ninety-nine, instead of the ninety-nine to the hundred, it is only a fraction less immoral. Of two such parties, whichever fulfils this declaration necessarily breaks the law of equal freedom: the only difference being that by the one it is broken in the persons of ninety-nine, whilst by the other it is broken in the persons of a hundred. And the merit of the democratic form of government consists solely in this, that it trespasses against the smallest number.

The very existence of majorities and minorities is indicative of an immoral state. The man whose character harmonizes with the moral law, we found to be one who can obtain complete happiness without diminishing the happiness of his fellows. But the enactment of public arrangements by vote implies a society consisting of men otherwise constituted — implies that the desires of some cannot be satisfied without sacrificing the desires of others — implies that in the pursuit of their happiness the majority inflict a certain amount of unhappiness on the minority — implies, therefore, organic immorality. Thus, from another point of view, we again perceive that even in its most equitable form it is impossible for government to dissociate itself from evil; and further, that unless the right to ignore the state is recognized, its acts must be essentially criminal.

Got the Blue Book Blues

They’re 12 pages (6 sheets) of lined 8.5″ by 11″ paper. If you asked me what I thought they cost I probably would have said 10 cents each. I use somewhere between 300 and 500 of these for each examination (big one at least) I given in my larger classes. In other words, I am spending well over $300 just for the paper to write the exams on.

Never was this information given to me. Never was there any indication that I am using up lots of valuable resources. And certainly I receive no benefit from trying to figure out a way to reduce these costs. If this is right, then our department is easily spending something near $5,000 per year to pay for blue books. Surely there is a way to reduce our costs – I may decide to hand out colored paper and have a stapler at each exam – after all, 500 sheets of purple paper costs $8.49 – I’d need about 4 reams for each test, for a total cost of less than $35.00. I suppose I could also save the department money by offering multiple guess tests, or offering fewer exams – after all, I have been criticized elsewhere with the claim, “if economists ran the U of R, all the paths would be dirt and we’d teach the classes in tents.”

I’ll stop there. It’s the weekend.

At the same time as our university installed the Solar-Dok, it broke ground on a new student dormitory. This time the stakes are a little bit higher – the dorm is slated to cost $17 million. How is this relevant, don’t we need to build dorms to house students? Yes, but we’ve decided that this building would be built to LEED “Gold” standards – i.e. it’s going to be a “green” building. To make a building certifiably green requires two major expenses – planning and production. The planning costs include the increased costs to design, commission, documentation and energy modeling to meet LEED requirements. Estimates of these costs are evasive – this source indicates that they range from 1.5 percent to three percent of the costs of construction. For example, a Natural Capital center in Portland that is a third larger than our building is estimated to have cost $322,000 in planning alone (3.2 percent of its $10 million in construction costs). Building green also requires a change in the way buildings are constructed and a change in the materials used. The need to label a building green implies that building green is not cheap. The physical expenses include more work at the site itself to prepare it, different HVAC systems, different lighting systems, different roofing systems, different materials, and different places to secure materials from as compared to building conventionally. Estimates of added construction costs are in the three percent to eight percent range.  For example the construction of a Steelcase furniture manufacturing plant in Michigan to LEED Silver standards is estimated to have added three percent to its construction costs. More complex facilities build to higher standards would likely cost more.

Taking a moderate range from the two cost estimates (6 percent of total costs) then building our new dorm to LEED Gold standards is probably going to add about $1 million to the costs of the dorm. Let me ask some reasonable questions.

(1) Is spending an extra million dollars to construct the building going to deliver energy and water and maintenance savings? If so, how much?

(2) Is spending an extra million dollars to construct the building going to deliver the promised environmental benefits? At what cost?

How many of you think I would get clear answers to these questions if asked? How many of you think that someone actually did these calculations? I am sure someone did. Right? After all, we’re talking $1 million. We’re talking valuable resources, someone else’s resources. It’s all just harmless symbolism, right?

Is there any way to address these issues and still be invited to a New Year’s Eve party?

Tax collections and tax rates mean nothing. The true burden of government is captured by the resources it consumes. If it spends nothing every year, and merely collects taxes and gives them right back to us, the tax collections themselves may cause distortions and may themselves be costly to collect, but the burden of government is extremely small. On the other hand if governments spend trillions of dollars every year, but never collect a dime in taxes to do it, those are substantial costs, as it takes real resources to do this today, and will require payment in some form or another from taxpayers in the future.

I’d also add the caveat that “big” government in the sense I am going to depict below is NOT a priori evidence of bad or intrusive government, though it certainly is a piece of data to consider. For the purposes of this series I want to show the data without much commentary.

The following chart captures how spending at all levels of government has increased since 1960. The data are all in constant dollar terms (as of October 2011 prices). I have also eliminated the expenditures of transfers at the local and state levels – a huge chunk of their nominal spending comes from federal to state, federal to local and state to local transfers – so we need to pull these out so as to not double count. A detailed analysis of the productivity of government expenditures would be required to make any deep observations about the data, and is the topic of a longer-term research project of mine (sort of an update of this paper).

Sources: US Census of Governments, US Census, Bureau of Labor Statistics, Office of Management and Budget, NASBO, Various Years

I’d only like to make three observations on the obviously growing and large level of government spending in the US economy.

1. I take a Hayekian view of this. I think the level of government spending is very much an emergent process. No single person has the ability to say, “aha, I am the US Czar now, so I will set expenditures on an ever upward march!” I know the right and some libertarians are prone to this kind of an argument, and I can see its allure. But it is not very useful. The level of government spending is an emergent order that is the outcome of hundreds of millions of small decisions made over many years. Sure, “we” can possibly increase or reduce it with some pen strokes, but that is a simplified way of thinking about the issue. For example, since we are so darn rich, it might be the case that “we” demand more government spending as a matter of course. Or, since we are so darn rich it might be the case that “we” can tolerate a lot more government spending as a matter of course. I really have no idea what is the reason, but it is clear that the income elasticity of demand for government spending is not a small number.
2. For those of you wanting me to jump on this data, you might reflect on the nature of public goods (this idea is not original to me). If the government is in the business of providing truly pure public goods, then you should not see real, per-person government expenditures increase very much as population and GDP increases. Why? Because a pure public good is something for which providing it to one person is no less costly than providing it to 10 people. Think of viewing a sunset, or a missile defense system. If the US needed to spend $1 trillion on national defense to protect a population of 200 million, it should not cost 50% more to protect a population of 300 million. Of course, this is not what we see in the data.
3. Notice the dramatic crushing of the government during the soul-crushing conservative Reagan years and the dramatic expansion of government during the bleeding heart liberal years of Clinton.

1. Here is Alex Tabarrok:

“What astounds me is not that someone could amass $35,000 in student loans pursuing a dream of puppetry, everyone has their dreams and I do not fault Joe for his. What astounds me is that Richard Kim, the executive editor of The Nation and the author of this article, thinks that the failure of a puppeteer to find a job he loves is a good way to illustrate the “national nightmare” of the job market. Even in a wealthy society it’s a privilege to have the kind of job that Kim thinks are the entitlement of the middle class. And, as Tyler says, we are not as wealthy as we thought we were.” Do go and check out the information at the bottom of the post.

2. Here is Tyler Cowen:

She has heavy student debt and does not know how to pay it back; in the meantime she has become an activist against Bank of America’s proposed debit card fee.  She doesn’t have a full-time steady job and her story is here.

She majored in art and architectural history and spent her summers interning at art museums.  Here is more:

She and her boyfriend — a law firm paralegal working against the proposed AT&T and T-Mobile merger — spend their days living frugally. They have no television or car. They rarely eat out. They just bought a tub of 48 random beers for $15 at a grocery store.

She has sent job applications to Planned Parenthood, the Center for American Progress and SEIU but has heard nothing. She is fretting that a grace period for her student loans ends in December.

I should stress that I am sympathetic with some of her choices (not the tub of beer), and you can read this as reflecting some strengths of American higher education.  Still, not all liberal arts students have her organizational and media talents, and this kind of story goes a long way toward explaining the current job market malaise for the young.  Even she is having a hard time finding remunerative work and getting on a career track.  Furthermore, she doesn’t seem to be striving for that.

I want to write a post about college major choices, but there is a serious internal debate I am having and it is by no means settled. if everyone majored in “the right majors” I am not convinced the world would be very different today. Evidence perhaps to be provided at a later date. Note that I consider myself fortunate, not of particularly good foresight.

It might seem reasonable to some people that such questions are not out of bounds, particularly given the hundreds of thousands of dollars colleges dedicate to such efforts and the tens of billions of dollars the government directs into those same efforts (where do you think they might get such ideas?). That said, let me provide for you, sans comments about my raising this question with my employer, one small effort to “Go Green” here in Rochester. I present to you, in all of its glory, the “Eco-bench,” formally known as the SolarDok, one of several “environmentally friendly” products sold by a company called Enerfusion. I am not even going to try to investigate where that company gets money from, let’s just assume that everything they do is on the up and up.

Here is the new Ecobench at my school.

Of course, it rarely rains in Rochester and the sun shines all the time, so I just happened to be cherry picking a day to snap these pictures.  A full view of the Eco-bench is below.

So, this is basically a bench with a table, nominally capable of seating 8 people, but at best capable of seating 4 people, and unless those 4 people are intimate friends, more likely to hold fewer than that. Of course, all campuses need benches and tables, so maybe this was a slightly more awkward version of something they otherwise would have put in. That it is made of recycled materials (which perhaps is green, but that’s not at all clear) and is powder coated instead of painted with traditional paint perhaps makes it a little more expensive than a typical bench.

But this bench has one “cool” feature – it is also a charging station. It has about 10 square feet of solar panels attached to its awning, and those panels are connected to a battery (that large box you see below the table) so that people can plug in their laptops into one of the 4 conventional plugs or to plug in their phones, cameras, iPads or other USB devices into the two USB charging ports in the table.

Seems cool. As an experiment, to see if it might provide some conveniece for students, you might think it makes some sense to pay a little more for this bench than a typical bench. A typical metallic bench, bolted into the ground, could cost you around $1,000. I am sure University purchases could get a deal at least as good as I can find randomly online. So, when I first noticed this bench, I assumed that perhaps we wasted another $1,000 for the show of it, for a total cost of around $2,000. That’s not ridiculous I suppose, after all, the college spends hundreds of thousands of dollars each year on bagels, cookies, sodas, coffees, etc. for various events that are held on campus. And if this bench could double as a place to charge up your stuff, maybe it would be a good thing.

Now, let’s remember that no student or faculty member I have ever met has ever clamored for an outdoor charging station, nor is there really a need for a table or bench in the location that it happens to be in and also ignore the fact that between September and May, when students are on campus, at best there are three months of nice weather when people might conceivably use the bench. Surveys of students that I have done suggest otherwise, and the university never actually bothered to ask anyone outside of the few “green students” who pushed for its installation if they actually wanted it. That brings up an interesting point – if you asked me if I wanted an Eco-bench for my backyard, I think I would say yes as well, so long as I did not have to pay for it, which of course none of these students does, at least today.

Being interested in these sorts of things, I was stupid enough to try to figure out what this “Eco-bench” cost the university, and also decided to figure out what it might do to the environment.

So, what DID it cost? Well, a little more than the $2,000 I expected would be the price tag. Answer: $11,500 including installation. Let me repeat that, a plastic bench which charitably seats 4 people, with a table and (perhaps reliable) charger attached to it cost $11,500. Do I need to ask any of my readers under what circumstances you would ever be inclined to make such a purchase. Note that this cost does not include any of the known costs that will inevitably be incurred from maintenance of such an object. After all, the life of those solar panels is not infinite (likely to be in the 25 year range) and the life of the battery is much shorter (and ignore all those nasty chemicals that are housed within that battery), and the various parts of the bench need to be replaced and refurbished just like anything else on campus. Let’s just ignore that and look at exactly what this bench has done. I argue that no bench should cost that much, but perhaps it is a “reasonable” investment for a school to make, perhaps as a way to reduce energy expenditures for the campus, or to have a positive impact on the environment.

Indeed, that is the message the bench is trying to portray – this sticker is prominently displayed on it.

Making some very generous assumptions about the solar intensity hitting my city and the size of the solar panels on the bench and the efficiency of the solar panels (say, 5 kilowatt-hours per square meter per day of intensity, 15 square feet (or 1.4 square meters) of solar panels and 20% efficiency) the bench could generate about 511 kilowatt-hours of electricity per year (again, these are extremely generous assumptions about power capacity). Let’s make two additional generous assumptions (remember the two we already made: that the device has no maintenance costs, and that it generates a lot more electricity than it reasonably can be expected to produce). First, assume that a student has a device plugged for every single possible hour that the table produces electricity (remember where we live). Second, and perhaps a more tenuous assumption than the first, assume that a student who plugs in a laptop into Eco-bunch is using this electricity as a 100% substitute for electricity that would have been produced on the grid, AND that the power generator in the grid would actually reduce the burning of coal or gas in accordance with how much solar electricity is reducing the need for it (remember that a country like Denmark, a world leader in wind which gets nearly 20% of its electricity from wind, has still not reduced a single coal power plant, indeed it has added some in order to provide the needed backup for the “renewable” energy it produces).

How much electricity costs would we be saving under all of these assumptions? Well, including taxes and distribution charges, my average utility bill from Rochester Gas and Electric last year showed me about a 9 cents per kilowatt hour cost for all of my electricity. Let’s assume that on campus the electric costs are twice as high as they are for my house. So, each kilowatt-hour of electricity produced by the bench will “save” my campus 18 cents of electricity costs. 18 cents per kilowatt-hour times the 511 kilowatt hours yields an annual electricity savings of … $91.98. You might want to scratch out on an envelope what a more realistic estimate of the costs savings would be (I’d bet they are closer to $15).

OK, so here’s a simple cost-benefit calculation. Would you spend $11,500 on an asset which generates income of $91.98 per year? That’s a return of 0.8% per year at best. Or to put it another way, suppose the bench was infinitely lived, how many years would it take to recoup that investment if we ignore discounting?  Only 125 years. Not bad!

Well, my good environmental economists might be thinking, “yes, it’s costly, but it might still make sense! After all, it is costly to burn coal to make electricity, it will contribute to a warming planet, so maybe this bench reduces enough CO2 to make it worthwhile.” Sure, I like that question, it is a good one to ask. The Carbon Fund tells us that each kilowatt hour of electricity produced by a coal fired powerplant (oops, there’s another assumption – after all, there is a large nuclear plant near here, as well as the possibility of getting energy from hydro, so let’s ignore that too and assume that all electricity being replaced comes from coal) generates 1.31 pounds of carbon dioxide.  Therefore, assuming 100% of the electricity from the bench replaces coal production entirely, then the eco-bench will save about 722 pounds of CO2 from being emitted each year. This is roughly .36 tons.

What is the economic/climate damage from each ton of CO2 emitted each year? The midrange estimate from the Intergovernmental Panel on Climate Change is about $25 per ton of CO2. This is the value/cost of rising sea levels, expanded malaria ranges, changes in crop growth, etc. that we are told will happen when the climate warms further. So, for a situation to make environmental economic sense, we should be willing to pay up to $25 to prevent $25 of damage from happening. If we pay $30 to stop $25 of damages, we are actually inflicting more damage than by doing nothing. Note that neither outcome may be desirable — but if we cannot use this metric, then what CAN you use to guide policy (btw I have entertained dozens of different responses to that question). You might reasonably cite distributional concerns, but those are not to be confused with the waste of resources if we spend $30 to stop $25 from damages.

The per pound cost of CO2 emissions is therefore 1.25 cents. Therefore, the 722 pounds of CO2 that would have been emitted were it not for “eco-bench” would be expected to cause about $9.03 of damages to the globe. So, we’d be making a good environmental decision if we spent $9.02 per year or less to prevent the damages and a poor one if we spent more. Therefore, ignoring the dollar savings from electricity, we have managed to spend $11,500 on an asset which generates an annual environmental savings equivalent to about $9.02 per year. What is the “return” on an asset like this? It is 0.078% per year. Or to put it another way, this is the equivalent of spending $32,050 for an asset which reduces one ton of carbon dioxide every year. Suppose a reasonable long term return on safe assets (i.e. the returns are assured, which again is not true for Eco-Bench) is 5%. An asset worth $11,500 would yield a stream of certain benefits of $575 each and every year, forever. Therefore, the “Eco-bench” is equivalent to spending about $575 every year to prevent a cost of $9.03.

This is worth repeating. As an environmental “investment” this Eco-bench spends roughly $575 every year to prevent $9 of damages. My estimates are already incredibly conservative. But suppose I am off by a  factor of twenty beyond my already conservative estimates – the thing is still an awful idea. In that case, we’d be spending over triple the amount we would ever want to spend to prevent the damages from the emissions. As it stands, we are spending more by a factor of sixty-four. That’s not 64% more. That’s not 640% more. That’s more like 6,400% more than we ought to be spending.

Eco-bench ought to be renamed “eco-stench” because that’s how good an economic investment it is and its really how good an environmental investment it is. Might I remind my readers that our fully loaded tuition and fees exceeds $56,000 per year. Even if every student gets a 50% discount on this price, we’re talking near $30,000 per year. Remember that some of my students pay their own way for college – some famously working full-time jobs or two part-time jobs just so they do not have to rely on their parents and/or government. Or remember one of the biggest concerns of the OWS crowd: massive college loan debt with no job prospects to show for it.

Oh, and did I forget to make clear one additional assumption we are making above? That the bench itself was costless to produce, or at least imposed no more environmental impact in its production than whatever bench would have replaced it (of course, this ALSO assumes that we need the bench, that there is no alternative better use of resources than putting in a bench). We wouldn’t expect folks to recognize this would we? After all, I’ve seen people complain that fracking for natural gas is bad because it takes concrete to build the well-pad and it requires cars and trucks to service the well-pad — as if no resources are required to produce and deliver energy from windmills or solar panels or biofuels. Sure.

This is where I’ll have to stop, not because the story gets less interesting from here, but rather because it gets more interesting from here. But divulging anymore would probably do more than have me removed from only polite company. And as I am not a bachelor with few responsibilities, that’ll have to be the end of the story for now.

UPDATE!: Hey, look, we even just won an award for our efforts. No mention of course about whether any of those efforts accomplish their goals or are cost effective. Who thinks the recycling program is cost-effective? What about building to LEED standards? OK, so ignore costs – who is confident that we’ve done serious calculations to ask whether these sorts of things actually improve the environment? After all, the entire city of Rochester has never bothered to do a cost-benefit assessment EITHER of the economic costs and benefits OR the environmental costs and benefits. It’s not very collegial to be asking such questions. Nope. Sustainability is like pee-wee soccer – everyone wins just by showing up. The 9th place team gets the same trophies as the first place team.

UPDATE #2: We just won another award! This time from the EPA. Not the same award I gave out last year of course.