Our favorite correspondant sends this note: In the ever more intense race between Brad DeLong and Paul Krugman to be the first to destroy his reputation completely, we have the latest effort at:
In which Paul decides that it is EVIL to employ the tools of economics to compare alternative uses for scarce resources. Specifically, to do what David Friedman has done recently on sci.econ; compare the costs and benefits of the Kyoto treaty with the costs and benefits of (as Krugman derisorily puts it) "only ... adapting to the changes" .
Of course, who could be behind this but No Blacks in Brazil Bush, dastardly head of SMERSH-ENRON who will leave no stone unturned in advancing the cause of that Great Malefactor of Wealth.
Except, wait a minute, NBiBB outfoxed himself a while back in the turf war with the Clinton-Gore family:
http://www.cato.org/dailys/02-06-02.html
<<------------------------------------------- February 6, 2002
Why Enron Wants Global Warming by Patrick J. Michaels
(Patrick J. Michaels is senior fellow in environmental studies at the Cato Institute and author of "The Satanic Gases.")
By now, much to the chagrin of my greener friends, it is common knowledge that Enron Corporation was lobbying the Bush administration for highly profitable policies relating to the Kyoto Protocol on global warming. In fact, the tatters of Enron still want the administration to place a cap on carbon dioxide emissions so the company can broker the trading of "permits" to emit carbon dioxide under that cap.
....Enron, of course, would be happy to pass the [natural] gas through their pipelines after brokering the permits to burn it. So Enron was very big on Kyoto. Company correspondence asserted it would "do more to promote Enron's business" than any other single regulation.
...[in] a 1998 letter, signed by Enron's then-CEO Ken Lay ....dated Sept. 1, asked the president to shut off the public scientific debate on global warming, which continues to this date. In particular, it requested Clinton to "moderate the political aspects" of this discussion by appointing a bipartisan "Blue Ribbon Commission."
The purpose of this commission was clear: high-level trashing of dissident scientists. Setting up a panel to do this is simple -- just look at the latest issue of Scientific American, where four attack dogs were called out to chew up poor Bjorn Lomborg. ....
Imagine a 1940 congressional hearing to discredit Einstein. "This man actually believes the faster you drive, the slower your watch runs. Mr. Einstein, then why weren't you here yesterday?"
The public, listening on radio, immediately concludes this Princeton weirdo is just another academic egghead. End of reputation.
The proposed commission was billed as an "educational effort" that would lead to "subsequent policy actions," which the letter itself recommended. These included a directive to "establish the rules for crediting early, voluntary emissions reductions [of carbon dioxide]."
And who was going to sell these credits? Enron, of course.
...."We urge the Kyoto Protocol not be submitted to the Senate in the near future, where pre-emptive rejection would remove the U.S. from a political leadership role," said Lay's letter.
In other words, Lay wanted to derail the normal democratic process of having our elected officials vote on a treaty, so that Enron could prosper.
While that was happening, Enron commissioned its own internal study of global warming science. It turned out to be largely in agreement with the same scientists Enron was trying to shut up. After considering all of the inconsistencies in climate science, the report concluded: "[T]he very real possibility that the great climate alarm could be a false alarm. The anthropogenic warming could well be less than thought and favorably distributed."
One of Enron's major consultants in that study was NASA scientists James Hansen, who started the whole global warming mess in 1988 with his bombastic congressional testimony. Last month, he published a paper in the Proceedings of the National Academy of Sciences predicting exactly the same, inconsequential amount of warming in the next 50 years as the scientists that Enron wanted to gag. --------------------------------->>
Demosthenes thinks my assertions that really cutting emissions would mean cutting back to much lower levels of standard of living are funny, ha ha. Of course, he doesn't have any facts or numbers to back this up (or if he does, he hasn't shared them with me); just his insouciant certainty that it can't be all that hard to make radical changes in an economy the size of ours. Well, Demosthenes is about to find out why it's not a good idea to make fun of MBA's about things with numbers. Because now we're going to see what an MBA's idea of fun is.
Which is to say, running the numbers and seeing how they come out. When quant jocks argue with each other, the usual response is for the better informed one to chuck a file full of data at the offender and say "you do the math". In this case, I'm not sure my detractors can, so I've done it for them. Oh, Demosthenes, it didn't have to be this way. Really it didn't. And next time, when I say something about GDP, I have a feeling that Demosthenes is going to trust me.
Methodology This section is only for the people who are going to pick through it so that they can a. (Liberals) Scream that my treatment of the transition from GNP to GDP in 1955 invalidates everything I say b. (Conservatives) Pick through every decision I made with a fine-toothed comb for the sheer joy of proving someone else wrong.
If you must read this section, turn off any heavy machinery you may be operating. Do not mix with alcohol. And if you are doing something important, like heart surgery, or inventing the next furby, maybe you should put off on this. Like, 'til you retire.
My methodology is extremely crude; I'm sure others can pick holes in it at their leisure. But in the main, it seems pretty solid to my humble eyes. I downloaded, from the National Bureau of Economic Research, and Free lunch (both very cool sources of free economic data compiled from government sources. I mean, if you think that such things as free economic data are cool. Oh. . . it's just me, then. That's okay. If you invite me to your parties anyway, I'll just stand behind the bar and pour drinks, and I promise I won't try to talk to anyone.)
For standard of living, I've used per-capita GDP. Yes, I know it doesn't capture all the intangibles of clean air and such, but our air is cleaner than it was in 1950, we live longer, etc. It is, as far as I am concerned, an adequate proxy.
I wanted to get the GDP data and the population data from the same source (the BEA), so I annualized quarterly GDP figures with a non-weighted average of the quarterlies. It's not exact, but the differences are, for my purposes, trivial.
GDP data is only available from 1947 on, so 1947 is our starting year for the numerical analysis, although I did use one figure, population for 1900, from the BEA source.
I downloaded a terrific spreadsheet from the Carbon Dioxide Information Analysis Center, another government site, showing carbon emissions from all the countries they could get data on since 1791. It's fascinating -- and not only for the emissions data, but because there are sad little pieces of the spreadsheet which show historical data, like that for "Unified Korea" until 1947, that illustrate that CO2 isn't the only footprint industrial society has left. I used their number for net CO2, which includes fuel and industrial uses such as cement production, but not things like people breathing, which is fine because I don't think any of my readers want to see a plan to cut down on the latter sort of emissions.
Carbon emissions data ends in 1998, so that's where my calculations end.
Using these three basic numbers -- population, CO2 emissions, and GDP -- I proceeded to extrapolate some figures. The full spreadsheet can be found here.
Highlights from the Data So, what did we find out? That GDP used to be very damn low, for one thing. Also, you don't realize, emotionally, how devastating the Great Depression was until you realize that per-capita GNP was virtually the same in 1940 as it was in 1930 -- and as it was in 1919. In 20 years, the economy had gone nowhere. On the other hand, GNP more than doubled during WWI.
(Note: The primary measure of national income prior to the 50's was Gross National Product. We now use Gross Domestic Product. The differences, for our purposes, are trivial. I would explain it to you, but you're already having difficulty staying awake. Also, before I get the inevitable crank who emails me to tell me that of course I can't compare 1900 to 1998 because of inflation, the numbers are calculated in constant dollars; in other words, the GNP number approximates, on average, the purchasing power of 1900's GNP today. 'Kay?)
The summary numbers are (drumroll please):
That's right: per capita income in 1900 was around $2500.
Try this little excercise. Take your, personal family income. Now, multiply per-capita GDP by the number of people in your household. Then divide your income by your family's "share" of GDP. That's going to be your income multiplier.
Now, multiply 1900's GDP by the number of people in your household. Then multiply that number by your income multiplier.
The result is how much money you would have had to live on in 1900 -- in today's dollars. Our great-grandparents were poor.
They also emitted a fair amount of carbon -- although, of course, not nearly as much as we do. Now let's look at a few charts. Yeah, charts! I hear you cry. The clapping and cheering are ringing in my ears. I know, there's nothing more fun on a gorgeous Saturday afternoon than charts -- and have I got some great ones for you!
First, let's look at per-capita GDP growth since 1947. Why 1947, you ask? Well, because that's the year that I could get GDP data from, and while the differences between GDP and GNP are fairly trivial, I wanted to work with a single, continuous data set. If you're interested in finding out what our ancestors were doing before 1947, download the spreadsheet and enjoy the full majesty of the various data sets for yourself.
And what is Per-Capita GDP? It's the number of GDP's you have for every capita, of course. Tee-hee! If I only amused you guys as much as I amuse myself. No, seriously, it's the amount of national income divided by the number of people -- each citizen's "share" of GDP. It's a good approximation for standard of living. So let's take a look:
We've gotten richer since 1947. Much richer. But let's look at that little pink band. What is it, you ask? That's the period from 1973-1983, I reply. And why is it accented in pink? Because for people who are interested in the potential for reducing carbon emissions, that's a veyr interesting period; it's the impact of the oil shocks and the subsequent runaway inflation which (I would argue) was a result of the oil shocks as much as monetary policy. Now, if we look at the graph of our per capita GDP per ton, we can see that prior to 1973, there was a long run-up of per-capita carbon emission (the pink section illustrates the same time period on each graph) and then a precipitous drop following the oil crisis:
Notice anything about the two graphs? GDP was stagnant as hell. It's even more striking if we graph per-capita GDP on a logarithmic scale. Why would we do this, you ask? Well, because a $1,000 change in GDP is more important if GDP is $10,000 than if it is $100,000. Log scale charts allow us to think in relative changes rather than absolute changes. Clear? It will be. Look at the log scale chart:
As you can see, at the same time as per-capita carbon emissions are dropping, so is growth. Or maybe you can't see it if you're not used to staring at these charts for hours on end until your eyes glaze over and your tongue dries out and your nails bleed from biting them while you wonder what you can possibly find to say about the performance of the poultry industry during the great Salmonella crisis of 1974 that hasn't been said 800 times before by people who are smarter than you, and prettier, and sit in the front of the class with their shiny little palm pilots, hurling their hands in the air before the teacher has finished the question. . . . oh, excuse me, are you still here? Anyway, for those who aren't used to looking at the charts, I've taken the liberty of drawing straight lines through the starting and finishing points of per-capita GDP for the relevant period, and done the same for the 10 year periods before and after. And I'm sure you're staring at the page and thinking. . . how nice that she has a hobby. Aren't they supposed to teach them woodworking or something before they release them into the community? No, really, take a look:
As you can see, the band we're interested in is much smaller than the one either above (after) or below (before) it. What does that tell us? It tells us that the drop in per-capita carbon emissions was correlated with a drop in GDP growth, even though we were increasing our carbon efficiency, per dollar of GDP, like hell:
As you can see, while the overall trend in carbon efficiency per dollar of GDP is great -- we're using less than half as much carbon for each dollar of GDP as we were in 1947 -- the movement downward occurred primarily in two periods: immediately following WWII, when we switched from coal to oil for much of our fuel, and during the oil crisis. That's why although it's tempting to say that "Well, we increased productivity once -- we can do it again", it's dangerous. We'll never again see efficiency improvements like we got from the coal to oil switch unless we go nuclear (or discover some energy source I don't know about); for an explanation of why not, see this excellent piece on the efficiency of various energy sources. And the efficiency improvements following the oil shocks came after an enormous run-up in per capita consumption. We were driving inefficient boxes and otherwise wasting oil like hell; there's no reason to think that we can make similar improvements. And, as you can also see, even the efficiency improvements we made cost us, GDP wise.
The Payoff Demosthenes and others are challenging my assertion that in order to get back to 1950 level carbon emissions, we'd have to get back to 1950 level GDP. (Actually, I said "near".) Am I right? Well, as I hope you now understand from the foregoing, GDP growth is extremely well correlated with CO2 emissions. Which makes total sense. CO2 comes from producing energy. And energy is, at the heart, the stuff that makes everything else, whether it's your body burning fuel to think up smart posts on global warming (and you produce C02 while you're doing this), or your automobile burning gas to turn the wheels to get you to work at the factory where the electricity from the hydro dam powers the machines that make all the cool stuff we use. Given that we don't all have a hydro dam in our backyard, more stuff requires more energy, which means more CO2.
So: how much would we have to cut our standard of living in order to get back to still-somewhat-worriesome 1950 levels of carbon emissions, or pretty-comfy 1900 levels? Let's do the math:
Sit down, my little green buddies. I'm sorry you don't like the answer, but that's the truth. We've increased our carbon efficiency amazingly since 1950 -- but we've more than doubled the population of the country. To get back to their levels of emissions, we would have to cut our standard of living in half. And think that's scary? Take a look at the implied standard of living if we cut back to 1900 levels:
Now I know what you're going to say: We'll just have to be more efficient. Of course we will, but that isn't free. All the inefficient equipment, from coal plants to old cars to god-knows-what's-lurking-out-there-in-the-dark-industrial-heart-of-America has to be replaced. And all the resources we use to replace all the plants and cars and what have you don't get used to make other stuff we want, like cell phones and heart/lung machines and really good wild mushroom pate.
People who say things like "Well, we can make our cars more fuel efficient while we look for the answer" are deluding themselves. First of all, there's a limit on how efficient cars can be made. The Honda Insight gets up to 70 mpg, if you drive it under the absolute perfect conditions with a naked jockey at the wheel and no luggage (not that you can fit any in anyway). Don't let him stop for a beer, either, or the mpg will go down.
This is not practical for, say, a family of five. Even if the dog stays home.
And other, less efficient vehicles are less efficient because, in large part, they need to be. Trucking firms, believe you me, pay close attention to the price of fuel. Now, I'm not saying that they're perfectly efficient, but if there were a painless way to get 10 mpg more on their trucks, they'd be doing it. Not only is it cost inefficient (please, stop nagging me about the negative externalities. I'm getting there); but also, you really don't want an underpowered 18-wheeler with a chemical trailer full of cyanide sliding back down the hill when you're behind him. The tradeoff for fuel efficiency is either weight or engine power. Very hard to drag that kind of efficiency out of a passenger car, after a certain point; damn near impossible when your truck might have to haul a heavy load over, say, Wolf Creek Pass.
Renewables? Honey, they just aren't there. We're out of hydro sites. And as for the others, forget cost -- where are you going to put the solar panels to power New York City? Electricity doesn't travel well, and it's a bitch to store; you can't make the power in New Mexico and ship it to New Jersey. Nor can you put a major urban area on a power source that is highly variable for its base load. Oops, guys, it's overcast and the wind just died -- shut off the TV and go practice your butter-churning. C'mon. Yes, hopefully we'll get there someday. But that day isn't going to be now, or any time in the next ten years, absent a major breakthrough. You cannot put major breakthroughs that haven't been made yet into your model.
But let's say that we conserve. I'm going to throw you a bone and pretend that our increases in efficiency are magically costless, but don't go around thinking that this is so. Any efficiencies we achieve will almost certainly cost nearly as much in the short term as the money they save; in other words, if using 10% less carbon was going to cost us 10% of GDP, in the short term making our economy more efficient will still cost us 10% of GDP, even if we wring all the emissions savings out of efficiency rather than production. Capisce?
The reason that I am pretending it's costless is that I have neither the time nor the inclination, nor the knowlege, to build a working model of how productivity and CO2 efficiency would interact under an emissions reduction scheme. Just keep in mind that any savings would, over say a 10 year period, wash out in terms of improving GDP.
Let's look at our 1950 scenario:
If we improve our total efficiency by 10% -- which is, I am told, a stretch -- we get to live in 1967 instead of 1963. A wildly unrealistic 30% improvement in our CO2 efficiency brings us to 1977. To get back to now, we have to reduce our CO2 emissions, per dollar of GDP, by more than 50%. That's an implied increase in energy efficiency of over 200%.
So to get our economy back up to 1998 levels, with 1950 levels of emissions, your car would have to get an average of over 55 mpg. Your air conditioner would have to use half as much electricity. Every single thing that you use would have to magically become twice as efficient as it is now. Every factory would have to use half as much juice to produce the stuff you consume. If you think that this is even vaguely possible, go find the nearest mechanical or electrical engineer and let him explain to you, gently, how things work.
And if we wanted to really slow down global warming?
Your car would have to get 8 times its current mileage: 220 mpg. Your air conditioner, etc. would have to use 1/10th their current electricity. And that's not even to stop global warming -- just to slow it down a lot. Do you see why getting more efficient isn't going to get us there?
And please don't be fooled by the numbers. I'm sure that a fair number of you are sitting there thinking, "well, that's not so bad. $5,400 went a lot further in 1900". No, no, my friend, you do not understand. That number means that you try to do all the things you do today, such as eat, dress, and buy Eminem CD's, on $5400 -- at today's prices. The only people I've ever met who could do it were living in a squat. And keep in mind that this means that if you manage to get your hands on a more than your "share" of GDP -- someone else has to live on even less.
I am about to be bombarded with a litany of changes we could make, like moving closer to work. Okay, let's take New York. There are between 30 and 50 million people in the New York metropolitan area (depending on how you count). Where are you going to put them? How are you going to move them from place to place, when New York's transportation network is maxed out? How will you get them food, medicine, and the consumer goods they have come to enjoy? Whatever answer you come up with, it's going to be expensive as hell. Ripping up the domiciles of every person in the US who owns a car will leave you surprisingly far from your emissions goal, with an enormous bill and a lot of angry voters.
Conclusion Of course, there's always the possibility that I got something wrong; I am not, after all, a professional energy economist; I'm just an MBA with an internet connection and a little time on her hands. But, my chartreuse companions, that is not your way out; you do not have permission to sigh and say, "Oh, well, that's all right -- she must be wrong". If you think I'm wrong, you'd better be able to explain why. Otherwise, as long as my numbers are better than yours, you have to take them seriously.
And that's what this is about: taking global warming seriously.
I'm not a climatologist; I don't even play one on the internet. The evidence that I've seen has convinced me, grudgingly, that there's probably something there. Many of those who don't like what global warming implies are too quick to dismiss it. That's a cop-out; "I don't want to think about it, so if I close my eyes real tight and wish as hard as hard can be, maybe it will go away." It's valid to have a different opinion from mine; I'm certainly no expert. But if you do, it should be because you've analyzed the data, to the best of your ability and without wishful thinking; not because you want it to be so.
Stop laughing, global warming advocates; I'm coming to you.
The advocates are just as bad. They think global warming is a real problem. But when confronted with the enormity of the solution, they stick their head in the sand as far as it will go and say "I do believe in renewables! I do believe, I do believe, I do believe. . . " This is, frankly, -- well, my ladylike demeanor prevents me from putting a name to it, but it has no foundation in the real world. You are not going to cut our emissions back to safer levels without sacrificing a lot of GDP. 2/3 of the people living in 1900 lived under today's poverty line. They worked 12 or 14 hours a day for what they got, and many of them didn't have enough to eat. Those who lived in the cities usually lived in a couple of rooms with no electricity, no private plumbing, and sometimes no heat either. The ones outside the cities had more rooms and private plumbing -- if you can call a shack 25 feet from the back door "private". They ate less of everything. They died younger. In all measures of life, they were vastly worse off than we are today.
If you think you've got some magic way to live better on less, you'd better have some numbers to back it up -- not angry accusations as to the politics of the people who highlight the costs, or sarcastic comments about how I think we all have to go back to twirling parasols etc. First of all, parasols were not fashionable in the 1860's (when carbon emissions took off); they emerged in the 1870's and 1880's during the Parisian movement towards smaller hats, when ladies sought some way to stay fashionable yet still keep their skin a delicate white. (And with today's worries about skin cancer, you could do worse) But really, now, refusing to actually confront the costs of your goals is infantile, and is the reason that no one on the other side takes you seriously. You're giving them the ammunition to ignore global warming. You. Think about that.
A real dialogue about this -- the one we're not having because both sides are too busy screaming about the other side's dumb positions instead of addressing the real weaknesses in their own -- starts with taking the best scientific evidence about global warming and assessing the costs. And assessing the costs of stopping global warming. And talking, in a calm and rational manner, about where it is effective to lower emissions, and where to deal with the costs of warming. This is an attempt to set out some of the costs of emissions reduction. And unless you have something intelligent and reasonable to say about the numbers, I don't want to hear another parasol joke.
Can't they do anything right? Have you seenCaptain Euro? The Europeans have dressed their erstwhile hero in what appears to be a track suit left over from the costume pile one of the earlier episodes of "Murder, She Wrote"
The American missionary being held hostage by Muslim guerillas in the Phillipines has been killed in a rescue attempt; his wife was wounded, but rescued.
In a way, I feel sorry for Paul Krugman. The poor guy's been OTBE'd -- OverTaken By Events. I wrote a piece for Salon on the Microsoft lawsuits, and lo and behold, the day I sent it in, someone else filed a suit against them. So I have some sympathy. Krugman, quite innocently, files a column blaming the Bush administration for not doing anything about our intelligence problem, and those bastards go and do something right before it runs. Some days, it just doesn't pay to put your column to bed.
As Senate investigators examine evidence on the administration's Enron contacts, the White House counsel, Alberto Gonzales, has already delivered the verdict: Everything's fine, because officials did nothing to help Enron as it was collapsing.
I believe him. I also believe that the administration played no role in the death of Elvis Presley, an equally relevant assertion. Mr. Gonzales is pulling the same trick on energy policy that Dick Cheney has pulled on antiterrorist policy: Respond to real, serious questions about the administration's actions by self-righteously denying charges that nobody is actually making. Nobody has accused the White House of helping Enron when it was down, just as no Democratic leader has accused the administration of deliberately allowing Sept. 11 to happen.
Now, first of all, it isn't true that no one has accused the administration of doing anything to halt the collapse; several representatives have, for starters, as well as columnists in the Washington Post and -- if memory serves -- the New York Times. Even Paul Krugman, as I recollect, made much of Ken Lay's phone calls to the president at the time.
And second of all, the reason that the Senate is investigating Enron is that collapse -- not because of any influence it may or may not have had on energy policy. The Senate is seeking information about those meetings because the Senate wants to associate the words "Enron" and "Bush" in the minds of the public, not because it gives a rats ass about the influence of a defunct energy company on some now irrelevant energy initiatives.
The real questions in both cases are whether the administration failed to act against real threats because it was preoccupied with a preconceived agenda; why officials who manifestly got it wrong have not been held accountable; and whether, because nobody has been held accountable, the administration is continuing to make the same mistakes.
I know that I'm about to get a barrage of mail saying that energy policy and terrorism are not comparable; but bear with me for a minute.
In the case of energy policy, the administration still won't release information about Dick Cheney's energy task force. But it's clear that energy companies, and only energy companies, had access to top officials. The result was that during the California power crisis — which, it is increasingly apparent, was largely engineered by Enron and other companies that had the administration's ear — the administration did nothing.
This would be more compelling if the putatively excluded groups hadn't refused to meet with the commission.
As for the "increasingly apparent", it is nothing of the sort.
It's a ridiculous assertion. Enron lobbied California's government. So did CalPIRG and about 8 zillion other special interest groups. Both got parts of their agenda written into the deregulation. Which particular little pieces of the deregulation caused which parts of the crisis will be debated for years to come, but there's plenty of blame to go around, including the main causes of the crisis, WHICH WERE A DROUGHT THAT DREW DOWN HYDRO RESERVOIRS AND A BOTTLENECK IN THE NATURAL GAS PIPELINE, COMBINED WITH CALIFORNIA'S DRACONIAN AIR-QUALITY LAWS. AND AN INSISTENCE ON USING THE SPOT MARKET, WHICH WAS NOT ONE OF ENRON'S PET PROJECTS. Why aren't we hearing about Gore's tie to the energy crisis in California?
But just as John Ashcroft, who brushed aside appeals to make terrorism a priority, remains in charge of our effort against terrorism, Mr. Cheney — who ridiculed conservation and price controls, which in the end were what saved California — remains in charge of energy policy. And that scares me more than terrorism.
That scares me more than terrorism>? Well, of course it does, Paul; you live in Princeton, New Jersey. You are secure in the knowlege that if the terrorists every try to come out your way, they'll miss the exit like everyone else does, and drive round and round until they accidentally get back on the turnpike and end up in Tom's River.
Okay, I know that this is hyperbole, but let's get real here. Krugman is afraid that Cheney has his hands on our nation's energy policy because Cheney's going to put us on the path to a global warming disaster. This is presumably as opposed to the alternative in some fairytale Gore Administration.
Now, I'm sure that the Gore Administration would be friendlier to environmentalists, and less so to energy companies. But this is a democracy, not Stalinist Russia. The Gore Administration would be exactly as friendly to environmental groups as the congress and the polls allowed. The congress and the public fall somewhere to the right of those who think Kyoto is the perfect solution, as evidenced by the Senate's 99-0 vote against Kyoto. And, as I demonstrated earlier, Kyoto would have done very little about global warming. So, if you think that Cheney's going to lead us into a global warming disaster, you also have to believe that the Gore Administration would have lead us into the same disaster -- or any other administration that could conceivably actually be elected in the US.
And John Ashcrof ignored appeals from whom? No citation; I'm sure if anyone writes them, he'll come up with one obscure guy in Oregon whose newsletter -- circulation 23 -- was making these appeals, but I've yet to hear from anyone other than wing-nut defense hawks who can honestly say that they were calling to make terrorism a priority before 9/11. Krugman, as I recall, was calling for cuts in our defense budget.
Earlier this week the Environmental Protection Agency released a report confirming what the vast majority of climatologists, and every other advanced-country government, had already concluded: human activity is causing global warming, and the consequences will be nasty. But the E.P.A. did not propose any preventive action. Instead, it talked only about adapting to the changes.
Krugman isn't quite brave enough to talk about what changes might actually work, because, as an economist, he'd either have to tell unpalatable truths, or lie through his teeth.
Old hands recalled the days of James Watt, the interior secretary back in the 1980's. When scientists discovered that industrial chemicals were depleting the earth's protective ozone layer, Mr. Watt suggested that people wear hats, sunscreen and dark glasses. Luckily for the planet, he was overruled; the United States joined other countries in curbing production of ozone-depleting chemicals. The ozone hole is still growing, but disaster has at least been postponed.
In other words, we took action, and it didn't do any good. (I'm told the ozone hole is actually caused by the sun and the earth's magnetic field, rather than the chemicals.) Now that's something to celebrate.
No such happy outcome seems likely on global warming. After a curious pause, George W. Bush rejected his own administration's analysis. "I read the report put out by the bureaucracy," he sneered.
Clearly, this was a replay of what happened early last year, when the E.P.A.'s Christie Whitman assured the public that Mr. Bush would honor his pledge to control carbon dioxide emissions — only to be betrayed when the coal and oil industries weighed in on the subject. So the administration learned nothing from the California crisis; it still takes its advice from the energy companies that financed its campaign (and made many administration officials, including Mr. Bush and Mr. Cheney, rich).
Umm. . . Halliburton's a construction company, Paul. Yes, they construct oil pipelines and drilling rigs and such. But they made Cheney rich in the same sense that 250 million Americans driving cars made Cheney rich. And those energy companies didn't make Bush rich; his ancestors took care of that.
And it's one thing to reward your friends with subsidies and lax regulation. It's something quite different to let them dictate policy on climate change.
Many people believe that the Bush administration had a special window of opportunity on global warming policy. Politically, it could have been a Nixon-goes-to-China moment: Mr. Bush could have passed legislation that would have been totally out of reach for a Democrat. Furthermore, many corporations were actually eager for guidelines that would allow them to make long-term plans.
The fact that I might like to know when I'm going to die so I can make a will doesn't mean I'm quite ready to throw myself off the bridge yet. And as pointed out, ad infinitum, legislation that would actually do something about global warming -- as opposed to creating the perception of doing something about global warming -- is not legislation that any company outside of the manufacturers of solar panels is eager to see.
But because the administration continues to listen only to the usual suspects, that window of opportunity is closing fast. And bear this in mind: Whatever he imagines, Osama bin Laden can't destroy Western civilization. Carbon dioxide can.
And if it will, it's going to anyway, no matter who's in office. Neither Democrats nor Republicans are ready to tell the public they have to sell the split-level and move back into a one bedroom flat like the one Grandma used to live in. If we're headed for the abyss, we're all rushing there together.
Predictive validity: I'm tempted to slack off because it is hard when you write a column that's obsolete before it runs. But fair is fair: PV now stands at 5.5 out of 7, or 79%
George W. Bush is either the luckiest politician in history, or he's smarter than anyone has given him credit for. Which is to say that he was either happily beavering away on a plan which just happened to make the Democrats look like petty jerks when he needed it most, or he
a) Responded to a crisis with a decisive plan, or found out about the crisis a long time ago and carefully calibrated the release of information so as to defuse it and
b) Had the patience to let the Democrats jam their feet so far down their throat that all we'll be able to see come election time is their backsides sticking off the end of their necks -- and then deliver the killing blow and
c) Either way, exerted such terrific discipline that the opposition didn't see it coming and took the full force of the blow right between the eyes. Stand bye for the Dems staggering around in a daze, muttering "Where'd that come from". And
d) Brilliantly pre-empted the partisan bickering and Committee in-fighting that would have ensued had he just floated the idea gently. Of course, it'll cost him, in the Senate, especially -- but I'm confident it's a price he was willing to pay.
Now, I don't think that this is a cure-all; the CIA and the FBI still clearly require internal reform, and I'm going to want to see some action in the Middle East pretty soon. He's also exhausted my patience with the protectionist giveaways --are you listening, George? But God, politically it was exactly the right thing at the right time. Or at least that's my opinion. Patrick Ruffini and other real professionals probably disagree. And whether or not you admire this brilliance probably has close to a 1:1 corollation with your partisan leanings.
The Dems are starting to look like a tide of lemmings. You would think that they would have taken something away from the experience of Bill Clinton: like, if the president has astronomical approval ratings, don't engage in futile suicide attacks against the almighty fortress of public opinion. And yet, there are the Dems, bloody but unbowed, raising the banner one more time as they rally the troops to charge once more over the bodies of their dead and wounded towards their inevitable destruction.
Forward, the Light Brigade! Was there a man dismay’d? Not tho’ the soldier knew Some one had blunder’d. Theirs not to make reply, Theirs not to reason why, Theirs but to do and die. Into the valley of Death Rode the six hundred.
I was chatting with my father this morning about this; I just don't understand why the Democrats don't stop this futile assault on the presidency, when that's not in play for another two years, and concentrate on the local races where they might make some headway, consolidating their position in the Senate and possibly retaking the House. My father's opinion: they're afraid that if they do this, Bush will maintain his popularity and then, after Labor day, start running around the country pointing to Republicans and saying "these are the people I need helping me in the War on Terror." Probably true. Nonetheless, given that the only thing they've been able to achieve with their attacks is slightly raising Bush's popularity, while dropping the popularity of the Dems five points with every attack, you'd think they'd try something new. Then there's an unnamed source who thinks that Tom Daschle is crazy. Really. What is the definition of insanity, he points out, but doing the same thing over and over and expecting to get a different result? He has a point. However, by this definition, half the people in the government are crazy.
Which, come to think of it, isn't all that far-fetched.
Warblogger Watch has come under fire from a woman reporting "Live from the World Trade Center." An unemployed MBA alumna of the University of Chicago - that place where interned academics examine equations instead of actually existing economies, and enjoy their Austrian fantasies in cognitive dissonance-free comfort - takes us to task endlessly. Allow me to register a few words in our defense from my station beneath the "slush pile at a third-rate college newspaper."
Let's start with the facts:
1) I'm not unemployed
2) As far as I'm aware, the academics are allowed out at any time
3) Chicago is not part of the Austrian school. It is part of the -- ahem -- Chicago school.
4) Grady whatever his name is knows absolutely nothing of the practice of economics as it occurs outside the Macro class he got a B in an unnamed number of years ago. Economists very rarely sit around waxing theoretical; it certainly isn't the exclusive activity of any serious academic, and certainly not at Chicago, which is famed for it's quantitative approach. What those academics do is sift endless (I mean really endless -- I've seen it) amounts of data on the real world, applying rigorous data analysis to develop new hypotheses and test old ones. I mean, I realize it can't compare to writing books about your fictional boyhood in Jerusalem, or credulously repeating every allegation from but it's something.
"Jane Galt's" principal complaint against us is our juvenile refusal to give proper hearing to the arguments of our opponents. Given that nearly every posting is deals with a specific instance of warmongering on someone else's behalf, I find this assertion curious. If we don't engage the quote thoroughly - and for my part, I emphatically do not - it is likely because the words before us are from a yabbering ass, offered at maximum volume and with minimum acquaintance with both fact and logic. How, I wonder, did those encountering Lee Perry respond when they found him walking backward and striking th eground with a hammer?
Actually, my principal complaint with them is stylistic. They are only interesting unintentionally. My secondary complaint is that they don't argue intelligently. Their subsititution of phrases like "yabbering ass" for rational discourse is only my tertiary complaint with the site.
She is spot on re: some of her other charges. My shop teacher told me back in 1976 that I was perhaps the most competent builder of strawmen he had ever seen in practice, and I feel I owe very little the way of courtesy to someone who delights in other peoples' sufferings and indulges in the truly scatological. If admirable conduct these days demands quiet deference before the perpetrators of one of the grossest crimes against public discourse since the enactment of the Sedition Act, I proudly inscribe myself among the uncivilized.
In other words, I think hyperbole is a substitute for reason. Oh, stand proud, little man. Stand proud.
Though insufficient to land her a paying job, Galt seems to have read all the required management texts and Paul Samuelson books. She's got the telltale arrogance. Noam Chomsky and Edward Said et al., she says, have been saying the same thing for thirty years, and have been overtaken by history in the interim. If she had actually familiarized herself with either the works of Chomsky and Said or with history itself, she would probably not have ventured this statement. But then again, the disdain required by the boardroom impressed upon her sputtering brain by Chicago, she probably would have. Chomsky is profoundly anti-theoretical, and what he has been doing for the past thirty years (in addition to that little side job he's got redefining linguistics and dethroning the behaviorism that so enamored conservatives) is cataloging the misdeeds of the American government. If your appreciation of history is so minimal as to not apprehend the fact that we have put down almost every secular, progressive indigenous movement to rise, then it seems pointless to continue. Likewise, if Said has been saying the same thing for thirty years, perhaps he was writing in response to an unchanged constant, viz. the unremedied wronging of the Palestinians.
Grady is clearly not familiar with my whole bio, such as the piece where I was a quasi-socialist lit major. I've not only read Said and Chomsky; I've defended them from people like me. More ably than anyone at Warbloggerwatch, I might add.
So the situation in the Middle East hasn't changed. At all. Nothing. 1972, 2002. Same year. Indistinguishable. No reason to change a single opinion you've held. It's amazing how that flighty Thomas Friedman just abandons principle by responding to changing conditions.
And Chomsky is "profoundly anti-theoretical". Which is just what you want in a tenured professor of linguistics. Of course, credulously repeated every tenuous accusation made against the US, while simultaneously discrediting even the most well-confirmed statements by the US unless they support the conclusion you've already reached, can hardly be qualified as "practical", either.
But why am I bothering to refute this chap? It's not like he refuted anything I said. If your appreciation of history is so minimal as to read Chomsky without the numerous sources that ably refute him, and your knowlege of economics is so minimal as to make fun of the Chicago school for exactly the things that are not wrong with it, then it's hard to refute much of anything; it's hard to do much more than flap your lips when you talk.
Galt, while projecting a reasonable enough persona at times (though wrong nearly always), is just as flawed as her warblogging brethren. Convinced of her own heroism in defending the status quo, she is best left alone to contemplate the perfection of markets and the moral beauty of Richard Perle.
Note that my wrongness requires no proof, nor even examples; it is enough to know that I disagree with Said and Chomsky.
But it's hard to find proof when you don't read the material you're critiquing. (Strange, isn't it, how the sins of which the Warbloggerwatch crew accuses others are usually the ones to which they are most prone?) And if you read my stuff, you could hardly accuse me of defending the status quo. Unless you define the status quo solely in opposition to the utopian foolishness of the Chomsky crowd.
Gunn, with longtime railroad and transit operating experience including heading Washington's Metro system, said he realized when he agreed to take the job that Amtrak was in financial trouble. But he indicated that after digging through Amtrak's confusing financial accounting, he discovered the situation was worse than he expected.
Amtrak has already mortgaged almost everything it owns, including New York's Pennsylvania Station, and its debt has ballooned to $3.76 billion. That includes a $700 million debt increase this fiscal year that was used mainly just to keep the system running.
"What did we get for that investment?" Gunn said. "We got to survive another year -- maybe."
Gunn said previous Amtrak management " should have blown the whistle on this thing much sooner."
Think of Amtrak as a company owned by 300 million shareholders. Yes, that's us; the bunch of suckers they took for a ride.
What do we want? A decent rail system that doesn't require us to continue shoveling our money into the sucking vortex of its collapsing system. (Note, this may not be an achievable goal. But that's what we want.) At the very least, we want to stop the cash shoveling part.
What do the managers want? To continue holding their jobs. And how do they continue holding their jobs? By providing not-terribly-awful service to every minor county seat located near a powerful congresscritter. Hence the train that runs, virtually empty, between Chicago and Ann Arbor. Not once, but three times a day. And to do this -- and of course, also to provide jobs for 84(!!!!!) vice presidents and associated useless staff, they gutted the company. They took out loans to cover ordinary operating expenses, even though there was no conceivable reason to think that the situation would change ("while revenues were down again this year, for next year we've forecast a 90,000% increase in ridership due to the horde of space trolls that we confidently predict will destroy the nations airports and bus terminals, while leaving our train stations intact"); even the most captive of idiot boards wouldn't have allowed this, nor would the crookedest auditor. Make no mistake, if this were a private company, and it were in this state, it would be in receivership. And if its managers had declined to give the public the kind of information that this Gunn fellow is now disclosing, they would be in jail.
And Amtrak is precisely the kind of public-private Great Society partnership that 70's business was all about. After all, the important thing is not that this system is bloated, expensive, and immune to the prodding of common sense; the important thing is that the people who work for Amtrak need jobs, and there are people who need the trains to get from one place to another, and it doesn't matter that it would be cheaper to buy an economy car for every single previous Amtrak rider, because automobiles are tools of the devil. Rail transportation's the wave of the future, dude. Sustainable development is groovy.
Rail isn't even profitable where rail is supposed to work; the subway in New York loses moderate amounts of money (and is perennially starved for capital development funds that could improve New York's transportation picture); the commuter rail system loses a lot. And that's in the most densely populated area of the United States. How in hell is rail supposed to work in Nebraska?
Shutter it. Sell of the Boston-Washington line to a company that can actually operate it with a profit and without dumb politicians making sure that the trains go to every idiot whistle stop installed 100 years ago. Give the rest to the freight companies, or tourism companies, or anyone else who wants 'em. But for Gosh sakes, stop wasting our money trying to bring back the good old days of 1910.
Sasha Castel does a little discreet shredding of Warblogger Watch that's minutes of fun for the entire family.
Memo to Warblogger Watch: The reason that we're worried about terror attacks, my little red smurf, is that we live smack dab in the middle of the biggest terror target outside of Israel. If there's a suicide bomber, it will go off within five miles of me, and I could easily be in its way. If it's a dirty bomb, I -- like five million others -- am a dead woman. That's cause for a little worry. When there are demonstrably people in the world with the interest and determination to blow your fat ass off the map, the insouciant "can't happen to me" approach isn't sophisticated, it's stupid.
My current favorite bit of juvenalia at Warbloggerwatch is about Lileks:
Any third-year psych major could tell you that someone so profoundly alienated from his fellow men and so uncomfortable with his sexuality as to eschew all non-violent interpersonal contact with other males is in for serious trouble at a later date.
Yes, I'm sure that's true. And then the psych major would graduate and get some patients in the real world, and stop trying to make predictions about people based on pseudo-scientific, Pop-Freudian snap judgements.
Are any of these people old enough to drink? Emotionally, I mean. Their writing seems like random samplings from the slush pile at a third-rate college newspaper.
Update Gosh, this is hours of fun for the entire family. Another treasure leaps out:
"Susan Sontag and Noam Chomsky and Edward Said and Harold Pinter got their names in the papers again... You're still here? You're still talking? Why? The most obvious fact about the people who bravely -- oh, so bravely, so bravely -- dared to tell truth to power in the New York Review of Books and the London Review of Books, and the Cosmic Review of Blah-Blah, was how old they were... Old, old, old. Also tired, tired, tired. These people -- precisely these people -- have been saying these things -- precisely these things -- since, in many cases, the early Dylan years (Bob, mostly, although in some cases Thomas)... How interesting, gramps, how interesting; did you really know John Reed..."
This is a little wordier than the adolescent flip-offs used by the blogbrethren (e.g., Matt Welch to Gore Vidal: "Whatever, freak!"), but the animating spirit is the same: we are the New, you are the Old, so let's not even bother with you, gramps.
This can be an amusing approach when you're talking about fashion faux pas and such like. But if you're talking about war and peace, I should think that age and achievement would warrant more respectful attention.
I mean, Pinter wrote several of the 20th Century's best plays; Kelly wrote this stuff. You tell me who's irrelevant.
Assumption 1: Pinter wrote several of the 20th Century's best plays.
I find his dramas tedious and overwrought. But let's not argue this one; let's just call it unproven.
Assumption # 2 (assumes proof of assumption #1): . . . and therefore we should listen to him about geopolitical defense issues.
Corollary assumption: Vladimir Nabokov wrote some of the century's best novels . . . and therefore I should let him perform my root canal.
Warbloggerwatch completely missed the point. The point is not that these people are old; it's that they've been saying exactly the same thing for the past thirty years or so. "Age cannot wither, nor custom stale" their infinite repetitions of the same tropes they adopted at an age when hormones are high and common sense minimal, despite the fact that their central beliefs about
1) markets 2) national defense
have been Overtaken By Events, or in layman's terms, conclusively disproven. Refusing to change when contrary evidence is presented isn't brave; it's idiotic. Whether or not you write plays.
And then there's this bit:
"Now, as a terrorist, you would be facing an unknown number of guns potentially pointed at you from all directions. Go ahead; take that flight attendant hostage. You can't use her to make people give up weapons neither you nor she knows they have. You have to assume you're outnumbered, and you dare not turn your back on anyone, because you don't know who might be packing."
Of course there might be a few problems, like shooting holes in the plane. But don't worry, the plane with crash slowly:
"And, about that stray-bullet thing. Airplanes aren't balloons. They don't pop when you put a round through the fuselage. A handful of bullet holes simply cannot leak air fast enough to be dangerous; there would be plenty of time to drop the plane into the troposphere. To sidestep the problem, encourage air travelers to carry fragmenting ammunition like Glaser rounds."
I'm no engineer, but even I don't think that a bullet-size hole in the plane will cause it to crash. Nor do I think, as Warbloggerwatch apparently does, that fragmenting rounds increase the risk of catching another passenger in the crossfire:
And of course some passengers will get caught in the crossfire, but no biggie, it's all for the greater good:
"The worst realistic case from arming passengers is that some gang of terrorist pukes tries to bust a move anyway, and innocent bystanders get killed by stray bullets while the passengers are taking out the terrorists. That would be bad -- but, post-9/11, the major aim of air security can no longer be saving passenger lives."
No, we definitely don't want to risk getting other passengers in the crossfire. There's no need, really, when by waiting only an hour or so, we can blow up all the passengers, instead of the one or two who would be caught in crossfire.
Just think how cool that would be!:
"Think of it. No more mile-long security lines, no more obnoxious baggage searches, no more women getting groped by bored security guards, no more police-state requirement that you show an ID before boarding, no more flimsy plastic tableware. Simpler, safer, faster air travel with a bullet through the head reserved for terrorists."
Sounds great! And if granny gets her head blown off in the crossfire because a couple air rage jerks have had one too many drinks, well, that's the price you pay for efficiency!
Now, I don't know that I favor arming passengers; I haven't developed an opinion on the matter. But this is just stupid. People don't want to arm passengers because they think it would be fun to carry guns, and don't really care if a passenger or two buys the farm in the process; they think (rightly or wrongly) that it will cost fewer lives, not more. But Warbloggerwatch has at least achieved this distinction: most straw man arguments rely on putting silly arguments into the mouths of nebulous unnamed opponents. Warbloggerwatch, on the other hand, quotes their opponents -- and with the arguments right there, bravely ignores them and pretends that they're talking to straw men. Other people are content to wait for their opponents to refute their arguments, but not the folks at Warbloggerwatch -- they jump in and do it themselves. Which is, after all, the only way to make sure that the job gets done right. That takes a certain level of guts, if not good sense.
Overall, I really can't get over how juvenile and third rate these folks are. It isn't because they're on the left; there is a fine tradition, from Orwell to Hitchens, of engaging, intelligent writing from the rosy-hued crowd. There isn't any particular reason for it, but there it is: ad hominem attacks instead of argument, dripping sarcasm of the sort I last saw in the eighth grade lunch room, willful ignorance of the reasonable elements of their opponents' positions, and a repeated recourse to juvenile phallic and scatalogical humor that ensures that any valid points they might have are lost to one's general distaste for the crudeness of the minds that produced them.
On the other hand, they are, if taken in limited doses, funny as hell. In a laugh-at, rather than laugh-with, sort of way.
Rand Simberg says that he's in the two percent. So am I. Go read the post and you'll see what I mean.
But he may point to a clue to why we both were: we're verbal thinkers. I'm completely verbal -- I think it's why I rocked at math until I hit integral calculus. I simply don't visualize well. I can render a picture perfectly -- from a photograph. But I can't draw in 3-D, and when I think, it's always in words. As me to picture my mother's face right now and I can't do it. Oh, if I think really hard, I can call up a shadow, but not a good picture of her. And yes, I'm very fond of my mother. I can't picture anyone else either.
I remember talking to a friend who's an artist about reading novels. "When I read novels," she said, "I have to draw the picture in my head."
"That's funny," I said, "because when I see a picture, I have to make up a story about it."
Two totally different ways of seeing the world.
That's also probably what makes me a good blogger (or so I light-heartedly hope). I don't just think verbally; I think in words. Which is to say, I don't vocalize when I read; I think of the words apart from their sounds. Don't ask me how; either you do it, or you don't. Most people do vocalize, at least in their heads, when they read. I don't hear the words at all. Whatever center of my brain is devoted to reading is developed in such a way that it's disconnected reading and writing entirely from the vocal/hearing process. I can't explain it; either you already do it, or you don't. I type 80 words a minute, and I can pump out sentences at about 70-80% of that rate. It makes people very nervous when they work on projects with me. It makes people even more nervous when I talk, as I am prone to do, the same way that I write -- in complete, grammatical sentences. Which is not to say that I do this all the time. But the fact that I can do this, extemperaneously, makes several of my friends rather jumpy.
On the other hand, most of my friends are better at math than me. And physics. And they care about music, which I don't. I mean, I like it. But I couldn't care less about the theory, and I can think of almost anything I'd rather be doing than talking about new bands and their sound, and their influences, and hell, I don't even care enough to describe the things I don't care about. Ol' one track Jane, that's me. And can draw. Me, I'm the evolutionary apex of the maxim pick one thing and do it well.
Now if I can just find someone to pay me for reading six pages a minute, I'm all set.
The Israeli's are unleashing a can of whup-ass on Arafat. Can't tell what's going on, but it looks serious to my non-military eyes; stuff is blowing up.
There are two idiots from Harvard on O'Reilly trying to defend
a) Harvard refusing to allow the military on campus in the form of ROTC b) Harvard's total willingness to allow groups on campus that raise money for terrorists.
Section b), you see, is an issue of academic freedom -- you know, the free interchange of ideas. Apparently, if you are an American soldier, you have no opinions, issues, or activities of academic interest. War is only academically interesting if you are killing Americans or Israelis.
I'm not calling them idiots because they're idiots. I'm calling them idiots because they are, collectively, dumber than a bag of hammers. White, suburban hammers with good extracurriculars, of course. Harvard hammers. Why is it that I've only ever met one person from Harvard who could, upon meeting someone, let more than five minutes pass without mentioning, ever so casually, where they did their undergrad?
Now, I'm not a huge fan of O'Reilly. And I can't help but think that he picked these two little weenies because they're too stupid to formulate a good argument. (To be fair, I can't formulate a good argument for it either. But I'm not trying that hard.)
But what really struck me is the arrogance of these two. O'Reilly pressed them to explain how it was different, and they kept explaining that it was different because -- well, because it's different, that's why. As O'Reilly badgered them, one of them, a junior, finally snapped "If you'd just let me finish, I can explain it."
No you can't, little boy. You just said the same thing five times and it's stupid. A sixth chorus is not going to convert anyone.
But this kid doesn't even know that his faith in the power of his ideas is overblown. The academic powerhouse hasn't given him a good grip on the most important of all intellectual skills: carefully examining each and every idea and asking "so how could this be wrong?" He hasn't had to. His intellectual abilities have been formed by sitting around with his friends exclaiming how stupid and wrong-headed and uneducated and just not-as-smart-as-us-Harvard-types are those who disagree with him -- whom he encounters only in heated classroom-style debates in which participants bounce in and out of their seats like well-moussed jack-in-the-boxes without ever hearing what the other side has to say. This kid not only thinks he's right; he is totally unacquainted with the idea that he might be wrong.
I think Harvard has more pressing academic issues to worry about than whether or not its students really understand where Hamas is coming from.
And is it hopelessly reactionary of me to think that any school that doesn't allow ROTC should be forbidden to receive federal funds? Harvard, as a private institution, is, of course, free to do exactly what it wants regarding the military.
Instapundit thinks we talk about cloning instead of neuroscience because it's a simpler issue. I don't think it's because it's simpler; I think it's because the issues of neuroscience challenge the idea that we are unique and irreducible beings, and we don't want to think about it. I mean, it's interesting to debate when life begins, and genetics vs. environment, but in the end it doesn't make me any less uniquely me; identical twins tell us that much.
On the other hand, the idea that my wants, needs, and dreams are nothing but chemicals floating around the vast empty sea of my brain means that I may not be, in some sense, me; I may be a predestined glob of chemicals with no more volition or intrinsic value than a salt lick. Who wants to spend their time meditating on that happy thought? Every time I read Oliver Sacks, I am simultaneously fascinated and depressed by what neuroscience has to say about human beings. That, more than the complexity of the science, is what I think makes us shy away from discussing it.
In a column provocatively titled "Greed Is Bad", Paul Krugman takes on one of the greatest corporate villains of our day: Gordon Gekko.
There are some of you who may have thought that we had better things to do, as a nation, than debunk the rantings of third-rate Oliver Stone characters from the eighties -- especially when we could be raking over the coals more current ranting bumblewhoofs created by Mr. Stone's fervid imagination. For example, Oliver Stone. But that's just the kind of short-sighted, unimaginative thinking I'd expect from you yahoos. After all, why do you come to this site? Because you're market-oriented libertarians. And what do market-oriented libertarians prefer to the beneficent hand of the government? Corporations. And what do we call people who prefer corporations to the government? Republicans. Or, if we're in mixed company, vicious, scum-sucking yuppy larvae who, when the revolution comes, will be the first ones with their backs against the wall.
So you see, it's important to talk about Gordon Gekko. Because even though we all know that corporations are evil, unfortunately, they haven't been quotably evil this week. Which leaves us with quotes from blockbuster movies. Next week, I'll be illustrating the same concepts about Republican Monstrosity using "All The President's Men".
But I digress.
Opening paragraphs:
The point is, ladies and gentlemen, greed is good. Greed works, greed is right. . . . and greed, mark my words, will save not only Teldar Paper but the other malfunctioning corporation called the U.S.A."
Gordon Gekko, the corporate raider who gave that speech in the 1987 movie "Wall Street," got his comeuppance; but in real life his philosophy came to dominate corporate practice. And that is the backstory of the wave of scandal now engulfing American business.
Okay, I'm not saying that I would put it past corporations to model their corporate philosophy after the movie "Wall Street". I have, after all, worked with corporations that modeled their philosophies after the Code of the Samurai, How to Win Friends and Influence People, Dress for Success, and -- I swear I am not making this up -- the light humor of Will Rogers. However, one of the things that I have noticed about corporations is that despite their basic conformist impulse, they usually select different idiot philosophies around which to build their corporate culture, in the futile hope that this will confer some competitive advantage. Also, since I worked on Wall Street at the height of the financial boom, I feel I would have noticed if they had all, en masse, embraced Gordon Gekko. If nothing else, it would have been very hard to get copies of Wall Street at the Blockbuster on William Street.
Let me be clear: I'm not talking about morality, I'm talking about management theory. As people, corporate leaders are no worse (and no better) than they've always been. What changed were the incentives.
Twenty-five years ago, American corporations bore little resemblance to today's hard-nosed institutions. Indeed, by modern standards they were Socialist republics. C.E.O. salaries were tiny compared with today's lavish packages. Executives didn't focus single-mindedly on maximizing stock prices; they thought of themselves as serving multiple constituencies, including their employees. The quintessential pre-Gekko corporation was known internally as Generous Motors.
The quintessential pre-Gekko corporation was also losing money and market share hand over fist making big steel boxes that got 13 mpg when they bothered to run at all.
These days we are so steeped in greed-is-good ideology that it's hard to imagine that such a system ever worked. In fact, during the generation that followed World War II the nation's standard of living doubled. But then, growth faltered — and the corporate raiders arrived.
Krugman neatly associates corporate socialism with that double digit growth. Very cute verbal trick, because there's no demonstrable link to the doubling standard of living. We could write the same column attributing America's 1945-1970 glory to women's being where they belonged (in the kitchen), and the decline in productivity to those hormone-addled women's insistence on doing jobs that only a man could really handle. No one knows what caused productivity growth to falter; growth is discontinuous, obviously, but we don't really know why.
The raiders claimed — usually correctly — that they could increase profits, and hence stock prices, by inducing companies to get leaner and meaner. By replacing much of a company's stock with debt, they forced management to shape up or go bankrupt. At the same time, by giving executives a large personal stake in the company's stock price, they induced them to do whatever it took to drive that price higher.
Which is bad because, as we all know, there's only a fixed supply of jobs and wealth. That's why it doesn't matter that the cars GM made were basically super-sized Hot Wheels, because the important thing is that they distributed the jobs and wealth more equally. Now the corporate raiders have all the money and jobs, and they won't share. That's why you're reading this from a Maytag box under the Brooklyn Bridge.
All of this made sense to professors of corporate finance. Gekko's speech was practically a textbook exposition of "principal-agent" theory, which says that managers' pay should depend strongly on stock prices: "Today management has no stake in the company. Together the men sitting here [the top executives] own less than 3 percent of the company."
And in the 1990's corporations put that theory into practice. The predators faded from the scene, because they were no longer needed; corporate America embraced its inner Gekko. Or as Steven Kaplan of the University of Chicago's business school put it — approvingly — in 1998: "We are all Henry Kravis now." The new tough-mindedness was enforced, above all, with executive pay packages that offered princely rewards if stock prices rose.
Ouch. Steven Kaplan is the single most popular professor at Chicago; his class on Venture Finance is impossible to get into.
And until just a few months ago we thought it was working.
Now, as each day seems to bring a new business scandal, we can see the theory's fatal flaw: a system that lavishly rewards executives for success tempts those executives, who control much of the information available to outsiders, to fabricate the appearance of success. Aggressive accounting, fictitious transactions that inflate sales, whatever it takes.
It's true that in the long run reality catches up with you. But a few years of illusory achievement can leave an executive immensely wealthy. Ken Lay, Gary Winnick, Chuck Watson, Dennis Kozlowski — all will be consoled in their early retirement by nine-figure nest eggs. Unless you go to jail — and does anyone think any of our modern malefactors of great wealth will actually do time? — dishonesty is, hands down, the best policy.
And no, we're not talking about a few bad apples. Statistics for the last five years show a dramatic divergence between the profits companies reported to investors and other measures of profit growth; this is clear evidence that many, perhaps most, large companies were fudging their numbers.
Now, distrust of corporations threatens our still-tentative economic recovery; it turns out greed is bad, after all. But what will reform our system? Washington seems determined to validate the judgment of the quite apolitical Web site of Corporate Governance (corpgov.net), which matter-of-factly remarks, "Given the power of corporate lobbyists, government control often equates to de facto corporate control anyway."
Perhaps corporations will reform themselves, but so far they show no signs of changing their ways. And you have to wonder: Who will save that malfunctioning corporation called the U.S.A.?
Actually, I don't disagree with Paul Krugman that
a) the principal-agent theory, which makes perfect logical sense, still needs some work on how to implement appropriate compensation schemes. In particular, it rewards executives for artificially inflating earnings to impress idiot analysts, and it rewards them for fluctuations in the stock market which have nothing to do with their contribution to the company.
b) government reforms of accounting standards are unlikely to work. Not just because the government is captive of the interests it's supposed to be regulating (although that is certainly true); but also because we're asking too much of the government. I was talking to a lawyer the other day who had taken a securities case to trial, and she was telling me how impossible it all is. The lawyers themselves don't fully understand everything they're talking about often, and the jury not only doesn't have the faintest clue, but also resents you for making them sit there and listen to it.
"So how do the juries decide the case?" I asked.
She shrugged. "Beats me."
We expect our Senators to understand accounting better than jurors and lawyers.
Also energy regulation.
And food and drug safety.
And environmental standards.
And the rental car market.
And the country's strategic helium needs.
Etc.
Etc.
Etc.
Unless his staff is the size of -- well, actually, unless his staff is the size of all the people who are out there running the companies that he's regulating, that senator or congressman does not sufficiently understand each issue to rule with the wisdom that the one-shot nature of government requires. Whether or not he's captive to any set of interests. Whether or not lobbyists provide him good information. Even with all the information in the world, he's going to get it wrong a good percentage of the time. That's because he's human, remember? Not some massive omniscient supercomputer that runs on money, as the campaign finance folks would have you believe.
At any rate. It's not that I think Krugman is wrong; longtime readers know that my suspicion of the widsom of corporations is exceeded only by my suspicion of the wisdom of corporate regulators. But the fascination with the 70's is just bizarre.
The principal-agent theory arose because of the 70's -- because the technocratic fantasy of the New Deal, and then of the Great Society, turned out not to work. We couldn't engineer our way to a better society, and we couldn't build a Worker's Paradise by institutionalizing behemoth corporations with professional managers who had little at stake in the success or failure of the company.
Corporations were a bloated mess of competing fiefdoms and initiatives designed to benefit the managers at the expense of the shareholders. Reading Barbarians at the Gate, it's easy to hate the corporate raiders -- but ol' Ross was living the high life at the expense of the company's owners. The board was captive. The company was in trouble. And what was ol' Ross doing? Flying his fleet of corporate jets hither and thither, having a grand old time on the shareholder's dime.
Generous Motors? GM thought American consumers should be forced to buy their cars whether they were any good or not. All he had to do was keep giving stuff to the auto workers, and passing the price increase on to consumers, and to hell with making a good product or providing good returns for his shareholders -- who the f*** did they think they were, anyway, asking the President of GM to do their bidding? The autoworkers, meanwhile, didn't think it mattered whether GM produced any cars at all -- the purpose of the company wasn't making cars; it was providing jobs. Think I'm exaggerating? After Michael Moore came out with his ridiculous movie, Oprah had the entire town of Flint on her show (except for the ones who still had jobs. The mailman, I mean). One after one, they all came up to the microphone to say, yeah, we shut the plant down with trivial labor disputes, and hey, the cars we made sucked, and yes, we drove up the cost of cars at the plant, through wastage and sick days and the rest, until GM kinda lost money on the cars that rolled out of the plant -- but hey, that's not the point. We needed the jobs.
That was the Worker's Paradise, my friends, and if you long to return to it, go drag out your parents' old black and white Zenith.
The 70's model saw companies as servants of society, rather than, say, their owners. But as with public toilets, when "society" owns something, everyone takes their turn crapping all over it, and no one cleans up the mess, and we're all a whole lot worse off.
Of course, many corporations are still bloated masses of competing fiefdoms and initiativs designed to benefit the managers at the expense of the shareholders. Which is to say, human nature has not changed. But it's a hell of a lot better than it used to be.
And why? What did the government do to improve it?
Nothing, that's what the government did. It didn't raise tariffs on Japanese and German automobiles so we had to keep driving GM crap. It didn't make laws insitutionalizing some artificially determined level of executive compensation. It didn't start issuing directives, making regulations, or creating new agencies to make American companies more competitive. And eventually, competition did the job for them. Corporate raiders trimmed the bloat, and got rid of managers who couldn't respond to the market. Corporations realized no one was going to bail them out, and got busy bailing themselves out of the mess they were in.
Did they do the job perfectly? Nope. The market doesn't do it perfectly every time. The difference is, when the government does something, it has to get it right, because it's only going to do it once -- only oops! the government doesn't have a very good track record. The market tries a bunch of things, some of them fail, and eventually the right things succeed. The failure is the price of the success.
Just as these are. Note, the high-profile failures didn't involve Proctor and Gamble issuing complex toothpaste derivatives that no one understood how to value correctly. The businesses with accounting issues are telecomm, energy trading, technology -- new businesses, whose risk structures and business models aren't settled yet. Eventually, these businesses will mature, and we'll value them with boring regularity, and then it'll be nano-technology or space stocks we'll be worried about.
There are issues in the current market, both with ownership and corporate governance; the ownership in fact creates the corporate governance problems, by separating the owners from the management of the company. But these aren't new either; ever since there have been investors, there have been investors being taken for a ride. Stock options were a way to make executives more involved with the fates of the companies. Clearly there are still issues to be worked out. But that's not a call to throw the baby out with the bathwater. And I confidently predict that Enron will not bring down Democracy as We Know It.
Outstanding little piece on regulatory economics from Steven Landsburg:
What if the court had ruled differently, requiring governments to bear the costs of their own regulatory activities? Then those governments would be forced to think hard about which regulations are worth preserving. That's all to the good. We should encourage policy-makers to be reflective. Instead, the court has encouraged policy-makers to ignore the costs of their own decisions; that's a recipe for bad decisions.
In his decision, Justice Stevens expresses quite explicitly the belief that if governments had to pay for the costs they impose on landowners, then in almost every case, a sufficiently reflective policy-maker would opt for almost zero government. I'm not sure whether that's true or false, but if it's true, then it follows that we should have almost no government. So the court's position comes down to this: We should exempt governments from compensating landowners because that's the only way we can continue having more government than we ought to.
Reader Jane Z. asks this question regarding my maunderings on the estate tax: "Are there economic reasons, as opposed to moral ones, for opposing the estate tax?"
Interesting question.
First of all, the estate tax certainly impedes capital formation. We can argue about the extent: supporters argue a little, detractors argue a lot; but there is some effect, particularly on small businesses and family farms. Smaller firms can't afford estate planning the way big firms can, which is why my grandparents' estates, and probably yours, will pay a higher percentage of total wealth to tax than Bill Gates or his Dad (I refuse to listen to one more rich idiot advocating for the estate tax unless and until they eschew all estate planning and allow Uncle Sam to take his full 55% bite. Even one tax-free foundation dedicated to providing six-figure salaries to your dimwitted descendants invalidates any claim you may have to speak on the subject. But I digress.) There are transaction costs associated with the breakup or transfer of these assets that are a net economic loss to society. But it's probably not going to put us in the poorhouse, as a nation.
More costly is the re-allocation of assets to lower-valued uses because of their tax-advantaged status. (Sorry -- just proving to myself that I can still talk like an MBA). In other words, setting up a "Save the Guppies" foundation which is partially devoted to its stated goal of Making the World Save for Pet Fish, and partially devoted to providing the aforementioned jobs for your dimwitted descendants.
Maybe you like charitable foundations. But even if you do, you note that perhaps there are other people more qualified to hand out charity than the eighty-zillion little Fordettes employed by the Ford Foundation. Charity money is artificially diverted into the pockets of people who have done nothing to deserve it, pretty much exactly the way that it would be if they, say, inherited it. All at a considerable transaction cost to create and run the foundation. As well as the cost of stupid projects initiated by stupid heirs who show up at the office once a week in order to see how things are getting along without them, and thereby justify their salary to the IRS.
Oh, those aren't the only drawbacks. Blind trust, generation skipping trusts, more different kinds of gimmicks to escape the estate tax than you can shake a stick at. All are expensive to set up and maintain -- activity that generates absolutely no net economic wealth; in fact, destroys wealth. Those people we pay to tell us how not to give all our wealth to Uncle Sam could be out dreaming up ways to make a really good fat-free ice cream. And because in many cases the kinds of assets that these funds can hold, or the way that they can dispose of them, or manage them, are limited, these asset concentrations reduce liquidity, and thus efficiency, in asset markets. It's also an invitation to fraud (although of course big piles of money often need no invitation) -- the structure of the trusts often makes it hard to remove an executor who you think is crooked or incompetent, especially when that executor is, as it often can be, your Dad.
Finally, let's think about why society would have estates in the first place. Remember, property rights enshrine earlier customs: why would this particular one come about?
I would argue that in large part, its advantage is twofold. First of all, it reduces the risk inherent in savings. Not investment risk; the risk that you will save too much. You laugh, but it's a real risk. Without inheritance, the only purpose of saving is to defer consumption to some period when you will enjoy it more. One of the chief reasons we do this is so that we can enjoy leisure at a time when working is particularly unattractive -- when we're old and tired. So we give up some consumption now, so that we can consume more later, when our relative enjoyment of leisure will be particularly high, or when we may not be able to work due to infirmity.
But we don't know exactly when we're going to die, or whether the cost of living will rise, or we'll have a lot of medical expenses. . . we therefore should be conservative in our savings, and accumulate the maximum amount of assets that might be necessary to care for us in our old age.
But this is risky. Imagine no estates -- 100% of your wealth passes to the governmetn when you die. This makes it very risky to save conservatively; get hit by a bus when you're 50, and you're a big loser in life's lottery. Without estates, then, and with a minimal safety net such as we have, people will eschew savings in favor of current consumption, and let the government pick up the tag when they run out of dough. Note that this is exactly what a lot of people are doing now.
But if you allow people to pass on accumulated wealth to their children, you allay the fear of oversaving and denying yourself consumption you could have enjoyed -- because the ability to pass on wealth to your children is an economic good from which many people get a lot of pleasure. So in some sense, all the wealth saved is fully consumed -- that which is not spent on retirement is spent on passing an inheritence to the kids.
The other way in which estates provide a positive economic good is that it encourages people to keep working when they would otherwise retire.
Couple of basic economic concepts. First, there are basically only two inputs into an economy: capital and labor. Increasing the labor supply increases the net economic wealth we all enjoy (although of course this increase may not be evenly distributed). And second, leisure is a consumption good, just like anything else; the cost of leisure is the lost wages that you could have earned during the time you spent loafing around watching television and arguing with your husband about who was going to drive to the picnic. This cost is known as the opportunity cost: the value of the next best alternative use of your time.
Again, let's imagine a world with no estate tax. You're fifty, very successful, and you've accumulated enough money to pretty much replicate your current lifestyle -- less the money which goes to cover work-related expenses -- for the rest of your expected life.
Why wouldn't you quit? Of course, there are people who just enjoy working. But someone who has, say, accumulated three convenience stores might not feel so compelled to spend another ten years heading in to fix the slushy machine at 3 am because the night manager called in sick. Not when he has more than he really wants to spend now -- and when, with age creeping up and those 3 am trips ever harder on the body, leisure has become much more valuable relative to the extra consumption goods he could purchase if he doesn't retire.
But people like this -- people who have built up wealth through their own efforts -- have valuable skills and experience that create wealth for society. Their early retirement is, for us, a big loss, especially right at their peak years of experience. So how do we prevent it?
By allowing them to pass on any wealth they accumulate in excess of their consumption needs to their children, since most people are willing to exert a tremendous amount of effort to improve their children's lives. In this sense, the dimwitted children of the wealthy are actually doing the rest of us a favor, by making it utterly necessary for their clever parents to work as long as possible to make sure that they are taken care of.
So, to sum up: the estate tax has several economic costs. It discourages small- and medium- sized businesses from capital formation. It moves assets to less-valuable uses because they are not subect to the estate tax. It creates considerable transaction costs, both in breaking up and selling taxable assets, and in avoiding the tax. And it discourages personal savings. So the objections to the tax aren't just moral; they're financial as well.
Goes to Tapped for this post. Now, we all know that campaign finance supporters support it because they think, in their hearts, that it will help their interests at the expense of the opposition.
But until now, few supporters have the courage to come right out and say so. This includes an exhortation to the Democrats to come out and think about "real reform", along the lines of the (unconstitutional at the Federal level) Maine and Arizona public financing schemes. Normally, I'd say "Me no understand -- the reformers got pretty much everything that they want" (until the Supreme Court overturns, anyway). But Tapped has made it all too clear -- real reform is reform that helps the Democrats while hamstringing Republicans. Object-neutral laws are for toddlers.
New slogan for campaign finance reformers: "Now you're playing with power".
So on Sunday, I was in Barnes and Nobles, and there it was: Lileks' book. I was unable to resist the temptation to put it into my shopping basket, despite the $22 price tag.
It was worth every penny. It's been a long time since a book made me laugh out loud: this one turned the trick page after page. Every time I'd think the novelty must be just about to wear off, there would be another caption that threatened to make me spurt Diet coke out my nose in a teeming fountain. My family kept wandering in from other rooms, demanding to know what I was snickering about. Just as I was finishing it, my mother came into my room and said "What's so funny this time?"
"Same book," I said.
"Again?" she said, shaking her head, and turned around to go back to the kitchen. Then she stuck her head back in. "Can I have it when you're done?"
Bob is right that, when capital starts to flee, it can be brought back by nonmonetary policy -- tax cuts, deregulation, privatization, etc. But, still, there's something wrong with any monetary arrangement that requires a nonmonetary deus ex machina to stave off collapse. Pegged systems in a world of mobile capital are poison. All the big blowups of the 1990s -- Mexico, East Asia, Russia, and Brazil -- featured pegs that self-destructed.
There are only two viable exchange-rate policy options: Float your exchange rate or give up independent monetary policy (which may include, with dollarization, giving up your own currency altogether). Trying to have your cake and eat it, too doesn't work in the long run.
I'll add that in my (not too erudite) opinion, Argentina would have been better off dollarizing entirely than fixing it's exchange rate. Keeping the peso was like that pack of cigarettes you leave in the closet just, you know, to remind yourself why you quit -- until the sewer pipe in the basement breaks, your boss screams at you about the report you just submitted, and your mother announces she's divorcing your father and moving to Bali. Helloooo, Joe Camel.
When apprised of this by my exclamation, one of the chaps I worked with said, "It's pretty amazing how far these guys will go to avoid taking their medicine."
Now, I wouldn't want to suggest that you should hop on over there and vote for me. That would be pandering. However, I would like to suggest that a certain blogger, flush with newfound confidence at winning the poll, would be very grateful to the people who helped her get there. Very grateful. In fact, you can't imagine how grateful with your puny human minds. But that irrational exuberance might spill over onto these pages here, if you know what I'm saying. And I think you do.
Of course, if I should not win the poll. . . well, remember how your mother acted when you forgot her birthday? Didn't do that again, did we? Not if we didn't want to spend the rest of our lives trying to forget the image of our weeping, prone mother refusing to take her head out of the oven, we didn't. Now we have to have an electric stove even though it takes 25 minutes to heat a can of soup, and need to cut our cocaine with the back of a comb because straight razors cause flashbacks.
Now, if I should happen to lose, and if -- probably coincidentally -- I should happen to throw myself off a bridge or under the 1/9 subway tracks, or accidentally swallow sleeping pills or drop my toaster in the tub while I'm taking a bath, or take my 1997 Ford Taurus off a high cliff while guzzling whiskey like the Lost Allman Brother, well, I wouldn't want you to feel guilty. It's not your fault. You just voted your conscience, that's all, and if that happened to result in the untimely death of a lovely and talented young pundit-cub who, incidentally, loves each and every one of you with a passion seldom found in one so young, well, that's just the way things turn out sometimes. I don't want you to dwell on it.
I look forward to the next Kinsley column suggesting, "It would be the sheerest demagoguery to suggest that a person should take the blame for a company's shenanigans just because he happened to be CEO at the time."
The guy in this story, that is:
http://seattletimes.nwsource.com/html/businesstechnology/134466879_webmicros oft03.html <<------------------------------------ WASHINGTON - Microsoft has agreed to refrain from accounting violations to settle federal regulators' allegations that it misrepresented its financial performance, the government announced today. Under a settlement with the Securities and Exchange Commission, the software giant neither admitted to nor denied wrongdoing. No fine was imposed.
The SEC alleged that Microsoft's accounting practices from July 1994 through June 1998 caused its income to be substantially misstated.
[snip]
The agency said Microsoft enhanced its financial results by setting aside artificially large reserves to reduce revenues, with the idea of reversing that procedure to record the revenues in less profitable times.
The SEC has criticized the use of such so-called "cookie-jar" reserves, which it says can give investors an inaccurate picture of the company's current financial performance.
Microsoft disclosed the SEC's investigation in its annual report for 1999.
More than a year ago, Microsoft reportedly received a so-called Wells notice from the SEC, a warning that the company could face civil charges.
Chairman Bill Gates and other top Microsoft executives were deposed, and settlement negotiations began late last year.
Accounting rules generally allow businesses to set aside funds for potential expenses such as returned products, excessive inventory and bad debts. A higher estimate of those expenses reduces the amount of reported earnings.
The SEC investigation apparently stemmed from a lawsuit filed in 1997 by Charles Pancerzewski, a former Microsoft internal auditor who said he was wrongly fired for warning that the company's accounting reserve practices could violate SEC rules. -------------------------------->>
A few posts below, I talked about R&D costs. Derek Lowe weighs in on me-too drugs, saying pretty much what I did: sure, they're out there, but redundancy is the price you pay for having a distributed, decentralized market system.
Excellent post on recent challenges to First Amendment rights which are thinly disguised attempts to regulate certain speech on the basis of content, from Peter Sean Bradley, Esq.
Reader Jim Bennett writes in with this question about Kyoto:
haven't seen commentary on this from any of The Usual Suspects - but it seems likely to have economic consequences - that is, if the individual EU countries actually pay attention to the requirements handed down from above. Or was this treaty designed to be harmless to EU economies while handcuffing ours? So that the ratification really requires no changes on their parts?
I want to leave aside the question of whether global-warming treaties are necessary; that's an issue for another time. (And yet I guarantee that there will be at least one email which starts: "You say that it's an issue for another time. But it's the central issue that we MUST address before we talk about Kyoto. . . ).
Which leaves the following questions: 1) How much will it cost? 2) Is the cost outweighed by the benefit? 3) Is the treaty designed to screw the US?
How much it will cost is a tricky topic, because of course the advocates are out in force on the numbers. (For a good discussion of how the Clinton Administration got the forecasts it used, look here. Yes, it's Cato, my green-fingered goslings, and we all know they hate Kyoto. But all this paper is talking about is methodology, 'kay?) Best guess is between 1-2% of GDP, with best case scenarios estimating that we will be able to buy Russia's emissions permits, which would be based on their pre-collapse Soviet emissions levels, and that we can make a quick, optimally efficient switch to natural gas from coal, producing a negligible impact on GDP; while worst-case scenarios, in which Russia's economy booms and we have to actually reduce our own emissions, place the damage at over 4% of GDP. Neither best nor worst is particularly likely.
Doesn't sound like much, does it? Couple of things: First of all, that's a moderately bad recession. (For purposes of comparison, GDP shrank by about 25% during the Great Depression. We aren't talking about an economic holocaust). But unlike a recession, it's permanent. Second of all, our population is growing. A smaller pie, divided among more people, means a real decline in standards of living.
But no one really knows how much it will cost, because there are too many variables. But it certainly will not be, as environmental activists would like to make out, practically painless. For one thing, the coal industry will have its workforce cut by at least 1/3. That's a lot of angry, unhappy, vote laden miners, and a couple of regions losing their last source of employment. Labor mobility in the US is good, but certainly not perfect. Thousands of problems like this, on top of the reduced productivity from pricier electricity, will cost us.
So yes, there is a pretty serious cost.
Does the benefit outweigh the cost? Not according to anything I read, but of course, my sources are not exhaustive. But the environmental sources, while embracing Kyoto, wailed that it wouldn't go far enough, conceding through backdoor comments that it wouldn't do much; anti-Kyoto forces said the same thing, emphasizing the cost-benefit analysis. But serious carbon controls, the kind that would really dent global warming, would take us back to approximately the economic level last seen when global warming was not a problem. That's 1850. But say we're willing to accept a slower growth of global warming. 1900? Ouch. 1950? Doesn't sound so bad? Turn off the appliances, baby: your dishwasher, air conditioning, washer-dryer, and refrigerator are a major factor in global warming. Get rid of the second car; hell, half of you get rid of the first car. No air conditioning at work, either. That computer sucks a fair amount of juice; so does that plane trip you took to visit Mom -- and the Hawaiian vacation you were planning. Ever wonder why those resort communities in the Catskills and Poconos are dying? Because people can afford to go somewhere better, these days.
Maybe that's what we need to do. But that's going to be the price of serious global warming controls -- a serious decline in our standard of living. Or a serious conversion to Nuclear, and hey, I'm all for it.
Fuel celled cars won't help. It takes more energy to extract the hydrogen to put in the fuel cells than you get from the cell. Unless we build the nuclear plants first, no net gain in emissions. Conservation's no panacea either. Cost-effective conservation is not exhausted -- but it's a shallow well. And non-cost effective conservation cuts GDP.
Excuse me, I'm ranting. Here's the answer to your question, from Cato:
What would Kyoto do about [global warming]?
The answer is, nothing.
At least nothing that could have any discernible impact on how climate influences our lives. Clinton administration scientists answered this one for us: If all of the nations did what they said they would do under Kyoto, the net amount of warming reduced by the year 2100 would be 0.14ºC. That’s 6.4 percent of the average warming of those U.N. models.
So, answer to Question 2: Kyoto's benefits only outweigh the costs if you put a much higher price on the environment than most of us do.
Does it favor Europe over the US? Well, check out the graph on page 2 of this paper, and the answer seems to be yes. Columnists like to point out that the EU's target is even higher than ours: 8% for them, 7% for us. (Against a worldwide average of 5.2%). But that's getting too cute by half with the numbers. They get a huge drop from closing the polluting industries of the East German worker's paradise; then there's Britan's (independantly motivated) switch from dirty Welsh coal to clean North Sea gas. France gets a boost from nuclear plants and a shrinking population. Etc.
Kyoto won't hurt Canada much, either, with it's untapped Hydro -- but Canada's net GDP loss is even higher than ours. Why? Because Canada is a net exporter of energy, and not just renewable energy. Net energy exporters get hurt badly by Kyoto -- and I won't fault you for smiling a little at the discomfited Saudis.
So, overall, the answer is that, yes, it's economically costly; no, it's not particularly beneficial, and yes, it disfavors us at the expense of Europe and developing nations, who hope to gain competitive advantage by it.
It has to, in order to get signed.
This is what I think happened with Kyoto (and I'm about to get slammed for Europe bashing, but no matter):
The European politicians who pushed it care less about absolute prosperity than relative prosperity. They're okay with hurting their economies if ours is hurt more.
[Note: I'm not saying that this is the only reason that they signed it; you can decide whether it's altruism or naked political interest. I'm talking now about the shape of the treaty]
Let's look at key provisions:
Base year: 1990. Just in time to let Russia and Eastern Europe cash in on the closure of their inefficient companies (and in some cases, the collapse of their economies), Britain cash in on the gas conversion. Why not 7% below 1995, when the treaty was negotiated, instead of 5% below 1990? You know the answer.
No carbon sinks: Europe and most developing nations have little forest, the US has a lot. Can't let the US cash in by planting trees.
Developing nations excluded: China loves this.
These provisions were necessary to get it signed. Otherwise, Europe would end up worse than us, even with the same overall level of carbon emissions. Europe, with its 30 nations, would never sign. Nor would any developing country sign away their right to grow. Even Canada, I think, was willing to suffer as long as we suffered along with her. After all, it's not like the Canadian standard of living is miserable. As long as the voters couldn't compare it to a more prosperous America, the politicians signing the treaty have little risk of getting unelected.
So in order to get it signed, the majority made sure that whatever else it did, the treaty disproportionately harmed our interests. Who are the exceptions in the developed world? Australia and Canada, with small populations, not powerful enough to affect the outcome whether or not they do sign. Everyone else does better than we do. No, the target is us.
And they assumed that if they got enough of a majority, we'd go along. Clinton would have, I think; you can judge for yourself whether or not this is the high moral ground. But if it weren't for the Republican congress, I think we'd have had a treaty. To help Al Gore win, if nothing else. So it wasn't a bad gamble, overall.
And the upshot of all of this is that I will find it funny as hell if this explodes in Europe's face and 55% of all respondants sign, putting the treaty into effect for them -- and their constituents begin screaming about our unfair advantage.
Because when they back out because of that "unfair advantage", they're going to have to do some 'splaining about why they thought we should bear an "unfair disadvantage" about 3 times as large.
