Friday, 31 October 2014

"I'm not a scientist"

That has been the response from some politicians averse to any kind of climate policy, including my own Governor, Rick Scott, but also Mitch McConnell, and John Boehner. Michael McKenna, a prominent Republican energy lobbyist, says: "It's got to be the dumbest answer I've ever heard... .Using that logic would disqualify politicians from voting on anything. Most politicians aren't scientists, but they vote on science policy. They have opinions on Ebola, but they're not epidemiologists. They shape highway and infrastructure laws, but they're not engineers."

Monday, 6 October 2014

Society for Environmental Law and Economics, Groningen, the Netherlands -- Call for Papers

Society for Environmental Law and Economics (SELE) 2015 Conference
Call for Papers
The seventh annual meeting of the Society for Environmental Law and Economics (SELE) will be held on 21-22 May 2015, at the University of Groningen, the Netherlands.
We hope to build upon the great success of past SELE meetings, and continue to build a community of scholars interested in working at the intersection of law, economics and environmental issues. We welcome both theoretical and empirical papers, ranging from local to international themes. While all topics are welcomed, this year we in particular invite scholars to submit papers on how to balance sustainability and competition: should competition authorities allow for restrictions of competition that benefit the environment?
In a spirit of collegiality, the meeting will take place in a workshop format in which all sessions will be plenary. We strongly encourage all attendees to attend all presentations. Our goal is to create a program that includes a variety of disciplinary perspectives, ideally consisting of about 20 papers over the two-day period.
As in past years, no funding will be available for travel or lodging expenses, but food and drink will be provided during the workshop for the participants and a dinner will be hosted on the first day of the conference.
Further information regarding accommodation, the conference program and other logistic matters will be posted on www.envlawecon.wordpress.com. Inquiries can also be sent to (this year’s local organizer) Edwin Woerdman (e.woerdman@rug.nl).
To submit a paper, please email a Word or PDF file to Edwin Woerdman ate.woerdman@rug.nl with the subject line “SELE SUBMISSION”, by November 17, 2014. We will review all the papers and get back to you by December 15.
Hope to see you in Groningen!
Edwin Woerdman, Associate Professor, University of Groningen
Daniel H. Cole, Professor, Maurer School of Law and SPEA, Indiana University
Shi-Ling Hsu, Professor, Florida State University College of Law
Jonathan R. Nash, Professor, Emory University School of Law
Josephine van Zeben, Fellow, Worcester College, University of Oxford

Friday, 3 October 2014

University of Chicago Professor Saul Levmore on Thomas Piketty

Saul Levmore has posted on SSRN his review of Thomas Piketty's Capital in the Twenty-first Century. In it, he raises a question that others have raised: is there a problem with inequality, per se? We exchanged emails, and I raised this point: severe enough inequality creates a sitution in which the poor have a comparative advantage in violence. Even if the rich are able, with their resources, able to buy enough security to obtain a sizable absolute advantage in violence, the poor may have such low opportunity costs of violence that they may freely engage in it. Professor Levmore replied that if we are afraid of violent revolution, then we are in a pretty dark place and we are not quite there yet. Agreed. But we may not need to be at a point of violent revolution in order for the threat of inequality-induced violence to impose costs. Is our American gun fetishism part of that? If so, that is pretty costly. Everybody talks about Ferguson as if it were about race, only. Is it? Maybe. But is some of it a fear of the other, that other being quite possibly poor enough to entertain rational thoughts of violence? I dunno. But possibly.

Thursday, 18 September 2014

Solving Climate Change Will Cost Nothing, Sort Of

On Tuesday the Global Commission on the Economy and Climate launched its report, Better Growth, Better Climate, in which it makes the bold-sounding pronouncement that major steps can be taken to address climate change that cost nothing. Over the next 15 years we will spend some $90 trillion in infrastructure investment. "Our argument is that it would be smart to invest the $90 trillion in a good way," said Jeremy Oppenheim on APM Marketplace on Tuesday.

In a way, we have always known this. The question has always been, can you measure and quantify the risks and the known harms from climate change? Even if there remain uncertainties, it is increasingly incredible to deny that the balance of climate risks and mitigation costs tilts in favor of deep emissions reductions. So why do we still debate it? Why does it still seem as though reducing emissions is costly?

The answer goes back to my previous post, in which we do not explicitly grapple with the "losers" from climate policy, coal-related industries and states, petroleum industries, states, and countries, and all of the related industries. There is a lot of capital, physical, human, and social wrapped up in a lot of industries and places, and they may not be able to do much other than what they're doing, which is to continue to service a greenhouse gas-intensive economy. In theory, we could buy them out with the cost savings of avoiding all those climate harms. But in practice, we just don't have the money.

Wednesday, 17 September 2014

Wind and Sun Conquerors of Fossil Fuels and Fossil

The New York Times ran an article Sunday about how Germany is rapidly expanding its wind energy capacity, and realizing unexpectedly lower costs because of economies of scale never before seen in any non-hydro renewable energy industry. Large demand from Germany, Denmark, and a hanful of climate-conscious countries has helped induce the entry into the sector from Chinese businesses, which of course benefit from government support.

The question that hangs over environmentally-focused groups is why don't American utilities seem to be so intransigently wedded to fossil generation? This article seemed to point to the unease of utility executives. My theory is that in addition to a lot of physical capital in the industry, there is a lot of human capital tied up on fossil fuel extraction, transmission, and combustion. Economist and former Enron official John Palmisano used to talk about how he went around the country talking to utility executives, and made what he thought was a pretty strong case for switching to natural gas away from coal. The objection that seemed most heartfelt was that "[Utility Company X] was a company that is the coal-burning business, not the natural gas-burning business. Assuming we could retrofit coal plants to accept natural gas, what would do with all the people that know how to handle coal but not gas?" Add to that the infrastructure demands (gas pipelines, e.g.), it starts to look very difficult to switch from coal to natrual gas, or anything else. If it is that hard to get utility execs to think hard about another fossil alternative, it becomes even harder to think about non-hydro renewable energy sources. But it is not narrow-mindedness per se; it is form of capital that is specific to one way of doing things, and is not easily transferable to another way of doing things. That difficulty may be illusory, but it at least appears to those embedded in the fossil industries as very difficult.

Tuesday, 16 September 2014

Formality and Informality in Cost-Benefit Analysis

Professor Amy Sinden at Temple has posted a paper titled Formality and Informality in Cost-Benefit Analysis. This is an important paper that seeks to transcend a debate about cost-benefit analysis that has gotten intellectually (though not politically) stale in recent years. Professor Sinden points out that there are many levels of cost-benefit analysis, formal and informal, precise and imprecise, analyzing many alternatives and few. The mistake that is made according to Professor Sinden, (who is a critic of how CBA is used in environmental law and related fields) is that the case for CBA is often made by appealing to the intuitive usefulness of informal CBAs, while the formal but falsely precise formal CBAs actually bend public policy. I wonder if this is just a variant of the "false formalism" critique of CBA, but even if it is, it deserves some attention because of the nuance with which it treats different CBAs. Here is the abstract:

Abstract:      
Cost-benefit analysis (CBA) is usually treated as a monolith. In fact, the term can refer to a broad variety of decision-making practices, ranging from a qualitative comparison of pros and cons to a highly formalized and technical method grounded in economic theory that monetizes both costs and benefits, discounts to present net value, and locates the point at which the marginal benefits curve crosses the marginal costs curve. This article develops a typology that helps to conceptualize and analyze the multiple varieties of CBA along the formality-informality spectrum. It then uses this typology to analyze the treatment of CBA by the academic community and the three branches of the federal government. In academic and policy circles, the formal end of this spectrum generates far more controversy than the informal end. Additionally, the law (federal environmental statutes and federal case law) seems to favor informal over formal varieties of CBA. Nonetheless, the executive branch appears to be moving toward the formal end of the spectrum. Executive Orders and guidance documents direct agencies to conduct a highly formal mode of CBA. And anecdotal evidence suggests that agencies often go out of their way to give their CBAs the trappings of formality, sometimes in ways that lead to irrational results. I argue that 1) failing to distinguish between formal and informal CBA, and the many varieties in between, has led to muddled thinking and to misuses of CBA; and 2) the trend toward formality in the executive branch is a bad development, in part because it can, and often does, lead to what I call "failed formalism" — a corruption of CBA that can occur when agencies fail to clearly and consistently define where on the formality-informality spectrum a particular CBA falls.

Friday, 29 August 2014

The Role of Law in Thomas Piketty's Capital in the 21st Century

There is not a lot of law discussed in Thomas Piketty's book Capital in the Twenty-first Century. Piketty drops a few hints here and there about what laws he thinks likely contributes to widening wealth inequality (the advent of dynastic trusts, the lowering of marginal rates for the highest personal income tax brackets, which contribute to executive "super-salaries"), but his basic policy prescription is a small global wealth tax.

I would not oppose such a tax. There is something elegant about such a tax, if the international tax haven problem can be solved. But in my review of the book, I suggest that some examination of the legal order is in order. Legal rules and institutions contribute to wealth inequality indirectly. In Piketty's world, wealth inequality increases when the rate of return on private capital is greater than the rate of economic growth, or r > g in his vernacular. My review examines several areas of law in which legal rules and institutions drive up rates of return on private capital (r in Piketty-speak) without doing much to increase overall economic growth. These areas are financial regulation, antitrust law, oil and gas tax policy, electric utilities regulation, and the generic practice of grandfathering. In my view, a rather simplistic faith in trickle-down economics has caused policy-makers to support any policy in which Δg > 0, however speculatively, and if Δr >> 0, well then, God Bless. Of course, Δg is very often not greater than zero.