Environmental Economics Lectures

Unfortunately, I am still engulfed in laziness and have not formulated any coherent writings.  Hopefully that is not a permanent drought, as I still have some stuff that I intend to someday write about.

In the meantime, if any of the few readers are interested in some environmental economics, here is a link to the full course at Berkeley: http://kysq.org/EEP100/.  It has video (10,000+ views for every lecture) and transcripts.  If you have noticed, I have a few links to (mostly environmental) economics blogs.  But anyways, a lot of this is probably just basic microeconomics with an emphasis on environmental issues.

After listening to this for a while, he is definitely not as good of a lecturer as Mr. Lyons is.  But he isn't that bad.

Solidarity Comrades! Pepper Spray Galore

I did not think that I would have an opinion that is compared to fascism or Naziism.  Having read so much about the news going on around the rest of the world, it is an odd experience for the news to be where I am.  It is something that makes me even more skeptical of what I may read, considering the onslaught of lies and hyperbole from an issue that I do not think is worthy of anything more than local concern.  I have been relieved to hear that many of my friends and colleagues are similarly disgusted with the bloated coverage of a relatively trivial event.

Police used batons to try to push the students apart. Those they could separate, they arrested, kneeling on their bodies and pushing their heads into the ground. Those they could not separate, they pepper-sprayed directly in the face, holding these students as they did so. When students covered their eyes with their clothing, police forced open their mouths and pepper-sprayed down their throats. Several of these students were hospitalized. Others are seriously injured. One of them, forty-five minutes after being pepper-sprayed down his throat, was still coughing up blood.

Given that this is probably the most popular perspective that the public has been exposed to, it is of little surprise that they are vehemently outraged.  The above paragraph is part of Assistant English Professor Nathan Brown's open letter calling for Chancellor Katehi's resignation.  It would seem to be a scathing report of police brutality that deserves serious scrutiny.  The only problem is that none of it is true.  The police did not use batons to push students apart.  They did not push people's heads into the ground.  They did not hold anyone who was pepper-sprayed.  There were unfortunately two students hospitalized for treatment, but there is no indication that anyone was seriously injured.  No one had pepper spray forced down his or her throat.  The pepper spraying may have been an excessive use of force on the protesters, but it was no massive display of unprovoked police brutality.  Professor Brown's histrionic rhetoric has obfuscated the situation.  No, Chancelor Katehi and police forces are not "the primary threat to the health and safety of our university community." 

It is not so much the message of the Occupy Wall Street protesters that I have a problem with.  I am not going to hide the fact that I am unabashedly liberal, and I do see a problem with the rampant inequality in the country.  I am not going to get very political here, except say that I think that the movement has oversimplified the problem and the "solutions" are implausible and economically illogical.  Unfortunately, instead of developing a more coherent agenda, the protesters turned a legitimate gripe into a "non-violent" war against the police and the "system."  The pepper spray victims have been recognized as heroes in the eye of the media and public opinion.  Regardless of the legality or the morality of the police's actions, I think that it is simply wrong to view disobedient citizens as "heroes" for ignoring police orders.

Most people are simply lacking in perspective of the situation.  The "Occupy Davis" movement had gained little headway, regularly displaying a couple of broken signs and a few tents in a park in downtown Davis.  The police made no attempt to disband this.  However, when some students decided to set up tents on the quad, the administration told them that this was not permissible.  I do not think that it unreasonable to prevent the center of campus from becoming a tent city.  This does not diminish the right of students to express themselves freely.  However, even after days of warning, the students refused to move their tents.  They were given a final deadline of 3:00 on Friday and they still refused to budge.  The police were called in to dispatch of the tents and evacuate the protesters from the quad.  I do think that a riot squad was excessive; the movement was still relatively small.  However, it is a bit misleading to say that the protesters were simply peaceful.  They were breaking campus rules, and would not budge even when the police came.  I was not actually present when the police arrived, so I cannot give a full account on what transpired.  However, I can offer some perspective based on eyewitness accounts and Youtube videos.  

After the police took down the tents, the protesters proceeded to form a blockade on the quad sidewalk. I guess that is what they call peaceful civil disobedience.  However, I do not think that it unreasonable to prevent such a blockade and it is certainly not an assault on free speech to do so.  Many of the protesters seemed to heckle the police, with a few shouting "Fuck the police, from Davis to Greece."  The police attempted on multiple occasions to convince the protesters to unlink arms and leave the quad.  There was no sudden police action on the heckling crowd.  After a three-minute warning, a policeman showed the crowd a pepper spray bottle and shook it for a couple of seconds.  Instead of dispersing, the protesters held firmly and most put their heads down.  Among the protesters who were finally arrested, at least one went limp so he would be "violently" dragged away, while another resisted by curling up into a ball.  Anyone who thinks that this is a violent suppression of speech needs to get some perspective on actual police states, like Egypt and Syria.  If the pepper spraying at Davis is one of the most significant examples of police brutality in America, then there is no police brutality in America.  There are many tangible problems in America, and we must do more than link arms and deride the authorities and the privileged to solve them. 

Harvard, Economics, and Occupy Wall Street (hopefully more to come)

There have been many things that I have wanted to write about, but I have been more than a little lazy in putting my thoughts into words.  To be honest, I actually haven't been following the Occupy Wall Street movement that closely.  I will say that I am not necessarily supportive of the movement.  Then again, if you know me, you know that I am highly skeptical of almost everything.  I believe that recent controversy at Harvard is an example of the protest movement gone wrong.

The source of conflict is the professor of introductory economics at Harvard, Gregory Mankiw.  It is no secret that universities are made up of overwhelmingly liberal professors, so perhaps it is inevitable that a rather prominent conservative would cause quite a stir.  A group of students wrote an open letter to Mankiw explaining their opposition to the class's conservative agenda.  Around 70 students conducted an organized walkout on his lecture. I am somewhat dismayed, but not completely surprised to see a complete lack of understanding of basic economics from the Harvard students.  The letter states that "[t]here is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory."  Of course, it ignores the fact that the first semester (as in current semester) of the course covers microeconomics, while Keynes is famous for his macroeconomic theories.

This response to the letter and ensuing walkout is a good description of my feelings towards the issue.  There is absolutely no reason to believe that Mankiw is denying students a quality economics education.  I doubt that the material is much different from the material taught in AP Economics at high school.  Some of protesters have brought up issues of rent control and the minimum wage as examples of bias.  I remember both of these issues used as examples of the problems of price ceilings and price floors.  While there is certainly debate over the real effect of the minimum wage on unemployment, especially at its current level, there is nothing wrong with using it as an example of the theoretical impact of price controls.  Both are probably mentioned in every introductory microeconomics class.  Perhaps the students should attempt to understand the material before blindly disregarding it.

Having followed Mankiw's blog for the past few months, I can say with certainty that I have many conflicts with his proposals and opinions.  He is definitely a conservative in his economic policies, but he is not a blind political conservative.  For example, he is an enthusiastic supporter of a carbon tax, which also happens to be my ideal economic policy implementation.  Although I often disagree with Mankiw, I respect him as a PHD economist and a reputable source of economic happenings.  The departed students should trust his knowledge of basic economics.  There is nothing wrong with learning from someone that you disagree with.  Just suck it up and go to class.

My Attempt at a Debt Reduction Plan

Yoram Bauman: “We don't have a budget deficit because the left believes in mandates, or because the right believes in markets. We have a deficit because the middle believes in magic.”
For more economic and political humor, see the Stand-Up Economist.

 

    I’ll start by saying that I think that the debt plan was a disaster, worse than I expected.  I was hoping that the truly bipartisan Bowles-Simpson plan would be passed, as it was at least a start in the right direction.  However, even that fell apart.  I have little faith that the new "Supercomittee" will come up with anything better.  I think that Republicans deserve most of the blame for their utter refusal to raise even one penny in revenue.  Democrats were to an extent willing to start at Social Security reform, but the Republicans would not agree to eliminating tax breaks on the “job creators.”  Supply-side economics has proven a disaster under Reagan and George W Bush, falling significantly short in improving growth and turning out a disaster in raising revenue.  To be fair, the Democrats, including Obama, have gotten sidetracked by pushing for eliminating tax breaks for oil companies and private jets.  Although these tax breaks may be unnecessary, they make practically no impact on the debt.  Obama should have spent his time aggressively pushing Congress to draft Bowles-Simpson.  Fortunately, we avoided default, but only just barely.  The battle will rage on over the next few years, adding a painful layer to an already difficult time of economic uncertainty.

Every politician agrees that we should cut wasteful spending.  Now what does this mean?

“Conservative” Plan:

• Eliminate practically all non-defense discretionary spending
• -$714.3 billion in 2010
• =still over $700 billion deficit for 2010

We can eliminate Medicare and Social Security, but then we have to eliminate their respective taxes as well.  

Disclaimer: I am no economic expert nor claim to be one.  The following is almost entirely devoid of numbers and specifics.  However, I stand by the economics of the basic outline.

 

Here is my basic plan if I were dictator of the US:

• Social Security
• Note: In 2010, Social Security generated net $150 billion in revenue.  Although it will need restructuring to stay solvent in the future given the growing, aging population, it is not at all to blame for the current deficits.
• raise the retirement age
• raise the cap-make the payment system more progressive.  Alternatively, the Social Security tax could simply be eliminated, as it has not been used to fund just Social Security anyway.  Social Security would have had net profits since its inception until about 2050 if the money had not been funneled to fund other government operations.
• Alternatively (or additionally), the benefit system could be made more progressive.  Social Security could be reduced or even eliminated for the wealthy to reduce costs.  I am not sure that this would significantly reduce costs though since the vast majority of Americans are not wealthy enough to afford this.
• Health Care
• Europe-style (either single payer or public, private non-profit mix)
• Okay, I am punting this one.  Basically, our system is wasteful, inefficient, and ineffective.  We need to streamline records, encourage preventative medicine, have tort reform, eat healthier, exercise more.  It still may be prohibitively expensive.  The real problem is uneccessary visits/operations.  Expanding coverage may help with ER visits somewhat, but it is really tough to reduce costs with an aging population.
• Discretionary
• Independently review funding: spending should have economic analysis attached and continuing funding should be reviewed for cost/benefit analysis
• Eliminate wasteful, uneconomical infrastructure spending (not much money here)
• CUT DEFENSE (more than half of discretionary spending)
• less jailing, more education
• ELIMINATE MOST TAX CREDITS AND SUBSIDIES.  This should really be seen as a spending issue, not a tax issue.  Tax breaks=spending
• Taxes: Restructure Revenues
• Eliminate/reduce most taxes and replace with Pigovian taxes, starting with a large carbon tax.  See http://www.undp.org.ar/docs/taller_ecosistemico/2_7.pdf for a primer on the economics of taxing negative externalities.  Such a tax system is favored by a majority of economists across the political spectrum, although it has been scorned by nearly every active Republican politician. 
• Significantly increase welfare, as consumption taxes are highly regressive.  This is a more efficient solution than a progressive income tax.  Although it will have practically the same effect in aiding the poor and middle class, it will discourage excessive energy use.  Taxing energy will not only be good for the environment in a much more economical manner than mass subsidies and regulation.  It will encourage urbanization and alternative transportation.  One problem with a consumption tax is that the rich are still going to use large amounts of energy unless their wealth is eliminated.  However, there is a huge incentive here for companies to become more efficient, so even if wealthy Americans have high rates of consumption, their footprint will be significantly reduced.
• Hopefully, the tax will be ineffective at raising revenue, instead serving to greatly reduce pollution.  From an environmental standpoint, I would still favor a highly progressive consumption tax to an income tax, because consumption in itself wreaks havoc on the environment and depletes natural resources.   
• Good Government Spending to Keep/Increase
• Infrastructure (increase in bust periods, decrease when economy is booming)
• Education (always good; includes schooling and worker training)
• Research (see Internet, GPS, airplanes, etc)
• Keep in mind, though, that private investors will help in most promising startups (like Google).  Government investment must be in something that is too risky for private investors to get into, although just because something is “cool” (cough, cough, nuclear fusion) doesn’t mean it is a worthwhile investment.  Government should focus more on research and less on subsidizing already-available technology.
• Foreign Aid
• This is a tricky one.  Our foreign aid structure needs to be significantly revamped.  Just as should happen domestically, education needs to be put at a higher priority than welfare.  Sure, we need to make sure that African children don’t starve.  But we need to show them how to efficiently grow crops rather than dumping our excess corn.  Investing in education in developing countries is both the right thing and the economical thing to do.  Increasing their standard of living will decrease population growth and increase international trade.  We need to make sure that we teach them to live in an environmentally sustainable, but prosperous manner.  
• Subsidies
• Good subsidies: encourage greater education, sustainable growth
• Urbanization (such as city planning, public transit)
• Funding of long-term, but economical projects (ex: nuclear power plants, solar farms, infrastructure)
• Ways to help the poor
• EDUCATION (including worker training)
• Good, nutritious food (no food stamps for booze, cigarettes, alcohol, and junk food/drinks); if possible, teach to grow food and cook
• Health Care (including rehab, dental care, psychiatric care)
• Birth Control (largely a function of education)
• EDUCATION (I can't emphasize this enough)
• Regulation
• While regulation is economically seen as an inefficient way to reduce supply, it has arisen out of necessity to correct for systematic market failure.  Although it is more desirable for both the government and the economy to use the tax code to manipulate business decisions, sometimes large fines are simply not enough.  A poorly regulated industry can cause great harm to the economy and to the implicated companies, evidenced in the past decade by the Enron scandal, the Deepwater Horizon blowout, and the real estate collapse and the resulting bank failures.  
• Things to keep in mind
• Keynesian fiscal policy can work, and it does not always involve more spending.  In an overly ambitious economy, taxes should be raised, government spending should be decreased, and transfer payments should automatically decrease.  Unfortunately, it is a tough sell to the American people that their taxes should go up, benefits down, and unemployment should be higher.
• In a down economy, spend money, lower taxes, increase welfare (should be automatic).  This has not been much of a problem until recently.
• SUPPLY SIDE ECONOMICS DOESN’T WORK.  While there can be debate over the effect of lowering taxes on business incentive to produce and hire, there is absolutely no evidence that under current conditions, the increased economic activity would be enough actually decrease the debt created through lowering rates.
• Not all expenditures and revenues should be treated equally
• Short term cost does not tell the whole picture
• NEGATIVE EXTERNALITIES EXIST
• Wealth is good, but income inequality is bad/inefficient
• It is not a bad thing to reduce the number of necessary workers (more efficient).  In fact, if could eliminate the need for low-skilled workers, that would be a good thing.  Hopefully in the long term, people are educated enough to be able to fill some sort of a skilled position.

 

Addendum on Monetary policy:

    While elected officials have been bickering over seemingly irreconcilable differences, another entity in the government has been at work.  The Tea Party, championed by Ron Paul, has tried to paint the Fed as a bloated government bureaucracy wreaking havoc on the economy, but the Federal Reserve has done its job well.  It has provided hundreds of billions in monetary stimulus though its purchase of bonds in two rounds of “Quantitative Easing.”  It recently announced the the Federal Funds rate will be kept at 0%, an effort to boost borrowing by keeping interest rates near zero.  Unemployment has come down, albeit slowly, while inflation has been kept under control.  Some economists, most notably Harvard professor Kenneth Rogoff, argue that significant inflation in the short term should be encouraged to boost the economy.  However, there is no clear consensus on what more, if anything, should be done.   

 

 

 

 

 

 

 

 

 

 

 

About the Blog

"Deep Thoughts" is a reference to the computer "Deep Thought" in The Hitchhiker's Guide to the Galaxy.  In case you haven't read the series, get on it!  All of the books are laugh-out-loud hilarious.  They are far more compelling than any trivial drivel that you may read here.  I am not going to gloat or sulk or hyperbolize my usually uneventful life stories here.  To be simple and confusing, I will sometimes write about stuff that I find interesting.  This involves a great deal of politics, often relating to the economy, the environment, Jon Stewart, or some combination of the three.  I sometimes find sports amusing too, but they are rather unimportant.  I don't know how long this will last or if anyone will read this, but ranting to a nonexistent audience is a worthwhile pursuit.