Sunday, March 29, 2009
Friday, March 27, 2009
Dyson has said that it all boils down to “a deeper disagreement about values” between those who think “nature knows best” and that “any gross human disruption of the natural environment is evil,” and “humanists,” like himself, who contend that protecting the existing biosphere is not as important as fighting more repugnant evils like war, poverty and unemployment.Dyson has always been strongly opposed to the idea that there is any such thing as an optimal ecosystem — “life is always changing” — and he abhors the notion that men and women are something apart from nature, that “we must apologize for being human.” Humans, he says, have a duty to restructure nature for their survival.
Dyson has great affection for coal and for one big reason: It is so inexpensive that most of the world can afford it. “There’s a lot of truth to the statement Greens are people who never had to worry about their grocery bills,” he says. (“Many of these people are my friends,” he will also tell you.) To Dyson, “the move of the populations of China and India from poverty to middle-class prosperity should be the great historic achievement of the century. Without coal it cannot happen.”
The practical consequence for global-warming policy is that we should pursue the following objectives in order of priority. (1) Avoid the ambitious proposals. (2) Develop the science and technology for a low-cost backstop. (3) Negotiate an international treaty coming as close as possible to the optimal policy, in case the low-cost backstop fails. (4) Avoid an international treaty making the Kyoto Protocol policy permanent. These objectives are valid for economic reasons, independent of the scientific details of global warming.
A key plank of Obama’s campaign was a theme that we need to “reduce our dependence on foreign oil.” This was really more of a populist crowd-puller, and I assumed that it would kind of go away once oil prices came back to Earth. Instead, this call to action is informing tens of billions of dollars in spending on a variety of renewable energy projects.
Thing is, this really makes no sense. Foreign oil is bad because it pulls us into Iraq-like conflicts? That only tells you that invading Iraq was a bad idea–every other country on Earth manages to survive on imported oil just fine. In fact, every other nation is also dependent on others for some sort of energy, even Saudi Arabia. Energy autarky is a dangerously misguided notion.
But maybe it’s bad because of the whole carbon thing, and we should also get rid of coal energy as we go along. If that’s the problem, then put in a carbon tax–as Norway did, with amazing results–so we properly price carbon and use less of it. While some sort of cap-and-trade may be in the works, the dominant tactic for achieving this goal seems to lie in massive subsidies for researching ‘green’ technologies.
Of course, nuclear energy–one of the cleanest and cheapest technologies around, one that America is perfectly willing to export to the rest of the world–doesn’t count, because the Senate Majority Leader is from Nevada, where the waste would go. Hydro power doesn’t count either. Natural gas exists in abundance in this country and can be cheaply imported in liquid form. Many countries are switching over to gas for their cars and buses because it’s cheaper and pollutes far less. Yet Obama’s budget punishes natural gas drillers. For some reason, our technocrats have determined that our economy needs to shift to an entirely different mode of power because, well, windmills look awesome and take away our guilt. A lesser person than I, one far more cynical, would think that green-boosters are more interested in manufacturing a crisis to meet a pre-existing agenda rather than finding the most cost-effective solution to a well-defined problem.
Thursday, March 26, 2009
Wednesday, March 25, 2009
Tuesday, March 24, 2009
Sunday, March 22, 2009
The issue of whether Ricardian equivalence is a good approximation is closely connected with the issue of whether the permanent-income hypothesis provides a good description of consumption behavior. In the permanent income model, only a household's lifetime budget constraint affects its behavior; the time path of its after-tax income does not matter. A bond issue today repaid by future taxes affects the path of after-tax income without changing the lifetime budget constraint. Thus if the permanent-income hypothesis describes consumption behavior well, Ricardian equivalence is likely to be a good approximation. But significant departures from the permanent-income hypothesis can lead to significant departures from Ricardian equivalence.
We saw in Chapter 7 that the permanent-income hypothesis fails in important way's: most households have little wealth, and predictable changes in after-tax income lead to predictable changes in consumption. This suggests that Ricardian equivalence may fail in a quantitatively important way as well: if current disposable income has a significant impact on consumption for a given lifetime budget constraint, a tax cut accompanied by an offsetting future tax increase is likely to have a significant impact on consumption.
This discussion suggests that there is little reason to expect Ricardian equivalence to provide a good first approximation in practice. The Ricardian equivalence result rests on the permanent-income hypothesis, and the permanent-income hypothesis fails in quantitatively important ways.
There's something to be said for the assumptions of Ricardian Equivalence. You don't need people to be infinitely rational, only that deviations happen on both sides with equal probability. As much of the behavioral literature focuses only on the existence of deviations (Gambler's fallacy causes us to bet counter to the trend, while hot hand has us follow momentum), we don't have a great sense of whether distortions are systematically biased in equilibrium. The sort of crazy assumptions required could very well be reasonable approximations, ones that are consistent with the degree of foresight people seem to have--people seem to save for the future, leave bequests, and have cut down smoking and pollution drastically in response to more information.
Still, the empirical evidence is pretty lacking here. As someone once said, Economics is not Mathematics or Music; models not pretty or useful by themselves, but are only valuable to the extent they accurately represent reality.
Friday, March 20, 2009
Wednesday, March 18, 2009
Monday, March 16, 2009
Genuine bipartisanship assumes an honest process of give-and-take, and that the quality of the compromise is measured by how well it serves some agreed-upon goal, whether better schools or lower deficits. This in turn assumes that the majority will be constrained -- by an exacting press corps and ultimately an informed electorate -- to negotiate in good faith.
If these conditions do not hold -- if nobody outside Washington is really paying attention to the substance of the bill, if the true costs . . . are buried in phony accounting and understated by a trillion dollars or so -- the majority party can begin every negotiation by asking for 100% of what it wants, go on to concede 10%, and then accuse any member of the minority party who fails to support this 'compromise' of being 'obstructionist.'
For the minority party in such circumstances, 'bipartisanship' comes to mean getting chronically steamrolled, although individual senators may enjoy certain political rewards by consistently going along with the majority and hence gaining a reputation for being 'moderate' or 'centrist.'
From Audacity of Hope. Not that I'm complaining--the party in power should be free to do whatever it wants, and this circus of obstructing nominees and fillibustering every bill is ridiculous. But so is the notion that the specific sort of change that Obama would usher in would be one of calm-headed bipartisanship; one of empirical competence. This has always been a rhetorically shunt to mask genuine liberaldom.
See Johanathan Chait's plea that liberals support big government because the evidence is there, and conservatives are just willfully malignant. But, as Ross Douthat points out, empirical facts cannot be separated from a broader ideological framework. A pledge of unity and competence is even more hollow than one of change and hope because the very idea of coming to a objective consensus on all political issues in nonsense in a democratic system. This is why we don't have a single party regime; because political actors are not broad-minded technocrats (fighting against some especially mean-spirited opponents who reject reason and embrace fear), but narrow, political actors whom we can elect or not based on demonstrated political beliefs.
Deploying numbers and facts in such an apparently non-ideological manner has become the standard procedure for any interest group. Once upon a time, we relied on rhetoricians in the field of political debate, and a well-constructed argument or a witty turn of phrase could decide an argument. Now, economists and data crunchers are deployed by rival gangs to settle disputes under the pretence that some sort of categorical issue is being decided. That the only thing standing between our common fights and disagreements is a scientific judgement. Well, that's wrong. People are always going to argue and complain, but we should recognize what our politics consists of, instead of playing politics with the apolitical.