Global Warming Bleg: Update

My Bleg from last week has generated two different possibilities for why we should be taxing methane emissions from cows. BK Drinkwater and John Small (who have both weighed in with their own posts here and here, respectively) have posited the fertiliser theory: If the fertiliser used on the land grazed by cows contains carbon taken from the earth, then the methane emissions from a steady-state stock of cows will produce a continued increase in the stock of GHGs in the atmosphere (measured in CO2 equivalents).

John suggests that the source of the net carbon would be urea, although it is not clear from a quick reading of the Wikipedia article on it if the CO2 used to create the urea is a net addition of has already been created as a by-product of existing processes. In any event, as John points out, the policy implication would be to tax the use of urea.

The other possibility, suggested by PaulL in the comments is that the concern about methane is that the stock of GHGs in the atmosphere affects the flow of temperature increases, at least until temperature catches up. Paul suggests that this provides a reason for taxing a one-off increase in methane levels every year for a century.

The trouble with this line of reasoning, as I see it, is that the same argument would apply in spades to on-going emissions. That is, if methane is twenty times as powerful a GHG as CO2 for the same amount of carbon, my logic suggests that the tax on methane emissions that are part of a natural cycle (assuming no net additions from fertiliser) should be way less than 20 times the tax on CO2 emissions.

Unfriendly skies

The American airline industry has such a perfect record of happy customers with no delays or crushed guitars that there's absolutely no need for foreign carriers to be able to fly between American cities. Consequently, cabotage is forbidden. There is no need for competition from foreign carriers and so it must be banned.

Moreover, it is so supremely important that American carriers be protected from foreign competition that the Obama administration has wisely decided that it is better to risk ruining the NHL season than to allow Canadian teams on charter flights to fly between American cities.

In a furious exchange with the Obama administration over the mid-August ruling, Canada has launched its own investigation and will soon close its skies to U.S. sports team charters in retaliation, warns Transport Minister John Baird.

The sticking point is an eight-year-old exemption that had allowed sports and celebrity charters to make several pit stops in American cities. Under existing open skies agreements, regular Canadian airline flights can only visit one U.S. city before returning.

NHL Deputy Commissioner Bill Daly warns the charter ban will create a complicated "patchwork" of travel that could "wreck havoc" with the oncoming hockey schedule, including early league games in Europe, as teams scramble to book flights under the new rules.

This is for the best under this, the best of all possible Administrations with the best of all possible Presidents.

Real wages and growth

Growth measures always understate welfare gains when new products are of superior quality; quantifying the gains from categories of goods previously unavailable is even tougher. One example: the introduction of sugar, tea and coffee into Britain in the 1600s-1700s.

Using historical data on prices and quantities for these “new luxuries”, we estimate their value to consumers. It turns out to have been very large. By 1850, English consumers were better off by 15-20% as a result of new goods. The Age of Discoveries boosted peoples’ well-being – not by changing the quantities or prices of goods that Europeans already knew in 1500, but by expanding the range of goods that consumers could buy.

Comparing these gains to more recent new goods, we find that – from a welfare perspective – sugar, tea, and coffee mattered more back then than did the recent introduction of the internet, computers, satellite television, and mobile phones combined.

They find that sugar, coffee and tea went from 0% of household budgets ('cause they weren't available) to 7.2% of household budgets, with rich and poor alike enjoying the benefits of increased product diversity. Their results suggest Greg Clark's work understates true increases in real incomes over the period.

Call me a cornucopiaist if you like, but life just keeps getting better. Or, as Don Boudreaux asks, would you rather live in 1960 with 2009's median income, or in 2009 with 1960's median income? Pick up an old catalog from the 60s and figure out what you'd be missing....

Update: Paul Walker also likes this one.

Afternoon roundup

• George Thompson, one of the usual suspects at Otago at Wellington's Public Health department, warns that his preferred nanny state interventions are increasingly being accurately labelled as nanny state.

  “There’s a need to reframe public health activity as stewardship that protects people. Governments are expected to balance the public good against the interests of big business, and to care for the vulnerable in society. We need to create the language to reflect this, which looks behind slogans and the stereotyping of opposition to unhealthy products.”
  
  Dr Thomson said there’s a need to reframe and analyse businesses that inflict health damage to people, as leeches on society.

  What a world view. Leeches? Liberty Scott rightly takes him to task. I wonder whether folks at his outfit are getting worried about the cushy government contracts drying up with the change in government.


• Brad Taylor points to an excellent DeSoto video (the economist, not the car)


• Tetris made me smarter


• Guarding against date-bots: a truly excellent XKCD

Tiebout and Auckland: Sir Roger gets it

I've previously complained that nobody else seems to have noticed that Auckland's amalgamation will reduce Tiebout competition. I hadn't seen Sir Roger Douglas's submission.

On the community level, Councils should be designed to allow greater choice and competition between Community Councils, as well as providing for greater community control over expenditure.

Mechanisms that allow individuals to opt out of certain Council functions, and groups of individuals to switch Community Council, create a new Community Council, or amalgamate with an adjacent Community Council will foster greater competition between Councils. Such competition will allow more diversity and experimentation within Local Government.
...
Only when Government bodies are held responsible for setting and collecting rates and expenditure will there be adequate checks on their capacity to spend. The rates set by Community Councils could be collected on their behalf by the Greater Regional Council, but it is most important that the resident knows which portion of rates goes to the Community Council and which portion goes to the Greater Regional Council.

While the Government’s position on Community Councils – a position which departs from the Royal Commission’s absurd proposal to have only six local Councils beneath the regional authority – is generally sound, it is also important that Community Councils are held accountable for what they spend. This will only occur if they raise their own revenue.

...a group of citizens adjacent to another Community Council should be able to opt-out of their current Council, joining the neighbouring Council, if they think their mode of service delivery is more suitable to their wishes. The capacity to change Council will create competition for ratepayers, which is likely to see value for money being delivered by Local Government. Although this choice would only be able to be used by those at the edges, the capacity for others to change providers drives efficiency and therefore benefits all ratepayers.

Lots of other great suggestions in there, like having line-item council tax bills and allowing residents to opt out of certain items in favour of private providers. Hope the Local Government Minister was paying attention.

Buchanan on Meddlesome Preferences

From "Politics and Meddlesome Preferences", in volume 13 of the Collected Works of James Buchanan:

Consider the following politically orchestrated regulations:

1. Prohibition on private leaf burning.
2. Prohibition of the possession of handguns.
3. Prohibition of the sale or use of alcoholic beverages.
4. Prohibition of smoking in public places or places of business.
5. Prohibition on driving or riding in an automobile without fastening seat belts.
6. Prohibition on driving or riding on a motorcycle without wearing crash helmets.

...It seems quite possible that at least in some political jurisdictions a majority of voters might be found to support each and every one of the six activities listed. As noted earlier, however, the critical weakness in ordinary majoritarian procedures is that the intensities of preference are not taken into account. [So long as each supporter of each regulation values the regulation weakly but feels strongly the pains on the one dimension he opposes, then] The political process may well work so as to make each and every person in the relevant community worse off with enactment and enforcement of all of the prohibitions listed than he or she would be if none of the prohibitions were enacted.

My worry is there's a well-funded and vocal minority preferring prohibition across all margins in addition to folks' weak preferences.

...These prohibitions and regulations, existing or proposed, may be based on "scientific grounds." These critics might allege that leaf burning releases dangerous elements in the atmosphere; that handguns kill people; that alcohol is addictive and a causal factor in disease; that smoking is dangerous to health; and that seat belts and crash helmets save lives.

These arguments are highly deceiving in that they attempt to introduce, under the varying guises of "science," an objective value standard, one that "should" be imposed on all persons. Strictly interpreted, of course, almost any activity each of us undertakes is, in some way or another, a possible risk to our health. Once this is recognized, the question is one of drawing lines, and there is no well-defined set of activities that fall into one category or other.

Towards a Sumptuary Constutitution

We have been caught up in a wave of politicization for several decades. As a result, the set of activities that have been subjected to governmental-bureaucratic prohibition, regulation, and control has been expanded dramatically. Once politics was discovered as the apparent low-cost means of imposing preferences on behavior, a Pandora's box was opened that shows no signs of closing itself.

In these as in other aspects of the relationship between the citizens and the government, the dangers of excessive politicization cannot be avoided merely by a change in the makeup of political parties or by a change of politicians. In democracy, politicians respond to the electorates, and electoral majorities may, in a piecemeal fashion, close off one liberty after another. Prediction of such a prospect suggests that genuine reform can come only by constitutional rules that will prevent ordinary democratic majorities, in the electorates or in legislative assemblies, from entering too readily into the sumptuary areas of activities. Until and unless we recognize that politics, too, must operate within constitutional limits, each of our liberties, whether valued highly or slightly, is up for grabs.

Smart guy, Buchanan. Nobel in Economics 1986. Follow-up questions for my Econ 336 and 653 students:

• Why would logrolling not ensure the satisfaction of mean rather than median voter preferences across all issues?
• To what extent does the existence of fiscal externalities through the public health system affect the problem?
• While majoritarian democracy may have this problem, under what conditions might we expect a free-market anarchy of the type discussed by Caplan and Stringham to exhibit similar problems with meddlesome preferences?

Taxing choice

A new Mercatus Center primer on sin taxes points me back to an excellent volume handily available on my shelf: William Shughart's edited book "Taxing Choice". Excerpts are available from Google Books; whole volume from the Independent Institute.

Richard Wagner's chapter on alcohol and social costs is particularly nice. Important points made there:

• Costs of lost production are internal, not external
• Citing Alan Woodfield's 1986 study, abolition of alcohol abuse would hardly turn alcoholics into people otherwise indistinguishable from the general population
• In a system of private health insurance, health costs also are internal; if insurance companies do not find it worthwhile to adjust premia to reflect additional risks from alcohol use, then there's an externality on other insurance purchasers but not one that can be meliorated at any cost less than the benefit
• It's important to worry about the difference between alcohol being a contributing factor to crime or car crashes and alcohol being a critical factor
• Excise taxes punish moderate drinkers; fines and jail sentences for actually causing social harms is first best and excise taxation should only be considered if it's very very difficult to punish criminals

  Moreover, in the presence of a set of efficient penal sanctions, there is no place for corrective taxation. The penal sanctions achieve a cost-effective reduction of drunk driving, or at least have that capability. There is no scope for the taxation of alcoholic beverages to improve matters. In the presence of penal sanctions, excise taxes cannot serve as instruments of correction, but can only serve as instruments for raising revenue. To be sure, it might be argued that existing penal sanctions are not strong enough to achieve efficient deterrence. This argument, however, is a plea for stiffer sanctions, not a call for higher taxation.

How did I forget about this book? Another highlight: Tom DiLorenzo's chapter on the use of collected excise taxes to fund politically-correct propaganda. And Shughart's chapter worries about these reports being cloaked in the language of economics. I may have been reinventing the wheel with much of I've been doing here, but the folks on the other side have been advocating the use of square tyres despite the superiority of round ones having been shown now more than a decade ago.

I'm going to have to some time replace one week of my current policy issues class with a week on the economics of paternalism....