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Searching for common ground: In which I provide a partial defense of Ron Bailey`s "invisible hand of population control" thesis

June 22nd, 2009 No comments

Michael Tobis, a blogging climate scientist, kindly alerted me to his criticisms of Ron Bailey`s recent Reason post.

Here is my response to Michael:

Michael, thanks for the link and for twitting it to my attention.

I`m not sure you really want to get me started, but I won`t let that get in the way.

First,
of course, it`s regrettable that those on the left and right would both
rather fight than think seriously. There`s alot of middle ground, but
you can`t get there in war of words. I`ve criticized Ron for this,
but he deserves credit for accepting climate science and expressly
acknowledging and analyzing tragedy of the commons situations.

While
I think you have found an infelicitly stated portion of his piece,
clearly he`s trying to say that social collapse in the past might be
attributable to tragedy of the commons situation (where “proper
institutions for channeling individual striving into a process of
economic growth which ultimately promotes the public interest” were not
in place).

While there are other cause of collapse – wars,
climate shifts, disasters – do you really disagree with Ron`s point
that societies are vulnerable to collapse if they don`t establish
institutions that prevent ruinous exploitation of resources?

While
Ron focusses on economic freedom and rule of law (market institutions)
as checks on tragedies of the commons, he is familiar with (and
libertarians certainly accept) traditional, community-based property
rights systems can work just fine, though increasing demand (and use by
outsiders) might swamp them, or technology might make private property
more efficient.

I think that Ron is perfectly correct to note
that property rights and market institutions in free societies are
serving to check population growth.

The chief problem, of course
is that there are huge gaps outside individual Western countries: Where
are the property rights in the atmosphere, the oceans, the tropical
forests? As a result, we are steadily destroying whatever we can get
out hands on.

The related problem is that corrupt and/or inept
governments are often in the middle of these problems: e.g., the
Newfoundland cod fishery was destroyed under Canadian government
management, West coast salmon fisheries are similarly threatened, and
tropical forests are being converted to soybeans and oil palm because
governments don`t care to protect the rights of the natives who dwell
in them.

(The way governments fail libertarians are rather
attuned to; while it may grate to hear this after the gross
mismanagement of the Bush/neocon/Republicans, perhaps even liberals can
acknowledge that they have a point, even if they don`t want to listen
to fear of “socialism” from the right.)

Finding institutions to
end destructive exploitation and manage open-access commons is a real
struggle; Bailey points in the right direction for some solutions, but
he downplays the size of the task ahead and the need for those who care
to work at solutions.

More of my thoughts here:

Too Many or Too Few People? Does the market provide an answer?

Using the State to solve common resource problems?

Mises on fixing externalities: progress along the Kuznets curve is not magic, but the result of institution-building

Regards,

Tom

Evolution & religion: Idle hands express idle thoughts about Bob Murphy`s determination to apply reason to his insistence that "non-believers burn in hell"

June 22nd, 2009 No comments

I refer to Bob Murphy`s blog post, “Do Non-Believers Burn in Hell?”, which is still active, but with little further contribution from Bob (who`s been busy doing God`s work  on other matters). In the post Bob asserts that “the doctrines of Christianity make sense and are logical” and attempts to explain what he means by his belief that atheists are “going to hell.”

Below are my two posts on the thread.  The first asks Bob to clarify his logic; the second steps back to meta-issues that are too often unexplored in arguments over religion.

A. June 14, 2009 5:23 AM

Bob, if you`re in favor of using your reason when contemplating God, can you tell me:

1. is there a hell? what evidence is there for hell?

2.
Who goes to hell? You suggest “person[s] who actively rejected the
Creator’s offer of friendship”, but by this (a) do you imply that
everyone got a “personal” offer? how so?

(b) if not, what
happens to those throughout human history who never got a personal
offer, or who thought their offer was to follow Judaism, Islam, the
Budddha, etc?

(c) what about those with limited capacity –
children (including those stillborn, or naturally or artificially
aborted), the mentally handicapped? do they burn in hell for eternity,
or are they united in communion with the Creator?

I`m not sure
where reason leads us in matters of faith, other than we have a
capacity to believe all manner of what seems obvious nonsense now.

B.  June 22, 2009 4:42 AM

James, I think you are being far too judgmental.

And I think this discussion generally is too shallow.

Can
I suggest that you – and others – step back to consider the role of
“Ritual and Religion in the Making of Humanity,” as explored in a book
of that title by Roy Rappaport (former head of the American
Anthropology Assn.
and published postumously)?

Rappaport
recognized the role that ritual and “sacred postulates” (later,
religions) have played in the evolution of man as a social animal, by
providing a fundamental way of ordering the world, the group`s role in
it, and the individual`s role in the group – thereby abating commons
problems both within and created by the group.

The religious
lies at the root of our human nature, even as its inviolable, sacred
truths continue to fall by the wayside during the long march of
culture and science out of the Garden of Eden.

Amazon

Google Books

review by Mary Catherine Bateson

Interview

Especially as we live in an increasingly global world, it behooves us all to know ourselves better – even us hermits in Tokyo.

Can we sheath our vorpal swords?

 

 

 

To Ron Bailey: yes, an "invisible hand" controls population, but property rights & rule of law are not universal and, as Mises noted, require effort

June 19th, 2009 No comments

Ron Bailey, science correspondent at ReasonOnline, has a very useful post up that outlines how markets and the institutions that underpin them explain declining fertility in Western societies, and that suggest grounds for optimism when looking at population growth  in the developing world.

However, he leaves a few things out in his ongoing effort to show that the “Neo-Malthusians” are wrong to worry about population, including the following:

  • the West lies at the end of the demand chains that have swamped both unowned commons in the oceans and traditional, community-based property rights systems in developing nations (and that have fuelled kleptocrats for decades);
  • as developing nations grow, until clear and effective property rights systems are established, they will put stresses similar to those that the West did on open-access commons – including on the climate system as their fossil fuel use grows; and
  • establishing property rights and other institutions conducive to markets and wealth don`t spring up magically, but take time and concerted effort (and leave gaps), as Ludwig von Mises noted- and which is the lesson of the “Kuznets” environmental curve.

I remarked on some these in the following, which I posted (or tried to) at Ron`s comment thread:

Ron, in general I think your post is insightful and helpful, as it points the way to property rights and rule of law as ways that human societies can improve their well-being while controlling their population via the choices of individuals. This provides a fruitful focus for all participants in the discussion, including both the “conservative” and the “envirofacist” nature-lover poles.

However, for me at least it`s not a new insight (I studied some population dynamics, carrying capacity & sygmoid growth curves, was long familiar w/ Hardin & noticed in the 80s that the places where pop growth was highest was where property wasn`t adequately protected.

And you might not have not have noticed, but decades before Hardin, Ludwig von Mises explained how environmental problems arise from the lack of clear, appropriate and enforceable property rights.

More importantly, I think you fail to address both the West`s role in ongoing environmental destruction outside of their countries and the need for those concerned about environment and human welfare to continue to push and contend – both property rights on the supply side, and management (consumer pressure, boycotts etc.) are still needed on the demand side. I blogged on this two years ago, here: Too Many or Too Few People: Does the market provide an answer?“.

There are real problems and they aren`t magically solved (as Tierney seems to think, a la Kuznets). Mises pointed not only at the problem of externalities, but also at the transitions that societies make, deliberately or through changes in customs, to reduce externalities.

There is a lot of hard work ahead of us, and preferences and initiative matter greatly. I appreciate your efforts to educate and to push the ball forward.

Sincerely, Tom

On Bob Murphy`s narrow attack on Krugman`s support for the Waxman-Markey climate bill

June 12th, 2009 No comments

I just stumbled into Bob Murphy`s June 8 post at the LvMI Daily site, and submitted a few comments.  As it looks like my links prevented my comments from posting, I`ve copied them here (with a few typo tweaks and links added):

Bob, I didn`t realize you had put a post up here.

Allow me first to copy here a few points that I made on your related post at MasterResource, but which freedom- and open-debate-loving Rob Bradley blocked (your truly has been banned there for the past few months):

“The below is copied from MasterResource, where I remain on permanent moderation – IOW, banned – even though Bob and the authors of various threads seem perfectly interested in engaging me.

“TokyoTom { 06.09.09 at 12:53 am }

A few comments, if I may (in the hope that springs eternal that even the “unclean” will be allowed to post): [Note to readers:  rest easy; that the final “I`ve been banned!” reference.]

1. “Cost/Benefit Analysis Cannot Justify Waxman-Markey’s Aggressive Targets”

Why this headline, which is completely unsupported in the post?

You do link to a prior post, where you try to draw the conclusion that “If the whole world adopted the stringent emission cutbacks in Waxman-Markey, then the costs to the global economy would far outweigh any reasonable estimate of the benefits (measured in avoided climate damage)”, but both there and here you fail to address Weitzman, much less more fundamental problems regarding the validity of CBA (aggregating preferences across persons situated vastly differently, ignoring the problems of frustrated preferences, enrtrenched rent-seeking and the continuing lack of property rights or other mechanisms to manage an important commons).

And far from “agree[ing] with you”, the RFF paper much more fairly illustrates some of the complexities in applying CBA to the moving ball of international negotiations.

2. “the costs to the global economy would far outweigh any reasonable estimate of the benefits (measured in avoided climate damage)”

“Yet mainstream models of the global economy and climate system show that worldwide adoption of Waxman-Markey would be foolish as well. It takes heroic assumptions both of lurking climate catastrophes and of international dipomacy to justify support for the current bill.”

Again, you offer conclusions not established here or elsewhere. You appear to acknowledge your overstatements when you say: “If proponents of aggressive government measures want to say the benefits justify such costs, fair enough; but let’s not kid ourselves that this is going to be cheap.”

3. “RFF study, which says the cumulative cost through 2050, expressed today in present-value terms, is up to $43 trillion worldwide.”

Actually, don`t the RFF authors make clear that this estimate is based on universal adoption worldwide and least-cost reductions – 70% of which would take place in developing countries – with a clear indication that such countries are not likely to act agressively for decades? Accordingly, the RFF study implies that global costs will fall below the straight estimate.

4. It is interesting to me that you ignore the dynamics of the international context of climate policy and negotiations. Why no comment on the observations in the RFF paper that likely “leakage” of carbon-heavy industry to developing countries and dampening Western demand for fossil fuels will constitute net subsidies that spur development in poorer parts of the globe?

Your comment is awaiting moderation.”

Thanks for putting these up at your own blog.

Further, let me note:

1.  Your criticism of W-M on conventional CBA grounds is limited to W-M, and doesn`t address the many CBA analyses that conclude (as Nordhaus has done weakly for decades) that carbon pricing mechanisms are now justified.  Economist Richard Tol last year summarized the economic literature as follows:

Firstly, greenhouse gas emission reduction today is justified. Even the most conservative assumption lead to positive estimates of the social cost of carbon (cf. Table 1) and the Pigou tax is thus greater than zero. Yohe et al. (2007) argue that there is reason to reduce greenhouse gas emissions further than recommended by cost-benefit analysis. The median of … peer-reviewed estimates with a 3% pure rate of time preference and without equity weights, is $20/tC. …. The case for intensification of climate policy outside the EU can be made with conservative assumptions. … Secondly, the uncertainty is so large that a considerable risk premium is warranted. With the conservative assumptions above, the mean equals $23/tC and the certainty-equivalent $25/tC. More importantly, there is a 1% probability that the social cost of carbon is greater than $78/tC. This number rapidly increases if we use a lower discount rate—as may well be appropriate for a problem with such a long time horizon—and if we allow for the possibility that there is some truth in the scare-mongering of the gray literature.  Thirdly, more research is needed into the economic impacts of climate change—to eliminate that part of the uncertainty that is due to lack of study, and to separate the truly scary impacts from the scare-mongering.”

[Cato`s Jerry Taylor has a good summary of Tol`s review here.]

2.  Granted that you focussed narrowly on W-M, but by doing so you completely fail (a) to acknowledge the atmosphere/climate system as an open-access commons under growing infuence by man, and (b) to put forward a “free market” agenda that would serve as a win-win response to the wide array of people, firms, institutions and nations that are concerned about man`s role in ongoing climate change and about the likelihood of future climate change stemming from the growing use of fossil fuels and other human activities.

Are you indeed interested in addressing people`s legitimate preferences regarding climate, and pushing for freer markets?  This is a question that I have asked Rob Bradley at his self-declared “free market” MasterResource blog any number of times.

Rob has stated there in response to me [before he banned me] that: “a free-market approach is not about “do nothing” but implementing a whole new energy approach to remove myriad regulation and subsidies that have built up over a century or more”, but he and his co-bloggers (including you) haven`t  seen fit yet to actually recommend ANY free market approaches to climate concerns!

Failing any effort to actually offer policy suggestions, is it unfair to wonder whether you guys are, consciously or not, simply providing cover for the rent-seekers who benefit most by generating pollution and other risks in the manner permitted by current regulations?  (Why did Exxon stop funding Rob`s Institute for Energy Research, BTW?) 

[It`s very clear that Joe Romm and others perceive you this way; are you not seeking to persuade them?]

Regards,

Tom

PS:  Your chief post doesn`t actually link to the comment thread, which readers have to search for.  You might want to fix that.

 

Obama-Man Can! Laugh (and cry) at this spoof by Canadian comedian Greg Morton

June 12th, 2009 No comments

A buddy sent me this and I just had to pass it on:

[View:http://www.youtube.com/watch?v=zhhkF3dqXR0:550:340]

 

 

 

 

Categories: Greg Morton, obama Tags:

Executive compensation: Robert Wenzel sees a "United States of Obama"; I see people too frazzled to give a screwdriver to a those who only have a hammer

June 11th, 2009 No comments

Robert Wenzel has a couple of posts up on his blog that rightly ring alarm bells about the plans of the Obama administration to seek legislative changes that would allow regulators to oversee executive compensation (1) in the financial sector (“The United States of Obama Has Arrived“) and (2) for all public companies generally (“It`s Worse Than I Thought:”). 

And make no mistake, Wenzel is VERY alarmed:

“Treasury Secretary Timothy Geithner’s statement on
executive compensation packages is a clear signal that a dictatorship
has arrived in America. Make no mistake, the compensation package
regulations that are about to be instituted will go way beyond
regulations on banks and other financial institutions that took TARP
money. It is about controlling the entire financial sector–which will
ultimately result in controlling the entire economy.”

“Now that the government is moving in to control the financial sector,
the rest of the economy will be a lay up. Money controls the economy
and Barack Obama is about to take over the money infrastructure. Money
is going to end up going to some very funny places. Mostly to people
who control lots of votes in the next presidential election, and to
those who finance such election campaigns. In other words, the
connected. In the first group, we are talking unions, in the second
group we are talking about Goldman Sachs, Carlyle Group and the like.

“When
this is all over, the United States of Obama is not going to look
anything like the America we now know. Think Cuba, think North Korea,
that’s how all dictatorships end up.”

“The compensation oversight programs announced by Geithner will not be
limited to financial companies. The Treasury will propose legislation
giving the SEC the power to ensure that compensation committees are
more independent, for all publicly traded companies, according to Sperling.”

“What should be of major concern is that this is going to bring to the
compensation table all kinds of people with all kinds of agendas”.

“In short, there appears to be Herculean oversight of executive
compensation coming that is likely to turn into more regulation than
oversight. And there is enough wiggle room in these proposals, at this
point, that the Administration can drive the programs in any direction
they want, any time they want or need to. It sounds like a Paulson plan
all over again. Throw everything up against the wall, get legislation
passed and interpret all these broad generalizations any way you want,
down the road.

“Very scary.”

But in his rush to tell us that the doctor is about to enslave the patient, Wenzel neglects
to offer an opinion on whether the patient is sick, if so, why, and what treatment might be more apt.  Such analysis must be offered if one wants to persuade – either the patient that the doctor is a quack (and to run), or those with the lobotomizing tools to put them down (in favor of a more appropriate diagnosis and treatment). 

Have faulty incentive structures in the financial sector and within public firms not contributed to the financial crisis?  If indeed they have – as seems to be universally acknowledged –  how did those incentive structures arise, and what are the best ways to remedy them? 

While the discussion can become quite nuanced, it seems to me fairly clear that root causes lie in financial regulation and in the regulation of “public” companies, both of which have served to loosen shareholder/investor control over management. 

This loosening of control, of course, has an even deeper root, namely, the grant of limited liability to shareholders for the torts committed by company executives and employees.  This grant incentivized lighter oversight by shareholders (as gains from risky activities could be captured, with losses in excess of  assets being shifted to the public), and in turn has led to a continuing cycle of federal regulation intended to rein in risks – particularly on environmental, health and safety areas, and regulation of stock markets and “public” companies – with resistance from and rampant rent-seeking and gamesmanship by larger risk-generating firms.  Sometimes forgotten by advocates of “free markets” is how larger firms utilize their political influence to co-opt regulators and regulations, both to raise barriers to entry to keep smaller and nimbler competitors at  bay and to ensure that they can continue in business without facing the full external costs of their business activites.

This dynamic – and the way free market advocates miss it – can be seen in Wensel`s most recent post, where he notes:

“The Treasury will propose legislation
giving the SEC the power to ensure that compensation committees are
more independent, for all publicly traded companies, according to Sperling.

“Sperling
championed this as putting standards into effect for compensation
similar to those put in place for audit committees as part of the
Sarbanes-Oxley Act.

“I know of no one, including most legislators
, who don’t think that Sarbanes-Oxely was a big mistake, that it costs
companies millions of dollars annually in compliance costs, with zero
benefit. Setting up such a nightmare for all publicly traded companies
will make it even more difficult, if not impossible for small companies
to raise money and go public, and will force others to leave the public
markets and go private (or overseas).”

Sarbanes-Oxley vastly extended the reach of federal securities regulation, and raised costs for public firms.  But while Wenzel can see this, why has he failed to note that such regulation also greatly raised the costs of access to the public capital markets, thus benefitting public companies by insulating them from potential competitors?

The whole system of public company regulation is rotten.  We need less regulaton, and greater self-policing by investors and market counterparties of the risks they face.  The alternative of lightly-regulated private companies (especially unlimited liability structures like partnerships) ought to be more vigorously explored.

I quote  a summary of my views on this subject from another recent post:

“I share Ariely’s concern that we are likely to be distracted by a
focus on big “bad apples” that may satisfy our needs to string someone
up, but that will ignore the rot at the core – the systemic
cheating that, in the American system, is very much related to the
institution of state-granted “limited liability” to corporate
investors/shareholders
.  This grant (1) frees investors from the
downsides of losses suffered and borne by third parties as a result of
corporate actions, (2) limits investor incentives – and abilities – to
monitor and control risks faced by and generated by executives,
managers and other employees, (3) thus incentivizing risky behavior and
providing greater freedom of action to executives and managers –
including freedom of action to seek favors from government , (4)
leaving executives and managers freer to loot their companies by taking
large bonuses, which shifting downside risks to shareholders and
taxpayers, and (5) fuelling pressures by consumers and others adversely
affected by corporations to seek to use legislative, regulatory and
judicial mechanisms to check corporate behavior.  In sum, limited investor liability has proven to lie at the core of the moral
hazards which have produced the Great American Ponzi scheme that our
fearless leaders are now struggling mightily to patch together and
profit from
.

“Did I leave anything out?  (Ah, maybe how various firms, investors and their political handlers profit while socializing climate change risks?)

“Anyone game for exploring ways to reduce the destructive gaming and rampant cheating in the American system?”