Here`s Bradley`s post, A Texas-Sized Energy Problem: Republicans, Democrats, and ‘Baptists & Bootleggers’ Running Wild in the Lone Star State (Obama sends his thanks).  I left a short note wondering how Bradley could have made it through a generally observant post without referring to all of the sweet deals that Boone Pickens managed to buy from the thoroughly Republican Texas legislature; it`s also a puzzle why he didn`t call for public utility deregulation.

Rob banned me from his blog 6 weeks back; I`m checking to see if he`s reconsidered.

Here`s the comment I left:

Although Pres. Obama had earlier indicated he had no intention or interest in pursuing criminal or other public investigations into possible criminal wrong-doing in connection with acts of torture auuthorized by the Bush administration, Obama is now (as the NYT and GlennGreenwald report), after being forced by a lawsuit under the Freedom of Information Act to release four “top secret” torture memos, finding himself under pressure from public opinion and some Congressional Democrats to allow such investigations to proceed.

As I found out in my email Inbox, this is producing conniptions from the so-called American Conservative Union, which, in an unashamedly breathless, hyperbolic and truthless missive, alleges that (1) Obama has condoned show trials against heroes who have safeguarded us from terroism and (2) in the process has undermined our national security by telling the terrorists and the world that America is weak.

Who knew that considering whether the people serving within U.S. government are subject to the rule of law could itself threaten our national security?

The email from the ACU is quoted further below; here is a copy of my direct reply [caution: obvious snark ahead]:

from TokyoTom <[email protected]> to Dennis Whitfield <[email protected]> date Sat, Apr 25, 2009 at 1:45 PM subject Re: Tokyo Obama’s Political Prosecutions of Opponents

from Dennis Whitfield <[email protected]> reply-to Dennis Whitfield <[email protected]> to Tokyo Tom <[email protected]> date Sat, Apr 25, 2009 at 12:31 AM subject Tokyo Obama’s Political Prosecutions of Opponents mailed-by mailmanager.net

[Snark Factor:  Ridiculously High]

In honor of Earth Day, yesterday Dr. George Reisman, Professor Emeritus of Economics at Pepperdine University and author of Capitalism: A Treatise on Economics, put up a fun little post that mocks the full-employment arguments made by President Obama on behalf of environmentalists and investors in the wind and solar power industries.

On the comment thread, I couldn`t resist expressing my appreciation, while introducing newer readers to the deeper challenge to which Dr. Reisman invites his readers:

I too have enjoyed another delightful article from Dr. Reisman; bravo!

But Dr. Reisman`s style does seem to present problems of
interpretation for some readers, whom do not seem to understand that
while Dr. Reisman appears to simply be bashing environmentalists or
environmentalism generally (by focussing on the most absurd arguments
that some of them offer), he is in fact challenging his readers to do
precisely what he has studiously avoided.

That is, far from simply pulling the wings off of flies as he might
seem to some, Dr. Reisman is actually suggesting that serious students
of economics and libertarian approaches to society should diligently:

• – seek to engage others productively and with sympathy, in a manner
  carefully designed to improve the functioning of markets and ancillary
  institutions that enhance plan formation across society;

  – note that there are many important, valuable open-access/unowed
  resources and government-owned resources – in which property rights and
  pricing mechanisms are working poorly at best;

  – acknowledge that while proposed “solutions” offered by
  environmentalists may be misguided, enviros have legitimate preferences
  as to how such resources should be protected, managed and distributed;
  and

  – recognize that the concerns of enviros frequently arise in
  response to government interventions have clearly benefitted powerful
  insiders, including wealthy investors and large enterprises, while
  shifting costs and risks more broadly.

  As a result, Dr. Reisman`s tongue-in-cheek posts are in fact searing
  indictments of the status quo and tbe fat cats who are using government
  to stifle open competition, consumer choice and innovation, while
  frequently generating large external costs. Unlike some who spoil the
  fun by engaging in the pedestrian task of spelling out the problems
  with the status quo that enviros are right to be dissatisfied with, Dr.
  Reisman treats his readers as adults by bracingly challenging them to
  use their thinking caps and to clear their own heads.

  For those for whom this task is too difficult, perhaps this piece by Lew Rockwell might be a good start:

  “Just who is in charge of getting electricity to residents? A
  public utility, which, in the absurd American lexicon, means
  “state-run” and “state-managed,” perhaps with a veneer of private
  trappings. If you look at the electrical grid on a map, it is organized
  by region. If you look at the jurisdiction of management, it is
  organized by political boundaries.

  “In other ways, the provision of power is organized precisely as
  a central planner of the old school might plan something: not according
  to economics but according to some textbook idea of how to be
  “organized.” It is “organized” the same way the Soviets organized grain
  production or the New Deal organized bridge building.

  “All of centralization and cartelization began nearly a century
  ago, as Robert Bradley points out in Energy: The Master Resource, when
  industry leaders obtained what was known as a regulatory covenant. They
  received franchise protection from market competition in exchange for
  which they agreed to price controls based on a cost-plus formula — a
  formula that survives to this day.

  “Then the economists got involved ex post and declared that
  electrical power is a “public good,” under the belief that private
  enterprise is not up to the job of providing the essentials of life.

  “What industry leaders received from this pact with the devil was
  a certain level of cartel-like protection, the same type that the
  English crown granted tea or the US government grants first-class
  postal mail. It is a government privilege that subjects them to
  regulation and immunizes companies from business failure. It’s great
  for a handful of producers, but not so great for everyone else.

  “There are many costs. Customers are not in charge. They are
  courted only for political reasons but they are not the first concern
  of the production process. Entrepreneurial development is hindered. Our
  current system of electrical provision is stuck in time. Meanwhile,
  sectors that provide DSL and other forms of internet and
  telecommunication services are expanded and advancing day by day — not
  with perfect results but at least with the desire to serve consumers.
  …

  “How New York and California consumers would adore a setting in
  which power companies were begging for their business and encouraging
  them to turn down their thermostats to the coldest point. Competition
  would lead to price reductions, innovation, and an ever greater variety
  of services — the same as we find in the computer industry.

  “What we are learning in our times is that no essential sector of
  life can be entrusted to the state. Energy is far too important to the
  very core of life to be administered by a bureaucracy that lacks the
  economic means to provide for the public. How it should be organized we
  can’t say in advance: it should be left to the markets. Whatever the
  result, you can bet the grid would not look like it does today, nor
  would its management be dependent on the whims of political
  jurisdiction.

  “What we need today is full, radical, complete, uncompromised
  deregulation and privatization. We need competition. That doesn’t mean
  that we need two or more companies serving every market (though that
  was common up through the 1960s). What we need is the absence of legal
  barriers to enter the market.“

  Thanks, again, Dr. Reisman, for challenging us, and not pandering to the dullest and laziest among us, the way Lew Rockwell does!

  Your admiring pupil (and fellow enviro-hater),

  TT

• Published: April 23, 2009 5:32 AM

For those who think that Dr. Reisman is being serious in his one-sided attack on enviros while ignoring the problems of ongoing rent-seeking by entrenched statist corporations, I would be pleased to refer to other posts in which he is clearly posting tongue-in-cheek and intends no rancor or imbalance.  A good example would be his light-hearted post in March 2007, Global Warming: Environmentalism’s Threat of Hell on Earth, in which Dr. Reisman appeared to seriously argue that

“there is a case for considering
the possible detonation, on uninhabited land north of 70° latitude,
say, of a limited number of hydrogen bombs. … This is certainly
something that should be seriously considered by everyone who is
concerned with global warming and who also desires to preserve modern
industrial civilization and retain and increase its amenities. If
there really is any possibility of global warming so great as to cause
major disturbances, this kind of solution should be studied and
perfected. Atomic testing should be resumed for the purpose of empirically testing its feasibility.“

While apparently serious, how could this possibly be a libertarian, nonstatist proposal?  The answer clearly MUST be – since Dr. Reisman is a lover of freedom and markets, and not of big government, goverment-run mega projects or statist corporate rent-seeking  – that Dr. Reisman was NOT being serious.  Instead, in his usual playful manner, he was simply inviting his readers to see through his words, and to productively engage those who are concerned with climate or other commons issues, on the basis of a cool consideration of libertarian and market principles.

Inquiring minds might like to note that I have remarked on Dr. Reisman`s  productive and insightful playfulness on a number of other occasions, on top of comments on his environment-related posts,  which have been fertilizing the LVMI pages since the 2005 Earth Day.

Q.E.D.

I just ran across an interesting speech and related commentary provided last month at TED by behavioral economist Dan Ariely, professor at MIT and author of Predictably Irrational.  Both the speech and the commentary are worth a look.

Ariely’s speech, billed as “Why we think it’s OK to cheat and steal (sometimes),” discusses how we fail to test our often-wrong intuitions, and focusses on the cognitive and social aspects of cheating behavior.  The Carnegie Council (which has a sidebar with other resources on cheating and corruption) summarizes Ariely’s speech as follows:

Ariely finds that in most situations a lot of people cheat a little, and that there are predictable ways to influence honesty.  When test subjects are reminded of morality, cheating drops. When subjects are distanced from the object of reward—for example, by replacing money with redeemable tokens—cheating increases. When other members of your social group cheat, you are more likely to cheat as well.

TED also asked Ariely for his thoughts on the Bernie Madoff scandal; these are a short read (about a page), but allow me to present a “readers’ digest” here:

Madoff’s massive Ponzi scheme was horrific on many levels. But while we watch the next phase of the scandal, it’s important to ask: What lessons are we going to learn from this? I can see three lessons that relate to my work studying human irrationality — and in particular, some non-useful lessons we might [unintentionally] learn.

One lesson that individuals and foundations are likely to take from the Madoff scandal is that in addition to diversifying their portfolio across several investments (stock, bonds, equity, cash), they also need to diversify their investments among several advisors. … You will need a whole new level of coordination among them so they can have the right amount of cash, bonds, stocks etc., across all of your assets.

And I think that people will begin to over-diversify across investors. Why? Because when we have one large and salient instance in our minds, it can be so powerful that we overemphasize it. …  In general, what we find when there’s one single vivid event is that people overweight it — we focus on it too much. So that’s the first lesson: We’re going to learn from the Madoff scandal, but we are going to overdo it.

Another non-useful lesson that I think we will adopt is to start searching with more vigor for other bad apples. On one hand, it is clearly important to prevent more Madoffs, but at the same time I worry that as a consequence of searching for bad apples, we won’t pay enough attention to other financial behavior that might not be as badly wrong but that can actually have larger financial consequences.

In our research on dishonesty, we found that when we give people the opportunity to cheat, many of them cheat by a little bit, while very few cheat by a lot. In our experiments, we lost about $100 to the few people who cheated a lot — but lost thousands of dollars to the many people who each cheated by a bit. I suspect that this is a good reflection of cheating in the stock market, where the real financial cost of the egregious cheating by Madoff is actually a tiny fraction of all the “small” cheating carried out by “good” bankers.

The risk here is that if we pay too much attention to chasing bad apples, we might pay too little attention to the situations where the small dishonesties of many people can have large consequences (such as paying slightly higher salaries to cronies, making small changes to financial reports, doctoring documents, being slightly dishonest about mortgage terms), and in the process neglect the real economic source of the trouble we are in. (emphasis added)

A third bad lesson that I think people will take from this concerns the way we define acceptable levels of cheating. In a study that may parallel Madoff’s egregious dishonesty, we … [found] that when someone who is part of our own social group cheats, we find it more acceptable to cheat, but when people who are not part of our social group cheat, we want to distance ourselves from these people and cheat less. (emphasis added)

Madoff was part of the financial elite — part of an in-group of our financial leaders. Think of all these people who were in his house, who knew him well. So now, when other people in this circle see him cheating, think about the long-term consequences: Would these other people in this financial industry now be more likely to take the immoral path? It doesn’t have to be another Ponzi scheme. It just means that, now that they have been exposed to this extreme level of dishonesty, they might adopt slightly lower moral scruples.  … I don’t think that those in his circle will necessarily become more Madoff-like people, but I do suspect that they will get a substantial relief from their moral shackles. Sadly, that’s his legacy.

So, Chapter One of the Madoff scandal is over, but I worry that the negative downstream consequences of this experience are just starting …

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?

The Ludwig von Mises Institute (which kindly hosts these pages!) continues to outdo itself on providing empty climate posts, this time by bringing us a new author, Jason King (completely new to LvMI, and apparently with no prior internet-searchable commentary whatsoever).   How is it that LvMI is proving so singularly effective in telling us so little about Austrian perspectives on climate, climate politics and climate policy?

Mr. King presents us with “The Law of Intended Darkness”, a puzzlingly empty Mises Daily essay  that criticizes “Earth Hour” that – as a gesture to symbolize public support for political, corporate, community and personal action regarding climate change – was staged around the world last Saturday, March 28th, between 8:30 and 9:30 pm, with participating communities, firms and individuals shutting off non-essential lights for one hour.  

Mr. King’s chief points are (1) to criticize the Earth Hour for being likely ineffective, in and of itself, in affecting energy use over the course of an hour, and (2) so to conclude that participation in the Earth Hour must be intended to be symbolic.  Mr. King concludes with a triumphant report that the main sponsors of the event, the internationally well-regarded World Wildlife Fund, have themselves stressed that “The purpose of the event [is] not to save money or power. It’s a symbolic event”, but what Mr. King reveals instead is that he has completely failed to examine whether Earth Hour might be effective on its intended terms of symbolic speech. 

Rather than considering whether the event has been or is likely to be effective – from the point of the sponsors and participants – in gathering support and galvanizing action, what Mr. King has done is to wasted our time with his own essentially idle and rather poor speculations as to whether Earth Hour might be effective in reducing energy use for an hour – a goal that the organizers have expressly said is not their primary purpose.   As a result, Mr. King has in effect told us nothing. Mr. King argues that, since “the effects of Earth Hour boil down to dim rhetoric,” “as much attention should be placed on humanity’s hot air footprint as its carbon one.”  Cute, but this time the dim rhetoric and the hot air all Mr. King’s own.

Too bad – one wonders not only about whether Earth Hour might be effective on its own terms, but what are the aims of the project and its many corporate, municipal and individual participants, whether such aims are consistent with liberty or Austrian principles, or, if, not, what approaches are preferable for dealing with conflicting preferences regarding open-access resources in which there are no effective property rights.  Should citizens be seeking particular actions from their governments to deal with a collective problem that cannot be solved purely by private transactions and that requires international action?  All of this beef seems simply too much for LvMI and its readers to chew.

To tip my own hand, I noted last year Gene Callahan’s point that, with respect to climate change as much as for other matters,  public moral pressure is a perfectly appropriate way by which concerned citizens, acting in the market of public opinion, can influence behavior that generates externalities.  Further, given the nature of the atmosphere, any effective approach to climate change requires multilateral action (and as no single government can force a solution on others, this looks like Coasean bargaining, not Pigovian rule-making), and I hardly expect that we can expect to address global issues such as climate change without involving our governments (which don’t appear anxious to step out of the way in any event).

The inquiring reader – hardly in evidence on the related blog thread – is forced to do his own research about this, the third annual  “Earth Hour”, which was apparently a fairly strong success.   Earth Hour began in Sydney in 2007, when 2.2 million homes and businesses switched off their lights for one hour.  In 2008 some 53 million people and 371 cities in 35 countries switched off their lights, including global landmarks such as the Golden Gate Bridge, Rome’s Colosseum, the Sydney Opera House and the Coca Cola billboard in Times Square.  WWF reports that participation grew strongly in 2009, to hundreds of millions of people in over 4,000 cities and towns in 88 countries.  Many more landmark buildings around the world switched off this year, including the Empire State Building, the Las Vegas strip, Niagara Falls, the Eiffel Tower, Rio de Janiero’s statue of “Christ the Redeemer,” Athens’s Acropolis, Egypt’s Great Pyramids, Table Mountain in Cape Town, the Merlion in Singapore, Hong Kong’s Symphony of Lights, the Shanghai Hong Kong New World Tower, and the London Eye.

Those interested in who participated and why might take a further look at the Earth Hour site linked above and here and here.

And as for thoughtful engagement regarding climate on the front pages of Mises Daily and the Mises Economic Blog?  Hope springs eternal.  At least LvMI and its editor, Jeffrey Tucker, allow an open discussion and are not running a corporate-funded spin site like Rob Bradley‘s “Master Resource” blog, which bans dissenters and refuses to acknowledge Exxon’s explicit support for carbon taxes.

I received the following in an email from NASA climate scientist James Hansen (whom I`ve mentioned a number of times), in connection with today`s New York Times Magazine article (“The Civil Heretic”) on Freeman Dyson, which is now making its way through the “skeptosphere”.  My short and unfair take on Dyson?:  Short Freeman Dyson: Yep, it`s warming; I LIKE vast uncontrolled experiments with climate, and who needs fish in the ocean anyway!

Dyson is rather critical of Hansen, but it`s not at all clear that he understand`s Hansen`s position.  But why attack Hansen, when Exxon  and its CEO Rex Tillerson are now explicitly pushing carbon taxes?  If any firm ought to understand fossil fuels – and the problems with government actions – it`s Exxon.  Hansen is a vocal scientist, but he represents no particular special interests.

In any case, Hansen`s mail is fairly brief, so I thought I`d just post it as if for all you open minds out there:  

            Tomorrow’s NY Times Magazine article (The Civil Heretic) on Freeman Dyson includes an unfortunate quote from me that may appear to be disparaging and ad hominem (something about bigger fish to fry).  It was a quick response to a reporter* who had been doggedly pursuing me for an interview that I did not want to give.  I accept responsibility for the sloppy wording and I will apologize to Freeman, who deserves much respect.

            You might guess (correctly) that I was referring to the fact that contrarians are not the real problem – it is the vested interests who take advantage of the existence of contrarians.

            There is nothing wrong with having contrarian views, even from those who have little relevant expertise – indeed, good science continually questions assumptions and conclusions.  But the government needs to get its advice from the most authoritative sources, not from magazine articles.  In the United States the most authoritative source of information would be the National Academy of Sciences.

            The fact that the current administration in the United States has not asked for such advice, when combined with continued emanations about “cap and trade”, should be a source of great concern.  What I learned in visiting other countries is that most governments do not want to hear from their equivalent scientific bodies, probably because they fear the advice will be “stop building coal plants now!”  These governments are all guilty of greenwash, pretending that they are dealing with the climate problem via “goals” and “caps”, while they continue to build coal plants and even investigate unconventional fossil fuels and coal-to-liquids.

            I will send out something (“Worshiping the Temple of Doom”) on cap-and-trade soon.  It is incredible how governments resist the obvious (maybe not so incredible when lobbying budgets are examined, along with Washington’s revolving doors).  This is not rocket science.  If we want to move toward energy independence and solve the climate problem, we need to stop subsidizing fossil fuels with the public’s money and instead place a price on carbon emissions.

            My suggestion is Carbon Fee and 100% Dividend, with a meaningful starting price (on oil, gas and coal at the mine or port of entry) equivalent to $1/gallon gasoline ($115/ton CO₂).  Based on 2007 fuel use, this would generate $670B/year – returned 100% to the public (monthly electronic deposit in bank accounts or debit cards), the dividend would be $3000 per adult legal resident, $9000/year per family with two or more children.  This is large enough to affect consumer product and life style choices, investments and innovations.  Of course all the other things (rules re vehicle, appliance and building efficiencies, smart electric grid, utility profit motives, etc.) are needed, but a rising carbon price is needed to make them work and move us most efficiently to the cleaner world beyond fossil fuels. 

Jim Hansen
 

*             The reporter left the impression that my conclusions are based mainly on climate models.  I always try to make clear that our conclusions are based on #1 Earth’s history, how it responded to forcings in the past, #2 observations of what is happening now, #3 models.  Here is the actual note that I sent to the reporter after hanging up on him:

 I looked up Freeman Dyson on Wikipedia, which describes his views on “global warming” as below.  If that is an accurate description of what he is saying now, it is actually quite reasonable (I had heard that he is just another contrarian).  However, this also indicates that he is under the mistaken impression that concern about global warming is based on climate models, which in reality play little role in our understanding — our understanding is based mainly on how the Earth responded to changes of boundary conditions in the past and on how it is responding to on-going changes.  

If this Wikipedia information is an accurate description of his position, then the only thing that I would like to say about him is that he should be careful not to offer public opinions about global warming unless he is willing to first take a serious look at the science.  His philosophy of science is spot-on, the open-mindedness, consistent with that of Feynman and the other greats, but if he is going to wander into something with major consequences for humanity and other life on the planet, then he should first do his homework — which he obviously has not done on global warming.  My concern is that the public may assume that he has — and, because of his other accomplishments, give his opinion more weight than it deserves.

      (emphasis added)      

Roger Pielke, Jr., a political scientist who rather persistently blames politically naive climate scientists for the very natural fact that there is a politicized debate over climate policy,  posted last week at his Prometheus website a guest commentary by Michael Zimmerman, Professor and Director, Center for the Humanities and Arts at the University of Colorado.  Zimmerman’s post, “Coal Trains, Death Camps, and Recent Anti-Modernism,” which only recently came to my attention, apparently addressed politically-oriented remarks and actions by climate scientist Jim Hansen.  “Apparently”, I say, because the essay itself has been taken down by the author in light of factual errors and other criticism made of it, both at Prometheus and around the blogosphere (which sometimes does not lap so strongly at my distant shores).

But having finally been drawn toward Roger’s site by the fuss and taking a look through comments, I felt compelled to make a few comments, despite my inability to read the actual post.  I felt particularly struck by the commonness of a refrain we are hearing from various pundits who prefer to question the good will or sanity of environmentalists over the harder work of engaging in a good faith examination and discussion of the underlying institutional problem of ALL “environmental” disputes:  namely, a lack of property rights and/or a means to enforce them. 

We can see this not only in George Will‘s recent piece about sea ice, but also in the ongoing series of posts by the supposedly “free market” libertarian Rob Bradley and his co-bloggers at MasterResource.

With that as background, here is what I posted at Roger’s (emphasis added):

I’m sorry I missed the fun; did anyone happen to archive Mr. Zimmerman’s work, apparently so flawed that it required a withdrawal rather than an update or two?

Roger, I note the criticisms of you and Mr. Zimmerman at Things Break, and have to say I agree with them: http://thingsbreak.wordpress.com/2009/03/03/honest-broker-at-prometheus-attacks-hansen-over-claim-he-never-makes/. Perhaps Mr. Zimmerman has never carefully read the man whom he attacks in his piece, but you have, and it’s crystal clear that Hansen has ALWAYS been talking about coal’s relationship to species extinctions, not coal’s impact on humans. I’m surprised that you would post such an obvious misreading of Hansen.

I think I can agree with tomfid and Len Ornstein without the benefit of reading Zimmerman’s piece. It’s clear that we have no ability to instantly replace coal, but it’s also clear that even without the climate change issue, coal is not even now bearing its environmental costs – witness the roughly $1 billion TVA flyash spill, the 25,000 or so annual deaths that the American Lung Assn attributes to coal, etc – w/o even getting to China and India. Investors make profits, while losses are shifted to others. There’s hardly anything conservative or socially beneficial in that business model.

It’s also very clear that, far from wanting to return to a golden age, environmentalists (largely a well-to-do/wealthy slice of America) have quite legitimate concerns about the future, and about our uncontrolled, widespread and large-scale experiments with our planet. Find me someone ranting about “Malthusians” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between wealth-creating markets based on private property / contracts protected by law, and the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans) or when the pressures of markets swamp indigenous hunter-gather community rules.

Just look at how the oceans are being trashed and strip-mined of fish, for an alternate example. It is a first order priority of mankind to grapple with the problem of managing our commons, before we irreversibly impoverish them. For the atmosphere, the handwriting has long been on the wall, though those who profit by externalizing risks have done a pretty good job of scribbling all over it.

Of course, while on the one hand the “skeptics” manage to so completely ignore their supposedly much greater understanding of markets, on the other hand, we hear very little talk about markets from most of the enviro pundits.   Even if scientists have a right to be worried, that doesn’t really tell us what we should do. 

So what’s the deal?  Here’s a perfect opportunity for skeptics to educate the supposedly market ignorant, but they refuse, preferring to focus instead on why concerned scientists must be wrong, how concerns about climate have become a matter of an irrational “religious” faith, or that those raising their concerns are “misanthropes” or worse.

Both sides, it seems, prefer to fight – and to see themselves as right and the “others” as evil – rather than to reason. 

While we should not regret that we cannot really constrain human nature very well, at least Austrians (a breed of libertarian-linked economists, for any visitors not already familiar with these pages or the great LvMI organization that hosts them) ought to be paying attention to the inadequate institutional framework that is not only poisoning the political atmosphere, but posing risks to important globally and regionally shared open-access commons like the atmosphere and oceans (which are probably are in much more immediate and grave threat than the climate).  And they also ought to recognize that there are important economic interests that profit from the current institutional framework and have quite deliberately encouraged the current culture war.

(One such economically interested party, Exxon, has recently stopped funding one culture war outfit, Rob Bradley‘s climate “skeptic” shop – “MasterResource” – which remains dedicated to trumpeting relentlessly pro-coal talking points – e.g., civilization will collapse if we try to substitute nuclear, gas or other technologies for coal, or try to make coal investors pay for the climate and other environmental risks that they shift to society as a whole!)

[Update:  I`ve added more background on Exxon, “Malthusians” and productive engagement.]

How has Rob Bradley showed his hand?  By shutting down reasoned (if challenging) debate at his blog, in the face of comments that were certainly more “free market” than displayed by Rob himself and his co-bloggers.

In a series of posts here and in comments at his blog, I have been critical of a number of obviously skewed and uninformative posts at MasterResource, the self-proclaimed “free market” energy blog of Rob Bradley‘s Institute for Energy Research, that downplay climate risks, cheer on coal and fossil fuels and point out problems with alternatives, while disappointingly show little evidence of a commitment to or understanding of free markets, much less a commitment to libertarian principles.  

Rob has fairly consistently simply ignored difficult questions from me on his posts, but what does he do when his guest bloggers (in particular, (a) Tom Tanton of  Pacific Research Institute, who jumped in on a post by Rob on drawbacks to wind that ignores the external costs of coal, and (b) climate scientist/paid policy consultant Chip Knappenberger) have no good answers to my comments and questions?  Even when I am just responding to his guest bloggers and others on the thread, he simply stops posting my remarks.  I am now blocked (“on moderation”) on all threads.  Granted, both Tanton and Knappenberger were in difficulty, but rather than allowing all (including other readers) to learn by having an open conversation, he apparently decided that open discourse with someone who can hold their own isn`t worth the potential embarrassment and distraction from the “mission”.  Tanton, to his credit, though he shows little understanding of market principles, at least chased me back to my linked blog post to throw in a few more parting words.

Of course the blog his plaything – or that of whoever funds it for him – so it’s entirely his right to decide whom he allows to comment.  But by deciding that hard questions and critical comments from a fundamentally libertarian, market perspective were too inconvenient, he’s tipped his hand that his interest is not in promoting “free markets” in energy, but in protecting the interests of his fossil fuel funders.  I noted on a previous post by Rob that boosted coal while bashing the “Malthusian anti-energy crusade” that:

I haven’t concluded here that Rob’s a rent-seeker; more evidence would be needed, but it’s fair to inquire and to wonder.

However, Austrians are problem solvers, not trying to win government
favor for a particular industry or bashing those with different views
for the benefit of clients. It doesn’t looking like Rob is trying very
hard to be even-handed.

I think it’s fair to question what precisely are the objectives and
who is funding Rob, “Master Resources”, the Institute for Energy
Research, the American Energy Alliance and affiliated
institutions/personages. My understanding is that fossil fuel firms are
the principal funders, and it looks like the funding is rather generous.

So the jury is now in.

Too bad, as it’s just another manifestation of how powerful corporate interests work to manipulate the public debate (of course the wealthy citizens and corporations that fund enviros also deserve mention).  Further, it`s a turning away from principled and productive engagement over resource problems and the role of government in providing, facilitating or getting in the way of solutions to them. 

I queried Rob about his methods of engagement in response to a post by him entitled “Long Live King Coal?” in which he said that “coal looks to remain a mainstay in the domestic energy mix and bodes to help defeat the Malthusian anti-energy crusade.”  My comment?:

TokyoTom { 02.05.09 at 2:50 am }

Rob,
are the John Badens, Terry Andersons, Bruce Yandles, Elinor Ostroms and
others who want to find ways to manage our commons better – by
improving ownership, incentives and pricing signals – also part of a
“Malthusian crusade”?

I just wanna make sure I know who to hate.

As for that big fly ash breach/spill in Tennessee, I’m glad that you
didn’t point out how this was a result of government ownership of TVA,
with the added benefit that costs will be borne not only by direct and
indirect victims, but by taxpayers as well. No sense in pointing out
how government is so often in the way, particularly if it detracts from
our “we hate enviros!” message. Last thing we ever want to do is to
reach a shared understanding with enviros of the institutional
underpinnings of problems, since that means our funders might lose some
of their fairly purchased, government-given special privileges.

Interestingly, though, apparently ExxonMobil – a well-run firm that Rob Bradley praises – has decided to actively promote carbon taxes. As I pointed out in a recent post, Exxon CEO Rex Tillerson,in a speech on February 17 at the Stanford University-centered Global Climate and Energy Project (the world`s largest, and internationally collaborative research prject focussed on clean energy), which Exxon commenced funding six years ago and has committed $100 million over ten years to, specifically endorsed carbon taxes AND pointed out its support as an effort to persuade others:

“It
is rare that a business lends its support to new taxes. But in this
case, given the risk-management challenges we face and the alternatives
under consideration, it is my judgment that a carbon tax is the best
course of public policy action. And it is a judgment I hope others in
the business community and beyond will come to share.”

This must pain Rob to no end, as IER was once funded by Exxon; Exxon cut off funding last year to IER and certain other climate change denial groups.  An Exxon spokesman noted:

“We discontinued contributions to several public-policy research groups whose position on climate change could divert attention
from the important discussion about how the world will secure the
energy required for economic growth in an environmentally responsible
manner.”

Rob`s skewed data flow and perhaps even his own denial on climate science, investments and politics could be seen on his recent post in which he highlights comments from Exxon`s Tillerson about Exxon`s unwillingness to invest in renewables due to the unreliability of the government-provided incentives.  When I managed to get in a comment that pointed out Tillerson`s explicit endorsement  of carbon taxes, Rob responded that Exxon had not endorsed carbon taxes, but had argued that carbon taxes were simply preferrable to cap and trade.  Rob`s parsing of Exxon is ridiculous, as Exxon has clearing been signalling for the past few years that it believes that coordinated government action on climate change is merited.  But on top of that, I responded to Rob with a link to Tillerson`s Stanford speech, which clearly shows that Exxon HAS endorsed carbon taxes and that Rob is wrong.  But Rob won`t post this correction (which I made in earlier “moderated” comments as well), obviously preferring to continue to mislead his readers (with the statement that “ExxonMobil has not come out in favor of a carbon tax or pricing carbon
per se; they favor a tax over cap-and-trade. Two different things.”).

If Rob doesn’t want to let me in over there (I’m hoping he’ll change his mind), I guess I’ll just have to start an “anti-MasterResource” thread here.  Maybe I’ll see if I can get funding from Exxon!

A few items of interest have come to my attention regarding the TVA’s massive spill last December 22 of wet coal fly-ash into a lovely river area near Kingston, TN (about 35 miles west of Knoxville, at the junction of the Emory and Clinch Rivers).  The collapse of a retaining wall released over five million cubic feet (more than a billion gallons) of wet coal ash
flooded nearly 400 acres of land adjacent to the power plant and into the nearby
Clinch and Emory rivers, filling large areas of the rivers, damaging homes and property, rupturing
a major gas line and damaging a
railway line.

– according to a report in the Tennessean, the TVA was long aware of the possibility of a release from the Kingston site, but elected not to proceed with any costly fix – the most expensive fix apparently in the ballpark of $25 million – because it didn’t want to set a precedent for spending similar sums at its other wet ash storage sites.  Penny wise, pound foolish – how often that happens when decision-makers don’t face personal responsibility for the downsides (yes, my “limited liaibility breeds moral hazards” meme)!

– in response to the accident, the EPA announced on Monday that it will: request electric utilities
nationwide to provide coal ash impoundment information (the EPA estimates there may be as many as 300 coal ash impoundments across the US
); conduct on-site assessments to determine structural
integrity and vulnerabilities; order cleanup and repairs where needed; and develop new regulations for future safety.  Said administrator Lisa Jackson: “Environmental disasters like the one last December in Kingston should never happen anywhere in this country.”  Not only are such regulations too little too late and probably unneccesarily costly, but one wonders why in this case she fails to note that as the TVA is wholly-owned by the US government, in this case the government did this to us itself.  The industry must be really grateful to TVA for leading the way to more regulations!

– The TVA is spending $1 million a day on the cleanup, and estimates final recovery may cost $525 million to $825 million.  This is just the cost for recovering the spilled ash, which could take two years or more, and does not cover long-term mediation costs, or litigation expenses, fines or any settlements
from the accident or the extra cost of upgrading coal ash ponds at
other TVA plants, or costs being borne by local, state or other federal agencies.  So we could be easily talking physical damage of a billion dollars or more, and decades before local homeowners can start enjoying the rivers again.

– The TVA announced in February that TVA it lost $305 million in the fiscal quarter
ending Dec. 31 2008 due to the $525 million charge the utility took for the
estimated cost of the ash spill.

– In response, TVA president and CEO Tom Kilgore, who earned $2.2 million in FY2008, saw his base and incentive compensation for FY 2009 cut by about half.  Said Kilgore, who had outraged ratepayers in October (on the heels of rate increases) by taking large compensation increase for FY2009 (in a package worth up to $3.275 million), “I’m at the point in
my career where it’s not all about money.” 

– The fly ash poses health risks, both as the small particle dust can affect the lungs and since the ash contains elevated levels of heavy metals that were left behind from the combusted coal.  A Tennessee Department of Health survey indicates that a third of the people living near the toxic coal ash spill are experiencing respiratory problems, and about half
have increased stress and anxiety.  

According to TVA President Tom Kilgore, TVA and the state Department of Environment and Conservation have tested the water and believe there’s “no reason to believe that the water is not safe,” but “water quality tests conducted by environmental activists showed arsenic
levels as high as 48 times the primary drinking water standard in river
water nearest the spill. Coal industry watchdog United Mountain Defense
and Washington, D.C.-based Environmental Integrity Project said January
levels of arsenic, lead, selenium, cadmium, beryllium, antimony and
copper violated water quality standards and exceeded primary drinking
water standards.”

State senator Tim Burchett (a Republican) characterized TVA officials as “arrogant clowns” on March 10 as he presented legislation on coal ash storage to a Senate committee.  “I want to assure my colleagues that any offense (to TVA) is intentional,” he said. “I have little faith in what TVA is telling us.”

More on water testing results and on health, safety and environment impacts is here.

– the TVA is naturally trying to buy out residents, both to cut future losses and to limit coverage of the affected area. Apparently these buyouts require the sellers to waive all future health claims against the TVA.

– On top of such purchases, though, TVA – through its own police department – is trying to make it difficult for residents to remain and to prevent full disclosure of health risks, by restricting access to public roads and to the homes of residents, requiring any who receive medical checkups from TVA doctors to waive health claims and by hassling volunteers who, at the invitation of residents, do ash, water and air testing, deliver bottled water, and assist some residents with the transportation needs.   In two recent incidents, the TVA police have gone onto private property to detain volunteers and force the removal of private air quality monitoring devices, and arrested, shackled and jailed on March 6 a driver who had used a public road – now restricted by the TVA – to drop off a two grandmothers (one elderly and vision-impaired) at their homes after a town meeting – and who had written permission from residents to visit at any time.

According to one group, volunteers “have relatives in the Swan Pond Community and have an
open invitation to visit residents or their property near the disaster
site at any time day or night.”   The volunteer who was arrested reports the following, entirely believable – conversation with a TVA officer when he was being booked:

So as I was escorted to the Roane County Jail for processing I was informed by the TVA officer that he was “protecting the residents” of the Swan Pond Community from “people like me.”  When I questioned him further about this he stated that he meant onlookers and sight seers and people taking video while disrupting vehicle traffic and impeding the cleanup of the disaster site.
 
Well if TVA has any video proof of me personally disrupting vehicle traffic or impeding the cleanup of the disaster site I would like to see it, please post it to YouTube; show the world exactly what I am doing, PLEASE.    When I stated,” why would the residents need to be protected from someone who is delivering water, taking people to the grocery store, hospital, doctor, not trespassing, monitoring air/ water/ coal ash, helping facilitate trainings and organize with the local community, and sit at the Harriman American Legion building for more than 20 hours helping with heavy metal exposure testing,” he could not answer.

– So far, one lawsuit against the TVA has been filed in federal court in Knoxville on
behalf of 109 citizens.  The TVA harassment policy may be aimed in part at preventing residents from gathering independent evidence to support their claims.

– The TVA is governed by a nine-member board of directors, all current members of which were appointed by nominated by former President Bush (on
the approval of senators from the region) and confirmed by the Senate. 
Over the objections of the current chairman and two others
(Republicans),former national GOP committee chairman and former TVA board member was reappointed in February as chairman.  Since the TVA board has two vacancies, will
have two members terms expire in May and another in 2010, President Obama will have the opportunity to take control of the board.

– Photographic and video images of the impact of the ash spill are here:

– by renowned photographer Carlan Tapp

– by local residents (first three minutes are home footage before the accident)

– More information by the enviro group doing testing and resident support work

– the TVA’s home page, etc.

Where is anyone calling for the privatization of the TVA?

Finally, someone in the Fed is arguing that the Fed should stop printing money like crazy to bail out managers, owners and counterparties of failed banks.

In a speech on Friday, March 6, Thomas Hoenig, President of the Kansas City Fed, argued strongly that “Too Big has Failed“, and that the continuing ad hoc bailouts are just stringing out the ultimately necessary realization and workouts of failed banks and bad assets, thus creating uncertainty while increasing the cost of the crisis by prolonging the unavailability of credit.  Hoenig argues that a transparent receivership program should be set up for large, insolvent institutions, whose management should be fired and shareholders wiped out.  The whole speech is worth a read.

It is bracing to see someone in the Fed finally start talking about action to end the bailouts, but an honest observer would have to realize that federal and state regulators already have all the authority the need to take over insolvent banks; they just need to have the Fed and Geithner stop handing out money to those who have already lost hundreds of billions.  In rougher terms, no more “stinking badges” are needed; just action.  It is unlikely that simply the creation of a new RTC for too-big-to-fail banks will, as Hoenig suggests, by itself “restore an important element of market discipline …, limit moral hazard concerns and restore  and restore … fairness of treatment”.   Federal and state banking regulators already have sufficient authority; what they`re lacking is the political will to stand up to the managers and owners of failed institutions and pull the trigger.  Hoenig is essentially punting to our lazy and corrupt Congresscritters, who will no doubt give owners and managers a chance to influence any new receivership law.

Hoenig does indicate that lawmakers/regulators should consider how to prevent firms in the future form backing “to big to fail”; my suggestion?  Follow the suggestion of Glassman and Nolan that banks be encouraged to adopt a partnerhip or corporate structure that does not include a limited liability feature for owners, who, because they would have unlimited personal liability for losses, would  be incentivized to very closely monitor risks.

h/t to Calculated RISK