TT's Lost in Tokyo — by TokyoTom

(Note; tongue firmly in cheek: see my straight post earlier.)

Well, maybe they weren’t WISE to build a row of nuclear power plants on a coastline known for earthquakes and a history of prior massive tsunamis, but surely the earthquake and tsunami are not TEPCO’s fault, right?

And it’s not THEIR fault that

• their founding shareholders took advantage of Japanese limited liability incorporation laws that free shareholders from any concern about personal liability (and, as TEPCO’s shares are “fully paid-up”, from any future cash calls by management) that would otherwise exist for private enterprises;
• the Japanese government allowed them to qualify as a ‘public company’ and thus widely raise capital from the public, under regulations that isolate managers from shareholders and create barriers to entry);
• the Japanese government licensed TEPCO as a public utility, effectively granting it a monopoly in the greater Tokyo area,
• the Japanese government ensured that TEPCO could raise the long-term capital necessary to fund the nuclear power plants,
  • by authorizing to set rates guaranteeing TEPCO’s returns on its investments by government,
  • by licensing the power plants themselves and approving their location, suppliers and safety, and
  • by giving TEPCO express liability caps for damages that radiation releases may cause others if an “act of nature” occurs?

And surely none of the concatenation of these acts of government, the construction of the plants and the earthquake or tsunami is the PERSONAL responsibility of any of TEPCO’s emploees, managers or executives, right? (Much less of the poor shareholders!) After all, having a corporation means that we get to embark on mega-projects that pose mega-risks, all without any real people being  personally responsible! How else, without these layers of protection for personal responsibility provided by government, would progress ever be made?

Thus, we can see clearly that this was all nothing more than a simple ACCIDENT, in which “TEPCO” – whoever the heck we consider that to mean – is the BIGGEST VICTIM – both of the earthquake/tsunamis and of Japanese silly government and citizens and customers who now clamor for TEPCO to pour more BILLIONS down a money hole! Outrageous – all of these snivelling people should just go away, and lump it, so that TEPCO can more easily figure out what it should do next. Cleanups are for governments and the smaller victims.

Such a wonderful system, allowing such marvelous works! Though unfortunate calculations might be made, the system allows us to quickly move ahead, as if nothing had happened. Naturally, TEPCO might require further assistance from government and government-protected banks, so that TEPCO can build more engineering marvels.

Boy, aren’t Austrian insights wonderful?

[Those of you who missed or who wish to refresh your recollection regarding my posts last year on a very related case, might enjoy the following link:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=victim+bp.]

I just stumbled across a Mises Daily post by Sterling T. Terrell (an “economist and writer living outside of San Antonio, TX”) on “The Story of Stuff” video by  Annie Leonard (a former Greenpeacer)

I couldn’t resist making a few comments, which I copy below.

Frankly, while I was disappointed by the shallow analysis by Terrell, I can’t say I was surprised – Austrians seem to like nothing better than to abandon principles and productive engagement in favor of partisanship, particularly if it enables dodging or defending corporate statism. What are principles over an emotional thrill, anyway?

Oh, you damned enviros! You make us Austrians/libertarians so stupid! (emphasis and some links added; further comments in brackets)

TokyoTom November 6, 2010 at 2:23 pm

[This is a work in progress and largely taken from previous posts, but readers might find some value in it in the meanwhile.]

1. Heated but vacuous climate wars

On environmental issues in general and climate in particular, find me someone (like George Will) ranting about “Malthusians” or “environazis” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between:

(1) wealth-creating markets based on private property and/or voluntary interactions/contracts protected by law, and

(2) the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans), when the pressures of developed markets swamp indigenous hunter-gather community rules, in many cases where governments formally own and purport to manage “public” resources, and when governments absolve purportedly “private” actors from liability for harms to others (such as via grants of “limited liability“).

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 by a broad swath of society about climate have become a matter of an irrational, deluded “religious” faith, or that those raising their concerns are “misanthropes” or worse.

Such pigheadedness is met by those on the left likewise see libertarians and small-government conservatives as deluded and/or deliberate pawns of evil Earth-destroying corporations.

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 libertarian and others who profess to love markets 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 flawed institutional framework and have quite deliberately encouraged the current culture war.

2. Why the reflexive libertarian disengagement?

I have on numerous occasions tried to point out, to posters on the Mises Blog who have addressed climate issues, the stunning unproductivity of the approach that they have taken — that of focussing on science and dismissing motivations and preferences, rather than exploring root causes and middle ground, and have continued to scratch my head at the obstinacy and apparent lack of vision.

The following seem to be the chief factors at work in the general libertarian resistance to any government action on climate change:

– Many libertarians, as CEI’s Chris Horner has stated,  see “global warming [as] the bottomless well of excuses for the relentless growth of Big Government.”  Even libertarians who agree that is AGW is a serious problem are worried, for good reason, that government approaches to climate change will be a train wreck – in other words, that the government “cure” will be worse than the problem.

– Libertarians have in general drifted quite far from environmentalists (though there remain many productive free-market environmentalists/conservationists). Even though libertarians and environmentalists still share a mistrust of big government, environmentalists, on the one hand, generally have come to believe that MORE government is the answer, despite all of the problems associated with the socialized ownership of resources and/or inefficient bureaucratic management (witness the crashing of many managed fisheries in the US), the manipulation of such management to benefit bureaucratic interests, special interests and insiders (wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and the resultant and inescapable politicization of all disputes due to the absence of private markets. On the other hand, many libertarians  reflexively favor business over “concerned citizens”, while other libertarians see that government “solutions” themselves tend to snowball into costly problems that work in favor of big business and create pressures for more government intervention. Thus, libertarians often see environmentalists as simply another group fighting to expand government, and are hostile as a result.

– Libertarians are as subject to reflexive, partisan position-taking as any one else. Because they are reflexively opposed to government action, they find it easier to operate from a position of skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW must be addressed by government) than to open-mindedly review the evidence or consider ways that libertarian aims can be advanced by using the pressure from “enviro” goals.

This reflexive hostility – at times quite startingly vehement – is a shame (but human), because it blunts the libertarian message in explaining what libertarians understand very well – that environmental problems arise when property rights over resources are not clearly defined or enforceable, and when governments (mis)manage resources, and that there are various private steps and changes in government policy that would undo the previous government actions that are at the root of environmentalists’ frustrations.The reflexive hostility is also a shame because it has the effect, in my mind rather clearly, of rendering libertarians largely blind to the ways that large energy, power and certain manufacturing corporations continue to benefit from (and invest heavily in maintaining) the existing regulatory structure, in ways that shift large costs and risks to unconsenting third parties.

– There are some libertarians and others who profess to love free markets at AEI, CEI, Cato, IER, Master Resource and similar institutions that are partly in pay of fossil fuel interests, and so find it in their personal interests to challenge both climate science and policy proposals that would impose costs on their funders.

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. 

3. The whys of climate concerns and calls for “clean” energy

I want to get started with a list of policy changes that I think libertarians can and should be championing in response to the climate policy proposals of others.

The incessant calls for – and criticism of – government climate change policies and government subsidies and mandates for “green/clean power” both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns, while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources. This leaves the middle ground unexplored.

There are plenty of root causes for the calls for legislative and regulatory mandates in favor of climate policies and clean / green / renewable power, such as:

• concerns about apparent ongoing climate change, warnings by scientific bodies and apprehensions of increasing risk as China, India and other developing economies rapidly scale up their CO2, methane and other emissions,
• the political deals in favor of environmentally dirty coal and older power plants under the Clean Air Act,
• the enduring role of the federal and state governments in owning vast coal and oil & gas fields and relying on the royalties (which it does not share with citizens, but go into the General Pork Pool, with a relatively meager cut to states),
• the unwillingness of state courts, in the face of the political power of the energy and power industries, to protect persons and private property from pollution and environmental disruption created by federally-licensed energy development and power projects,
• the deep involvement of the government in developing, encouraging and regulating nuclear power, and
• the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity, resulting from the grant by states of public utility monopolies and the regulation of the pricing and investments by utilities, which greatly restricts the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount of electricity that consumers use by time of day or appliance.

4. Is a small-government, libertarian climate/green agenda possible and desirable?

So what is a good libertarian to suggest? This seems rather straight-forward, once one doffs his partisan, do-battle-with-evil-green-fascist-commies armor and puts on his thinking cap.

From my earlier comment to Stephan Kinsella:

As Rob Bradley once reluctantly acknowledged to me, in the halcyon days before he banned me from the “free-market” Master Resource blog, “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 unfortunately the wheels of this principled concern have never hit the ground at MR [my persistence in pointing this out it, and in questioning whether his blog was a front for fossil fuel interests, apparently earned me the boot].

As I have noted in a litany of posts at my blog, pro-freedom regulatory changes might include:

• accelerating cleaner power investments by eliminating corporate income taxes or allowing immediate depreciation of capital investment (which would make new investments more attractive),
• eliminating antitrust immunity for public utility monopolies to increase competition, allow consumer choice, peak pricing and “smart metering” that will rapidly push large potential efficiency gains (as identified by McKinsey),
• ending Clean Air Act handouts to the worst utilities (or otherwise unwinding burdensome regulations and moving to lighter and more common-law dependent approaches),
• ending energy subsidies generally (including federal liability caps for nuclear power and allowing states to license),
• speeding economic growth and adaptation in the poorer countries most threatened by climate change by rolling back domestic agricultural corporate welfare programs (ethanol and sugar), and
• if there is to be any type of carbon pricing at all, insisting that it is a per capita, fully-rebated carbon tax (puts the revenues in the hands of those with the best claim to it, eliminates regressive impact and price volatility, least new bureaucracy, most transparent, and least susceptible to pork).

Other policy changes could also be put on the table, such as:

• an insistence that government resource management be improved by requiring that half of all royalties from mineral and fossil fuel development be rebated to citizens (with a slice to the administering agency), and
  
• reducing understandable NIMBY problems by (i) encouraging project planners to proactively compensate persons in affected areas and (ii) reducing fears of corporate abuses, by providing that corporate executives have personal liability for environmental torts (in recognition of the fact that the profound risk-shifting that limited liability corporations are capable of that often elicits strong public opposition and fuels regulatory pressure).

5. Other libertarian discussants

A fair number of libertarian commenters on climate appear to accept mainstream sciences, though there remain natural policy disagreements. Ron Bailey, science correspondence at Reason and Jonathan Adler, a resources law prof at Case Western, Lynne Kiesling at Knowledge Problem blog, and David Zetland, who blogs on water issues, come to mind.

I`m not the only one – other libertarian climate proposals are here:

• Jonathan Adler at Case Western (2000); he has other useful commentary here, here,
• Bruce Yandle, Professor Emeritus at Clemson University, Senior Fellow at PERC (the “free market” environmentalism think tank) and a respected thinker on common-law and free-market approaches to environmental problems, has in PERC’s Spring 2008 report specifically proposed a “A No-Regrets Carbon Reduction Policy“;
• Iain Murray of CEI; and
• Cato’s Jerry Taylor is a frequent commentator and Indur Goklany has advanced a specific climate change-targeted proposal.
•  AEI’s Steven Hayward and Ken Green together have provided a number of detailed analyses (though with a distinct tendency to go lightly on fossil fuels).

Several libertarians recently urged constructive libertarian approaches to climate change:

• Edwin Dolan, in his Fall 2006 Cato Journal essay, “Global Warming: Rethinking the Market Liberal Position“, analyzes relevant Lockean considerations and cautions that market liberals appear to be hamstringing their own analytic strengths by falling into a reflexive and conservative mind-frames that benefit established economic interests.
• Sheldon Richman of the Foundation for Economic Education also recommends Dolan’s essay and calls for less wishful thinking and greater engagement by libertarians in his piece The Goal Is Freedom: Global Warming and the Layman (December 8, 2006; The Freeman):
• Gene Callahan makes a similar warning in his essay “How a Free Society Could Solve Global Warming“, in the October 2007 issue of The Freeman.
• Ron Bailey of Reason Magazine, “Congratulations to Al Gore; But be wary of the man’s proposed solutions for global warming“,  October 12, 2007.
• One self-described libertarian group in California has specifically proposed carbon taxes, though their “Pay Your Air Share” proposal appears to be little-discussed.
• Dan C. Shahar, in his recent paper, “Justice and Climate Change: Toward a Libertarian Analysis” (The Independent Review, Fall 2009), notes that (i) libertarian arguments to the effect that, even if man contributes to climate change, mankind should just roll with the punches and adapt, presuppose that man-made climate change would not represent an injustice, and (ii) if climate change IS an injustice, libertarians should eagerly offer ideas about how best to protect the victims’ rights.

There have been several open disputes, which indicate a shift from dismissal of science to a discussion of policy; the below exchanges of view are worthy of note:

• The Cato Institute dedicated its entire August 2008 monthly issue of Cato Unbound, its online forum, to discussing policy responses to ongoing climate change.  The issue, entitled “Keeping Our Cool: What to Do about Global Warming“, contains essays from and several rounds of discussion between Jim Manzi, statistician and CEO of Applied Predictive Technologies, Cato Institute author Indur Goklany; climate scientist Joseph J. Romm, a Senior Fellow at the Center for American Progress; and Michael Shellenberger and Ted Nordhaus, the co-founders of The Breakthrough Institute.  My extended comments are here.

• Reason Foundation, posted an exchange on Climate Change and Property Rights June 12th, 2008 (involving Reason’s Shikha Dalmia, Case Western Reserve University law professor Jonathan H. Adler, and author Indur Goklany); discussed by Ron Bailey of ReasonOnline here; here`s my take.

• Debate at Reason, October 2007, Ron Bailey, Science Correspondent at Reason, Fred L. Smith, Jr., President and Founder of CEI, and Lynne Kiesling, Senior Lecturer in Economics at Northwestern University, and former director of economic policy at the Reason Foundation.

• Reason Foundation, Global Warming and Potential Policy Solutions September 7th, 2006 (Reason’s Shikha Dalmia, George Mason University Department of Economics Chair Don Boudreaux, and the International Policy Network’s Julian Morris).

• Readers might also find this upbraiding of Penn & Teller at a gathering of skeptics in 2008 to be interesting.

Finally, I have collected here some Austrian-based papers on environmental issues that are worthy of note:

Environmental Markets?  Links to Austrians

Ones such paper is the following: Terry L. Anderson and J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?

On December 16, Spiegel Online ran the following interview with Elinor Ostrom, whose 2009 Nobel prize in economics (shared with Oliver Williamson), was widely applauded by Austrian economists (and whose work I have referred to any number of time previously).

Der Spiegel asked some good questions, and Ostrom provided interesting responses, though thoughtful readers of course are left asking for more.

I`ve tweaked the formatting, added my own emphasis, and interspersed a few bracketed comments of my own:

Nobel Laureate Elinor Ostrom

‘Climate Rules Set from the Top Are Not Enough`

The world is gathered in Copenhagen in an
effort to reach an agreement to slow global warming. Elinor Ostrom,
winner of this year’s Nobel prize for economics, spoke with SPIEGEL
ONLINE about shared ownership, local action and why we can’t sit around
waiting for politicians to act.

SPIEGEL ONLINE: The Copenhagen summit is about setting new
global rules for how we treat the Earth. But are people willing to
change their personal lives accordingly?

Elinor Ostrom: Under the right circumstances, people are willing
to accept additional efforts and costs. It all depends on trust in the
fact that others will also act. Humans have the capacity to engage and
see that their own long-term future is harmed if they don’t change
their lifestyles. Under the right circumstances they understand: It’s
not me against you. It’s all of us against ourselves, if we don’t act.
So trust really is the most important resource.

[The multi-decade, global trust-building exercise has made a great deal of progress, despite being hampered by gamesmanship, domestic rent-seeking, partisan mistrust, legitimate worries about abuse of government, and the difficulty we all face in actually agreeing there might be a problem (as opposed to a big scam/mass delusion).]

SPIEGEL ONLINE: How can we generate enough trust so that we all act in concert?

Ostrom: Rules set from the top are not enough. Successful
communities often have a few common design principles — monitoring and
sanctioning of the participants, for example. They also have conflict
resolution mechanisms in place and the people have some authority to
make their own rules. Under those circumstances humans can develop some
trust in each other — faith that if they take a costly action that
benefits everybody in the long run, others will also invest.

[Yes, but does “community”-level action scale? How do we make a “community” with billions of people we have little interaction with? Is Ostrom suggesting we need more global-level “grassroots” community-building, in addition to leader-level trust-building?]

SPIEGEL ONLINE: Why is it less effective if governments establish strict rules from the top down?

Ostrom: Because people will not identify with it. My research
has shown that forests managed by local communities are in a far better
state than state-run parks, where locals feel left out and officials
can be bribed. Let us imagine, we live in a village and have all agreed
that none of us is going to be in the forest on Saturday or Sunday, so
that we can give the forest time to recreate. If I then see you in the
forest when you’re not supposed to be, I will probably yell at you. If
only the state is in charge, I will just walk on past.

[Now she`s talking; libertarians and a host of others almost completely reject even climate “science” out of a reflexive but understandable concern that climate “policy” is or will be sufficiently corrupt as to vitiate any intended/purported gains. The same is true with many on environmentalists and others on the left, who feel that powerful corporate insiders will make climate policy ineffective.]

SPIEGEL ONLINE: In your research, you focused on local and
regional levels. What makes you think that your solutions would work
for the entire planet as well?

Ostrom: Indeed, the global scale is a challenge. Building that
kind of knowledge between the different parties is tricky. We need our
global leaders to take some of the decisions on a very big level. Here
at the summit, those guys are talking to each other and gaining some
trust because they meet face to face. But then they go home — and
that’s when the real action starts.

[It`s tricky, but much progress has been made; even Sen. Robert “Coal” Byrd is signalling that coal states need to change, and China abd India both concede change is needed – though naturally they make an equity argument that they have a right to catch up with out per capita CO2 emissons (which are four times theirs).]

SPIEGEL ONLINE: Can money help to build trust between developing nations and industrialized nations?

Ostrom: Maybe, and it is hard to see a climate deal without
serious financial commitments. But at the same time, I am very worried
and nervous about corruption. If we pour money into a country in which
the corruption level is very high, we would be kidding ourselves not to
think that some of it will end up in the wrong pockets. At first, a lot
of the proposals on the table sound great. But four to six years later,
you have a lot of politicians who have money in Swiss bank accounts.
What we need are tight rules and controls to ensure that the billions
that might be put on the table here are used correctly.

[Ostrom is absolutely right, if understated – perhaps most “development” aid has been disastrous. Still, it might make sense for some aid money to go to climate adaptation projects, and to allow offsets for preserving tropical forests – if the money goes to indigenous peoples, and not corrupt governments.]

SPIEGEL ONLINE: In other words, an anti-corruption task force —
like the one that exists in Indonesia — might be the best
environmental protection agency?

Ostrom: Absolutely! If you look at the role corruption plays in
giving away forests to big corporations and in looking away if forest
protection rules are broken, you will see that bribery is one of the
main contributors to environmental destruction.

[A fruitful focus by libertarians and conservatives might be on simply helping to bolster law and order – including the property rights of locals – in developing nations.]

SPIEGEL ONLINE: Is it possible to save the climate with a single treaty?

Ostrom: One treaty will not solve the problem entirely. This is
why I propose a so-called polycentric approach to tackling climate
change. We need all levels of human society to work on this to be
effective in the long run. Cities, villages, communities and networks
of people have been neglected as players.

[I`m not sure I agree with Otrom here; there has been plenty of action on climate on individual, local, corporate and state levels, thanks in no small part to the stifling of climate policy at federal levels under the GWB/Cheney administrations. While such “thousand points of light” efforts may be bolstering mutual trust at various levels around the world, federal and international policy coordination is still needed, fraught with rent-seeking problems though it may be, ]

SPIEGEL ONLINE: What happens if there is no agreement?

Ostrom: We need to get away from the idea that there is only one
solution on the global scale. There are many, many levels in between.
So we need to take action on smaller levels. If the politicians do not
agree in Copenhagen, I would like to embarrass the hell out of them by
getting some agreements going where people are doing something —
essentially saying: “We are tired of waiting for you.” The city of
Freiburg is a very good place to see what that actually means.

[Politicians don`t embarrasss so easily; rather they see opportunities to jump on and use band wagons to bolster their own careers and to steer favors to rent-seekers.]

SPIEGEL ONLINE: Why Freiburg of all places?

Ostrom: I spend quite a bit of time in Germany and I’m very
impressed by some of the local action I see. Local action cannot do it
fully, but just think about all the bicycle-paths that they have built
there. That is a case where the action of individuals is reducing
emissions. At the same time it is a very healthy thing. On Sundays
everybody is going to the woods and has a good time on their bikes —
and not in their cars. It’s good for your health and for the
environment. So everyone should ask himself: Why don’t I bike to work
and leave the damn car at home or get rid of it entirely?

SPIEGEL ONLINE: Still, such a decentralized approach sounds
painfully slow. We need rapid action if we wish to limit global warming
to 2 degrees Celsius.

Ostrom: If we sit here and twiddle our thumbs and wait for these
guys up there to make a decision — that is what I would call painfully
slow. Should we just blame the politicians? I am not saying that we can
solve it entirely, but we can make significant steps. To some extent we
can challenge them. Everyone can contact foolish politicians like some
US Congressmen who oppose climate change action by e-mail or phone and
let them know that they are acting irresponsibly.

[Unfortunately, Ostrom doesn`t address how we figure out how to trust our own government, and how to mitigate/manage the problem of rent-seeking. But I`ve tried to note the types of policies that libertarians cand – and should – support here. Some Austrians might even want to consider the root cause of rampant renk-seeking and fights over the wheel – the corporate risk-shifting juggernaut that has its genesis in the grant of limited liability]

SPIEGEL ONLINE: Why is the US so reluctant to fight climate change?

Ostrom: In the economic emergency we are experiencing, some
people think that we cannot afford it. I think it is the other way
around, if we don’t act now we will run into even greater economic
problems in the future. And of course we still have the bad legacy of
our previous president, George W. Bush. For eight years, the White
House didn’t consider the issue to be important. We did not have
American leaders who understood that there is a scientific foundation.
Obama has a much higher chance of understanding the science. But even
for him it is just damn tough.

[It`s  even more complicated, obviously. The Bush administrtion actually DID work on building trust with China and India, supported the IPCC science process, etc. But they were also rather naked catering to coal and other fossil feul interests, while making political hay by labelling all concerned scare-mongering socialists. Not only is it extremely difficult to coordinate this issue globally, it`s also difficult politicaly to tell Americans that fossil-fuel-based energy is underpriced, to seek to undo public utility monopolies, or to address the favors to dirty coal in the Clean Air Act, or to streamline nuclear power licensing.]

SPIEGEL ONLINE: Worries about climate change have slowly
resulted in people seeing the Earth’s atmosphere as a common good that
we all must protect. Where is the next challenge?

Ostrom: The oceans! They are being threatened to an ever greater
degree. It is a disaster, a very difficult situation. The fish
resources are overexploited and waste, including CO2, is dumped in huge
quantities into the ocean. The law of the sea has not been effective at
all. A lot of fishing ships act like roving bandits. That’s why better
ocean governance is one of the top priorities for safeguarding the
future.

Interview conducted by Christoph Seidler and Christian Schwägerl

I would be remiss if I did not point out that Ostrom recently elucidated her views on climate policy in much greater length in a paper that she prepared at the behest of the World Bank. Yes, Ostrom`s trying to give the Beast indigestion – from the Inside. 

Here`s the extract of her paper,  “A Polycentric Approach for Coping with Climate Change”:

Abstract: This paper
proposes an alternative approach to addressing the complex problems of
climate change caused by greenhouse gas emissions. The author, who won
the 2009 Nobel Prize in Economic Sciences, argues that single policies
adopted only at a global scale are unlikely to generate sufficient
trust among citizens and firms so that collective action can take place
in a comprehensive and transparent manner that will effectively reduce
global warming. Furthermore, simply recommending a single governmental
unit to solve global collective action problems is inherently weak
because of free-rider problems. For example, the Carbon Development
Mechanism (CDM) can be ‘gamed’ in ways that hike up prices of natural
resources and in some cases can lead to further natural resource
exploitation. Some flaws are also noticeable in the Reducing Emissions
from Deforestation and Forest Degradation in Developing Countries
(REDD) program. Both the CDM and REDD are vulnerable to the free-rider
problem. As an alternative, the paper proposes a polycentric approach
at various levels with active oversight of local, regional, and
national stakeholders. Efforts to reduce global greenhouse gas
emissions are a classic collective action problem that is best
addressed at multiple scales and levels. Given the slowness and
conflict involved in achieving a global solution to climate change,
recognizing the potential for building a more effective way of reducing
green house gas emissions at multiple levels is an important step
forward. A polycentric approach has the main advantage of encouraging
experimental efforts at multiple levels, leading to the development of
methods for assessing the benefits and costs of particular strategies
adopted in one type of ecosystem and compared to results obtained in
other ecosystems. Building a strong commitment to find ways of reducing
individual emissions is an important element for coping with this
problem, and having others also take responsibility can be more
effectively undertaken in small- to medium-scale governance units that
are linked together through information networks and monitoring at all
levels. This paper was prepared as a background paper for the 2010
World Development Report on Climate Change.

I left this earlier comment on the paper at the blog of libertarian-leaning water economist David Zetland:

TokyoTom
said…

David, I saw this elsewhere and read through this，but count me
unimpressed. It`s basically a recounting of what we already know – that
there are formidable barriers to reaching coordinated global decisions
on climate policies, that local, regional and efforts are proceeding
and will be needed in any event, both in mitigation and adaptation.

Nothing about whether local, regional and national efforts scale to the size of the problem.

18 November, 2009 08:17

In my initial post, on how Austrians strive for a self-comforting irrelevancy on climate change, I copied my chief comment to Stephan Kinsella.

I copy below my other posts and some of the remarks I was responding to on Stephan`s thread, including the one that I was unable to post – for some reason I am trying to figure out (but that Stephan tells me was not a result of moderation by him; I note my full apology, as stated in my update to my preceding post):

• TokyoTom

  fundamentalist: “I love the responses from the GW hysteria crowd.
  They have nothing to offer but ad hominem attacks and appeals to
  authority.”

  Am I excluded from the “hysteria” crowd, Roger? Because if I`m in,
  you seem to have entirely missed my post, and my point, as to the
  consistency of your arguments with Austrian principles and the
  effectiveness of approaches like yours in dealing with the rest of the
  world – including all of the deluded and others who are engaged in bad
  faith.

  Published: October 30, 2009 9:44 AM

• Stephan Kinsella
  [Note: this is the comment to which I responded with the remarks copied on my preceding post]

  “Tokyo” asked me to respond to his post but it’s so rambling I am
  not sure what to respond to. To me this is very simple. I think we are
  in an interglacial period. It’s going to start getting cooler
  eventually, unless by then we have enough technology and freedom (no
  offense, Tokyo) to stop it. If there is global warming maybe it can
  delay the coming ice age by a few centuries.

  If there were really global warming why not just use “nuclear
  winter” to cool things down? You don’t see the envirotards advocating that! 🙂 (see Greenpeace to advocate nuking the earth?)

  In any event as I see it there are several issues. Is it warming?
  Can we know it? Do we know it? Are we causing it? Can we stop it?
  Should we stop it?

  It seem to me we do not know that it’s warming; if it is, it’s
  probably not caused by Man; and if it is, there’s probably nothing we
  can do to stop it except effectively destroy mankind; there’s no reason
  to stop it since it won’t even be all bad, and in fact would be overall
  good. I do not trust the envirotards, who hate industrialism and love
  the state, and seek anything to stop capitalism and to give the state
  an excuse to increase regulations and taxes; why anyone thinks these
  watermelons really know what the temperature will be in 10, 100, 1000
  years, when we can’t even get accurate weather forecasts a week out, is
  beyond me.

  That said, I’ll take the watermelons seriously when they start
  advocating nuclear power. Until then, they reveal themselves to be
  anti-industry, anti-man, techo-illiterates. (See Green nukes; Nuclear spring?.)

  Published: October 30, 2009 10:03 AM

• TokyoTom

  [my prior version ran off without my permission; this is a re-draft]

  It seems like I can lead a horse to water, but I can`t make him think,

  We all have our own maps of reality and our own calculus as to what
  government policies are desirable and when, but as for me, the status
  quo needs changing, and the desire of a wide range of people – be they
  deluded, evil, conniving or whatnot – to do something on the climate
  front seems like a great opportunity to get freedom-enhancing measures
  on the table and to achieve some of MY preferences, chiefly because
  they help to advance the professed green agenda. [To clarify, I didn`t mean that I want to advance “the green agenda”, but that the pro-freedom policy suggestions I have raised should be attainable because greens and others might see that they also serve THEIR agendas.]

  I see no reason to sit at home or simply scoff or fling poo from the
  sidelines, and let what I see as a bad situation get worse. There`s
  very little in that for practically anyone here – except of course
  those who like coal pollution, public utilities, corporate income
  taxes, big ag corporate welfare, political fights over government-owned
  resources, energy subsidies and over-regulation, etc. (and those folks
  aren`t sitting at home, believe me).

  I can keep on questioning everyone`s sanity or bona fides, or I can
  argue strongly for BETTER policies, that advance shared aims.

  Does Austrian thinking simply lack a practical political arm, other
  than those few who have signed up to support special interests?

  Ramblin` Tom

  Published: October 30, 2009 11:51 AM

• TokyoTom

  Stephan, if I may, I am appalled and offended by your shallow and
  fundamentally dishonest engagement here. That there are a string of
  others who have preceded you in this regard is no excuse.

  You: (i) post without significant comment a one-page letter from a
  scientist – as if the letter itself is vindication, victory or a
  roadmap for how we should seek to engage the views and preferences of
  others,

  (ii) refuse to answer my straightforward questions (both above and
  at my cross-linked post, which you visited) on how we engage others in
  the very active ongoing political debate, in a manner that actually
  defends and advances our policy agenda, and (putting aside the
  insulting and disingenuous “Tokyo asked me to respond” and “it’s so
  rambling I am not sure what to respond to”); and

  (iii) then proceed to present your own view of the science, the
  motives and sanity “watermelons” (as if they`re running the show), a
  few helpful, free-market libertarian “solutions”, like open-air
  explosion of nuclear weapons to bring about a “nuclear winter” effect!

  And my attempt to bring your focus back to the question of how we
  actually deal with others in the POLITICAL bargaining that is, after
  all, underway is met with silence – other than your faithful report
  back from your trusty climate physicist expert policy guru friend about
  …. science (all being essentially irrelevant to my question, not
  merely the cute little folksy demonstration about how the troubling
  melting and thinning of Antarctic ice sheets actually now underway
  simply CAN`T be occurring, but also a further failure to address the
  very rapid ocean acidification our CO2 emissions are producing)!

  Maybe it`s me, but I find this type of insincere and shallow
  engagement on such a serious issue to be a shameful discredit to the
  Mises Blog (even if it does cater to those who prefer to think that the
  big to do about climate – which may very well result in a mass of
  ill-considered, costly and counterproductive
  legislation – is really groundless and so can simply be ignored, aside from a bit of internal fulminations here).

  If you are not actually interested in discussing policy on a serious issue, then consider refraining from posting on it.

  Maybe it`s not my position to expect better, but I do.

  Sincerely,

  Tom

  Roy Cordato (linked at my name) said this:

  “The starting point for all Austrian welfare economics is the goal
  seeking individual and the ability of actors to formulate and execute
  plans within the context of their goals. … [S]ocial welfare or
  efficiency problems arise because of interpersonal conflict. [C] that
  similarly cannot be resolved by the market process, gives rise to
  catallactic inefficiency by preventing useful information from being
  captured by prices.”

  “Environmental problems are brought to light as striking at the
  heart of the efficiency problem as typically seen by Austrians, that
  is, they generate human conflict and disrupt inter- and intra-personal
  plan formulation and execution.”

  “The focus of the Austrian approach to environmental economics is
  conflict resolution. The purpose of focusing on issues related to
  property rights is to describe the source of the conflict and to
  identify possible ways of resolving it.”

  “If a pollution problem exists then its solution must be found in
  either a clearer definition of property rights to the relevant
  resources or in the stricter enforcement of rights that already exist.
  This has been the approach taken to environmental problems by nearly
  all Austrians who have addressed these kinds of issues (see Mises 1998;
  Rothbard 1982; Lewin 1982; Cordato 1997). This shifts the perspective
  on pollution from one of “market failure” where the free market is seen
  as failing to generate an efficient outcome, to legal failure where the
  market process is prevented from proceeding efficiently because the
  necessary institutional framework, clearly defined and enforced
  property rights, is not in place.”

  Published: October 31, 2009 1:00 PM

• TokyoTom

  Bala:

  “Did rising temperatures cause an increase in atmospheric carbon-dioxide concentration”.

  This is a great, basic question; I`d love to answer it (actually, I
  already did, though a bit indirectly), but you see, I`m one of the
  nasty obfuscating members of the socialist hysterical crowd, so I
  really should defer to others here who have better ideological and
  scientific stature here (and who hate ad hominems and love reason),
  such as fundamentalist, or perhaps even our confident lead poster,
  Stephan Kinsella (who has nothing to offer on the question of how
  libertarians should engage with others on the political front), or even
  our humble physicist climate system authority, Dr. Hayden.

  Gentlemen, take it away.

  Published: October 31, 2009 11:31 AM

• TokyoTom

  I`m sorry I don`t have time now to respond in more detail to those
  who have commented in response to mine, but let me note that not one of
  you has troubled to actually respond to my challenge, which was based
  on Austrian concepts of conflict resolution, understanding of
  rent-seeking embedded in the status quo, and the recognition that the
  present debate on climate, energy and environmental issues presents
  opportunities to actually advance an Austrian agenda.

  In my view, we can either try to improve our lot, by seeking items
  such as those I laid out previously or condemn ourselves to irrelevancy
  by standing by and letting the big boys and the Baptists in their
  coalition hammer out something worse from our Congresscritters.

  For this, the correctness of our own views of climate science
  matters little – nothing, in fact, unless we are willing to DO
  something about it, by engaging with OTHERS who have DIFFERENT views.

  For those who have too much trouble remembering the legal/regulatory changes that I suggested, here they are:

  [pro-freedom regulatory changes might include:

  * accelerating cleaner power investments by eliminating corporate
  income taxes or allowing immediate amortization of capital investment,
  * eliminating antitrust immunity for public utility monopolies (to
  allow consumer choice, peak pricing and “smart metering” that will
  rapidly push efficiency gains),
  * ending Clean Air Act handouts to the worst utilities (or otherwise
  unwinding burdensome regulations and moving to lighter and more
  common-law dependent approaches),
  * ending energy subsidies generally (including federal liability caps for nuclear power (and allowing states to license),
  * speeding economic growth and adaptation in the poorer countries most
  threatened by climate change by rolling back domestic agricultural
  corporate welfare programs (ethanol and sugar), and
  * if there is to be any type of carbon pricing at all, insisting that
  it is a per capita, fully-rebated carbon tax (puts the revenues in the
  hands of those with the best claim to it, eliminates regressive impact
  and price volatility, least new bureaucracy, most transparent, and
  least susceptible to pork).

  Other policy changes could also be put on the table, such as an
  insistence that government resource management be improved by requiring
  that half of all royalties be rebated to citizens (with a slice to the
  administering agency).]

  Many others come to mind.

  Well, what`s it going to be? Relevancy, or a tribal exercise in disengaged and smug self-satisfaction?

  Published: October 31, 2009 12:37 PM

• TokyoTom

  1. Christopher and mpolzkill:

  Thanks for the favor of your comments.

  I was asking if Austrians never seek to practically engage others on
  questions of policy; the first of you brings up Ron Paul, but one man
  is not a policy, nor are his sole efforts a policy program; the other
  of you suggests succession from the U, which is hardly an effort at
  pragmatic engagement with anybody over a particular issue. (BTW, here
  is Ron Paul`s climate program.)

  I can see some engagement by libertarians on this issue, but such
  seeds either (i) die when they fall on the rocky ground of the Mises
  Blog or (ii) represent work by people paid to criticize one side of the
  debate, and consistently ignore problems with the definitely
  non-libertarian status quo.

  Why libertarians do not see any opportunity here for a positive
  agenda? Do they prefer to be taken as implicit supporters of the
  government interventions that underlie most enviros` complaints?

  2. fundamentalist:

  “I don’t see anyone doing that except the GW hysterical crowd.
  Honest scientists like Hayden try to present evidence and reason so
  that we can have a real debate, and the hysterical crowd flings poo
  from the sidelines.”

  Thanks for your direct comment (even as you lace it and others with
  ad homs), but can`t you see you also are missing my point? Are you NOT
  interested in trying to cut deals that would, say:

  * accelerate cleaner power investments by eliminating corporate
  income taxes or allowing immediate amortization of capital investment,
  * eliminate antitrust immunity for public utility monopolies (to allow
  consumer choice, peak pricing and “smart metering” that will rapidly
  push efficiency gains),
  * end Clean Air Act handouts to the worst utilities (or otherwise
  unwinding burdensome regulations and moving to lighter and more
  common-law dependent approaches),
  * end energy subsidies generally (including federal liability caps for nuclear power (and allowing states to license),
  * speed economic growth and adaptation in the poorer countries most
  threatened by climate change by rolling back domestic agricultural
  corporate welfare programs (ethanol and sugar),
  * insist that government resource management be improved by requiring that half of all royalties be rebated to citizens,
  * end federal subsidies to development on barrier islands, etc. or
  * improve adaptability by deregulating and privatizing roads and other “public” infrastructure?

  Or is it more productive to NOT deal with those whom you hate, and
  stand by while special interests cut deals that widen and deepen the
  federal trough?

  TT

  Published: November 1, 2009 2:21 AM

• TokyoTom

  Allow me to outline here a few responses to the arguments raised by
  Dr. Hayden, even as I do not pretend to be an expert (and, to be
  pedantic, even though they are largely irrelevant to the question of
  whether Austrians wish to take advantage of the opportunity presented
  by the many scientists and others who have differing views, to roll
  back alot of costly, counterproductive and unfair regulation).

  1. Models: Dr. Hayden disingenuously casts aside what modern physics
  tells us about how God plays dice with the universe (via random,
  unpredictible behavior throughout the universe), and the limits of
  human knowledge (including the ability to measure all inputs affecting
  climate, including all of our own), and essentially asks us to wait
  until our knowledge is perfect, and our ability to capture and
  number-crunch all information relevant to the Earth`s climate
  (including changing solar and cosmic ray inputs and ocean behavior)
  before any of us, or our imperfect governments, can take any action on
  climate.

  Physical and practical impossibility aside, is this how any human or
  any human organization structures its decisions? Narrowly, Dr. Hayden
  is of course right that “the science is not settled”, but so what?

  2. Was there a tipping point 300 million years ago (or whenever it was when CO2 levels reached 8000 ppm) ?
  Dr. Hayden plays with language, suggesting that a “tipping point” means
  something irreversible over hundreds of millions of years, when it`s
  very clear that there have in the past been numerous abrupt changes in
  climate (some taking place in as little as a few years, with a general
  return to prior values sometimes taking very long periods of time) and
  that scientists today are talking about tipping points that may be reached in human lifetimes.
  Will we lose all mountain glaciers? Will the Arctic become ice-free in
  winter? Will thawing release sufficient methane from tundras and seabed
  clathrates to push the climate even more forcibly than CO2? Are we set
  to lose glaciers in Greenland and Antarctica, regardless of what we do?
  Will we dry out the Amazon basin, and interrupt the Asian monsoon?
  There is plenty of concern and evidence that these things are real
  possibilities.

  3. “Global-warming alarmists tell us that the rising CO2 concentration is (A) anthropogenic and (B) leading to global warming.”

  But you never tell us whether you, too, Dr. Hayden, are an
  “alarmist”. Further down you acknowledge that “Nobody doubts that CO2
  has some greenhouse effect” admitting (B) (though not that it may be
  the chief factor), but as far as (A) goes, you only acknowledge that
  “CO2 concentration is increasing”. Care to make yourself an alarmist by
  admitting what cannot be denied – that man is responsible for rising
  CO2 concentrations? Or you prefer play with laymen`s ignorance by
  irresponsibly suggesting that rising CO2 is now due to warming oceans
  and not man`s activities?

  – “CO2 concentration has risen and fallen in the past with no help from mankind.”

  Yes, but what relevance is this now, when man is undeniably not simply “helping” but clearly responsible?

  – “The present rise began in the 1700s, long before humans could have made a meaningful contribution.”

  So? Does the fact that CO2 fluctuates naturally do to things other
  than man`s activities mean humans` massive releases of CO2 have NOT
  made a “meaningful contribution”? It`s very clear that the Industrial Revolution caused a dramatic rise in CO2. Surely you don`t disagree?

  – “Alarmists have failed to ask, let alone answer, what the CO2
  level would be today if we had never burned any fuels. They simply
  assume that it would be the “pre-industrial” value.”

  “Alarmists” of course is simply an unhelpful ad hom; and as for the rest, concerned scientists and laymen clearly note how CO2 has fluctuated prior to the Industrial Revolution.

  There undoubtedly many clueless laymen, just as there are some
  clueless scientists, so your sweeping statement may be narrowly
  accurate.

  But in the big picture, it is clear that man has had a drastic
  impact on CO2 levels – so what, precisely, is your point, except to
  confuse the issue?

  – “The solubility of CO2 in water decreases as water warms, and
  increases as water cools. The warming of the earth since the Little Ice
  Age has thus caused the oceans to emit CO2 into the atmosphere.”

  Sure, but this doesn`t mean man hasn`t been the dominant contributor to atmospheric CO2.

  Further, of course, warming oceans CEASED to release CO2 at the
  point that atmospheric CO2 started to make the oceans more acidic.

  – “The historical record shows that climate changes precede CO2
  changes. How, then, can one conclude that CO2 is responsible for the
  current warming?”

  The lag in the historical record BEFORE man simply shows that CO2,
  which has an acknowledged warming effect, was a warming reinforcer and
  not an initiator. This does NOT, of course, suggest that massive CO2
  releases by man magically have NO effect.

  4. Assuming that we ARE changing climate, is that a bad thing?

  – “A warmer world is a better world.” Maybe, but are there NO costs,
  losses or damages in moving to one? And do those people and communities
  who bear these costs or kinda like things as they are have any choice,
  much less defendable property rights?

  – “The higher the CO2 levels, the more vibrant is the biosphere, as
  numerous experiments in greenhouses have shown. … Those huge
  dinosaurs could not exist anywhere on the earth today because the land
  is not productive enough. CO2 is plant food, pure and simple.”

  I see; this is not a question of fossil fuel interests homesteading
  the sky (or being given license by govt) and so being entitled to shift
  risks and costs on us, but them beneficiently bestowing gifts on
  mankind – or dinosaurs, as Dr. Hayden may prefer! Wonderful gifts that
  cannot be returned for centuries or millenia! Yippee!

  [This is only scratching the surface of the letter, but I`m afraid I need to run for now.]

  Published: November 1, 2009 4:51 AM

• TokyoTom [Note: my original post contained some bolding that went haywire and bolded most of the post; I`ve fixed that.]

  Okay, here`s a few more unconsidered thoughts to show how hysterical
  I am, am hooked on religion, hate mankind, [want to] return us to the Middle Ages
  and otherwise take over the world:

  – “Look at weather-related death rates in winter and in summer, and the case is overwhelming that warmer is better.”

  Sure, for If only it were so simple. The increase in AVERAGE global
  temps that we`ve experienced so far has meant little warming of the
  oceans (a vast thermal sink), and has shown up at higher latitudes,
  where we have seen a very marked warming and ongoing thawing, a shift
  of tropic zones away from the equator, disruption of rainfall patterns
  and stress on tropical ecosystems; all of this is considered to be just
  the beginning of a wide range of climate effects that have not yet been
  fully manifested for GHG and albedo changes so far,. much less to
  further increases in GHGs.

  – “CO2 is plant food, pure and simple.”

  It IS a “pure and simple” plant food, but your rhetoric implies much
  more – essentially that CO2 is NOTHING BUT plant food, and large
  releases of it have no effect on climate. And this, as you well know,
  is NOT a “pure and simple” matter.

  – “CO2 is not pollution by any reasonable definition.”

  You mean not by your reasonable definition, or under
  historical standards. But what IS “pollution”, but a social construct
  to describe the outputs of human activity that some of us have found to
  be damaging to our persons, property or other things that we value?
  Were CFCs released by refrigeration equipment “pollution” before we
  discovered that they damage the ozone layer?

  Scientists may be qualified to measure particular outputs and their
  consequences, but otherwise have no special insights into what others
  value.

  – “A warmer world begets more precipitation.”

  Sure, as warmer air generally holds more water – which in turn has a
  warming effect, let`s not forget. But as for the water itself, climate
  change leads to more severe rain events in some places but to droughts
  in others. And let`s not forget that a warmer world means that mountain
  snows don`t last until spring and summer as they once did, leaving
  streams and forests drier, and adversely affecting agriculture that
  relies on such water.

  – “All computer models predict a smaller temperature gradient
  between the poles and the equator. Necessarily, this would mean fewer
  and less violent storms.”

  Not so fast; this doesn`t hold for rain events or tornadoes.
  Further, independent paths of research indicate that while the North
  Atlantic may end up with fewer hurricanes, warming is likely to make them more intense.

  – How, pray, will a putative few degrees of warming melt all the ice
  and inundate Florida, as is claimed by the warming alarmists?

  First, note again the Dr.`s use of a strawman; no one is expect an
  imminent melt of “ALL” the ice. But significant melting and thinning of
  coastal ice IS occurring, and not merely on the West Antactic
  peninsula, which the good Dr. would realize if he`d trouble himself to
  compare his simple mental model, of reality with FACTS. As previously
  noted, coast ice sheets are plugs that slow the flow of glaciers from
  the interior. As these plugs are removed, the glaciers flow more
  quickly, via that exotic phenomenon we call “gravity”. I`ve already
  addressed this above, with links.

  – “If the waters around it warm up, they create more precipitation.”

  Yes, but does the new precipitation balance the ice being melted?
  Actual, detailed observations tell us that, despite your absolute
  certainty, that we are seeing increasing net mass losses far inland,
  not merely in Greenland but also in Antarctica. Your religious-like
  faith in your own superior understanding doesn`t make the facts go away.

  – “The ocean’s pH is not rising. It is falling, ever so slightly.
  Obviously your respondent has not the faintest clue as to how pH is
  defined. (BTW, the oceans are basic, not acidic.)”

  Yes, the good Dr. catches my mistake – pH is falling rather
  remarkably (from basic towards acidic) – but he too hastily skates past
  the main point, which is that this is due to increased atmospheric
  levels of CO2, which prove that the oceans are NOT actually releasing
  CO2 (or they`d be becoming more basic).

  I provided links in this last year here:
  http://blog.mises.org/archives/007931.asp#c192563

  Here`s more:
  http://www.scienceprogress.org/2008/06/our-dying-oceans/
  http://docs.google.com/gview?a=v&q=cache:y_W6vseUrykJ:www.tos.org/oceanography/issues/issue_archive/issue_pdfs/20_2/20.2_caldeira.pdf+caldeira+ocean+ph&hl=en&gl=jp&pid=bl&srcid=ADGEESgEEoFLf7xd9QTyol2TYYmXKPxXFqMq5Nr1IPdGd_yEbV3zIxPi-4Rmhb6d-IQ-r4BPwBqzyhF6GZQw_ka1Eh3Ynn0lYlP7p974IYMHIdLMVE90nWJ81GHAfcdTrUJTNk7W8Man&sig=AFQjCNGg6Idq6GQ5gyrddlXRD8R98NQ_dQ

  From the Plymouth Marine Laboratory (UK) :

  “Until recently, it was believed that the oceans contained so much
  disolved carbonate and bicarbonate ions that any extra would have
  little effect. In fact this absorbtion was generally acknowledged a
  valuable process in protecting the planet from the worst effects of
  rising temperatures and climate change. However, in 2003 a paper was
  published in Nature (vol 425) which suggested that the increases in
  atmospheric CO2, occurring over the last 200 years, has actually
  increased the acidity of the oceans by 0.1 of a pH unit.The pH scale is logarithmic and this change represents a 30% increase in the concentration of H+ ions.

  “However, atmospheric concentrations of CO2 have been
  higher during previous times in Earths history and these high CO2
  periods didn’t cause ocean pH to change. The difference now is that the
  rate at which CO2 concentrations are increasing, is 100 times greater
  than the natural fluctuations seen over recent millennia. Consequently,
  the processes that ultimately balance the carbon cycle are unable to
  react quickly enough and ocean pH is affected. About half of all
  released CO2 is absorbed by the oceans but even if we stop all
  emmissions today, the CO2 already in the atmosphere has been predicted
  to decrease ocean pH by a further 0.5 unit.”

  From
  Wikipedia”>http://en.wikipedia.org/wiki/Ocean_acidification”>Wikipedia:

  “Dissolving CO2 in seawater also increases the hydrogen ion (H+)
  concentration in the ocean, and thus decreases ocean pH. Caldeira and
  Wickett (2003)[1] placed the rate and magnitude of modern ocean
  acidification changes in the context of probable historical changes
  during the last 300 million years.

  Since the industrial revolution began, it is estimated that
  surface ocean pH has dropped by slightly less than 0.1 units (on the
  logarithmic scale of pH; approximately a 25% increase in H+), and it is
  estimated that it will drop by a further 0.3 to 0.5 units by 2100 as
  the oceans absorb more anthropogenic CO2.[1][2][9] These changes are
  predicted to continue rapidly as the oceans take up more anthropogenic
  CO2 from the atmosphere, the degree of change to ocean chemistry, for
  example ocean pH, will depend on the mitigation and emissions pathways
  society takes.[10] Note that, although the ocean is acidifying, its pH
  is still greater than 7 (that of neutral water), so the ocean could
  also be described as becoming less basic.”

  – “The term global warming has given way to the term climate
  change, because the former is not supported by the data. The latter
  term, climate change, admits of all kinds of illogical attributions. If
  it warms up, that’s climate change. If it cools down, ditto. Any change
  whatsoever can be said by alarmists to be proof of climate change.”

  Wonderful observation, except for the fact that IT`S WRONG; the
  change instead being deliberately led by Republicans; leading
  Republican pollster/ spinmeister Frank Luntz in 2002 pushed Republicans
  to move the public discussion away from “global warming” to “climate
  change”, because, as Luntz wrote,

  “’Climate change’ is less frightening than ‘global warming.’
  … While global warming has catastrophic connotations attached to it,
  climate change suggests a more controllable and less emotional
  challenge”.

  Of course there IS the inconvenient fact that “climate change” is
  actually more accurate than simple “global warming”, but who cares
  about accuracy anyway, right Dr.?

  – “the earth has handily survived many millions of years when CO2
  levels were MUCH higher than at present, without passing the dreaded
  tipping point.”

  I already addressed above the point that while the Dr. seems to
  what to recreate the Cretaceous, the better for dinosaurs, most of us
  seem rather to like the Earth that we actually inherited and that the
  rest of current Creation is adapted for. He is obviously a physicist
  and not a biologist, and doesn`t seem to give any thought to the
  rapidity of the scale at which we are conducting our little
  terraforming experiment, and te challenges the pace of those changes
  are posing to ecosystems.

  – “To put it fairly but bluntly, the global-warming alarmists
  have relied on a pathetic version of science in which computer models
  take precedence over data, and numerical averages of computer outputs
  are believed to be able to predict the future climate. It would be a
  travesty if the EPA were to countenance such nonsense.”

  To put it bluntly, this is largely rubbish; there is a tremendous
  and growing amount of climate change DATA. You just make it your habit
  not to let facts get in the way of your own opinions. I would be a
  travesty if we continue to countenance posts such as yours, questions
  of relevance to Austrian purposes aside.

  – “I don’t do politics”

  Fine; I can see why that would not be your forte. But what`s very
  puzzling is that you seem to think that climate science IS your forte,
  when all you`ve show is a shocking level of arrogant ignorance.

  – “I don’t pretend to be an economic theorist.”

  And on a blog dedicated to Austrian economists, just why, one
  wonders, do the “giants” in our Mises world keep filling the Blog pages
  with post such as this, which are, on their very face, IRRELEVANT, to
  the question of how Austrians wish to address the preferences of other,
  the misuses of government and the management of unowned common
  resources.

  – “he only difference between the Republicans and the Democrats
  is, in practical terms, their rhetoric. I don’t pretend to be an
  economic theorist.

  – “But the notion that we can run an industrialized giant on
  chicken manure and sunbeams doesn’t even pass the giggle test. Except
  in Washington.”

  At long last, you say something something intelligible. Except
  Washington spends trillions on nonsense at the drop of a hat, if you
  haven`t noticed recent events.

  Published: November 1, 2009 10:02 AM

• TokyoTom

  Sorry if I`ve been a bit intemperate; that I`m rushed doesn`t excuse it.

  Dr. Hayden, you are entirely welcome to your own opinion and your
  own mental map of reality, but not to your own facts. As to your
  opinion and mental map, they are by your own admittance uninformed as
  to matters of economics and political science, but I must confess that
  I find your understanding of climate science to be seriously wanting.

  Given these, I fail to see what you offer here, other than a
  convenient, if very thin, cover for others here who don`t want to
  think, or to fight to make the world (or our own government) better.

  Sincerely,

  Tom

  Published: November 1, 2009 10:11 AM

• TokyoTom

  Bala, I appreciate your polite persistence; I`m sorry I haven`t responded yet, but I`ll get to you.

  Please note that my time is both limited and my own (though indeed
  others have claims on it), and I have no obligation to spend any of it
  responding to your importunings regarding climate science, which are
  now shading into impertinence.

  Feel free to draw whatever conclusions you wish, but a fair reader might note that:

  – my priorities may (unsurprisingly) differ from yours,
  – my chief points (and Austrian principles as to how to engage with others) have nothing to do with climate science per se,
  – I explicitly make no pretense of being a scientist or climate expert, and
  – in any case, there is no simple course to understanding reality; we
  are all forced to make decisions as to how much energy to devote to
  puzzling things out on our own (and overcoming what we know of our own
  subconscious cognitive filters) versus outsourcing this effort to
  others (by accepting things without deliberation, “on faith” as it
  were).

  Others who have been around longer will know that I`ve also devoted
  what they might consider an unreasonable amount of my time over the
  past few years, “hysterical” trying to help others work through climate
  science (and policy) issues.

  TT

  Published: November 1, 2009 8:46 PM

• TokyoTom

  mpolzkill:

  – “Tom, believing you live in a Republic with 300,000,000 people is a delusion which heads off all actual pragmatism.”

  This is not a delusion I have, but in any case it`s not at all clear
  that this or any other delusion “heads off all actual pragmatism”.

  – “Until there is actual representation, everything said by we
  proles is literally hot air (unless it’s happens to coincide with
  whatever benefits the regime).”

  I use “our government” simply as shorthand for what you call “the
  regime”, but perhaps may be more accurately described as a multicentric
  mess.

  In any case, the painstaking efforts of LVMI to grow the Mises
  website, and the welcome reception of and contribution to those efforts
  by everyone here – yourself included – belies both your near-nihilistic
  cynicism and your conclusion, as to virtually every topic discussed
  here. Words are deeds, though they be more or less frivolous, weighty,
  insightful or consequential.

  If the other Mises bloggers agreed with you as to the possible
  efficacy of their words, either generally or on this particular topic,
  they simply wouldn`t bother to post.

  However, I share your concern about efficiacy, which is why I
  criticize posts such these (whether by Stephan, George Reisman, Sean
  Corrigan, Walter Block, or Jeffrey Tucker), which are, by and large,
  more of a circle jerk than an effort to engage.

  – “thank you for being respectful”

  My pleasure, but you hardly need to thank me; this is a community, after all.

  – “even though you mistakenly think I’m a nut.

  In this case, it is you who are mistaken (not that you ARE a nut, but that you think I think you are).

  Tom

  Published: November 1, 2009 9:35 PM

This is last version of the comment that I tried to post several times:

method fan:

[my first attempt apparently failed to post, so apologies if this shows up twice]

– “You are insofar wrong, that not only this “data” is analysed but it is also used to “predict” the future of reality by using it in simulations!”

You miss my criticism of Dr. Hayden`s refusal to examine facts about ongoing melting in Antarctica, but of course I do NOT disagree with you that current and paleo data can be used to “predict” the future.

But of course a scientific understanding of the world, and information – in this case, both about the past and current trends of climate inputs – certainly can give us useful information about what the future may hold in store for us.

“There is no sound experimental proof that human activity-emitted carbon dioxide is the cause for some sort of global warming.”

Nicely phrased; there of course plenty of experimental proof that carbon dioxide is an atmospheric warming agent, but no experimental proof that it is “the” cause for any global warming.

While we are now running such a global experiment – one that started centuries ago and will not be played out for centuries hence and is, for all intents and purposes irreversible – and thus cannot, in the Popperian sense, even be considered an “experiment”.

Whether our ramping up of the experiment is prudent or principled are entirely different questions, and properly the subject of much discussion.

– “These guesses remind one of the idea that rain dances are the cause for rain.”

I`m tempted to make a comeback, but surely you realize your flip comparison is entirely inapropos.

Here`s hoping for more sincere discourse.

TT

[Update: Readers may wish to note the latest developments, as I note in these follow-up posts.]

Stephan Kinsella – whom I have engaged before on the ramifications of the decidedly non-libertarian state grant of limited liabiility to corporations – has a new post up on the Mises Blog on global warming;  his first on this subject, as far as I know.

The post is surprisingly short, and consists of a simple introduction by Stephan a copy of letter to the EPA (which he has appended) that one Howard Hayden, a retired physicist, one whom Stephan assures us is “a staunch advocate of sound energy policy” – whatever that means (hey, me too!) – submitted in connection with the EPA`s Supreme Court-mandated consideration of whether to regulate CO2 and other greenhouse gases. Stephan also refers to Dr. Hayden`s letter as a “one-letter disproof of global warming claims.”

I welcome Stephan to this discussion, which has taken place at the Mises Blog in fits and starts over the past few years. However, the absence of any commentary by Stephan leaves me scratching my head. Where`s the beef? Are this person`s scientific views on climate so convincing or obviously correct, and are the policy implication so straightforward, and correct, that we should all “get it” and agree, without any commentary by Stephan? Or Is Stephan simply playing with our credulity, and his own?

In any case, given both (1) the focus of Austrian economics on productively addressing conflicts between people with conflicting preferences (and the frequently negative role that governments play in resource tussles, generally to the benefit of entrenched insiders and to government itself) and (2) the recent Nobel prize award to Elinor Ostrom regarding the ways that humans work together successfully or not) to address common resources, I am simply disappointed. Is this all that Stephan has to offer?

Observing that Stephan fits within a grand tradition at Mises of shallow thought on climate and other “environmental” issues, I felt compelled to post a few thoughts at Stephan`s post, which I copy below:

Stephan:

Thanks for bringing your post to my attention.

My short response? Remember “Thank you, Prof. Block, for feeding our confirmation biases“?

But since I can`t resist doing what nobody else seems inclined to – I suppose it is, after all, why you invited me to this feast – let me make a few comments on matters that would apparently not otherwise occur to you or to the rest of the community.

The fact that most of the contents of Dr. Hayden`s letter is confused twaddle that has been explained in detail countless times (and personally by me, ad nauseum, to the extreme annoyance of most of the blog over the years 2006-2008) aside, it puzzles me that you and others prefer to treat the pages of the Mises Blog as a forum to dismiss – through drive-by postings like this (a la Walter Block) of a particular piece of “skepticism” that caught your fancy – extremely widespread scientific views (held by EVERY major national academy of science, including China and India), rather than engaging in a discussion of preferences, institutions and policies.

As I`ve asked Jeffrey Tucker previously, is science the forte of the Mises Blog, or its readers?

Even if those who believe that man`s rising emissions of CO2 have nothing to do with an observably rapidly changing world and pose no threat whatsoever – and that those who disagree are all deluded and/or evil – turn out, after we play our little massive and irreversible game with the Earth for another few centuries, to be absolutely right, is engaging with them by dismissing their concerns an approach that holds even the slightest prospect of success?

It`s as if Austrians were determined to ignore their own principles, stampede themselves into irrelevancy, and to make sure that we get the WORST policy outcomes possible.

Why not, if you think others all wrong, deluded or evil, play along with their game, and actually seek policy changes that might not only address the expressed concerns of others in a meaningful way, while also advancing a libertarian, freedom-seeking agenda?

As I have noted in a litany of posts at my blog, most recently one addressed to Bob Murphy, such pro-freedom regulatory changes might include:

• accelerating cleaner power investments by eliminating corporate income taxes or allowing immediate amortization of capital investment,
• eliminating antitrust immunity for public utility monopolies (to allow consumer choice, peak pricing and “smart metering” that will rapidly push efficiency gains),
• ending Clean Air Act handouts to the worst utilities (or otherwise unwinding burdensome regulations and moving to lighter and more common-law dependent approaches),
• ending energy subsidies generally (including federal liability caps for nuclear power (and allowing states to license),
• speeding economic growth and adaptation in the poorer countries most threatened by climate change by rolling back domestic agricultural corporate welfare programs (ethanol and sugar), and
• if there is to be any type of carbon pricing at all, insisting that it is a per capita, fully-rebated carbon tax (puts the revenues in the hands of those with the best claim to it, eliminates regressive impact and price volatility, least new bureaucracy, most transparent, and least susceptible to pork).

Other policy changes could also be put on the table, such as an insistence that government resource management be improved by requiring that half of all royalties be rebated to citizens (with a slice to the administering agency).

As Rob Bradley once reluctantly acknowledged to me (in the halcyon days before he banned me from the “free-market” Master Resource blog), “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 unfortunately the wheels of this principled concern have never hit the ground at MR [persistently pointing this out it, and questioning whether his blog was a front for fossil fuel interests, appears to be what earned me the boot].

There have been occasional   libertarian  climate  proposals floated over the past few years, but they have never graced the Mises Blog, instead falling gently to the ground unnoticed – apparently, except for me – like the proverbial unstrained koala tea of Mercy.

Austrians seem to act as if the love of reason requires a surrender of it in favor of the comforting distraction of a self-satisfied echo chamber of a type that would warm the cockles of any like-minded religious “alarmist” cult.

Then of course, we have our own  home-grown libertarians who are happy to participate actively in the debate (with many excellent points, naturally), but carefully skirt for the purposes of maximum effectiveness (and felicitously, for their own consciences) the fact that their views are funded by the dirtiest class of rent-seekers. Plus we have a few who are happy to regurgitate for us “heroic” “grassroots” efforts that are transparent corporate PR ploys.

Finally, since no one else seems to be remotely interesting in scratching the surface of Dr. Hayden`s letter, here is what a little due diligence turns up:

– sure, the solubility of CO2 in water decreases as water warms, and increases as water cools. Some skeptics use this to suggest that rising atmospheric CO2 concentrations are due not to man, but to a naturally warming. That`s why it`s so interesting that, despite a warming ocean, ocean pH is rising [oops, I meant pH is “falling”, as I`ve noted in a previous comment about rapidly changing ocean pH]  because dissolved CO2 is also rising (because man`s CO2 emissions are forcing more CO2 to be dissolved in water).

– You ask sarcastically, if the melting point of ice is 0 ºC in Antarctica, just as it is everywhere else, how will a putative few degrees of warming melt all the ice and inundate Florida, as is claimed by the warming alarmists? The answer is, simply, that (1) the warming oceans melt and undermine the coastal ice, and (2) as coastal buttresses are removed, gravity brings the continental ice down more rapidly. This process is well underway and apparently accelerating, as described in a study just published in Nature. Note also that not all of Antarctica lies precisely at the South Pole, and that some parts are melting directly as the atmosphere warms.

– finally, not all men are dinosaurs, nor is the rest of extant Creation (save birds, of course). Why should we feel comforted by the fact that we may, in the blink of an eye in geologic time (decades/centuries), be terra-forming the Earth for creatures that no longer exist, while stressing it for the rest of Creation? Do we have no right of preference in climate or in the life we share the Earth with, or have the investors in fossil fuel firms homesteaded the right to modify environmental matters willy nilly, come what may?

Thanks for providing the soapbox, Stephan.

Tom

I note that Stephan closes his introduction to Dr. Hayden`s letter with the following:

“I love Hayden’s email sign-off, “People will do anything to save the world … except take a course in science.””

Would that problems of governance of shared resources were so easy as taking a science course! Then ALL of us Austrians, and not merely our leading lights at the Mises Blog, could simply pack up and go home, and leave everything to a few philosopher-king scientists!

[Update: I copy at bottom a follow-up exchange I had on Bob`s thread with another reader – radio silence from Bob.]

Bob Murphy has a new post up at his blog, “CBO Testimony Misleads on Cost of Cap-and-Trade“, that draws attention to a new blog post at the Institute of Energy Research that Bob says he “had a lot to do with”.

The IER post rightly criticizes some of the numbers that the Congressional Budget Office has released, but the IER is playing games itself.

I left the following note at Bob`s (now substantially goosed up for the benefit of readers):

TokyoTom said…

IER? Isn`t that the “free-market” blog that bans libertarians who are not on their pro-coal, pro-pollution wagon? [Oops, I confused this with Rob Bradley`s MasterResource blog; IER is different, in that IER is – much more clearly than MR – an active rent-seeking front for fossil fuel interests, which Exxon made clear last year when it publicly announced that it would no longer fund IER`s “unproductive”, climate-skeptic position.]

But while we`re on the subject, let`s not forget:

– Austrians` fundamental objections to cost-benefit analysis;

–
that the mining, transport and combustion of coal, in addition to whatever climate “cost” it
might have to various people whose preferences can`t be measured, have
very real and significant costs in terms of damage to persons and property;

–
that federal law authorizes this (via the “Clean Air Act”, surface mining laws and ownership of the TVA), and grandfathers the very worst
midwestern utilities, the oldest 10% of which (41 or so) are  estimated to be responsible for 43% of the
$62 billion in annual  damages (not including damages from harm to ecosystems, effects of some air pollutants such as mercury, or climate change)(according
to the latest NAS report on the indirect costs of fossil fuels);

– that our federal government and states own most of the coal deposits and are otherwise addicted to the royalty revenues and complicit in turning a blind eye to damages;

– the future “costs” that the IER analysis refers to (in 2050) are not discounted to present value;

–
that alternative policies – such as

• a rebated carbon tax,
• accelerating cleaner power investments by eliminating corporate income taxes or allowing immediate
  amortization of capital investment,
• eliminating antitrust immunity for
  public utility monopolies (to allow consumer choice, peak pricing and “smart metering” that will rapidly push efficiency gains),
• ending Clean Air Act handouts to the dirtiest
  utilities (or otherwise unwinding burdensome regulations and moving to lighter and more common-law dependent approaches),
• ending energy subsidies generally (including federal liability caps for nuclear power (and allowing states to license), and
• speeding economic growth and adaptation in the poorer countries most threatened by climate change by rolling back domestic agricultural corporate welfare programs,

are never advanced, much less their costs weighed [that is, no attempt is ever made to engage opponents in good faith or to seek mutual gains by working to resolve underlying problems];

– the costs/consequences/risks and equities of “do-nothing” policies are hardly considered, and when so are heavily discounted;

– that deliberate “geo-engineering” holds no promise as a panacea, and itself is fraught with issues about statism, preferences, risks and liaibility;

–
the need for investment in infrastructure and change in laws to adapt
(and foster adaptation) to very real ongoing climate changes are never
discussed; and

– no one at IER ever seems to question the
unstated presumption that utilities and our transportation industries
have somehow homesteaded an ownership right over the global atmosphere – or the massive role that our federal government and states play as coal and other energy resource owners),
so that it`s perfectly okay to dismiss the preferences of those who
have concerns at home [those “religious” nuts like Exxon, and our Academies of Science] and those abroad in the least developed countries
that are most vulnerable to damages (much less to suggest how those
injured should be aided).

In other words, those defending the
status quo seem to have abandoned any Austrian training (or to have no
familiarity with its concern for problem-solving and awareness that
[as Block points out] common law protection of private property rights was hijacked a century
ago, with massive pollution and rent-seeking problems being the result).

Someone
ought to post a few of these thoughts over at IER; Rob Bradley somehow
finds comments of this type over fundamental principles to be “ad hominem” arguments [of the kind that very quickly tested his patience and got me banned, without any word to his co-bloggers, who found my comments worthy of considered response].

Sure, we should fight over policy, but let`s not ignore principles or put our heads in the sand.

October 28, 2009 10:10 AM

*  From the NAS report:

Coal accounts for about half the electricity produced in the U.S.  In
2005 the total annual external damages from sulfur dioxide, nitrogen
oxides, and particulate matter created by burning coal at 406
coal-fired power plants, which produce 95 percent of the nation’s
coal-generated electricity, were about $62 billion; these nonclimate
damages average about 3.2 cents for every kilowatt-hour (kwh) of energy
produced.  A relatively small number of plants — 10 percent of the total number — accounted for 43 percent of the damages.  By 2030, nonclimate damages are estimated to fall to 1.7 cents per kwh.

[update:

Supporters of cap and trade always turn to the
argument that opponents are burying their heads in the sand. It’s not
true. This legislation won’t do anything to help the environment. It is
merely a front so that the administration and the Democrats can say
they did “something.” We don’t need legislation that is going to cost
every single American household and won’t even be able to achieve its
stated goals. Write your Congressmen at
http://dontcapandtradeourjobs.net/?tr15.

[A], you`re missing my higher -level poinht, which is that IER is
rather apparently UNINTERESTED in engaging productively or on a
principled basis on this issue; rather, they are simply sniping (though
they make excellent points) at the cap-and-traders).

Though,
of course, from the view of those financing them, this form of
engagement may very well be “productive”, if it delays any action that
will lower returns to coal, rail or utility investors.

What`s
regrettable is that this obfuscation, which has been going on for
decades, is what is likely to saddle us with extremely costly, porky
and ineffective “climate change” policies.

# posted by  TokyoTom : October 29, 2009 12:08 AM

The incessant calls for – and criticism of – government-funded/mandated “green/clean power” pork both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns (concerns underscored by the May 19 MIT study), while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources.  This leaves the middle ground unexplored.

While there are plenty of root causes for the calls for legislative and regulatory mandates in favor of clean / green / renewable power, such as:

• concerns about climate change,
• the political deal in favor of dirty coal under the Clean Air Act, 
• the enduring role of the federal and state governments in owning vast coal fields (the royalties from which it does not distribute to citizens but go into the General Pork Pool), 
• the unwillingness of state courts, in the face of the political power of the mining industry, to protect persons and private from pollution and environmental disruption created by mining,
• the deep involvement of the government in developing, encouraging and regulating nuclear power,

the most obvious and proximate root cause is something that attracts far too little attention – the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity.  It`s prettty clear that the grant of public utility monopolies and the regulation of the pricing and investments by utilities greatly restrict the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount power consumers use by time of day or appliance.

With freer markets, we would see much more competition, better pricing, much more cost-saving (and conservation), and more money flowing into green power. So why is so little attention being paid to all of the gains that could be achieved from less – and more rational – power regulation?

Allow me to provide a few quotes and links to those interested:

1.  Lew Rockwell, President of the Ludwig von Mises Institute, “The Real Cause of Blackouts” (July 27, 2006):

Now, if markets were in charge, a heat wave would not be looked at as a problem but as an opportunity. Entrepreneurs would be swarming to meet demand, just as they do in every other sector that is controlled by markets. The power companies would be praying for heat waves! …

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 …. 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. …

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.

2.  Lynne Kiesling, Senior Lecturer in Economics at Northwestern University and former director of economic policy at the Reason Foundation; participant in debate at Reason online “Carbon: Tax, Trade or Deregulate?“

3.  Paul Joskow, current President of the Alfred P Sloan Foundation and former head of theMIT Department of Economics (now on leave) and former director of the MIT Center for Energy and Environmental Policy Research; speech at the National Press Club in September 2008:

For almost 50 years this sector was stuck in an organizational and regulatory framework that may have been well matched to the electricity generation and transmission technology available in 1935, but was surely poorly matched to changes in technology, new technological opportunities, contemporary investment needs, or current economic and environmental challenges. Then in the early 1980s, electricity sector reformers began to stir, responding to concerns about the system of regulated vertically integrated monopolies inherited from the 1930s. The “good old days” of regulation represent a view to the past with rose colored glasses. The system of regulated vertically integrated monopoly was plagued by cost overruns associated with nuclear power plants, poor operating performance for both nuclear and large fossil-fueled plants, poor fuel procurement decisions, wide price differences between neighboring areas, excess generating capacity, inefficient dispatch and economy energy trading between generating companies, regulatory incentives to keep old inefficient plants operating rather than retiring them, too many small utilities to take advantage of economies of scale, institutional and technological barriers to using the transmission network to access lower cost power, productivity lags, and inefficient retail prices. The system …was unnecessarily costly and inefficient.

Reformers looked to the favorable experience with restructuring, competition, and regulatory reform in other sectors and with electricity in other countries to help to solve the problems associated with the fragmented electric power sector made up of over 100 vertically integrated geographic monopolies. Municipal distribution companies and large industrial customers were especially aggressive at promoting reforms focused on open transmission access, the creation of transparent organized regional competitive wholesale markets, and (in the case of large industrial customers) retail competition.

A large number of states initially embraced this restructuring, competition, and regulatory reform vision and began to implement it. In 2000 it looked like restructuring and competitive market reforms were going to sweep the U.S. electric power industry.

Then came the California electricity crisis, the collapse of Enron and a number of merchant generating companies, increased volatility to natural gas markets and associated volatility in wholesale electricity market prices, and a long march upward in fossil fuel prices ultimately resulting in rising retail electricity prices in both regulated and restructured states. Most of the states that were leaders in restructuring during the late 1990s, when natural gas prices were low and there was excess capacity, initiated reforms during a period when regulated prices for generation service were expected to be much higher than perceived comparable competitive wholesale market prices. The expectation was that over time retail prices would fall. This forecast was based on the assumption that low prices for natural gas in particular would continue and that a new system built on efficient CCGT technology would evolve. At that time, a major “problem” that many of these states had to cope with were the “stranded generation costs,” primarily associated with what were perceived to be costly nuclear power plants, that were expected to result from the introduction of real wholesale and retail competition. This was expected to be a “transition problem” because it was expected that competition would result in market prices that would fall to levels below the embedded costs of nuclear plants and older fossil plants that would have otherwise been used to calculated (higher) regulated retail prices.

However, as natural gas and coal prices continued to rise far above anyone’s expectations, many of these states soon found that competitive market prices were rising dramatically along with natural gas prices (which affect competitive wholesale electricity prices in most regions of the country) — arguably rising to levels above what regulated prices would have been today under the status quo ante (though this requires a difficult counterfactual analysis). This, of course does not mean that these electricity sector reforms were a failure. In states that adopted the restructuring, wholesale and retail competition model, retail prices now reflect marginal supply costs, as they should to give consumers the right price signals to use electricity wisely. Rather it means that regulated prices are or would have been too low to give consumers appropriate incentives to make wise consumption decisions.

In evaluating restructuring, competition and regulatory reform one must understand all of its efficiency and distributional properties, not just at short run price effects. From an efficiency perspective, the restructuring reforms implemented at the federal level and in some states have led to numerous cost reducing successes in the face of rising fossil fuel prices.  These include dramatic improvements in the performance of divested nuclear plants, significant improvements in the performance of fossil plants that now face market incentives, roughly 200,000 GW of new (mostly merchant) gas-fired generation has been added to the system between 1999 and 2004, while the risk of cost overruns, fuel price fluctuations, demand variations, and availability problems experienced by some of these plants were shifted to their owners through the market rather than borne by consumers through cost-of-service regulation. There is good empirical evidence that the expansion of the boundaries of RTOs (e.g. PJM) have led to significant changes in power flows and more efficient dispatch of power plants, while inefficiencies are observed at the boundaries of RTOs that have not agreed to be consolidated (e.g. NY/NE). Gradual improvements in wholesale market designs have increased the efficiency of these markets and have restored investment incentives. Moreover, retail prices now respond quickly to changes in wholesale market prices, providing consumers with the right price signals rather than the wrong price signals resulting from retail price regulation. And these price signals are properly differentiated by time and location to reflect marginal supply costs, rather than the depreciated original cost of generating plants built 50 years ago. Demand management programs linked to short-term supply and demand conditions are expanding quickly as well in the reform regions.

Of course, the full reform program has not been implemented in large areas of the South, the West, and portions of the Midwest. The partial electricity reform equilibrium that we appear to be in now will not serve the country well and is potentially quite unstable. We have a system that is 1/3 reformed and 2/3 stuck in the structural and regulatory paradigm of the 1935s or somewhere in between.

The problems created by an antiquated industry structure and incompatible mix of state and federal regulation have not gone away. They are lurking out there to undermine achieving the goals that I enumerated earlier. Absent a comprehensive national electricity policy framework this sector is and will perform poorly in meeting the four sets of goals that I discussed earlier.

Joskow has spelled out his specific proposals for reform, which I note here.

4.  Google, September 19, 2008 press release – “Partnering with GE on clean energy“:

Today we announced that we’re joining forces (PDF file) with GE to use technology, information and corporate resources to drive the changes necessary to empower consumers with better energy choices. We will focus on improving power generation, transmission and distribution – a combination of technologies that could be known as the “smart grid.” (It would be fair to refer to electricity technologies in common use today as a “grid of only average intelligence.”)

The existing U.S. infrastructure has not kept pace with the digital economy and the hundreds of technology opportunities that are ready for market. In fact, the way we generate and distribute electricity today is essentially the same as when Thomas Edison built the first power plant well over one hundred years ago. Americans should have the choice to drive more fuel efficient cars – or even electric cars – and manage their home energy use to reduce costs, and buy power from cleaner sources, or even generate their own power for sale to the grid.

We all receive an electricity bill once a month that encourages little except prompt payment. What if, instead, we had access to real-time information about home energy use? What if our flat screen TVs, electronic equipment, lights and appliances were programmed to automatically adjust to save money and cut energy use? What if we could push a button and switch the source of our homes’ electricity from fossil fuels to renewable energy? What if the car sitting in our garage ran on electricity – the equivalent of $1 per gallon gasoline – and was programmed to charge at night when electricity is cheapest?

This vision is what unites Google and GE. We’ll start by working together in Washington, D.C. to mount a major policy effort to enable large-scale deployment of renewable energy generation in the United States.[deregulation? mandates?] We’ll also work on development and deployment of the “smart” electricity grid that will empower consumers, utilities, and technology innovators to manage electricity more efficiently and lower their carbon footprint. Finally, we’ll collaborate on advanced energy technologies, including technologies to enable the large-scale integration of plug-in vehicles into the grid and new geothermal energy technologies known as enhanced geothermal systems (EGS).

As I have noted elsewhere, 

5.  Jerry Taylor, senior fellow at Cato Institute, “The Right Way to Fix the Grid“, August 19, 2003 (New York Post):

Yes, the need for more investment in the grid seems clear. The system was designed to handle a limited number of transactions, not the large interstate exchanges of electricity now common. Moreover, transmission capacity has been stagnant relative to the growth in power generation, stressing the system even more.

Why has the grid deteriorated?

* Transmission projects are considered, approved and paid for at the state level – but the benefits cross state lines. And state-level decision-makers understandably resist using ratepayer dollars to pay for investments that will mainly help out-of-staters.

* In much of the country, incumbent utilities and state politicians actively resist improving the grid. Vertically integrated companies (which own the generating plants, transmission lines and distribution networks within a service territory) often fear that a more robust transmission system would boost potential competition.

Many politicians also oppose grid improvements because new transmission capacity would make it easier for out-of- state customers to bid-away the cheap power from in-state consumers.

* Returns on transmission are regulated, so utilities have found that they can make more money by investing in virtually anything besides transmission infrastructure.

* With many regulatory fights still unresolved, and the potential for profit thus unclear, investors have delayed risking their money on the grid.

The solution now in vogue to solve these problems is to give the Federal Energy Regulatory Commission more authority over transmission investment. State regulation of transmission is, after all, an archaic relic of another era; and all who use the transmission system are vulnerable to the weakest links in it.

But forcing utilities to invest in transmission upgrades through increased federal regulation is too crude and blunt a policy hammer. It may get the job done to some degree, but running industries by federal dictate is less efficient than ensuring that proper incentives exist for the industry to operate efficiently on its own.

Instead, why not try deregulating the grid? Kill the cap on transmission profits. Jettison the state regulations that protect transmission companies from competition. Cease the endless political debate over how the transmission lines ought to be organized and managed and let grid owners discover for themselves how to most efficiently run their businesses – something market agents are more adept at learning than legislators or regulators.

Most analysts are convinced that the transmission system is a natural monopoly, and so recoil at the very thought of competition to the grid. But it already exists, in the form of natural-gas pipelines.

All new power plants, after all, are natural gas-fired. They can be located far from urban areas and their product shipped to urban areas via the electricity-transmission system, or they can be located in urban areas and their output shipped locally.

The competition between gas and electric transmission is no worse than the competition between cable and satellite television service providers.

Deregulation would also mean an end to rules that force grid owners to do business with anyone who wants access to their wires. Transmission providers should be allowed to negotiate the terms and conditions for both putting power into the lines and for taking it off.

Those who own the power lines, after all, have a greater incentive to ensure that their lines run safely than do the regulators who watch over them, particularly since they wouldn’t be able to rely on regulatory bodies to guarantee them a rate of return on their investments.

Deregulation can’t guarantee that blackouts would never again occur. But it would almost certainly lead to a faster flow of dollars into overdue investments in reliability and a far wiser use of such dollars than would the orders and mandates being contemplated in Washington.

More by Taylor on power regulation here and here.

Any Austrians who have read through this may be familiar with these words from Roy Cordato:

“by placing environmental problems within the context of personal and interpersonal plan formulation, we discover that they are not about the environment per se but about the resolution of human conflict. …

“Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.”

“The focus of the Austrian approach to environmental economics is conflict resolution. The purpose of focusing on issues related to property rights is to describe the source of the conflict and to identify possible ways of resolving it.”

“Environmental problems are brought to light as striking at the heart of the efficiency problem as typically seen by Austrians, that is, they generate human conflict and disrupt inter- and intra-personal plan formulation and execution.” 

Do Austrians and others have their problem-solving caps on, focussed on aiding conflict resolution?  Or are they instead simply fighting over the wheel of government, in a way that ensures the continuing frustration of the concerns that many have about apparently very serious climate change risks?