Pricing Problems for Environmental Goods

I read a claim the other day that using disposable cups is more environmentally friendly than using normal, reusable cups. The logic of the argument is that it takes water and energy (to heat the water) to wash reusable cups. But what if we don't know the marginal cost of that water and energy?

As a general rule, a lower cost product reflects a smaller amount of resources used in making it. I'm reasonably certain that the production of a paper coffee cup uses fewer resources than the production of a ceramic coffee mug. So if I was going to purchase only 1 cup of coffee, it the environmentally friendly purchase would be the styrofoam cup.

But of course I'm not buying just one cup of coffee, I'm a daily coffee drinker. That means I would use many more styrofoam cups than ceramic cups over the course of a lifetime. The problem is that as a consumer of water and energy, I don't know the marginal cost of those resources as applied to the washing of a mug, and there are several variables involved, such as:

1. If I drink 3 cups of coffee a day, am I reusing the same paper cup, or getting a new one each time? If I'm buying it from the coffee stand in our student union, it will probably be a new one each time, but if I'm making coffee in our break room or at home, I'll use the same cup all day (or even two to three days, depending on how fastidious I am).

2. Am I washing the coffee mug after every use with hot water? Or am I washing it once a day with the rest of my dishes? In the latter case, the only extra energy/water used is the water used to rinse the soap away after cleaning.

3. How long do I actually keep a ceramic mug, on average? I'm better than most people at losing things. I've gone through at least 4 travel mugs in the last 4-5 years, which strengthens the case for disposable cups, but I've been using the same mug at home for close to a decade.

I can plot these on a simple continuum, to see the best and worst case scenarios.

Break ceramic mugs regularly.....................Keep the same mug for decades
Wash in diswasher after each use..............Wash only when doing other dishes
Reuse paper cups multiple times.................Toss paper cups when empty

...<---------------------------------------------------------------------->

On the left side of the continuum, I'm disposed to listen to the claim that I'd be a better friend to the environment by using paper cups. But on the right side, I'd be very very dubious that disposables are better than reusables. I'm somewhere in the middle-right. I actually do reuse paper cups regularly; for example when I buy my first cup of the day at the coffee stand, then get my other cups from the breakroom, I frequently reuse the paper cup from my earlier purchase, which would incline me to the left side. But, with the regrettable exception of travel mugs, I keep the same ceramic mug for years and rarely wash it except when doing other dishes (I'm not too fastidious about a dirty coffee mug) , which pushes me more towards the right side of the scale.

Overall, I'm inclined to think that I should probably continue using a ceramic mug. But I can't be sure, because while I can figure out those personal factors, I simply don't know how much it costs me to wash my coffee mug. I suspect it's just not that much, which satisfies me with my own economc choice, but doesn't satisfactorily answer the important question:

How can consumers be environmentally responsible

without adequate pricing information?

Answer: They can't, and that's a pity, because it keeps us uninformed about the environmental effects of our purchasing decisions, and makes us more susceptible to falling for bad arguments, both political and economic, whether they are coming from left-wing environmentalists or right-wing anti-environmentalists.

Addendum: I think I'll use this as an exercise in my environmental politics course next spring. My plan for the course is twofold: (1) to teach students the structure of environmental policymaking (primarily in the U.S., but, if time allows, some focus internationally as well); (2) to teach them to analyze environmental claims rather than just accept them based on their political predispositions.

Any suggestions for good readings, issues to include, exercises, etc., are welcome.

How Should Superdelegates Vote?

There's been a lot of talk about how the Democratic Party's "superdelegates" should vote. Superdelegates are party bigwigs, rather than low-level functionaries chosen in primaries and caucuses, as the not-so-super delegates are.

It rarely matters how they vote, because the primaries and caucuses have, since they developed, always selected the candidate. But this time, with the race between Obama and Clinton so tight, it is possible that the superdelegates could make the difference.

Many folks are now saying they should vote for (a) whichever candidate has the most delegates, because that's obviously who the public really wants, or (b) whichever candidate has received the majority of the popular vote, because that's obviously who the public really wants. (Because of (a) the caucuses that some states hold, and (b) the different ways the states dole out the delegates, some in winner-take-all, some proportionally, and some by district, or a mix of these, having the most delegates may not coincide with having a majority of the popular vote. To all that confused mess I can only say, God bless American federalism.)

Both of these claims assume that the public ought to be the determining factor in selecting the party's candidate.

But that's a lot of nonsense. First of all, the superdelegates are individuals, and so they ought to vote their own conscience. Second, they have a better idea of the party's interests, and their conscience ought to lead each of them to vote for the candidate they think is best for the party.

In the bad old days, it actually was party leaders who selected presidential nominees, and while it was very undemocratic, it had two related advantages:

1. It resulted in more cohesive and responsible political parties;
2. It resulted in presidents who were constrained by those parties, rather than our current situation where presidents feel they are solely responsible to the public, and believe that gives them leeway to be nearly autonomous executives--after all, if the public is sovereign, anyone acting in their name is merely exercising sovereign power and ought not be constrained in any way.

The creation of the primary system, which shifted presidents' allegiance from their party to the public (Woodrow Wilson's "small c constitution" approach to the presidency) has been one of the primary causes of our run-away imperial presidency.

I wouldn't be willing to bet it will happen, but the best outcome would be for the superdelegates to determine the Democratic nominee, and for them to act as a group in extracting pledges for restraint as a condition of throwing their support to one or the other.

I'm a Lousy Teacher

There's nothing like grading final exams to make me feel like a failure as a teacher.

The question was about the Pentagon Papers case (a case where the NY Times and Washington Post published a stolen Pentagon report revealing the military's conclusion that the Vietnam War was unwinnable).

The answer: "The Pentagon Papers case was a case about Richard Nixon stealing documents from the Pentagon to get reelected."

Sigh. Sometimes it feels hopeless. And that was from a front row student, not even one of the backbenchers.

On Being an Evil Overlord

Best line every written by one of my students:

In conclusion, being an evil overlord could be a good occupation, if you maintain the ability to think strategicaly and to analyze your opponent's moves.

That's from an analysis of how villians always screw up in the movies, despite always beginning with so many advantages. The paper is for my political behavior class.

The paper reminds me of a book I once read that was written by a former Mossad agent (long lost, and I don't remember the title). The author pointed out that in real life, when you burst into a room of bad guys, you don't pause to announce your entrance and give them time to reach for their guns; you just go in shooting and try to kill them all before they realize what's happening.

I'd like to see more Hollywood movies where the characters really are strategic actors behaving rationally.

McCain Gets Free Trade Half Right

Campaigning in Youngstown, Ohio, John McCain defended free trade, while still getting it wrong. Here's what he said.

McCain again defended free trade during a town hall meeting at Youngstown State University, but added that other countries have violated the principle at the expense of the U.S. interests. "We have to insist on fair and open competition," McCain told a man who protested Chinese "dumping" of cheap steel, crippling steel communities such as Youngstown.

McCain dangerously mixes the notion of "fair" trade with free trade, showing that he still doesn't really get it. Let's say China's not being fair, that they are "dumping" goods in the U.S., and not allowing U.S. goods in. Conventional wisdom, and McCain is wholly conventional here, says the U.S. is being hurt while China prospers. But, as so often happens, conventional wisdom is anything but wise.

The more goods and services you can buy, the more well off you are. So if China sells stuff to us super-cheap, we can buy more stuff, and we're better off. It also leaves us more money left over to buy other stuff, including American made stuff, like dvds of Hollywood movies, dinner at Applebees, Amish-made furniture, etc.

On the other hand, if China is really selling things below cost, then they are losing money, and their ability to buy goods and services is declining. And if they are really keeping American made goods out of China, then they're just depriving themselves of access to quality goods.

In other words, if China doesn't play fair, America gets richer while China gets poorer.

Unfortunately, too many people still think the basis of the good life is jobs, rather than goods and services. Jobs are merely the means to the end of acquiring lots of goods and services. It's an odd misconception to have, when you consider that most people's vision of paradise is having everything we need without having to work. Just think, if China really did "dump" goods on America, giving us everything we need for free, it would destroy millions of jobs--but we'd be that much closer to paradise.

I Didn't Vote for the Guy, Really

Not only is my U.S. Representative backing a wildly dishonest resolution that essentially claims the U.S. was created to be a Christian nation, but my state senator is sponsoring a bill in the state legislature to ban "partial birth abortion." What's wrong with banning this procedure? The fact that it's already outlawed by federal law--a federal law that has already been upheld by the U.S. Supreme Court. I heard about this from Ed Brayton, who asked me to comment on it for a Michigan Messenger article.

The background is that the Michigan legislature passed a ban previously, in 2004, which was vetoed by the governor (a Democrat), then passed in a petition initiative by the state's citizens, but then declared unconstitutional by the 6th Circuit Court of Appeals in 2005. In 2007, the U.S. Supreme Court upheld the federal government's partial-birth abortion ban.

Since it's already illegal, Ed suggested that it's a Republican plan to put Michigan Democrats in a pinch this fall, by making them either go against their base or go against the clearly expressed wish of the majority. But I'm not sure it's that strategic a move. I think it's a case that the supporters are true believers, for whom a federal law is necessary but not sufficient--there can never be too many laws restricting abortion, even if they're redundant. And also it allows the individual supporters to go to their constituents, many of whom are at best vaguely aware of the federal ban, and take the high ground as the candidate of moral values.

Meanwhile, they ignore the state's failing infrastructure, ongoing problems of its tax-base, subpar educational system, etc. They're engaging in symbolic politics because it's a lot easier, and more emotionally satisfying, than solving real problems that are really happening.

And these are the same people who talk about small government, about getting government off the backs of the people. They're the ones who talk about reducing the cost of government. And yet they continue to pass more criminal laws regulating people's private lives, and pretending that these things don't add to the size, cost, and intrusiveness of government.

To hell with all of them.

Coke Goes Commie?

This could be another sign of the apocalypse, evidence of how poorly educated Coca-Cola's ad execs are, or just more evidence that capitalism can coopt anything, even communism. Coke, a major sponsor of the Beijing Olympics, is using the ad slogan "red around the world."

Of course it's only coincidental that Coke's can is the same color as "red" China, but in this context it sure seems as though the Coke people are either ignorant of, or simply ignoring, the political symbolism of the color. The Foreign Policy bloggers aren't too amused, and when we remember that the "People's" Republic has killed over 70,000,000 of its own people.

Of course capitalism does have a great ability to coopt nearly anything, but in doing so it tames what was radical (e.g., Lou Reed's "Take a Walk on the Wild Side" being used to advertise the yellow pages). But what happens if we "tame" communism? Will capitalism undermine its innate hostility to human rights, or will we just come to think of communism as something cute and quaint that they do over in China, and downplay its abuses?

I suspect I'm overreacting, but this does bother me. And what really bothers me is the suspicion that nobody at Coke is having trouble sleeping at night, even while China imprisons anyone who would dare to question the idea of being red around the world.

Expelled Finally Opens

After months of breathless anticipation...at least among scientists..."Expelled" has finally opened at the box office. I'm not really sure how much of the public besides the scientific community was really aware of this crock-umentary.

And it showed at the box office. Somehow, the producers of Expelled managed to open it on over 1,000 screens, very impressive for a non-Hollywood film. But the per-screen take wasn't so good, only about $1,000 per screen per day. That won't really pay the movie theaters' bills. And since only a percentage of the take goes back to the producers, Expelled seems unlikely to be profitable at the box office. Still, I'd bet that they'll eventually make it back through video sales and rentals. Any film that can secure a cult following will eventually do so, and any film that targets a particular niche as clearly as this one does should secure a cult following. (Don't you just love the irony of describing right-wing Christians as cult followers?)

I think the filmmakers must have fallen for the myth of the silent majority--that great huge group of Americans that are being ignored and suppressed in our capitalistic and democratic system. It's a classic example of selection bias. "Everyone I know thinks evolution's a crock, so everybody must think evolution's a crock, so there must be a large crowd just begging for a film like ours. Why they'll all flock to see it, proving once and for all that most Americans really do agree with us!"

It never happens, of course. There's a comment on a prior post here suggesting that lots of people in my county are actually against CAFOs. But I suspect that person's circle of friends is not randomly distributed among county residents, and what the survey shows is that 48% of respondents think CAFOs are, overall, beneficial for the county, with only 31.6% thinking they are, overall, harmful (and a sizable 20.4% saying "neither" or "don't know").

Overcoming biases in our thinking is just damned hard. Fortunately it probably doesn't matter that much most of the time, but when you sink millions into a movie, it might hurt a bit. Even if they do make their money back eventually, the opportunity costs are pretty doggone high--they could have invested that money into CDs and probably come out ahead of where they'll be.

More Problems for Michigan

The Detroit Free Press today reports complaints of service industry owners that their business taxes are skyrocketing, often by more than 100%. There’s a fascinating back story.

Years ago Michigan replaced a complex series of business taxes with the Single Business Tax, which was supposed to be simpler and fairer. The SBT taxed labor, capital and profits. Businesses hated it, and fought for years to get rid of it. Taxing labor and capital discouraged investment and expansion, and many have argued that is one of the causes of Michigan’s poor economic performance.

But the structure of the tax hit manufacturing businesses harder than service businesses, and with the slump in manufacturing in Michigan, the SBT hit the state’s revenue base hard, and the legislature finally pulled together enough to change it.

So now, while the majority of Michigan businesses are supposed to pay less under the new tax, the businesses that were treated favorably by the SBT are faced with substantial increases. One the one hand, this seems only fair, as some of these were clearly not carrying their share of the public expenditure load before. On the other hand, with manufacturing’s struggles in recent years, it may be bad policy to hit service industries with a big tax increase, just when they are becoming an increasingly important part of the state’s economy. And with an unemployment rate greater than 10% (that’s the official rate, the real rate is probably over 20%), those businesses may find it hard to pass on their tax increases to their customers through price increases.

I’m no expert on tax policy, and I never did really understand the Single Business Tax (although, apparently, that was true of most business’s accountants, too), nor do I really understand the new tax. But this is one area where I both despise and sympathize with legislators. Too many of them simply think that increasing taxes on business will result in greater revenue, but trying to raise enough revenue to give the public everything it demands while not creating real business disincentives is a task far beyond me, and I can hardly blame them if they don’t get it right.

The Enduring Myth of American Steel

If you don’t live in Michigan, you may not know the term “American Steel.” It’s not a company name, but a term referring to American cars. Well, not all American cars, just General Motors, Ford and Chrysler—what we call “the big three.”

Problem is, the big three are shrinking. Daimler eagerly dumper Chrysler recently, for far less than it had bought it for not so long ago; Ford is bleeding money; and GM—also a money bleeder—recently lost its place as the largest auto seller in the world, by volume. (Ironically, since GM loses money on each car it sells, it’s probably better off selling fewer cars.) Their struggles are a big casual factor in Michigan’s long-term economic malaise, as they have collectively shed hundreds of thousands of manufacturing jobs in recent years. And everyone here knows the cause of the problem—all those traitorous Americans driving “foreign” cars and our free trade laws, which make those foreign cars so cheap, destroying American jobs.

The Detroit Free Press—which almost never fails to have an auto industry story above the fold on the front page—inadvertently highlighted the perversity of this myth recently. The front page of the business section had a column using the phrase American steel,* while the back page had two brief articles that an alert business reporter ought to have highlighted.
· One was about Volvo laying off workers at its truck plant in Virginia;
· The other was about demand for Honda’s new corporate jet, made in California

So, just what counts as American anyway?

This all reminds me of a conversation I had with my brother-in-law back in the ‘90s when I was looking for a new car. It went something like this.

B.I.L. “What kind of cars are you looking at?”
Me: “Oh, I was looking at a Toyota.”
B.I.L. “Why don’t you buy an American car, like I did?”
Me: “What do you drive?”
B.I.L. “A Geo Metro. It’s made by GM”
Me: “Hmm, you ever noticed how much that looks like the Suzuki Swift?”
B.I.L. “Yeah, they are kind of similar.”
Me: “Yeah, because it’s the same car, built at the same plant in Japan.”
B.I.L. “Oh.”
Me: “You know where most of the Toyotas sold in the US are built?”
B.I.L.: “No.”
Me: “Tennessee.”
B.I.L. “Oh.”

For the record, I bought a Saturn, also made in Tennessee, by GM, but with God only knows how many imported components. Now I drive a Subaru, a nominally Japanese car built in Indiana. And I have no idea where the actual steel came from in any of the cars I’ve driven.

Now it turns out that that Subaru’s Indiana plant has begun producing Toyota Camrys (apparently Toyota owns a stake in Fuji Heavy Industries, which is the parent company of Subaru Indiana Automotive). And of course Ford actually owns Volvo. And GM’s new sedan is being designed in China.

So what is American steel nowadays?

Just a phrase trying to guilt trip me into buying a car built by hard working men and women in Michigan, instead of one built by hard-working men and women in Indiana, Tennessee, Kentucky, California, etc.

End of Term Blues

No posts for a long time. The blogging world doesn’t seem to have noticed.

It’s the end of the term, and I’ve just been too mentally exhausted to write anything. But now it’s finals week, and soon I get a mental break. It’s strange how exhausting teaching can be. I can’t yet explain it, but I see it on the faces of all my colleagues as each term winds down. I really don’t know how elementary and high school teachers, who spend far more time in front of classes than I do, can handle it.

Support for Same-Sex Marriage, by Age Cohort

Ed Brayton claims

A generation from now, we'll look back in bewilderment that anyone could possibly care whether a gay couple wants to get married or not,

I'd say he's right. Here's a graph I produced recently from data from the 2004 American National Election Study.

Source: University of Michigan, Center for Political Studies (2004)

Some people like to claim that young people just support it because they don't know any better yet. But that wouldn't explain why my cohort--low 40s--is more accepting than my mom's cohort (late 70s). It's pretty clear, a multi-generational shift is occuring. I predict same-sex marriage is here to stay in Massachusetts, and will exist in several more states before I retire.

What Kind of Good is Public Radio?

My local public radio station is doing its pledge drive. I'm a shameless free-rider, but since I average only about 5 minutes a day of public radio, I figure it's ok to be without shame.

This morning, the announcer said that their listernship is growing, and that each new listener increases their costs. Now I'm puzzling over that. It seems to me that public radio is a toll good--that each new listener would have minimal, if any, effects on cost. (Unless you got those new listeners by putting up a new antenna to reach a new set of potential listeners).

So did NPR lie to me to get my money? Or is there something I'm missing?

Survey--Success!

We reached our goal of 300 respondents. Hooray, and we're all glad to be done with it. Now we just have to finish inputting, and analyze the data. The inputting will go fast, but with the end of the school year coming up, and a lot of writing deadlines I have, I doubt I'll get much beyond looking at frequency distributions before next fall.

At another level of the research, we toured a 1400 cow dairy CAFO yesterday. A fascinating operation--from the mortality compost pile (dead calve mixed with hay and manure) to the automatic milkers that pop off when the milk flow drops below 1/2 gallon per minute.

The farmer said the cows probably average 30 gallons each per milking (they measure by weight and by groups of milkers, rather than by individual cow), and are milked 3 times a day. So I estimate, roughly, 90 gallons per day over a 5 year milking period (after that they magically turn into hamburgers on my grill) equals 164,000 gallons per cow.

And the damn things eat better than you do, too. They eat a scientifically developed feed that is very nutritious, and which I can only assume costs a small fortune.

And, interestingly, in contrast to what I have been led to believe, the cattle were not chained up and stuck in one position. They were in large pens that allowed them to walk around, and had raised beds of sand that allowed them to lay down out of the muck, as well as access to water in raised troughs (that keep the muck out of the water). And the muck is squeegeed out during their milking each day.

Here's the part the economist inside me liked most: the squeegees are made out of old tires from earthmoving equipment. Some company in Michigan buys the old tires, cuts them into sections, and puts connectors that allow them to be attached to bobcats. A good case of the market using resources well, rather than wasting them.

Worst Analogy Ever: Contracts = Slavery

New University of Michigan football coach Rich Rodriguez has a hell of a lawyer. Rodriguez is trying to get out of paying up on a $4 million buyout clause that was part of his contract with his former employer (University of West Virginia). Can't blame a man for trying, I guess, although how a guy who is smart enough to run a college football empire, and who had legal advice during his contract negotiations, is going to successfully argue he was tricked into signing a contract with that buyout clause is a bit of a mystery.

Here's how, apparently.

"It's like back before the Civil War when slaves had the right to buy their freedom," attorney Marv Robon argued. "A penalty of $4 million is almost like a slave from Africa trying to buy his freedom in America.

As usual, the media gets the point wrong. Whomever wrote the article follows with

He's comparing a millionaire to slaves? Oh, come on.

No, no, no. What's wrong is that he's comparing contract law with slavery!

Rodriguez' decision to sign a contract he now regrets is compared to a system in which people were stolen away from their families, packed into ships without proper food, ventilation, water, sanitation, etc., and sold them to other people who would keep them and their descendants enslaved in perpetuity unless one of those descendants happened to find himself in a situation in which he could earn the money to buy his freedom.

Yep, contract law and slavery--surprisingly similar. Wonder how that lawyer did in his contracts class in law school?

I Has Smart Students

Two of my students came to my office yesterday during a class break. One of them had taken my political economy class, so I asked her to analyze the Cuban agricultural underproduction/food importation issue. She said, "Well, I would guess that they'll probably grow more sugar and tobacco for export, so it won't reduce their food imports. Then they'll have more money, so they might even import more food."

It's always nice to know that students actually learned--that is, actually retained--something from your classes.

By the way, she's a finalist for a Fulbright award. One of the best students I've had.

And, somehow, I can't seem to convince anyone that Cubans are going to eat sugared tobacco.

Another Blow to Socialism--and Economic Reporting

A Blow to Socialism
In yet another implicit admission that socialist "production" is an oxymoron, Raul Castro has announced that Cuba will begin letting private farmers and cooperatives farm unused land. According to the reports, about half of Cuba's arable land is unused or under-used, while the 35% that is farmed by private cooperatives accounts for 60% of the island's ag production.

Gee, wasn't the idea that Socialist governments could plan better than capitalist economies, so there would be more production of necessities, and less waste? Or maybe it was that as the material basis of society changed, ideology would change, and the need for incentives based on self-interest would disappear, as everyone produced according to their ability, and took only according to their need?

Another Blow to Economic Reporting
The article mentions that Cuba spends $1.6 billion annually on food imports (around $140 per person), obviously treating that as a symptom of agricultural under-production.

But the U.S. is the world's largest food exporter, and it imports over $60 billion of food each year, or over $200 per person.

That is, food imports aren't necessarily caused by lack of production. And in Cuba a lot of the ag production is tobacco and sugar--increasing that won't help directly feed Cubans, so it wouldn't reduce food imports. If Cuba starts producing more, it could produce food that could directly feed Cubans, food that could be exported (for cash, which can be used to import more food, indirectly feeding Cubans), or tobacco and sugar that can be exported (again, indirectly feeding Cubans by using the cash to buy imported food).

Most likely, if Cuban agricultural production increases, adding wealth to the Cuban economy, Cuban food imports will rise, rather than fall.