A quick note to, hopefully, make things more grey

In the light of a number of corporate bailouts, much ado has been made about CEO pay and bonuses.

I have heard many pundits and journalists express outrage that companies that are receiving federal money would put it toward such a finite investment as a bonus for the CEO. However, I would think that the CEO of a failing company would be thinking, nearly every day, of jumping ship. The decision made by a board of directors to give the CEO more money does provide the value of keeping the existing leader in the time of crisis.

One might also make the argument that the existing leadership of a failing company deserves to be removed from their posts. This might definitely be true. However, the cost of attracting a new CEO to the post might be even more than merely retaining the existing CEO. Place yourself in the shoes of a business executive, and ask yourself what salary you'd require to be the head of AIG right now.

I don't necessarily think all this justifies the expense. But I do like viewing most things as a tricky grey area.

Perhaps our outrage should be toward the fact that CEOs of major companies have such an astronomical baseline salary to begin with, rather than that the failing companies have to keep those salaries high to compete.

More on the unsustainability of full employment

The concluding point of this recent post was that perhaps an economy based on full or nearly-full employment is unsustainable, or at least in conflict with what is healthiest for individuals as consumers, as well as for residents of a finite planet. Robert Reich concurs, but he does so by explaining why a Keynesian solution to the current economic crisis may prove insufficient.

The false assumptions, according to the Keynesian model, are that "American consumers will eventually regain the purchasing power needed to keep the economy going full tilt," and "even if Americans had the money to keep spending as before, they could do so forever."

His explanation of the error of those assumptions illustrates the dilemma of full employment:

This would be a problem if most of what we consumed during our big-spending years were bare necessities. But much was just stuff. And surely there are limits to how many furnishings and appliances can be crammed into a home, how many hours can be filled manipulating digital devices, and how much happiness can be wrung out of commercial entertainment.

The current recession is a nightmare for people who have lost their jobs, homes, and savings; and it’s part of a continuing nightmare for the poor. That’s why we have to do all we can to get the economy back on track. But most other Americans are now discovering they can exist surprisingly well buying fewer of the things they never really needed to begin with.

What we most lack, or are in danger of losing, are the things we use in common – clean air, clean water, public parks, good schools, and public transportation, as well as social safety nets to catch those of us who fall. Common goods like these don’t necessarily use up scarce resources; often, they conserve and protect them.

He identifies the problem perfectly and lucidly, but his solution doesn't nearly address it. His solution is the standard liberal model of social programs supported by income taxes. Though the social programs he proposes are good and often absolutely necessary, income taxes won't be sufficient if we're facing the dilemma of chronic underemployment.

Whatever solution we concoct must address the fact that: a) individuals might not be able survive on purely employment income alone, and b) taxing employment income might not get you as far as it once did. A potential solution that fits the bill could be extensive natural resource taxation, levied on all income that people earn from selling land, airwaves, oil, et cetera. These are all things that came with the earth, and anyone who profits from them did little to earn the profit, other than get there first. Each of those industries are among the most profitable on the planet, since most of the income is taken from control of common resources, rather than productivity. And if those things are common resources, the existing system of control and profit is theft, and justice requires their taxation.

The government should step in, yes. Though instead of as a buyer where consumers no longer can, they should as a supplier where corporations should not. The few necessary social programs that Reich defines as common may still be necessary, but they in no way match the revenue that is available from natural resources. The remaining surplus can be returned to each citizen as a share of the commons, thus addressing dilemma (a).

And we have, reported Friday, an appointee for Secretary of Energy who might be amenable to such a solution (at least in part). The Nobel Laureate Steven Chu has advocated the increasing of gas taxes. Though unclear from this article whether his proposal would be the case, most often the gas tax is proposed with an income tax decrease to offset it. This is the direction we would like to head.

Consumerism, or Consumer "Confidence?"

"According to Keynes, the root cause of economic downturns is insufficient aggregate demand," quoth Mankiw in the NYT.

In plain English, people are buying less stuff. Very simply, this can be for two reasons, either: a) they want to, or b) they have to.

The latter cause is easily understood: if you've lost your job, took a pay cut, or merely haven't seen your income increase with the cost of living, you tend to put spending on hold.

The former is peculiar, and is treated as such by the press. In the famous incident in which Phil Gramm told reporters that the nation's recession was "mental" it is very likely he was thinking of this group, people who curb their spending not because they are forced to by losing their job, but because they fear that they could become part of the latter category for any of the named reasons. It didn't help that he (Gramm) added that we were a nation of whiners.

When an economy is in trouble, it can most readily be saved by people -- those who still have the power to spend -- doing so. This is why some of the less-charismatic economists can show disdain for this group of folks who fear what may happen: They see this group as those who hold the solution, who are holding back out of fear and self-interest. And when those who can spend hold back, the government steps in to spend in their stead, which is anathema to the free-market orthodoxy (as well as, potentially, common sense).

But what is this group really thinking? It's usually not so conscious a thought as "I might lose my job, so I'd better hoard up cash in case I do," it's usually something more along the lines of "Maybe I don't need this thing after all." It's as if television media reporting on corporate and economic troubles (with the (conscious or subconscious) message of "don't spend more than you have to") is currently counteracting television advertising (with the (conscious or subconscious) message of "buy this thing, you need it") such that people are actually deciding what they need and what they can do without.

And the effect is what economists and reporters call "low consumer confidence" (which has the same horrible ring that Phil Gramm's comments did, i.e.: "Why don't you grow a pair, you thifty sissies?"), when what it actually is is just lower consumerism. People are deciding they're happy with what they have and they don't need more stuff. As long as people don't lose their minds navigating the conflicting messages coming from their colorful living room appliances, this is actually a very good thing for individuals.

It's bad, however, for an economy that is dependent upon full, or nearly-full employment.

In the WSJ:

The Obama-Baucus solution to this slow-motion catastrophe is to add tens of millions more people to the federal balance sheet. Because the public option will enjoy taxpayer sponsorship, it will offer generous packages to consumers that no private company could ever afford or justify. And because federal officials will run not only the new plan but also the "market" in which it "competes" with private programs -- like playing both umpire and one of the teams on the field -- they will crowd out private alternatives and gradually assume a health-care monopoly.

Well, yes, the public insurance would compete in the market, not "compete" in the "market."

One of the major reasons a publicly run insurance payer would be more cheaply is simply because it would tend to cover more people. The reasoning here is the same as in the debate over the mandate.

Should healthcare be subsidized in this way? Perhaps not if there are other private, non-profit insurance agencies. There are arguments for subsizing healthcare, such as correcting the labor market externality or to contribute to the positive externality that your community benefits when you are healthy. If any insurance company answers to stockholders before their patients (ahem, "customers,") it would be reasonable to deny them subsidy. But even if private, non-profit insurance agencies were to receive the same subsidy, I'm still not sure they would be able to offer to cover people as cheaply as the public option.

And in the end, it is the feeling of this nameless WSJ journalist that this is a potential downside, that an option be created that gives people healthcare, more affordably, by choice. And that people might overwhelmingly take that choice.

Postscript:
The President-elect has responded to a petition sent by Transportation for America, an advocacy group for transportation alternatives. Most notable to me is:

Everyone benefits if we can leave our cars, walk, bicycle and access other transportation alternatives. I agree that we can stop wasteful spending and save Americans money, and as president, I will re- evaluate the transportation funding process to ensure that smart growth considerations are taken into account.

You've earned that puppy.

"I earned capital in this campaign, political capital, and now I intend to spend it," Bush told reporters, after winning in 2004 with a popular vote of 50.7%. Bush won the electoral vote 286 to 252. Bush took this as a mandate. He used his political capital to attempt social security privatization.

President Elect Obama won 349 electoral votes, with some states still to be decided (NC and MO, as of this writing). For what policy is this a mandate? I'm hoping for massive-health-care-reform and alternative-energy-infrastructure.

But now the real fun begins: office betting pools for cabinet appointments.

"We are witnessing something remarkable here: Obama's race is receding as he becomes more familiar. His steadiness has trumped his skin color; he is being judged on the content of his character."

- Joe Klein, after the second debate.

Epistemology & Education

For a couple of generations, what we as a country have basically understood to be true has been controlled by the television, which is to say, a handful of media companies. This was all at-least-tolerable until the FCC repealed the Fairness Doctrine in the 1980s and news organizations were under no instruction to provide competing viewpoints.

The democratization of media represented by fantastically easy web publishing of word and video marks a turn. The opportunity here is only present if Americans (all of Western culture, perhaps?) relearn how to evaluate information presented to them, a skill that seems to have been lost through the days of perceiving the television as a viable authority. According to a UCLA study, we are:

The researchers said that, compared to simple reading, the internet's wealth of choices required people to make decisions about what to click on in order to get the relevant information.

You could easily replace the word "relevant" with "accurate."

What this means is that our information intake might not be decided by questions like "Does that station lean conservative or liberal?" but moreso, "where did that reporter get his information?" To push progress along, some educational institutions are moving toward less emphasis on knowledge -- after all, most knowledge is available just on the other side of the Google -- and more emphasis on judgment and evaluation of evidence.

Coincidentally, while watching the debate last night, it occurred to me that one reason why Barack Obama has been considered a gifted speaker, and has been considered a winner by many in all three debates, is that he has held a job that puts him among limited company with past presidents: an educator.

As you've no doubt been told,

There's a mortgage/subprime/credit/stock crisis! Run! The US Treasury has indicated that seven hundred billion dollars will be available for investment banks, and is now planning on giving more in exchange for an equity stake.

You've probably been told that the banks need money because people took out loans they couldn't afford to buy houses that were too expensive. When we refer to a "bubble" it means that an asset is overvalued, and people are willing to pay more than a thing is actually worth. If one buys a house at the peak of a bubble, later discovers that they can't afford payment (or the interest rate, and thus the payment size, rises), they have to foreclose, the house defaults to the bank, and the bank thus owns an asset that is worth far less than the amount they were expecting to receive over time for it from the homebuyer. If you own a stake in any investment, you've probably seen your investment drop as a result of this realization: banks are discovering that what they own isn't worth what they thought it was.

You've probably been paying attention to all this.

However, in most cases, it's being framed as a "loss," as in, "I just lost several thousand dollars in my investments!" A better term might be "discovered to be fraudulent," as in, "I just discovered that several thousand dollars of my investments were fraudulent!" If we are to believe in free markets, then part of the belief is that an individual can choose to give their money to investment firms that make bad decisions, and that we are, to the extent of our investment, also morally culpable for the mistakes that they have made.

The problem is: the loss exists. When the government sends money in to foot the bill, then they bear the loss. They either make up the loss by raising taxes (we get the loss) or by... doing nothing and letting the sudden appearance of 700 billion cause massive inflation... and we thus receive the loss again.

If there's reason for government intervention at this point (at least, a government that generally believes in the free market), it would be to rescue businesses and individuals who rely on regular credit from the banks that are now short on capital to loan them. However, instead of sending the money as a bailout to banks, it might make more sense to offer such loans directly.

Thus far, most solutions have been discussing how to manage the problems that have arisen. Now that stocks are picking up (slowly, perhaps temporarily -- Paul Krugman reminds us that many foreclosed homes are still on the market), some people have taken a breath to discuss why this came about.

Why were people unable to afford the homes they thought they were?

Robert Reich discusses how Americans have lived beyond their means. Specifically, the living hasn't gone up, the means have gone down:

Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.

It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.

It is true that the average American has as much stuff as ever, and that if we paid the true cost of the creation and disposal of this stuff, we'd discover that it was not worth the cost. We'd discover that this contributes to an economist's view of standard-of-living, but a human being's view. But as Reich asserts, it's not the stuff as much as the necessities. One necessity in particular is health care:

About 30 percent of people said they filed for bankruptcy because of an illness or injury, even though most of them had health insurance when they first got sick.

When bills are too much to afford, which do you give up, your health, or your house?

Tax Ads

The linked article on consumption has a fantastic suggestion:

Kasser has more ideas: Limit – and tax – advertising, he says. To promote consumption, ads foster insecurity, he says. That hinders self-acceptance, which is another predictor of lasting well-being.

This has valid economic justification. Human attention can be considered a natural resource, if for no other reason that the supply of it is finite: there is nothing we can do create more time to devote our attention to things. This would mean that, like the supply of land or oil in the ground, the supply curve would be represented by a straight vertical line. The market for human attention (the advertising market) only gets inflated as the population increases, and as demand for our attention increases, which makes advertising a fantastically profitable industry: enough to fund tv, print, and online media outlets.

Only in a sense does the right person get paid for their attention: the community gets to experience the media for (nearly) free. Otherwise, the payment for our attention is being delivered to media companies. This too is parallel to the other common resources mentioned above: e.g., The value of an urban area is created by the community, though the rent for land is collected by those who own it, just as the value of media advertising is created by the community viewing it, despite the rent of our attention being collected by those who own the media. And likewise, not collecting that rent for the community has allowed ownership of both urban land and mass media to be consolidated.

So, under this system, how will media be made, news be reported, etc? One possible solution: in recognition of every citizen's creative impulse, give everyone a tax rebate. Depending on your tax bracket, this could be enough to be a dividend check. Given that technology has driven overhead for media outlets to become almost negligible, citizen driven media and entertainment could become more likely as well.

A Few Notes

A Freakonomics Quorum on the future of suburbia was posted recently, featuring James Howard Kunstler at the top. An interesting note from his response is reagrding an upcoming urbanization prediction:

One popular current fantasy I hear often is that apartment towers are the “greenest” mode of human habitation. On the contrary, we will discover that the skyscraper is an obsolete building type, and that cities overburdened with them will suffer a huge liability — Manhattan and Chicago being the primary examples. Cities composed mostly of suburban-type fabric — Houston, Atlanta, Orlando, et al — will also depreciate sharply.

I'm not sure what, exactly, the concern is here, though I've also not read his books. I do recall, however, that before the days of elevators, most buildings reached a maximum height of about 7 floors. I'd be hard pressed to believe that running an elevator was the major concern, but perhaps I'm underestimating the energy used. Though, it would also make sense urban areas will need to be more dense than the recent half-century of suburban expansion, but not so dense that they cannot be supported by nearby agriculture.

Colin Beavan also wrote briefly about how "consuming fewer planetary resources may, instead of making us deprived, make us happier." Further:

Americans are now twice as rich as they were in 1950, but no happier... psychologists are advocating that policymakers use indicators other than the Gross National Product (GNP) to make decisions. What’s the purpose of an economy, they ask, if not to enhance the well-being of its citizenry

Freakonomics has recently had some excellent posts on the relationship of happiness to income. Much of the research indicates that, when viewed worldwide, there is a stronger relationship, perhaps because in many nations doubling your per capita income is the difference between poverty and subsistence.

Previous research has indicated that once you reach a level of income at which you are not concerned about meeting day-to-day needs, your happiness level is not as closely related to your income (though relative income is still important: i.e., "are you as wealthy as your friends?") Again, the data is, as Justin Wolfers says, "not so clear cut." In fact, in Belgium, it appears that more money makes you less satisfied with life.

More Pressure

After a lot of this tire air pressure debate, I wondered who among us have actually, as a result, checked the pressure on their car's tires. I, embarrassingly, had not until today.

A tad more background regarding the numbers we're going for: Csaba Csere, Editor of Car and Driver Magazine, reluctantly entered the debate only to contribute his expertise on tire pressure. He said that, yes, it is agreed that if all four of your car's tires are 10 PSI underinflated, you would gain about 3-4% of your mileage by properly inflating them. This would mean that, for a nation to gain 3-4% reduction of oil use just by inflating your tires, every car in the nation would have to have every tire underinflated by 10 PSI. Csere was doubtful this was the case, though it might be feasible that all cars in America are underinflated by an average of 10 PSI. Unfortunately, no empirical data here.

My car's tires require a pressure of 44 PSI. When I checked today, They were each at about 30-35 PSI. I could just be unusually negligent, but in my defense I've been biking more than I drive lately. Coincidentally, my bicycle, which requires 125 PSI, also had each of its tires deflated by about 10 PSI (a level of deflation that's actually kind of normal for tires of that pressure over about a week's time, which was the last I checked my bike). If you're concerned, all mentioned tires are now up to par.

Whether we're talking about ANWR drilling (3% of consumption according to Csere, though I haven't found that number duplicated anywhere) Offshore drilling (1% of consumption) or properly inflated tires (up to 3% of consumption) it's clear we're not talking about actual energy-independence solutions (which was, at the time, Obama's point, quote: "...we could save all the oil they're talking about getting off drilling, if everybody was just inflating their tires, and getting regular tune-ups. You could actually save just as much.").

Also worth note: the reason why most of these projections use 2030 as a benchmark year is that models predict that production would peak around then (ANWR in 2028, for example), which means that once we hit that 3% mark, were we to begin drilling in ANWR, production would decline rather than maintain that level.

More worth note: Mankiw posts today regarding Obama's justification for oil-company-windfall-profits-tax, quote: "That would be a logically coherent story, but not an empirically plausible one." My personal opinion is that I've yet to hear even a "logically coherent story" from his opponent, though I'm of course disappointed that we as voters have to settle for logical coherence and not empirical plausibility.

Why taxing the sale beats taxing the profit from sale.

Mankiw explains why a tax at the pump would work better than taxing windfall profits and subsidizing hybrids. The whole policy plan proposed by Obama seems to be a Rube-Goldberg-style invention to avoid saying we will tax your gas purchases, while attempting to accomplish the same larger goals such as discouraging petrol use (in the hybrid subsidy) through eating into oil company profits (via the windfall tax) when you'd easily accomplish both via a tax at the pump. At least, however, the larger goal is there, opposed to a larger goal of, say, more petrol use or ignoring the problem.

Also, when Obama was in Cleveland Tuesday, he was heckled for not starting with the pledge of allegiance at the beginning of the "town hall meeting." Obama, clearly bemused, tells him "You want to lead the pledge of allegiance? Go ahead."

At the end, the man is asked, "did someone say we're going to say the pledge of allegiance at some point?" and the man, John Quinn, clearly admits, "No!" and so no one is sure why he presumed it would happen.

A Brief FAQ

from Robert Reich.

The value of bare land.

Jay Newton-Small: "While millions of Americans drive to work and depend on their cars, there is a multi-billion dollar hunting, fishing and wildlife viewing industry that depends on pristine lands and waters -- areas that have suffered under Bush. And they vote, too."

I actually kinda want one. Sincerely, not Satirically.

In Barack Obama's energy speech yesterday, he said: "For the sake of our economy, our security, and the future of our planet, we must end the age of oil in our time."

Paul Krugman's comment was: "Now that’s more like it — a hard-hitting political speech with a solid policy proposal behind it." Krugman is of course more Keynesian than most, but the proposals at least demonstrate that Obama wants to move in a direction of less reliance on oil.

There are a few misleading policies among them, including Obama's call "to meet the goal of reducing our demand for electricity 15% by the end of the next decade. This is by far the fastest, easiest, and cheapest way to reduce our energy consumption..." Unfortunately, the fastest and easiest way to reduce demand for energy is to... make it cost more.

Some of the less-aesthetic policies might be rationalized by asserting that our culture is in quite a rough spot with our oil-based infrastructure, and that some extra effort is needed to dig our way out. If, for example, people payed the true cost of the gasoline they burn, they wouldn't need a $7000 tax credit to motivate them to buy a fuel-efficient vehicle (150mpg, according to his 6-year goal). But a "tax credit" for hybrids is far more politically palatable than "carbon tax," (true to the proverb that a Republican cannot say "tax" without adding "cut," and a Democrat cannot without adding "on the rich.")

Before the speech, Obama received some heat for conceding that he might consider the off-shore drilling currently supported by McCain if it were part of a compromise in a broader energy package. This sort of concession is apparently being encouraged in Congress by Nancy Pelosi. Quote, "Behind the scenes she’s encouraging vulnerable Democrats to express their independence if it helps them politically." Her assumption is that, in 2009, her party will have expanded their majority in both houses, and will be able to pass legislation more along the lines of the broader energy package that Obama is now proposing.

McCain, supporting proposals such as offshore drilling and nuclear power, is poking fun at the "low-hanging fruit" in Obama's proposals: that all drivers keep their cars tuned up and tires properly inflated. His jest is through sending out tire-pressure gauges as pictured above. However, this concern is wholly non-partisan. Republican governors Arnold Schwarzenegger of California and Charlie Crist of Florida have insisted upon it, was well as, well, NASCAR. And while off-shore drilling could meet roughly "1% of our demand two decades from now... keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%."

If only they made the tire gauge with a presta valve.

Critical Mass Assault

A Critical Mass is an event in which bicyclists take over city streets in cities worldwide. My brother did some photojournalism from a Critical Mass event in Budapest in 2006. Budapest's event, for example, was met peaceably by authorities and local police, as are others (mostly outside the US).

Not so, in NYC:


Oddly, the officer's story is that the bicyclist ran his bike into him (the officer) causing "lacerations," followed by (the bicyclist) resisting arrest. He managed to get that in the official report of the incident, which means that, now that video has surfaced, he (the officer) might be guilty not only of assault, but also perjury!

Also, just for fun: the cyclist was an Army Veteran, and the son of a NYPD detective.

GCBL:

With Americans driving less for the seventh straight month, less gas tax (18.3-cents on every gallon) for highway building is flowing in. Transportation secretary, Mary E. Peters, thinks the short-term solution would be for the Highway Trust Fund’s highway account to borrow money from the fund’s (2.86 cents per gallon) mass transit account.

Really? The nation is (albeit slowly) leaving our cars and highways for public transport, and so we want to put less money into public transport to accommodate the increase, so we can maintain the level of funding for the highways?

A better solution might be to send it the other way: have the mass transit account borrow from the highway account. You'll transport more people/goods per dollar spent.

Possibly beating Mankiw to the punch...

A reading for the Pigou Club.

Mankiw on the economist vote.

Greg Mankiw's article today covers how to get the economist vote.

If you're not familiar with Professor Mankiw, he was the Chairman of the council of economic advisors in the Bush administration, and has written what is probably the best selling introductory economics textbook. He is unusually (at least for someone employed by the Bush administration) fair and measured, and is if nothing else always pithy in his writing. Thus, he gives credit where credit is due to each of the current presidential candidates.

He covers in this article one thing which I have personally found confusing about the political divide: how a typical republican platform includes both anti-immigration and pro-free-trade policy, and the typical democrat platform is the opposite, despite the fact that the selections made in each platform are opposite positions in the wider discussion of globalism.

Some models predict the peak of oil production to occur as early as the next president's administration, thus, of all the positions he supports in his article, it would be reasonable to suggest that "tax the use of energy" might be one of the more important ones to consider. Adding to that issue's importance: decreasing the country's oil demand decreases the administration's (perceived) need to occupy oil-rich nations.

Hours & Roads

From Daniel Hamermesh:

Nonetheless, he wanted to cut back a little, perhaps from 100 percent to 75 percent work time (which meant from 60+ to 45 hours per week), because the money was less important than before and he wanted more leisure. The head of his hospital-based practice said the work was either 100 percent or 0 percent"

A major reason why employers have this kind of leverage is employment-based healthcare. There is nothing magical about the number 40, but in most wage-based industries, an employee must work 40 hours or lose coverage and worry about what could go wrong. Though many universal-coverage healthcare plans can be flawed, this is one major and completely overlooked benefit: it corrects this labor market externality.

Also in the category of "distorted markets as status quo" are roads. Since the gestation of post-war suburbia, fanned by Eisenhower and auto lobbyists, it has been considered a government duty to supply (by which we mean: "subsidize," or perhaps "subsidize in full") roads for transportation. Want to run a train? Get your own damn rails. To paraphrase James Howard Kunstler, America took its post-war wealth and invested in an infrastructure that has no future.

So, when an individual considers transportation options, one sees:

1. a heavily subsidized automobile option (free roads) with vast hidden social cost (traffic and pollution),
2. versus public transportation, with internalized infrastructure costs (privatized track), but far fewer of the hidden social costs.

Maybe if we start to see more private roads (as Dubner observed above), people might notice the inconsistency.

Not to say that roads and rail should all be private: a more equitable solution could be to consider rails, roads, and sidewalks to be public infrastructure equally, each to be funded 100%, and then allow both public and private transportation options on all mediums, offering subsidies where there is community benefit and taxes where there is community cost.

“I had an internal debate,” Mr. Obama said, “Because I knew that the A.P. was going to take a picture, and they were trying to portray it like Dukakis wearing that tank helmet. But I wanted to make sure that the children who saw that picture knew that even the Democratic nominee for president wears a helmet when he goes biking.”

More than voting

"But voting is not enough. If voting was effective, it would be illegal."

In 2000, John McCain was the candidate who had harnessed the power of internet fundraising and organizing.

In 2004, it was Howard Dean. Famously, in response to a Bush-Cheney $2000 a plate dinner, Dean posted online a photo of himself eating a "$3 turkey sandwich," and in that day matched his opponent's contributions from the wealthy at the preceding dinner (a figure somewhere in the area of $250,000).

This year, it's been Barack Obama. Polls show him ahead, though people can occasionally tend to be poor predictors of how they will actually vote. Political Economists predict that this will work in Obama's favor.

Chances are, then, that Obama will be the next president (63% according to intrade at the moment), which would make it the first time that someone who built a motivated online organization... won. When Howard Dean dropped out, he turned DFA (Dean for America) into DFA (Democracy for America) and continued to use his organization for "campaign training, organizing resources, and media exposure." But what happens when a person with an online grassroots organization wins? What happens to the "Obama" facebook application? A declaration of "Obama elected: job over!" coming from a campaign whose rallying cry was individual involvement would be somewhat nonsequitur.

What we've seen already from Karl Rove's permanent campaign doctrine is more of a permanent media campaign, aimed at disseminating misleading (or blatantly false) information and swaying public opinion. What would a permanent grassroots campaign look like? What if a president readily contacted his supporters with a message of, "I'm working on convincing the congress to pass bill X, and I need your help to contact them and convince them?"

It's bound to be very interesting, at the least.

Locavores, Gas Tax Holiday

Stephen Dubner covers some reasons why people would prefer to eat locally raised food. The four he covers include that "it should be 1) more delicious; 2) more nutritious; 3) cheaper; and 4) better for the environment."

The first and third reasons are fully captured by the pricing mechanism. The argument can be made that the nutritional value may not be fully captured, in that people may not fully consider their future health when deciding what to eat today, or in that people do not consider the detriment their failing health may have to their community. Only in this latter argument would this qualify food-shoppers' negligence as an externality.

The fourth reason, environmental impact, obviously pertains to a community cost that is not captured in the pricing mechanism. Still though, buying local doesn't assure a reduction of energy use, as Dubner cites a recent CMU study indicating that it isn't always the case:

We find that although food is transported long distances in general (1640 km delivery and 6760 km life-cycle supply chain on average) the GHG [greenhouse gas] emissions associated with food are dominated by the production phase, contributing 83% of the average U.S. household’s 8.1 t CO2e/yr footprint for food consumption. Transportation as a whole represents only 11% of life-cycle GHG emissions, and final delivery from producer to retail contributes only 4%. Different food groups exhibit a large range in GHG-intensity; on average, red meat is around 150% more GHG-intensive than chicken or fish. Thus, we suggest that dietary shift can be a more effective means of lowering an average household’s food-related climate footprint than “buying local.” Shifting less than one day per week’s worth of calories from red meat and dairy products to chicken, fish, eggs, or a vegetable-based diet achieves more GHG reduction than buying all locally sourced food.

If a price were placed on carbon emmissions, it would raise the price of red meat and dairy, even if locally produced, in an accurate proportion to the community cost. Likewise, if distantly-produced fish truly has a lower environmental cost, it would be seen in the price paid at the store. People would accurately assess the cost and benefits of their locavore instinct.

It may even be that the increased cost of gasoline could effect the nutritional externality (if it is considered to be such). That is, foods that are less healthy tend to be processed more, requiring a greater amount of energy input. If the cost of the energy input reflected the community cost, processed foods would be more expensive at the store and a little less desirable.*

Of course, McCain is still pushing for the opposite, asking for a gas tax holiday, despite the fact that it received no support from any economist. Anywhere.

The political advantage to this is because of the presumption that since it is a tax on things people regularly buy, they will experience the benefit of the repealing of the tax. Since, at the moment, petroleum is in pretty fixed supply (whether you consider it to be because OPEC limits production or because the world production has actually peaked based on the supply in the ground), the high price of gasoline reflects the fact that more people on the planet are tending to want gas, and thus the price has had to rise to remove some of the people who, well, didn't want the gas as badly. $4 a gallon is the price (currently) at which you can find a buyer for every gallon of gas produced and no buyer gets turned away due to scarcity. If the current 18 cent tax is repealed, and the fuel supply stays the same, the price will stay roughly the same, and the oil companies will pocket the 18 cents (with perhaps an increasing fraction going to OPEC as well).


* - Another similar effect could be found by eliminating the corn subsidy, which is also incredibly difficult, politically, given that, since the subsidy is paid to farmers, people presume (similar to the gas tax) it benefits farmers, whereas it actually benefits consumers (though with distortionary effects regarding cheaper food loaded with high fructose corn syrup), and the companies that make corn-based foods (read: almost everything lately). If the subsidy were eliminated, the price paid for corn at a grain elevator would rise to make up most of the difference (since demand for food in general is pretty inelastic) with the rest of the difference going to other crops that aren't necessarily used to make corn-syrupy-foodstuffs (since demand for corn in particular is elastic in comparison).

Reich in WSJ

Robert Reich's unpublished copy of his recent WSJ article:

That's why it's important that all revenues from carbon auctions be cycled back to citizens. And rather than launch another endless debate over how and to whom – a payroll tax cut for people earning under the median wage? a cut in capital gains? – it would be well to agree to the simplest possible formula: Every adult citizen should receive an equal share. If the carbon auction yields $150 billion in the first year, for example, each of America’s 150 million adult citizens should receive a Treasury check of $1000.

Such direct and simple repayments – what analyst Peter Barnes, who has been pushing this idea, wisely calls “dividends” – deal with another problem. Although the balance of economic studies suggest that the cost of a cap and trade system will be
modest, particularly to the extent it induces companies to reduce their emissions, inevitably some costs will be involved and be passed along to consumers. The cost of doing nothing about climate change will be far higher. But consumers Who are already walloped by high fuel and food costs will be in no mood to accept even modest additional price increases. Hence, the yearly dividend checks will be a welcome offset.

And to make the dividend checks really useful to people, they should be paid out on a monthly basis, the same as Social Security checks. Moreover, that way citizens can be continuously reminded of what they're giving away, and what they're getting back for it.

Our atmosphere belongs to all of us. It seems only reasonable that corporations should have to pay to use it. The citizens of Alaska and Alberta, Canada get yearly dividends from the oil companies that take away their natural resources. Why shouldn't the same principle apply when industries use the biggest common resource of all?

It's great to see someone of relatively high profile pushing such a good idea.

FYI

I've had very little time this week (I'm playing guitar in the orchestra of a musical production) so I'll forward without comment this fantastic article from the Philadelphia Inquirer about the coming end of car culture.

A note on bias & spin, using the context of McCain's Health.

You've probably all heard about McCain's recent divulging of his health care records. I tend to think this is a topic of little importance: if something were to happen to John McCain as president, rendering him incapable of performing his duties or perhaps dead, we'd find another president. The president should be determined by the criteria of who will do the job best.

Of course, as we've also heard, the means by which he revealed his health information to the press gave many suspicions. There were 1,173 pages of health records, and the press were allowed three hours to view them with no cameras, phones, or internet access. The three hours occurred on the Friday before Memorial Day weekend, when (presumably) people aren't paying as close attention to the national news. The suggestion is, of course, that there was some intent to conceal or at least downplay some of the contents of these records. Stated positively (as many did), it displays McCain's media savvy.

So, to cite today's google search of "McCain Health" provides the following at the top:

McCain's Physicians Say He Is in Excellent Health
Wall Street Journal - May 23, 2008
McCain's health. Evidence of melanoma surgery in 2000 is obvious to anyone who sees his puffy left cheek and prominent scar. The campaign has made efforts ...
McCain medical records show skin cancer concern, healthy heart CBC.ca
McCain deemed fit to serve Baltimore Sun
McCain's Medical History: What Will it Show? ABC News

Mostly positive, with mention of his melanoma history. Further down you can find a longer list of his health concerns.

So, I'd like to propose that there are three major categories of news regarding this story:

• Positive things about McCain's health ("fit to serve!" "healthy heart!")


• Negative things about McCain's health ("melanoma!" "kidney stones!")


• Things about how this information was presented to the press

I'd be curious, first of all, who of the general population had been exposed to any of the contents of those categories without being exposed to all three. Though the summarizations mostly focus on the first category, I saw no news story that didn't cover all three categories. I would suspect that those people who didn't hear either of the latter two categories of information likely have not payed attention to the story at all, though I certainly have no data to suggest this.

So let's again presume that any bias in the media could run in two directions: those favoring McCain would ideally only mention the first category, those against would ideally only mention the latter two. Those who argue for either side would consider the mention of the opposing category to be indicative of, well, the other side's bias, i.e., "Cover the way McCain released this information to the press, will you? Typical Liberal Media!" Again, remember, all the categories do contain accurate facts.

The conclusion and thesis (and perhaps, hopefully, a guiding principle in covering news here) will be that bias and context are inversely related, i.e., to reduce the bias of your media outlet, increase the context in the stories. Cover all three categories regarding McCain's health records. Conducting research? Reveal and report who payed for the research. Reporting on a poll? Say how the questions were worded. In each of these cases, this greater amount of information may seem as though it is spun, if only because it is reducing the previous spin of omitting that information. But the spin of greater information cannot be considered true spin, it is only the continuation down the path of the limit function toward objectivity.

This does, however, only cover the bias category of omission: deciding which facts to report and which not to given a limited amount of time. Other bias might include linguistic bias, which is inherent in the words chosen, or perhaps just the language used. And once we consider how much of human thought depends upon the language we are taught, we see how far away we are from objectivity on the aforementioned limit function.

Budget Hero

Play Budget Hero, provided by Marketplace of American Public Media.

Note that many environmental measures can have an overall effect of shrinking federal government, and actually tend to function as a revenue booster rather than a revenue spender.

I also didn't score to well with health care (it was my first try!) but I'd also like to think that the game underestimated the effect of environmental policy on people's health and well being. Not that I'd expect that to take care of most health care costs; I'd probably take a little more money from defense than the game allowed.

Robert Reich agrees

Former Secretary of Labor Robert Reich agrees with Mankiw regarding the carbon policy proposals of both Obama and McCain.

Though Mankiw quotes McCain saying that perhaps an auction could occur "over time," Reich gives him less benefit of a doubt. The latter uses rhetoric that cites common property rights, i.e. "our atmosphere belongs to all of us," and also cites the fantastic example of the Alaska Permanent Fund.

Alaska's state government reclaims the revenues from oil produced there and invests 25% of the revenue into what is basically a mutual fund for all Alaskans. The initial investment in the fund (part of which was likely taken from a bonus received by the government upon initially leasing the oilfields) was $734,000, and it has grown to a roughly $40 billion trust fund. Citizens are given a dividend payment each year from this trust fund; last year it reached $1654. The fund is a means to represent that the land of Alaska is common property, and as it is used or depreciated by anyone, the rent should benefit all owners.

David Brooks and his foray into neurology

I think I tend to have more respect for David Brooks than a lot of my peers, at least those I see commenting on a lot of news sites. He's been getting some attention recently from his editorial titled The Neural Buddhists, which covers some of the research that, in his opinion, finds "science and mysticism are joining hands and reinforcing each other."

Ana Marie Cox of Time magazine had the initial response of questioning Brooks's inclusion of Buddhism in the union with science -- presumably at the exclusion of other religions. Her conclusion was that he could start to sound like he was in line with anti-science propaganda*. Brooks offered his response at a Pew Forum that preceded the article, "My theory is I carry the label 'conservative,' and the label 'conservative' sets off certain neural patterns in your head that make you think that, as a conservative, I have reasonably strict spiritual beliefs or traditional religious beliefs, and therefore would be hostile to Buddhism." Admittedly, he was in the mood to describe everything in terms of neurology (which is not by any means a bad thing).

At the aforementioned Pew Forum, Brooks documented some of the conclusions of existing research quite accurately. My favorite point of his is on the subject of emotion theory: "The Doctor Spock idea from Star Trek, that reason and emotion are two different things, is completely wrong. Emotion is what we use to assign value to things, and without emotion you can’t make decisions."

Also: "There is no such thing as one individual brain. Our brains are all merged together in a series of ultimate feedback loops. So I think when you look at this research... It won’t lead to the idea that we are just material creatures and atheism is the answer."

Again, this is just a journalist summarizing the research of others, but the professor of radiology who was present at the forum had only corroborations to offer.

Speaking of belief: having never seen the man in person, it is my belief that David Brooks is roughly seven feet tall.

* - Whereas I suspected she was going to go in the direction of "anti-Christian propaganda," thus perhaps implying our unconscious allegiances. After she mentions the science-Buddhism link, she sarcastically asserts, "they're not like you and me!" implying her Christian allegiance, thus making Brooks guilty of potential anti-science (though, her allegiance is likely due to being a journalist representing the interests of a dominantly (and self-reportedly) Christian nation (the "you" of the "you and me"). My allegiance of unconsciously trusting science first led me to predict her argument would lead to an anti-Christian conclusion. Of course, if I were a Buddhist who didn't trust science, I would think it anti-Buddhist. But no matter.

Taxing recreational exercise

Partially tongue-in-cheek, but some sincere discussion of the social cost of cheap-food-derived-from-excess-carbon-use.

The tongue-in-cheek part also at least questions the idea of exercise: if our bodies were cars, we'd be filling them past the brim with gas and then occasionally driving them around the block a few times (or maybe even prop them up in the garage and run them for a while a la the ferrari in Ferris Beuller), while regularly loading the whole thing into a flatbed tow truck to get around.

"The Pigou Club gives the edge to Obama."

Greg Mankiw comments on the two (presumptive... assumptive?) presidential nominees' recent statements on environmental policy.

Mankiw's concern about McCain's position is that the auction is merely for a fraction of emissions, and is not immediate. Obama's "edge" is from his suggestion of a "hundred percent auction," which is, from lack of other qualification, presumed to be immediate.

My additional concern for both proposals is firstly: how often will it be auctioned? If, for example, a polluting factory wins an auction for 2 tons of carbon emissions in a year by paying a hundred dollars into the federal treasury*, can they continue at that rate indefinitely? or will they have to be willing to pay that hundred each year? If we are sincere in our conviction that we should begin to treat the atmosphere as common property, the community should collect regular (as in regularly scheduled) rent for its pollution or destruction.

My second concern is: who would participate, and what is the threshold for polluting that would require an auctioned permit? Would I also need an auctioned permit to run an automobile a given amount a month? And, if not, how do we intend to suggest that this will curb carbon emissions comprehensively? I would think that a solution to this second concern would be to instate a tax across hydrocarbon fuels based on the social cost of their emissions rather than auction their use, and I might guess that Mankiw would agree.

Lastly, who gets the money from the auction? Does it offset income taxes, essentially returning it to the nations citizenry, thus allowing them to (rightfully) be seen as the stockholders of the atmosphere? Does it go to the treasury, going toward the general federal budget (the majority of which is spent on three categories: social security, health programs (Medicare and Medicaid), and defense (Iraq))?

If we were to advocate a Pigouvian solution to this final question, the revenue from the auction would go towards the counteraction of the auctioned activity. Specifically speaking, to curb pollution, tax it, and then use the revenue to pay for the repairing its detrimental effects. This way, as pollution occurs less, you will need to fund its repair less, and you will receive less funding for its repair. In this spirit, health care might be an appropriate category to fund (as the pollution may exacerbate asthma or increase cancer incidence), or perhaps the replacement of carbon based infrastructure (roads with electric train lines, coal power plants with alternative sources) which will need less funding as it becomes more predominant.

I think this last concern might be the least important, as long as it doesn't go to something wasteful (Halliburton, Blackwater, starting wars in oil-rich nations) or something geared toward prolonging the existing problem (ANWR drilling, starting wars in oil-rich nations).


* I have no data to suggest that this would be a reasonable amount for a factory owner to pay. Surely, it would be determined by the cap on total emissions that the federal government instates, with a lower cap drawing higher prices. This is another benefit of the auction system: it harnesses the profit motive for the benefit of the atmosphere, as long as we instate a body (such as the federal government) that is considered the manager of the atmosphere. Specifically, if the managing body wants to raise more revenue, the easiest way to do it is to reduce the total emissions cap. In a tax system, you'd have the same effect through a different mechanism. Want more revenue? Raise the tax (and thus reduce the demand for polluting).

Help Dan save traffic.

AMP-Ohio's potential new coal plant.

I wrote this article for the Progress Report.