Sunday, July 26, 2015

The Definitive Sonny Rollins...

... on Prestige, Riverside, & Contemporary... I fired this up on Spotify before dinner, and two hours later it's still going. Every track a gem. Check it out.

Montara Mountain

The winding trail up the northwest slope of Montara Mountain from Pacifica offers a pleasant, verdant respite from the crispy vegetation in many of our local parks (and my yard) during this severe drought year. Chinquapin and manzanita predominate much of the way up, but with a lush mix of ceanothus, huckleberry, silk tassel, coffee berry, elderberry, and toyon to keep it interesting. Quite a few flowers are still blooming. The summer fog is key. Making a fantastic clear summer day all the more special. Wished I'd had the better camera.





Saturday, July 25, 2015

Myra Melford Residency, Part 5

I've fallen a bit behind...

Tuesday, July 21, 2015

E.L. Doctorow, RIP

When all is said and done, he was my favorite living novelist. His writing was brilliant, innovative, and poetic enough to deserve a Nobel prize, but perhaps the strength and appeal of his storytelling and his pigeonholing as a writer of "historical fiction" made him a little too popular. Ragtime and The March are deservedly considered his masterpieces, but I liked The Book of Daniel and Homer & Langley nearly as well.

Good news: The Central Limit Theorem assures us...

... that as the number of GOP candidates increases without bound, they will become approximately normal.

Monday, July 20, 2015

Was cap-and-trade for SO2 actually worse than command-and-control?

One thing we teach our students in environmental economics and other policy-related courses is that market-based pollution regulation is a great idea: it can be expected to deliver the same reductions in environmental damages as more rigid "command-and-control" regulations at substantially lower cost. Hence economists' strong advocacy of a carbon tax or cap-and-trade for fossil-fuel emissions. (Pope Francis, are you listening?)

Economic theory suggests why cap-and-trade is efficient: The government limits the total amount of pollution by limiting the number of permits to pollute that it issues. Then, firms that can reduce pollution at low cost have an incentive to do so, and sell their excess pollution permits to firms with higher abatement costs. Same overall pollution reduction, less total cost. And that's not all! We have always been able to point to evidence that it really works: the highly successful cap-and-trade program for SO2 reduction implemented by the EPA to cut acid rain.

Now along comes this paper by Chan et al, which if I read it correctly estimates that the SO2 trading scheme was on net actually quite a bit worse than a counterfactual uniform performance standard (command-and-control) that would have achieved the same aggregate emissions. While it's true that the power plants achieved the emissions reductions at lower total cost, these gains were more than offset by worse pollution damages in the form of adverse health consequences. (Side note: the major gains from cleaning up coal did not come from reducing acid rain, but from reducing health problems associated with particulates, etc.)

What went wrong? This finding points to a well-known potential problem with cap-and-trade systems. If it matters where the pollution goes, then administering a permit system that covers a wide area may sometimes lead to more pollution where it does more damage. In this case, the dirty eastern coal plants bought permits from their western counterparts, allowing the eastern plants to pollute more, as the western plants polluted less. Unfortunately, more people live downwind of those eastern plants. It would have saved more lives to force both the eastern and western plants to reduce their pollution by a uniform amount. (Now that we know there is a problem, there are well-known partial fixes to this problem—for example restricting permit trading to a "bubble" within a certain affected region. What is most interesting here is how important these effects turned out to be in practice.)

Now, back to climate change. Fortunately for carbon cap-and-trade (or a carbon tax), the damages associated with greenhouse gases are truly global in scope: The CO2 goes up into the atmosphere, spreads around, and warms the whole planet. So the localized damages are not a concern when it comes to climate change policy, and market-based solutions look pretty good again. Francis, are you still paying attention?

BUT... One caveat. One can never lose sight of the extraordinary, more localized impact of burning coal in places like China, where particulate air pollution causes hundreds of thousands of premature deaths annually. Pricing carbon globally is not the answer to that set of problems.

Friday, July 17, 2015

Rule #46

Brazilian singers, no matter how great, should never, ever, sing in English.

Thursday, July 16, 2015

Hillary's plan for the middle class

This column by Eduardo Porter is kind of bizarro. After rehearsing the depressing statistics about labor-market trends in the United States and elsewhere—stagnant wages for most, growing inequality—he notes that many of Clinton's ideas for boosting middle-class incomes and strengthening the social safety net are sensible and have been effective in the past. But they are also completely politically infeasible in the current climate. Porter's solution? "A future Clinton administration might help change the norms of corporate governance to foster the kind of labor relations that everyday workers have not experienced in decades." He doesn't suggest how, or why the very people who have been riding high on recent inequality trends would want to go back. This approach is just as unrealistic as Hillary's old-school liberalism, and from a policy perspective completely unproven in its effectiveness. The only real hope he offers is labor-market tightness: declining labor-force participation coupled with pro-growth monetary policy. We shall see whether Dr. Yellen continues to administer the necessary treatment.