Arguing with economics (economists)

[Posty McPostface]

One sad thing that I concluded from this thread is that nuclear is often not classified as a "renewable" despite GEN IV reactors being more than capable of producing their own fuel through breeder reactors or the fact that uranium gets replenished in oceans if we could find a viable technology to extract it from seawater. The discussion nowadays seems to be of the sort:

Either we invest in "renewables" or face a perilous future of climate change. This comes from liberals(!), predominantly, rather than conservatives(?). Strange world.

 

[Posty McPostface]

https://www.forbes.com/sites/jamesc...lear-power-completely-renewable/#16378359159a

 

[Mark44]

Regarding the book review in post #32, the authors of the review report that Nordhaus

argues forcefully that if the phrase "scientific consensus" has any useful meaning, there is a scientifc consensus that the Earth is warming, that we are responsible, and that the consequences of continuing on our current course will be somewhere between costly and catastrophic.

There is general agreement that the Earth has been warming, which it has been doing since the end of the last ice age about 12,000 years ago, with periodic variations. For the other two claims -- that we are responsible and that the cost of doing nothing will be somewhere between costly and catastrophic, there is not a consensus.

Regarding this "consensus" see this Youtube video of Dr. Judith Curry, Professor and former chair of the School of Earth and Atmospheric Sciences at Georgia Inst. of Technology. In it she is testifying before the US Senate Commerce, Science, and Transportation Subcommittee -- https://www.bing.com/search?q=Comme...-50&sk=&cvid=57F1CA9CCD8741C2A960CC6A42FAECC7

In addition, during 2017 there were at least 485 scientifc papers published that call into question one or more facets of the "consensus" that Nordhaus mentions in his book. This page contains links to all of these papers - https://wattsupwiththat.com/2018/01...with-485-new-papers-in-2017-that-question-it/

Some of the papers listed discuss flaws in the computer models that are used in long-range climate predictions. One particularly egregious prediction comes from NOAA, which in October of 2017 predicted the outlook for this winter as being warmer than normal for a vast swath of the US, including all of New England, the entire East Coast, all of the South, and large stretches of the Plains and Rocky Mountain states. Clearly their projections were way off. See https://www.climate.gov/news-features/blogs/enso/winter-coming-noaa’s-2017-2018-winter-outlook

Predictions that are so far off in three months don't give me much confidence in predictions that go out 50 and 100 years.

 

[NTL2009]

Arguing with economics (economists) --

And with a conservative for the matter...

How do you argue with economics? Let's take the example of fossil fuel production. If fossil fuels get the job done cheaper ...

So, what is the conceptual gap I am missing in understanding this issue? Is it simply a matter of 'ignorance' or an uninformed or even misinformed public?

I think your premise (as I understood it) is flawed. I don't see this as a problem with economists. Any economist worth his/her salt can make an estimate that includes the externalities. Granted, externalities can be difficult to measure, there are many variables and interactions, and assumptions, but that isn't the economist's fault. I've seen plenty of papers (and can provide links if needed), where there have been an estimate of the cost of externalities of various forms of energy production (and in many other areas as well).

I think you are asking a different question - why don't people and businesses routinely take these externalities into account? I think the answer is simple - it's hard. And it does not have an immediate effect. So people and businesses generally look at what they can easily see, and make a quick decision based on the available information, giving precedence to the immediate.

If you go to the store to buy meat, and see that all the beef costs much more than you expected, you check out the pork, or chicken, or veggies/pasta, etc. You make your purchase and go home and cook dinner, because your family is hungry. You don't stop to think about the total cradle-to-grave environmental impact of beef vs chicken vs pork vs grain vs veggies. You get on with your life.

Business does the same thing, focused on providing products for their customers that will provide a profit for them and shareholders. Externalities come second for them as well, in most cases. I don't think that is hard to see.

And it's not all doom & gloom. In the US, our air and water are cleaner than they have been in decades. People rallied around regulations, people and companies made an attempt to be 'green' (business uses it to attract customers, sometimes it's just window-dressing, often serious though).

It works both ways. It's common to see self-proclaimed environmentalists promote the "eat -local" movement as being environmentally friendly. But the studies I've seen (and evaluated), show that often, it takes far more energy and waste to get local products to the consumer than the big agribusiness products (economy of scale applies to the fossil fuels used in cradle-to-grave production of our food). Trains and semis move tens of thousands of pounds of produce at once at maybe 5 mpg (or better for rail), the local farmer moves a few hundred pounds, at maybe 15 mpg. Then consumers make a special trip to a farmer's market, to pick up a few pounds, and still need to go to the "supermarket" for other staples. It all adds up. Maybe they prefer the taste of fresh, heritage varieties of produce (it is worth a premium to me), but are they taking these "externalities" into account? Have you ever heard anyone at a farmer's market ask "How much fuel was used to deliver this product to this market on a per pound basis?". Are you surprised at that?

 

[NTL2009]

My issue is using economic 'common sense' in the opening post to justify continuing utilizing fossil fuels as a means to produce energy. As I think most people know, which I am hinting at the obvious here, that is detrimental to the economy as a whole via climate change. As to why this is the case, that people use 'common sense economics' to justify a self-destructive means of energy production, baffles me. Maybe people like easy answers or something? As if negative externalities didn't exist?

Hope that clarified it.

Are you saying that you use zero fossil fuels? I asssume not, so there's your answer. Look within.

 

[Posty McPostface]

I think you are asking a different question - why don't people and businesses routinely take these externalities into account? I think the answer is simple - it's hard.

It seems to me that it's easier to not take into account all externalities generated by some activity than rather hard. Please keep in mind, that with this mindset, that *we simply can't calculate all externalities*, then scenarios like the tragedy of the commons are all the more likely to happen.

There are some ways to tackle the tragedy of the commons and I think the idea goes along with the no free lunch idea. Here it is:

Privatization works when the person who owns the property (or rights of access to that property) pays the full price of its exploitation. As discussed above negative externalities (negative results, such as air or water pollution, that do not proportionately affect the user of the resource) is often a feature driving the tragedy of the commons. Internalizing the externalities, in other words ensuring that the users of resource pay for all of the consequences of its use, can provide an alternate solution between privatization and regulation. One example is gasoline taxes which are intended to include both the cost of road maintenance and of air pollution. This solution can provide the flexibility of privatization while minimizing the amount of government oversight and overhead that is needed.

I would argue that it's poor and bad economics to not factor in the generated externalities (both negative and positive) by any sort of economic activity. It distorts decision making, and endangers the future, along with distorting cost-benefit analysis'. Not to mention that this is the morally responsible solution to profess also, instead of imposing regulations or privatizing everything or having negative externalities transferred to social costs.

 

[Ryan_m_b]

I think you are asking a different question - why don't people and businesses routinely take these externalities into account? I think the answer is simple - it's hard. And it does not have an immediate effect. So people and businesses generally look at what they can easily see, and make a quick decision based on the available information, giving precedence to the immediate.

Another way to look at it is that businesses that work to take into account the cost of externalities and factor that into their pricing are likely to be out competed in the short term by those that do not, likely because their product range gets limited and/or the price goes up. Consumers may make a choice that the more expensive, externality costed version is more desirable but, issues of information aside, consumers face a similar issue of competing with each other (buying a suit ten times more expensive than the standard because its environmentally friendly might be great on a macro level but if you're snubbed for only owning one suit there's a real cost).

 

[NTL2009]

It seems to me that it's easier to not take into account all externalities generated by some activity than rather hard. Please keep in mind, that with this mindset, that *we simply can't calculate all externalities*, then scenarios like the tragedy of the commons are all the more likely to happen. ...

I have trouble formulating a meaningful response to you, when you make disjointed jumps like this. You go from "it's easier to not take into account all externalities" (and I agree, it must be true on its face, it's always easier to not do extra work), to "with this mindset, that *we simply can't calculate all externalities*,". That just doesn't flow. Who says we "can't" account for externalities? Huge difference between "not easy" and "impossible". Take some time to think this through before you post please.

... I would argue that it's poor and bad economics to not factor in the generated externalities (both negative and positive) by any sort of economic activity. It distorts decision making, and endangers the future, along with distorting cost-benefit analysis'. Not to mention that this is the morally responsible solution to profess also, instead of imposing regulations or privatizing everything or having negative externalities transferred to social costs.

It's not necessarily bad economics, which is what I said earlier. As @Ryan_m_b just posted, it might be good economics for a company to not factor in externalities. Now, that may be a bad decision for mankind in general, but that is two different things. Conflating the two will make it harder to come to any understanding.

Maybe you didn't see my follow up post yet, but if you can explain to us and reflect on the cases where you personally do not take externalities into account (I assume you use some of the products of fossil fuels - energy, plastics, etc), I think you will gain a lot of insight as to why other people/industries do not always take externalities into account.

 

[Ryan_m_b]

As @Ryan_m_b just posted, it might be good economics for a company to not factor in externalities. Now, that may be a bad decision for mankind in general, but that is two different things. Conflating the two will make it harder to come to any understanding.

Actually I'd still say it was bad economics in the global sense but short term incentives in many economic systems force non-optimal decisions. A lumber company that strips a forest until there are no more trees is going to be able to sell more wood in the short term because they don't have to factor in the cost of replanting in their pricing strategy. But once the last tree is gone there's no more money for them.

Unsustainable short term choices aren't unique to the market (replace "lumber company" with "easter islander" and it still makes sense) but they aren't necessarily insurmountable either. My point above was that unless all agree to act as one its difficult-to-impossible for the system to change because anyone actor making a different decision loses out in the short term, which in many cases means failing completely.

 

[NTL2009]

Actually I'd still say it was bad economics in the global sense but short term incentives in many economic systems force non-optimal decisions. ...

Agreed. What I'm trying to get across (mostly to the OP) is that for a meaningful discussion, the context must be included. "Good economics" for an individual/business is often different from "good economics" in the broader/global sense. If this isn't distinguished, it's hard to discuss meaningfully. Even in your example "non-optimal" for who?

 

[Posty McPostface]

It's not necessarily bad economics, which is what I said earlier. As @Ryan_m_b just posted, it might be good economics for a company to not factor in externalities. Now, that may be a bad decision for mankind in general, but that is two different things. Conflating the two will make it harder to come to any understanding.

Then perhaps we can agree that laissez-faire economics is just a terrible economic system for mankind, as a whole, as that can be seen as a point that I think is abundantly clear in terms of climate change. If we can't value sound long-term decisions over short-term gain, then something is fundamentally wrong with economics in general(?)

Hence some need for government regulation as a third party needed to evaluate these negative externalities and impose the appropriate taxes or means to valuing sound long-term economic decision making over short-term gains.

Even in your example "non-optimal" for who?

I think the argument can be made, that for people in general. If negative externalities aren't accounted for, then the buck gets passed on to the taxpayer to address whatever arising issue.

 

[NTL2009]

Then perhaps we can agree that laissez-faire economics is just a terrible economic system for mankind, as a whole, ...

Sorry, no, I won't agree to such a broad-based statement. Too broad to be meaningful.

... If we can't value sound long-term decisions over short-term gain, then something is fundamentally wrong with economics in general(?) ...

No, I don't think so. Economics is economics. It isn't wrong or right, it just is. Again, I think you are questioning how people and businesses respond to economic incentives, and that is something different. Water is water. It's bad if you are drowning, good if you are thirsty. You can't judge water, or economics as good/bad.

You have not answered my previous question that should clear this up for you. Why do you use the products of fossil fuel?

... Hence some need for government regulation as a third party needed to evaluate these negative externalities and impose the appropriate taxes or means to valuing sound long-term economic decision making over short-term gains. ...

No argument form me as long as you put that in broader terms. It can be self-regulation, it can be 'regulation' from popular demand, and it can be government regulation. But sure, business and people will try to do things they see as good for them but are harmful to others. So we need controls - does any rational person think other-wise? I've seen people who don't leash their dogs, and it causes problems for others - but the dog owner 'likes' having the dog free, and doesn't care about others. We have endless examples of regulations like this, to promote the common welfare (from the US Constitution).

Did you know a very common regulatory agency, that so many of us depend on, was created totally voluntarily, and has no government connections? That is UL, the label we see on electrical items in the US. It is a not-for-profit organization that was developed so that at the beginning of the age of electricity, manufacturers could submit their products for testing, so that consumers had some basis for knowing if this new tech was safe in their homes or not. Insurance companies started demanding it I think, but as far as I know, it is a completely self-regulated, yet viable and useful thing. I feel this could be a model for many other things, and would probably be more efficient than many governments attempts at it. The answer is not always "more government". More here: https://en.wikipedia.org/wiki/UL_(safety_organization)

 

[Vanadium 50]

Then perhaps we can agree that laissez-faire economics is just a terrible economic system for mankind

Your complaint isn't with laissez-faire economics, it's with people making their own decisions. Fortunately, there are political systems that solve that problem.

 

[Mark44]

Then perhaps we can agree that laissez-faire economics is just a terrible economic system for mankind

And with that, you're veering away from economics, and into politics, which I believe was your original intent.
Thread closed.

 

[Posty McPostface]

Understood. I'll review the thread sometime and see if I can present a better economic argument for the need to account for negative externalities, which is the whole point in retrospect I was trying to make.

Thank you for the posts everyone.

 

[russ_watters]

Posting after the lock, but...

Understood. I'll review the thread sometime and see if I can present a better economic argument for the need to account for negative externalities, which is the whole point in retrospect I was trying to make.

Put some real thought into that because I think what you should have discovered in this thread is that what you think are issues of economics are instead issues of personal choice/values (in particular, short term vs long term tradeoffs). Economics isn't math. It isn't possible to arrive at a single accepted/"right" answer.