Episode 6: The Tax to Save the World

The political atmosphere surrounding climate change is often excruciating to bear; scientists keep offering dire warnings but politicians can’t seem to agree on what to do, if anything. Governments can try tactics like capping total emissions, investing in alternative fuels, or mandating specific fuel efficiencies. But none of these has seemed to work thus far. Economic theory suggests we can shift the behaviors of consumers and firms to account for the negative effects of carbon by making its use more expensive. Would this “carbon tax” be any more politically feasible than the other alternatives? Will it be too much of a burden? Can we trust the government to implement it? Find out the dirt on carbon taxes and how it stacks up against other efforts to battle climate change.

To listen to the podcast, you can:
1. Click here: https://itunes.apple.com/us/podcast/upset-patterns/id675935423
2. Search Upset Patterns in the iPhone Podcasts app or iTunes music store
OR
3. Subscribe to this RSS feed: http://upsetpatterns.podbean.com/feed/

Advertisement

 

American Cuisine

I wouldn’t say I have much of a sophisticated palate. I am not very conscious of herbs, spices, oils, and different flavorings when I cook. That being said I do not eat fast food (and haven’t in probably a decade), eat relatively little red meat, and generally don’t like junk food. I believe my culinary tastes are purely a reflection of the household I was raised in as well as my generally active lifestyle. Growing up my mom always managed to make a pretty diverse array of meals each day of the week. My brother was also a vegetarian and so I became accustomed to, and developed a taste for, foods that were not based around a piece of meat.

There is a ‘food crisis’ in America, many would argue. Depending on one’s views it is one or more of factors including obesity, the over-industrialization of food production, the blandness of American food, rising food prices, and the need for quick and convenient food. I tend to not blame agribusiness or consumerism for any of these problems. I recently purchased (long overdue) Tyler Cowen’s An Economist Gets Lunch for my iPhone (also available in physical text form). In addition to explaining contemporary American culinary tastes, Cowen goes through interesting personal narratives of food exploration, macro-food solutions, locavorism, eating environemtally friendly, and some valuable general rules for finding the best bang-for-your-buck in terms of food.

While the book is interesting throughout, what I find most interesting thus far is how he explains how American cuisine got to where it is today. Despite having more options than ever, American cuisine is generally boring. He doesn’t blame it on agribusiness or consumerism, though. He divides it into three main historical occurrences.

Cowen notes that Europeans used to come to America in the 19th century and marvel at how fresh and high-quality our food was. Not anymore, of course. So what happened?

1. Prohibition – Making alcohol illegal had a significantly negative impact on American culinary tastes. For decades America couldn’t cook with wines like Europeans do. Eating fine food with alcohol no longer became a regular occurrence. Speakeasies weren’t interested in developing a fine culinary reputation. Similarly, drink tastes in America switched to more hard liquor than beer or wine in an order to binge drink quicker. This has had a long-lasting impact. Think of ‘quintessential’ American eating establishments – the diner, the candy shop, the soda shop. Diners are a reflection of eating entirely without alcohol. They also, with candy and soda shops, reflect that without alcohol we suddenly were switching our tastes to cater more to children’s. He elaborates on this more, showing how as a culture we are more willing to give our kids what they want (sugars, salts, etc) instead of what we want. Having lived in Britain for four years, I can confirm that diners don’t really exist. Cowen argues convincingly how this has negatively impacted most of America’s culinary tastes.
2. World War II – we switched from better quality meats to SPAM. Even in a world war, we Americans don’t want to cut back on meat. So we developed a taste for a conveniently packed but terribly tasting meat. Further, more women went into the workforce. This meant less time in the kitchen and suddenly more convenient and less time-intensive food were demanded by American consumers. Why didn’t this happen in Europe, which was literally destroyed in some areas? We had the infrastructure to mass transport foods, whereas Europeans necessity needed to eat local and have things fresh. If you can’t ship and store, you’ve got to have what’s nearby. Ironically, European cuisine had more in the way of quality cuisine by having less.
3. Immigration – immigration was essentially open for the first century and a half in America. We had ‘old world’ tastes and recipes being mixed with American ingredients and ideas. Food innovation, Cowen argues, was our greatest contribution to world food. In the 1920s and for several decades later, nationality quotas and other immigration restrictions outlawed this. Suddenly “ethnic” restaurants were run by second or third-generation immigrants with little memory of what their ethnicity’s cuisine was like in the old world. This made for a blander cuisine all around. Furthermore, xenophobia and the desire to be more “America” produced a homogenization of foods. Only recently has immigration picked up and this trended started to reverse. Most interestingly, Cowen notes that barbecue and Tex/Mex are America’s greatest original contribution to food. Because of the history of lax immigration enforcement of the Mexican border, the immigrant influence was still felt in Texas and the southwest, producing barbecue and Tex/Mex food. Being in Austin, and never really having had such delicious barbecue before, I agree wholeheartedly with him.

These points obviously have much more elaboration than I have provided here. Still, I think thinking about these three things and their effect on American cuisine is pretty interesting. American tastes are thus not the effect of dumb consumerism or agribusiness tricking us into eating high levels of saturated fats and high fructose corn syrup, but instead cultural and historical events. Check out Cowen interviewed on the EconTalk podcast and the Freakonomics podcast. Also, consider buying the book. It has been positively reviewed by pretty much everyone (NYT, USA Today, The Independent) and is a very easy read.

 

When Does the Presence of a Collective Action Problem Excuse Inaction?

Warren Buffett wrote an op-ed in the New York Times earlier this week arguing that rich people like him aren’t paying their fair share of taxes. This provoked a fairly predictable response from right-leaning pundits and politicians: if Buffett doesn’t think that he is paying enough taxes, then he should write a check to the government and rectify the situation!

Jonathan Chait comes to Buffett’s defense:

Obviously this fails to grasp the fundamental collective action problem that’s the entire basis for taxation. You obviously can’t fund the government on the basis of voluntary donations. Buffett and other wealthy people who favor higher taxes on the rich don’t just believe they should pay more taxes. They believe the government needs more revenue.

Seems reasonable enough. But I think it’s interesting to compare this case to others in which individual action to address a widespread problem is rendered more or less futile by the presence of a collective action problem. Global warming is an obvious example. One person deciding not to own a car or take an airplane doesn’t significantly change the amount of greenhouse gas emitted into the atmosphere. Yet at least some people seem to think that this fact does not justify everybody just throwing up their hands and saying, “screw it, I’m not going to change my personal habits to reduce my carbon footprint until there’s a mechanism in place that forces everybody to do so.”

Just last week I stopped for a night at Warren Wilson college in North Carolina, where I spent a night in an “EcoDorm” that had solar panels, non-flush urinals, a system that collects rainwater for the toilets, a special exterior shell to reduce air infiltration, and a bunch of other features that minimized environmental impact. The EcoDorm cost fifty percent more than a typical dorm, and it makes an essentially insignificant contribution to environmental collective action problems. But the students I talked to believed quite passionately in the EcoDorm; the presense of a collective action problem did not let them off the hook for doing their part to protect the environment, and I think that most environmentalists would agree. So why is it that a fair number of people hold this position with regard to the environment while it seems ridiculous that a rich guy like Buffett would have a duty to voluntarily give his money to a revenue-strapped government?

 

Firecrackers and Dynamite: Good Environmental Efforts that are Useless

I tend to think that people who try their best to help the environment are well-intentioned people who usually aren’t really doing that much to help the environment. I’ve written before about people feeling so good about themselves in terms of helping the environment that they feel entitled to do things that hurt the environment more. The most helpful analogy I have is an obese person going for a 5 minute jog, then feeling so good that they went out and exercised that they eat a triple chocolate cake. One step forward, two steps back. I re-use bags when I go to the grocery store, so I feel entitled to take multiple trans-Atlantic flights every year to get an education I could easily obtain within a couple miles of my house.

Cracked.com has a list of 6 socially conscious things that only look like they help:

1. Driving energy-efficient cars
2. Eating local
3. Purchasing reusable bags
4. Using biofuels
5. Volunteering overseas
6. Rescuing oil-covered birds

The site has a pretty good description for each of why people do it and why, in the end, it doesn’t do all that much.

I won’t take any sort of moral high ground against people who make these efforts. I just think it’s necessary to point out the actual results of these actions, instead of just their intentions.

 

Firecrackers and Dynamite: Eating Local

A Carnegie Mellon study shows that only 11% of food’s carbon footprint is from transportation. So why do people focus so much on eating local? By worrying about the firecracker of the problem (transportation) are people ignoring the dynamite of the problem (food that is made in an energy efficient way)?

The Chicago Tribune ran a front page story today about the costs and benefits of the “locavore” movement. It describes the growing number of people who are trying very hard to eat locally: food produced within a 100-300 mile radius of where they live. The jury is still out on which foods actually make an environmental impact by being produced locally.

I think it should be pointed out why eating locally might be bad for the environment over food produced thousands of miles away: growing raspberries in Illinois (where, to my knowledge, they are not naturally occurring and cannot stand the harsh weather) can take a lot of energy. To withstand the weather or non-ideal soil conditions, extra energy needs to be put into things like greenhouses or fertilizers. Overall, this can take more energy than just getting the raspberries from their natural environment and shipping them to Chicago.

People also might buy local for things like feelings of fellowship, community, or just supporting your friends (all of which I think are absolute bullshit). And although some studies seem to be coming out shortly that measure the possibly trivial and possibly huge difference buying local makes, the environmental aspect seems to be quite a firecracker characteristic.

 

Firecrackers and Dynamite: Environmental Impact

Often times, people engage in actions that tend to make a trivial difference in their end goal instead of focusing on the things that actually make a significant difference. I’m going to cheat on my wife, use the Lord’s name in vain, lie to tons of people; but I’m also going to donate lots of money to the Catholic Church and go to mass every Sunday. I’m going to go to a restaurant and order a double bacon cheeseburger with everything on it and get a large chocolate milkshake; but the milkshake is going to be made with skim milk.

The point I’m trying to make by these scenarios is that by being conscientious of those trivial acts, people feel like they are doing their part and actually getting closer to reaching their end goals. Sure, ceteris paribus, going to mass might make you a better Catholic and getting that skim milk might make you lose weight. But by doing those trivial things, people mentally justify actions that actually have a much bigger impact.

I was discussing this sort of idea with a friend a few days ago. He travels a ton: he went to high school on a different continent than his home country and goes to college far away from his home country.

Traveling contributes CO2 up the wazoo to the global environment. So will taking shorter showers, reusing plastic grocery bags, decreasing toilet paper thickness, or buying organic really make that much of a difference? All else equal, these actions are positive things. But by doing these very small things, is my friend indirectly justifying his incredibly high-carbon lifestyle to himself and not actually helping the environment? By focusing on things that account for 0.00000… % of his overall carbon footprint, is he incorrectly thinking that he can continue to travel so much yet still help the environment? I sure think so. I imagine someone who is trying to lose weight that just went on a 10 minute run: I can eat this double cheesecake; I owe it to myself, I just ran for 10 minutes!

The point is that there are things that make a small difference (firecrackers) and things that make a big difference (dynamite). If all we think about are the firecrackers, we forget that we are all responsible for some dynamite.

Perhaps this is somewhat of a digression, but I think my thoughts about general environmental activism should be mentioned here, especially because my friend admittedly takes the moral high ground on matters like this and believes people who don’t do the small things that decrease environmental impact “don’t get it.” We all do things we don’t need. In fact, we don’t need much. Here’s a quotation, courteousy of William Eric, regarding marketing and how it encourages people to buy things they don’t need:

We, as one agency, plead guilty. Advertising does sell people things they don’t need. Things like television sets, automobiles, catsup, mattresses, cosmetics, ranges, refrigerators, and so on and on.

People don’t really need these things. People don’t really need art, music, literature, newspapers, historians, wheels, calendars, philosophy, or, for that matter, critics of advertising, either.

All people really need is a cave, a piece of meat and, possibly, a fire.

The complex thing we call civilization is made up of luxuries. An eminent philosopher of our time has written that great art is superior to less art in the degree that it is “life-enhancing.” Perhaps something of the same thing can be claimed for the products that are sold through advertising.

They enhance life, to whatever degree they can.

-Young and Rubicam Advertising

We all like things we don’t need, things that aren’t meat (or food, more simply), a cave, or fire. Eating meat is terrible for the environment, but people do it because they say “I’m selfish, I like meat.” Similarly, people say “I like traveling, so I’m going to do it, even if it’s terrible for the environment.” People also say “I like my long hot showers,” “being lazy and not turning off the lights when I leave the house,” and even “my SUV isn’t really practical but god dammit it’s fun to drive so I’m going to do it.”

All of these things are things we don’t need. So before anyone takes the moral high ground and criticizes anyone else for not doing enough for the environment and engaging in conspicuous consumption, think about your life and think about all the things you have that you don’t need and are bad for the environment: that iPod, art, going to a college away from home when there is likely one closer, sports, watching movies, alcohol, barbecues, really comfortable chairs, hair gel, smoking pot, anything related to music, earrings, literature, etc.

In conclusion, if we are really to stop any sort of catastrophic climate change, we need to stop focusing so much on the firecrackers and start worrying about the dynamite. This is admittedly a stance that is fairly recently developed and ripe for criticism and I am willing to take any sort comments pointing out holes in my thinking.

 

Climate Change and World Poverty

Matt Yglesias is worried about what climate change will do to poor farmers in the developing world:

Farmers have particular land and particular crops they’re accustomed to growing. When the climate shifts, they’ve got a problem. Initially it won’t be an insurmountable problem for farmers in rich countries who’ll be able to draw on a lot of technical resources to try to adapt. But for poor peasants in the developing world, their livelihoods will be ruined quite rapidly.

My understanding is that, sadly, this is true: climate change will have its most damaging effects on countries that are closer to the equator.  The vast majority of these countries are poor.  Yglesias goes on:

[I]t’s worth attending to the problems of the third world and the ethical issues it raises. I doubt many members of the Chamber of Commerce would, if faced with a starving Namibian family on their front doorstep, just refuse to give them any food and say “hey, I’m greedy, get over it.” But when the climate shifts, there will be crop failures and famines and people will die. And the people preventing action to stop that outcome are doing it because it would be financially inconvenient. So how different is that?

The starving family on the doorstep example greatly understates the complexity of the ethical challenge that climate change poses.  Any climate change mitigation policy that actually succeeds in slowing climate change by enough to have a noticeable effect on the well being of subsistence farmers in the developing world will significantly retard economic growth around the world (global collective action is required for any climate change policy to work).  Unfortunately, this is bad for residents of developing countries because it reduces the export demand for their products, making it more difficult for them to rise out of poverty.

So the ethics of the effect of climate change on farmers in poor countries ends up hinging on a comparison of the cost of climate change with the cost of slower economic growth.  Because of all the uncertainties in the science (granting that there’s scientific consensus about the existence of global warming, the exact amount of warming and the extent of the future damages caused by warming are not clear), this is a difficult calculation to make.

Yglesias’s example does help to illustrate that there are moral demands upon the world’s privileged to help the world’s poor, even if the poor are far away.  But the best way to meet this demand is to donate money to charity, or perhaps to lobby for increased legal immigration and an end to farm subsidies (which indirectly hurt poor farmers).  There are just too many uncertainties for climate change action to be a sensible way of fulfilling our moral obligation to help the poor.

 

Dogs Vs. SUVs

Most people are willing to sacrifice something to help the environment. But different choices make different impacts. Not eating meat would do more to help cut carbon emissions than recycling, reusing plastic bags, and riding your bike to work everyday. Most omnivores wouldn’t give up their meaty diets. SUVs are often a target of people dedicated to improving the environment. Often ridiculed as being impractical, SUVs can easily be substituted with more fuel efficient cars. But are people willing to give up their dogs – perhaps more detrimental than SUVs – in order to help the environment? I’m going to guess the answer is no.

 

Big Bad Green Businesses

Loyal Upset Patterns reader Benji sent me this op-ed from the NY Times discussing corporations’ under-appreciated environmental efforts.

Corporations and big business in general have gotten a reputation for being everything that’s bad with capitalism and the marketplace. Unlike small businesses, conventional wisdom tells us, big corporations take shortcuts like paying employees bad wages and benefits, engage in environmentally unfriendly practices, have homogenous and boring goods, and will do anything it takes to please stockholders.

Sometimes, I like small businesses a lot more than big ones. I like independent coffee shops more than Starbuck’s. I like to buy my bacon from the monthly farmer’s market in St Andrews instead of the bland stuff at the grocery store. But I also like my iPod, my Nike sportswear, Coca Cola, and being able to find anything I want at a monolith of consumerism like Target. I’ve always thought big businesses get a bad wrap and that the nostalgia associated with mom-and-pop shops is generally undeserved. In my experience with working for several small businesses, I’d also say that they do not necessarily pay better wages or treat their employees better than big businesses.

The op-ed Benji sent me talks about how the greatest force for environmental action is not coming from governments but actually from big business. Profit-seeking, it turns out, is a pretty good mechanism for helping the environment.

The embrace of environmental concerns by chief executives has accelerated recently for several reasons. Lower consumption of environmental resources saves money in the short run. Maintaining sustainable resource levels and not polluting saves money in the long run. And a clean image — one attained by, say, avoiding oil spills and other environmental disasters — reduces criticism from employees, consumers and government.

The op-ed looks at three businesses almost always associated with evil corporate practices: Wal-Mart, Coca Cola, and Chevron. All three are doing significant things to cut carbon emissions and decrease use of resources. One excerpt about Chevron:

The third company is Chevron. Not even in any national park have I seen such rigorous environmental protection as I encountered in five visits to new Chevron-managed oil fields in Papua New Guinea.

There is one thing the op-ed doesn’t mention that I think is vital to understanding why the mere nature of big companies can be good for the environment. There’s a concept in economics called “economies of scale“. It essentially says that for some industries each marginal addition of product is very cheap when the business reaches a certain size. Think of delivering mail. If we had a thousand small companies delivering the mail, it would be a lot less efficient than one big company. Small businesses would have to travel long distances to remote villages to deliver one letter. But if there’s one big company, all the letters to that village would be delivered in one trip. This efficiency means that fewer resources are used. Cheaper business operations usually mean fewer resources are used – whether it be labor, fuel, or cardboard boxes.

There are some big, bad evil corporations out there. But before we assume that all of them are worse than small businesses at everything virtuous, let’s appreciate some of good they actually do for us.

Check out this list put out by Newsweek about the “greenest” U.S. companies and I think you’ll see some surprising names pop up on the list.

 

Global Warning

This guy was on the IPCC and is a distinguished professor at M.I.T. Because of this, I’m going to assume he’s pretty credible. So why is he contradicting everything else I seem to hear? Maybe it’s like if a biology professor at Princeton told me evolution was a myth: I’d just think he was an exceptional kook and irrelevant compared to the other 99.99% of people in his field. Either way, something fishy is going on. My best bet is that global warming, while a problem that needs to be urgently solved, is not as catastrophic as movies like The Day After Tomorrow make it out to be.