Environmental Economics : Pricing

The role of technology is really important in policymaking and regulations. Natural resources are not priced purely based on scarcity. The price is based on the cost of extracting that resource, and the rate that it can be extracted. Although the resource is always just being depleted, the price does not necessarily have to go up. It may take more “effort” to extract the resource as it gets depleted, but the effort is not necessarily translated to having a higher cost because of new technology. One example is the overfishing of tuna. Although tuna populations have dropped substantially, tuna prices have not gone up enough to decrease consumption substantially because of technology that makes it easy for fishermen to find and catch the athletic fish. Yes, it does require more effort to catch the tuna now compared to before, but it is not more expensive.

This effect is also present in the petroleum industry. Most environmentalists were hoping that as oil gets depleted and it becomes more and more technically difficult to extract, it will become so expensive that we'll have to move to clean technology. However, because there have been so many technological developments, we are not rate limited or production cost limited. Deep water oil rigs are serious engineering productions, but the amount of oil in the deep waters is considerable. Then instead of substituting oil with clean energy, we might keep using oil and even more frustratingly, continue to engineer cheaper ways to extract it instead of just giving it up and working entirely on clean energy instead.

The only thing that is really expensive with these rigs is the cost of a major mishap such as the Gulf Oil Spill. As it becomes more and more risky, the engineering may become more and more risky, which will ultimately make it more expensive. Even so, the cost to the environment is often greater than the monetary cost to humans. Nature cannot be paid off.

Krugman explains what is wrong with macroeconomics

How Did Economics Get It So Wrong?

Many economists have been putting out papers and rants about how to reform macroeconomics; Acemoglu, Stiglitz in FreeFall, and Caballero. I guess maybe I should email them or try to figure out how to be part of changing macroeconomics.

Kansas Hypocrisy We Like

Conservative Kansas conserves energy for a change. Prof John Sterman has been touting the successes of Kansas in his talks for a while now. The picture is kind of silly, though, since candles have more carbon emissions/lumen than any other light bulb.

In a way they are being hypocritical if they still don't want Climate regulation since they benefit from it. In some sense, they are being much less hypocritical, though, because they are being true conservatives.

Nonlinear Dynamics in Economics

Found a book of essays on nonlinear dynamics in economics, finance, and the social sciences. Looks like most of the authors are European.

Finding Internships in Public Policy

NASPAA site with links to internship search engines

Got it off the Harvard Kennedy School site.

Mountains 2

I finished a painting over the weekend. I am really excited about it because it's sooo much better than the first painting. I feel motivated to draw more often. Just think what could happen if I actually practiced.

Thoughts on Research and Career Directions

I'm starting to talk to other people about my research ideas so I can make them better, but I'm also trying to continually evaluate my career options. I am most drawn to macro, dynamic modeling, and theory, but I'm wondering if I should really be doing more applied economics since I'm ultimately interested in developing policy for the real world. Perhaps I should really be looking into public and labor economics more, and researching cross-impacts of environmental economics and labor economics through data-driven analysis.

At the same time, I'm not sure if I should be going into economics at all. I'm not sure that I have the right kind of instincts for analysis, and perhaps I should go into public policy after all. I should try to look at what kind of research is done in public policy or consider not doing research at all, and trying to figure out how to someone who helps implement policies. I think maybe I'm good at crisis management and figuring out what people need and getting them things.

Single Pipa

So I finally found out that the Buddha dance that I did in high school was a rearranged version of this Pipa song 阳春白雪, which means "sunlight on white snow." This whole time, I thought it was multiple instruments, but it was all just one. High labor productivity, only have to pay one musician.

Solar Panels for the White House

NYT

"The White House did the right thing, and for the right reasons: They listened to the Americans who asked for solar on their roof, and they listened to the scientists and engineers who told them this is the path to the future," said McKibben, the co-founder of the nonprofit 350.org. "If it has anything like the effect of the White House garden, it could be a trigger for a wave of solar installations across the country and around the world." Bill McKibbon

Monetary System and the Environment

Tullett Prebon is a one of the world's largest inter-dealer money brokers. I'm not exactly sure what that means, but the Director of Global Operations, Tim Morgan, put out a paper called Dangerous Exponentials. It is not an academic paper, and I'm interested in whether there is potential for research in this area.

We need to know the impact of the monetary system on the environment and resource use. The monetary system of most of the world depends on an ever-increasing money supply for stability and thus constant but non-zero interest. There may be some value in analyzing how much of production and consumption is simply to service debt and interest rather than actually improve welfare. In Beyond Growth, Daly argued that exponential growth of real economic output per capita is not physically possible. A recent report by Tim Morgan, Dangerous Exponentials, echoes this concern, and describes society and the economy as "energy constructs." He proposes a theory that the abundance of cheap energy has allowed the monetary system to grow. Now that energy return on energy invested (EROEI) has now begun to decrease, the exponentially increasing public and private debt will not be able to be serviced. While some might claim that technological improvements will be able to outrun the needs of the monetary system, I am not convinced.

An environmentally sustainable society is technically possible, although it may require behavioral changes as well as radical innovation. However, the endogenous growth function does not give any insight into whether or not there are effects or constraints posed by the banking system. The financial sector is usually thought to be completely irrelevant to reaching environmental goals. There should be some formal analysis to show that the American monetary and financial system can support an economy seeking to reduce material consumption. Alternatively, theory may show a certain baseline of growth in energy usage and material throughput is required for a stable financial system.

Many economists are concerned about the high level of debt in developed countries. The political problems of this large debt make it difficult to build support for the environmentalist agenda, but it is unclear if there are technical problems as well. Private and public debt has been steadily increasing for the past 30 years in many developed countries such as the US and the UK. There are some perfectly legitimate or at least predictable reasons for the high level of debt that the US government currently has. We are still funding a war in Afghanistan and we just had an economic crash. The American public has been encouraged to consume and keep economic growth robust, although now it has become clear that we have been spending beyond our means. Furthermore, much of the US debt is held by China. The trade deficit with China and other Asian countries can be analyzed with an endogenous growth function with trade dynamics, but there may be unexpected behaviors that arise from the particulars of the US and Chinese monetary systems. It would be important to know how these behaviors interplay with reducing environmental impacts.

The Case for Environmental Economics Theory

This is actually the introduction to a long research paper I wrote about what I thought were important areas of research. A shorter version of the research paper is here.



It is clear that we have environmental problems, and they need to be addressed in the context of improving the economic well-being of Americans. Two mechanisms have been identified, which are to provide green jobs and build green industry. One is aimed at addressing economic concerns of the labor class, and the other is to address the concerns of businesses and investors. Even so, it is unclear how to incorporate the environmental agenda with the rest of economic and social policy. For example, the bank bailouts, healthcare reform, and financial regulatory legislation had no framework for determining whether or not they were in line with the environmental agenda. As a result, the environmental agenda has been marginalized even though it is indisputably important to the economic well-being of Americans in the long run.

To build a stronger case for comprehensive policymaking and put environmental policy on the map permanently, we need to develop a strong theoretical foundation. We should build upon the endogenous growth function to examine the dynamics of labor, material resource use, technology development, and the money supply. This foundation needs to be able to answer three key questions. The first is how do we create jobs by rebuilding the manufacturing sector while reducing emissions? The second is how can we make green businesses more profitable while creating enough well-paying jobs to keep unemployment low? The third is how do we foster a stable while robust monetary system and financial industry while reducing emissions and material throughput? These answers are not just needed in the United States. While others such as China and Europe may have made more headway in clean technology than the US has so far, they will soon need more direction to complete the transition to environmentally sustainable economies.

UN Climate Talks in China

There are UN talks in Tianjin, China right now, a meeting of the UN Framework Convention on Climate Change.
Bloomberg

Among the sticking points are a demand by countries for Chinese commitments to more aggressive emissions cuts as well as for China to accept more stringent verification of its climate change mitigation, said Xie Zhenhua, vice chairman of the National Reform Development Commission of China, the country’s top economic planner.

Some countries tried to tie those conditions to financial assistance to the least developed countries, he told reporters through a translator today.

Developed nations have pledged $30 billion in short-term financing from 2010 to 2012, $2 billion of which still needs to be sourced, Figueres said. The outline of a longer-term climate fund could also be agreed upon in Cancun, she said.

The negotiations around targets for rapidly developing nations like China and for financial transfers are relevant to my research for the Climate Collaboratorium. I have been working on making it possible to see simulations of economic impacts of climate mitigations for different regions.

RFID Sensors in Florida

I just got caught up with a former coworker from Tagsense, who is now working at Locus Traxx, which is a small engineering firm in Florida. They are using some Tagsense products in some of their products to make sensors and energy harvesters. They are using piezo energy harvesters but also looking into this new kind for wind power. They were also making some sensors to sense the oil in the ocean from the BP oil spill. I wonder if fish will just eat those things, though. I may be able to do an internship there for the spring, which would be really cool.