Knowledge Problem

Vacation was lovely; we hiked into Haleakala crater and swam with sea turtles. More on that later, after I’ve recovered from taking the redeye back.

Meanwhile, I was very interested in Arnold Kling’s economics education take on Tyler Cowen’s post on the Buchanan “Soul of Classical Liberalism” essay. I find that I increasingly use the persuasion strategy that Arnold calls making “a case for the inherent beauty of free markets, where the consumer has the opportunity to turn down any proposal that is not to his or her benefit”. I particularly like when Buchanan says

It is only through an understanding of and appreciation for the animating principles of the extended order of market interaction that an individual who is not directly self-interested may refrain from expressive political action that becomes the equivalent of efforts to walk through walls or on water.

This is a very provocative essay. For one, I wonder about his definition of the “soul” of a device or an idea as “the organizing principles of their operation”. But I will have to read it in more depth and think about it in conjunction with some other things before I blather on any further (and without the benefit of sleep!).

I was also intrigued by Steve Verdon’s post on inequality and incentives. I second his recommendation of the new Laffont and Martimort book on incentives.

And isn’t Steve Verdon’s son adorable?

I’ve lifted this comment out of the comment box on the second water privatization post. It’s from Ed Reid, one of my very knowledgeable colleagues and sometimes, but not often enough, co-authors. Over to Ed:

Water supply shortages tend not to be short term events. They may persist for months or even years, as is the case on the West Coast, and was the case in the Mid-Atlantic region until this Spring/Summer. Therefore, there is no need (and little justification) for any response that is shorter than a meter reading period. Even if meters are read quarterly. the water authority could announce that the rates were being raised as of a certain date, and long period consumption could be prorated for the current billing period. I understand that this penalizes even those who conserve during some portion of the first long billing period, but the cost of perfection is quite high while the cost of water is generally quite low. Any inequity could be largely reversed by reducing the rates at the same point in a later billing period, after the water supply problem was resolved.

Water meters, like gas meters are not electrified, in general, so peak period measurement is not possible with most current meters; and, as pointed out earlier, is really not necessary anyway.

Many communities provide the option of separate meters for lawn watering, which are typically billed at a lower rate because no sewer charge is included in the rate. In these cases, a separate and even higher rate could be assigned to consumption through these meters during droughts or other periods of limited water supply. These users would still get a benefit when water was plentiful, but would be further penalized when water was in short supply.

Some communities, such as the older sections of Phoenix, still provide flood irrigation from their canal systems. This is a horribly wasteful practice and probably should be discontinued, especially during periods of limited water availability.

As the population of the US increases, these problems will become much more severe and will require more creative solutions. Probably one of the first end uses to be curtailed will be electric power plant cooling water, which will be hard pressed to compete with human consumption and agriculture for limited water supplies. I would vote for banning grass and rose bushes in the desert next; if you want to live in the desert, live in the desert and leave “up North” up North.

If population trends in the US continue, we will be sharing our current fresh water resources among a population of ~500 million souls by ~2050. Many once-through cooling and once-through washing applications are unlikely to survive through that period.

Waste water cleanup and reuse is very common practice today. I don’t remember the source, but I have read that the drinking water in New Orleans, LA has been through ~11 toilets on its way to the tap. Not a pleasant thought, particularly if you happen to live in NOLA, but a modern day reality apparently.

Not actually, more like on sand … got a 6 AM flight to Maui tomorrow, so will be largely out of commission until Monday 22 December. I’ve teed up some draft posts if I can be bothered to come in off the ocean and out of my kayak without the Knowledge Spouse getting all bunchy at me like he did when I checked my email in Italy.

TTFN!

Please note that I’ve added another RSS feed; redundancy is low cost and since I can’t be bothered to keep track of all of the different xml/rdf/0.91/2.0 crap, I figure having redundant feeds gets me out of having to pay attention. At least for now.

I’ve also put up links to places that aggregate information about weblogs, such as Technorati, BlogMatrix, and BlogStreet, where Knowledge Problem is registered.

Buildin’ those informal institutions of order …

While we’re at Crumb Trail and thinking about technological change, I notice a post on the development of the feasibility of producing gas from gas hydrates, full of good and informative links, and pictures! Randall Parker had a post on the same subject last week. This example of technological change can dramatically increase the energy resource availability from sources that were previously thought unproductive. Very cool indeed.

From the knowledgeable resident scientist at Crumb Trail:: more on contraction and convergence, as Ronald Bailey discussed in the article I pointed to in this earlier post today. Mr./Ms. Back40 (who, I may remind you, was responsible for finding the fix when I switched to MT and couldn’t get my stylesheet to behave) is skeptical about C&C as a viable and robust policy, pointing out that its proponents also do a poor job of relative risk assessment:

The main argument for C&C is that people in developed countries emit much more CO2 than people in undeveloped countries on a per capita basis though each has an equal right to do so. The way to reduce such emissions is to make the people in developed countries pay the people in undeveloped countries for exceeding their allotment. People in developing countries can use that money to develop and begin to make their own emissions but would then lose the payments.

This is quite a bizarre idea when you think about it. Countries that are overpopulated now and that will experience massive population growth in the near future are to be paid for their inability to manage themselves by people who have done a better job of it. It’s another crackpot idea that utterly fails to consider whole systems. Population growth is a far more pressing problem than CO2 emissions but C&C will provide incentives to increase population.

I also very much appreciate the conclusion:

The only useful thing people can do is develop better techniques that use material more gently, less wastefully, more effectively. The problems we have are a result of the techniques we have developed thus far. We can abandon them as a bad job and revert to a pre-industrial life style or press ahead with new urgency in developing better techniques. Those who have the talent and training to develop new techniques are doing just that. They are impeded in part by politicians though they could be aided. This is where we need political reform. The wealth and energy we squander on bureaucratic boondoggles such as Kyoto and C&C must cease. The impediments thrown up by politicians to development and implementation of improved techniques must cease. There is no positive contribution politicians can make. All they can do is a quartermaster function, the acquisition and distribution of material and funds required by technology developers to do their work.

Get out of the way, eh?

Tyler and Alex at Marginal Revolution are on fire this morning! Please do pay them a visit for more discussion of the economics of the new Medicare bill (ugh). I also particularly like Alex’s comments about human psychology and the sunk cost fallacy, although I’m not entirely convinced that overcoming the sunk cost inertia was truly the choice of a rational economic agent. Consider this: Alex goes out to shop without his wallet, goes home to get it, and the traffic and drudgery of northern Virginia is so exhausting that it’s not worth it at the margin any more, given his current state. I’ve just made a totally marginal argument, with no appeal to sunk cost, yet he stays home and bails on the shopping errand.

Thoughts?

UPDATE: I like the way Jonathan Wilde at Catallarchy put what I think is the same thing I was saying less eloquently:

All potential states of satisfaction are ranked on an individual’s value scale and those actions that are expected to achieve the highest ranked state are pursued. However, the rankings are constantly reshuffled as the environment changes, personal preferences are altered, and time passes.

Alex’s second trip to the store was simply a reappraisal of his circumstances at that time, and based on his own subjective preferences, he decided to take action to go back to the store.

Yeah, what he said.

Ronald Bailey spent last week hob-nobbing in Milan with the climate change crowd, and shares his analyses in four separate articles at Reason. A good series, and a good read.

Part the First: finding out why all this hot air, and if there’s really a there there for the 4000-plus delegates at the COP-9 conference. His conclusion:

Extrapolating the surface temperatures yields an increase of 1.7 degrees centigrade by 2100. Wentz’ trend would result in a 1.5 degree centigrade increase and Christy’s would be 0.74 degrees—all at the bottom of the range of increases identified by the IPCC. “We might see a degree of warming over the next century. None of those temperature increases is going to cause much of a catastrophe,” says Christy. Even the alarmist report from the German Advisory Council on Global Change concluded that the world can tolerate a rise of up to 2 degrees centigrade over pre-industrial levels.

So perhaps the delegates in Milan can just relax. Since they most likely won’t, I’ll be sending daily dispatches about the goings on in Milan. Ciao.

Part the Second: hydrogen mines and how much of the avoidance of climate disaster is supposed to come from “the hydrogen economy” and dynamic technological change. But the kicker in this story is that producing hydrogen requires the use of electricity, which if generated using fossil fuels kinda defeats the purpose of the hydrogen, right? This presents the hydrogen environmentalists with a dilemma — want hydrogen? Need nuclear.

But can solar power and wind power supply the energy needed to make hydrogen fuel? Not likely says, Jesse Ausubel, director of the Human Environment program at Rockefeller University. Ausubel does see one way to the carbon-free hydrogen economy—nuclear power.

But the way forward to the carbon-free nuclear/hydrogen future is hampered by the Kyoto Protocol, which excludes nuclear power as a “clean” source of energy despite the fact that it produces no greenhouse gases.

Part the Third: will we all need personal carbon permits? I’ve jokingly asked my students this for years! This article is a superb analysis of the possible transaction costs imposed under a global carbon cap-and-trade scheme:

The core of the idea is to set an appropriate level to which greenhouse gas concentrations in the atmosphere will be allowed to rise and then allocate globally the right to emit carbon on a per capita basis. The UNFCCC commits signatories, including the United States, to the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” “Dangerous” has never been defined, but the proponents of contraction and convergence suggest that levels of greenhouse gases be stabilized at 450 parts per million (ppm) to 550 ppm. In order stop at those levels it is estimated that global carbon emissions will have to be cut by between 40 and 60 percent—the contraction part of the scheme.

Part the Fourth: constructing the byzantine structure that is international climate policy, and further evidence of the contradictions inherent in the structure.

COP9 delegates built a new flying buttress by finalizing some of the very complicated requirements for how to account for “carbon sinks.” A carbon sink is anything that absorbs carbon dioxide from the atmosphere, which essentially means forests. The idea here is that rich countries that emit more greenhouse gases than they are allowed under the Kyoto Protocol can get offsetting credit by paying for carbon sequestering forest projects either at home or abroad.

At the end of the day, one must keep in mind that all of this hard bargaining and meticulous nitpicking over regulatory arcana is taking place against the background fact that the Kyoto Protocol has still not come into force six years after it was negotiated. It may turn out that Persanyi’s Kyoto Protocol cathedral is being erected on foundations of sand.

Versions of these articles are also available at Tech Central Station:
Meeting in Milan
Hydrogen mines
Personal carbon permits
The Kyoto cathedral

Is up and ready for reading pleasure at SamaBlog, home of Rob Sama. For future reference, here’s the permalink. Note the lovely art (!) and the snazzy snowflakes.

Not surprisingly, I enjoyed reading the entries, particularly Karun Philip’s entry on The Matrix and Hayek. I especially like the way he discusses the process orientation and evolutionary perspective that Hayek brings to economics and politics:

Hayek is considered warily in libertarian circles because he admits that we must not only consider the “equilibrium-perfect” idea of total market freedom, but also acknowledge where we are now. He recommends law be about banning individuals from coercing and defrauding each other, and that law enforced with coercion if necessary, but with presumption of innocence and due process of law. The word “coercion” is very broad for Hayek and is not limited to “inititiation of force” as most libertarians use it. The purpose of democracy is to discuss what constitutes coercion, especially when a new situation (like the Internet, for instance) emerges. Over time the accepted meaning of “coercion” may evolve and we may end up with only “inititiation of force” (or not) but that is an outcome to be evolutionarily (and democratically) determined. I find this more realistic and practical than reducing morality to a simple rule of an absence of inititation of force.