Archive for the ‘Politics’ Category

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Do you want to be intellectually honest?

April 27, 2012

Michael Giberson

Some techniques for checking the tendency toward extreme partisanship, which can be a ready source of intellectual errors (source):

•Take opposing points of view at face value.

It is more comfortable to treat opposing points of view reductively. That is, rather than deal with a different viewpoint, we prefer to explain it away. “They just want power.” “They just serve special interests.” “They don’t believe in science.” “They are socialists.”

Taking opposing points of view at face value means that we try to pass the ideological Turing test. Could my characterization of another ideology allow me to pass as a proponent of that ideology? Could an opponent’s characterization of my ideology allow that person to pass as someone like me?

•Police your own side.

In political debates, we put a lot of energy into pointing out the errors of our opponents. When somebody writes an op-ed exposing the “myths” that surround an issue, the purpose is to debunk the other side, almost never to question one’s own allies….

Imagine instead an environment in which we primarily tried to expose intellectual error on our own side. In street basketball terms, you “call your own fouls.” The onus of calling liberals’ intellectual fouls would fall on liberals. The onus of calling conservatives’ intellectual fouls would fall on conservatives.

Policing your own side would require a conscious effort to reverse the tendency toward confirmation bias. We would have to search as hard for holes in our allies’ arguments as if they were opponents’ arguments. If the goal is to improve public discourse by removing improper arguments, we are much more likely to succeed by having each side call its own fouls than by having people call fouls on the other side.

Street basketball with teams calling fouls on one another would probably degenerate into unsettled arguments. That is, it would start to resemble politics.

•Scramble the teams.

Many years ago, some men in our neighborhood started a pickup softball game on Sundays. We quickly realized that if we formed regular teams, antagonisms would fester. Instead, each week we formed new teams on a different basis, such as odd-numbered birthdays vs. even-numbered birthdays. Scrambling the teams kept the games friendly.

Much of our partisanship reflects emotional loyalty to the ideological group with which we identify. To scramble the teams, we would need to foster situations in which liberals develop emotional bonds with conservatives.

Emotional bonds develop when people work towards a common goal. Thus, in the past, military service and foreign threats have served to break down ideological differences. Historians view World War II as a period in which American unity was strong….Overall, the end of the Cold War, which reduced the sense of common threat, may account for some of the rise in partisanship within the United States in recent decades.

We need to find a substitute for external threats as a social bonding agent. Maybe some ideological peace could be bought by having liberals and conservatives who both root for the same sports team get together during important games. Perhaps liberals and conservatives could actively participate in charitable endeavors that both can endorse.

The work of [Jonathan] Haidt and other psychologists is persuasive and disturbing. It exposes a tendency to form ideological tribes that use moral arguments as rationalizations. Tribes will go out of their way to misunderstand one another. If we want to get along better and resolve differences more easily, it will take conscious effort to overcome tribal behavioral instincts.

From: Arnold Kling, “The Tribal Mind: Moral Reasoning and Public Discourse,” The American, Thursday, April 26, 2012.

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If you must subsidize energy, subsidize wisely

April 25, 2012

Michael Giberson

Earth Track has dedicated itself to uncovering the government policies that it finds harmful to the environment, with a particular focus on the effects of energy subsidies. From various quotes in the press from Earth Track founder Doug Koplow, I gather I may not always agree with his views of public policy and the world. But a casual review of the extensive work Earth Track has done on subsidies suggests that its work is, as it aims to be, pretty thorough and reasonably unbiased.

Koplow, noted for his criticism of energy subsidies, reports being asked which kinds of energy subsidies he does favor. His response – “So which forms of energy should we subsidize?” – notes that while he is not opposed to energy subsidies in principle, in practice there are many reasons to be cautious.

The realism exhibited with respect to the ways policymaking actually works is refreshing.

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Great strides have been made combating price gougers in Venzuela

April 24, 2012

Michael Giberson

Venezuela “President” Hugo Chávez  has put his government strongly behind efforts to combat price gouging, which in this context means selling a good for more than the government’s permitted price. The policy has had the usual effects: shortages of ordinary consumer goods and queues reminiscent of Soviet-style communism.

The New York Times reports, “With Venezuelan Food Shortages, Some Blame Price Controls.” Obviously those “some” are greedy capitalists and their economist lackeys, but Chávez isn’t buying into such corrupt and self-serving claims by economic elites. Instead, “[Chávez and his ministers] blame unfettered capitalism for the country’s economic ills and argue that controls are needed to keep prices in check in a country where inflation rose to 27.6 percent last year, one of the highest rates in the world.”

That’s the ticket: the more problems the government creates, the more reasons the government claims it is needed to solve problems.

HT to Paul Walker at Anti-Dismal, who offers a curated selection of quotes from the article.

MORE: A news story from 2010, “Venezuela closes price-gouging shops.”

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On the U.S. President’s role in economic highs and lows

April 23, 2012

Michael Giberson

SMBC on the president and the economy:

[HT to Rick Weber for the heads up.]

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Zwolinski: “Is price gouging immoral? Should it be illegal?”

April 19, 2012

Michael Giberson

Five minutes of Matt Zwolinski on price gouging (from Learn Liberty).

If you think price gouging should be against the law, watch this video. Are you persuaded by Zwolinski? Let me know in the comments.

MORE: Zwolinski has written serious philosophical works on price gouging,which makes the clarity of his position in the video all the more surprising. :-)   See links to some of Zwolinski’s work on the topic in previous KP discussions here and here.

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Oil speculator witch hunt, 2012 edition

April 18, 2012

Michael Giberson

Steve Mufson at the Washington Post reports:

President Obama proposed measures Tuesday to step up oversight of energy markets and boost by tenfold the penalties for market manipulation, in an effort to blunt political pressure over the 20 percent increase in gasoline prices since the beginning of the year. [Links in source.]

Not that the administration has turned up any evidence of problems in the market:

A senior administration official said the president wants to increase the number of “cops on the beat” to stop illegal speculation and market ma­nipu­la­tion…. But neither Obama nor his aides pointed to any examples of such illegal activity or to any evidence that oil speculators had, in fact, been responsible for raising prices recently. The senior official said that oil prices have been rising mainly because of growing global demand and political uncertainty in the Persian Gulf. Obama cited “global trends” in his announcement. Lawmakers on both sides of the political divide have alleged that “speculation” is partly responsible for the jump in oil prices over the past year, but they have not offered any examples, either.

See also: the Wall Street Journal‘s article; the New York Times on the topic; and from The Nation, “Obama Announces Empty Crackdown on Oil Speculation.”

The Nation‘s piece is interesting, essentially claiming that the President is right on the merit of his proposals, but just pandering to the public with symbolic gestures since five out of six of his proposals require Congressional action the President knows he won’t get, and the President refuses to do the one thing he can do that would work (in the author’s view): telling the attorney general to start subpoenaing oil traders and begin actually uncovering oil market manipulation.

Of course you may recall that a year ago the President did tell his attorney general to constitute an Oil and Gas Price Fraud Working Group. Last month the Attorney General reported on its many great successes.

Just kidding, they’ve got nothing. Here is what the Attorney General actually said on March 9, 2012:

Since last April – when I established a new part of the Task Force known as the Oil and Gas Price Fraud Working Group – we’ve also been focused on identifying civil or criminal violations in the oil and gasoline markets, and ensuring that American consumers are not harmed by unlawful conduct.   This Working Group’s latest meeting was held at the Justice Department just this morning – and its members discussed a variety of topics, including the role of speculators in the market; recent reports and enforcement matters by various Working Group members – such as the FTC and the New York State Attorney General’s Office; as well as ways to improve information sharing between Working Group members and partners; and where we go from here.

I can also report that one of the Working Group’s members – the Federal Trade Commission – is currently conducting an investigation, with assistance from other Working Group members, into whether gas prices have been affected by any antitrust violation or market manipulation by refiners, oil producers, transporters, marketers, physical or financial traders, or others.  Working Group members stand ready to act if the FTC learns anything that implicates the laws they enforce.

So in short, they’ve held meetings, talked about stuff, and are working on better “information sharing” (always a popular task for interagency task forces because you get to have new processes requiring new paperwork so you can justify new staff to handle the added work load). Oh yeah, the FTC is conducting an investigation. (Which has been known since at least last December and so far no results. More from McClatchy on the OGPFWG. A blogger at Think Progress is seriously disappointed in the administration’s lack of commitment to rooting out oil market manipulators.)

Like before, a shameful, pandering witch hunt in search of short-term political advantage. (And by the way, the GOP is no better in their beating of the political drums trying to pin high gasoline prices on the President’s failure to approve the Keystone XL pipeline and reductions of oil output from federal lands.)

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Reducing the size of the Strategic Petroleum Reserve

April 12, 2012

Michael Giberson

Yesterday’s Wall Street Journal carried an essay by Austan Goolsbee in which he advocates reducing the size of the Strategic Petroleum Reserve. Even better, he suggests a rule by which the SPR could be managed in a transparent fashion: aim to be able to replace 90 days worth of imports from non-North American sources.

Goolsbee noted that “economists are generally uneasy with the whole idea of the strategic reserve. Self-sufficiency is not really an economic concept, and it seems an odd goal for a product that trades freely around the world at a market price.” He argues, though, that we need not grapple with that issue to grasp the case for reducing the current size of the SPR.

His argument runs like this: “self-sufficiency” is a kind of physical insurance against disruption; the economics of insurance are well understood, as the size of the risk falls then less insurance is needed; and the boom in domestic U.S. and other North American production has reduced strategic risks. Therefore, we need less SPR insurance.

Interesting aside: Notice that so conceived, domestic oil production provides a public good in the form of reducing strategic risks faced by the country. Would Goolsbee agree that his logic supports the idea of a subsidy to domestic oil production?

Previously I’ve said here that I have never been “much of a fan of the SPR, having never been convinced that there was a coherent economic and political plan for management of the reserve during either the accumulation or release phases of operation.” While in principle oil is supposed to be released only when the United States is economically threatened by a disruption in  oil supplies, in practice SPR management has been a less than transparent mix of strategic, political and practical considerations. (See the DOE history of SPR drawdowns here, which mostly minimizes the political angles.)

Goolsbee’s suggestion supplies a potentially coherent, non-political rule to govern operations during normal times (i.e. times lacking a market disruption threat), it doesn’t provide any guidance for the much more critical emergency release phase of operation.  I’m still anti-SPR.

IN RELATED NEWS: China is believed to be building up its strategic oil reserves, also from the Wall Street Journal.

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Measuring success by how much you spent on the program: A renewable energy example

April 10, 2012

Michael Giberson

In general, in public policy analysis, you’d like to judge ultimate success or failure of a program by its net results, by actual benefits less the costs involved in achieving those benefits. Admittedly sometimes benefits are hard to measure, but ultimately the point of a policy change is to bring about some improvement in something somewhere. Ultimately it would be nice, once a program is done, to try to find and measure that improvement.

What we often get instead, however, is an attempt to infer a benefit based on the expenditures on the program: how much money was spent, how many people were employed, how many miles of ditches were dug, and so on. This is, more or less, what we see this week from the U.S. Department of Energy in the study it commissioned from the National Renewable Energy Lab on the impact of the Section 1603 Treasury Grant Program.

The Section 1603 grants were payments made to qualifying renewable power projects in lieu of those projects claiming the Investment Tax Credit or Production Tax Credit subsidies for which the projects would have otherwise qualified for. The NREL study looked at the $9.7 billion in program spending up through November 10, 2011; by the time the program ended it’s three-year run in December 31, 2011 over $11 billion in federal funds had be committed.

The DOE asked NREL to estimate the effects of the 1603 program on jobs and economic expenditures. In NREL’s report they explicitly state that their work is an estimate of “gross jobs, earnings, and economic output.” This means that they don’t consider any private sector crowding out, any disincentives from the taxation needed to support the program, any consequences from duplication of other government incentive programs, and so on. They simply treat the federal resources as if it were manna falling from the heavens, and the jobs, capital, and industries that became involved in building renewable power plants would have otherwise sat idle. (Note that I’m not criticizing NREL in performing just a piece of the overall analysis, they just did the work that DOE asked for and paid them to do.)

But note that this is primarily a study which just measures the expenses of the program and a part of what the expenditures bought. So, it is a partial study of the costs of the Section 1603 program, and not any kind of estimate of any of the benefits of the program.

Nonetheless, in the DOE press release accompanying publication of the study, they said the study found “the program has been a huge success.” How does it justify its claim of success? By noting how much was spent, how many people were employed, and how many things were subsidized by the program.

The DOE is not the only one to claim success. At Climate Progress, Stephen Lacey’s assessment is titled, “Grant Program Supported Up To 75,000 Wind And Solar Jobs: Congress Killed It Anyway.” Lacey’s post does mention some of the construction activity might have happened even without the grants, and he observes it estimates just the gross impact (and, by implication, doesn’t reflect any negative effects due to the crowding out of unsubsidized economic activity). But along the way Lacey keeps claiming the program was a success. How does he know? Well, he summarizes from the NREL report: the government spent a lot of money, hired a lot of people, and subsidized the purchase of a lot of things.

Great, but resources consumed is not a measure of success. Any fool can spend money, but spending it well can be a challenge. Is there any evidence in the NREL report that the money was well spent?

If the answer to that question is “no,” then we can’t conclude that the program was a success.

ADDITIONAL LINKS: Reactions to the NREL report from North American Windpower, Solar Industry magazine, and Clean Technica. Rep. Ed Markey (MA) cited the report in calling for Republicans to support “revisions to the tax code that level the playing field for clean energy.”

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Current oil prices: scarcity rents, political unrest, inflation hedging, or speculation

April 5, 2012

Michael Giberson

An article by Sarah Kent in the WSJ, “Gulf in oil prices may set up market for a fall,” takes notice of wide gap that has emerged between the current price of oil on the world market and the futures price of oil a few years into the future.

A variety of explanations for recent prices have been tossed around, from peak-oil related tightness in the market (aka “scarcity rents” in the jargon of economics), political unrest in some key oil exporting nations, use of commodity markets as an inflation hedge, or simple manipulations of evil speculators.

Here is the WSJ chart illustrating the matter:

The evil speculator story is mostly a useful story for politicians and regulators to grab more power over financial markets that lacks substantial evidence in support. The inflation hedge view would require future prices to be higher, not lower, than current prices. So is it peak oil or political unrest (or maybe some other view)?

The article notes that some analysts attribute the gap to an increasing expectation that oil production capabilities will rise, so future prices have eased, contrary to the beliefs of at least some peak oil advocates (for an example, see this post at the Scientific American blog). I’m sympathetic to the resource optimist view, but I think political unrest is the more obvious explanation.

The timing of the price moves in the WSJ chart are quite supportive of the exporter political unrest story. Both the May 2012 and December 2018 prices begin a sustained rise at the end of 2010, when the Tunisian Revolution erupted and began to spread. After about three months, though, the December 2018 price eased while the May 2012 price continued upward – this is approximately when the Libyan civil war became hot. The pattern would reflect an expectation that Libyan oil exports would not recover fully by mid-2012, but the market anticipated production would recover by 2018.

Note the most recent divergence between the May 2012 and December 2018 prices, emerging during the escalating political conflict surrounding Iran. The near term price is up $15/barrel while the more distant price has been unmoved by the conflict. Market concern about a potential interruption in supply, but not one that will endure, seem an entirely sufficient explanation.

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Left, right, and climate change

March 27, 2012

Michael Giberson

In principle, there is nothing in the science of climate change that imposes a partisan political commitment. It isn’t as if, for example, you have to believe in steeply progressive tax rates in order to understand climate science. Yet there seems to be a partisan divide on the science. Three recent posts at Grist have ventured into this ground.

David Roberts wrote, “What ‘left’ and ‘right’ really mean on climate change (hint: nothing)“:

The left-right alignment on climate is completely scrambled, in part because the real battle, as we shall see, is not ideological. …

I’m not sure I would call carbon-pricing solutions right-wing, but I do think it’s fair to characterize them as conservative. Conservative economic thinking prefers a minimum of government intervention in the economy. Sending a carbon-pricing signal via a tax or cap is a minimalist intervention, as technology and industry agnostic as policy can be….

The odd thing that’s happened in climate circles in the last few decades is not just that the (generally liberal) environmental community has fervently championed “market-based” solutions like carbon pricing, but that the activist left in particular has adopted a carbon tax as its cri de coeur. … That doesn’t make any sense at all … both are basically conservative in their approach.

Nonetheless, that’s the odd situation we are in today: an intra-left battle between two conservative policy solutions. … It’s a mess. There really is no coherent left vs. right on climate, at least not in terms of economic ideology.

Roberts concludes:

In actual fact, there is no struggle between philosophies happening in U.S. climate politics, only a struggle among economic interests.

A few weeks after the Roberts piece, Grist ran an interview with author/activist Naomi Klein, and she had a directly opposing view:

(Klein:) [B]elief in climate change in the United States has plummeted. If you really drill into the polling data, what you see is that the drop in belief in climate change is really concentrated on the right of the political spectrum. It’s been an extraordinary and unusual shift in belief in a short time. … So I started researching the denial movement and going to conferences and reading the books, and what’s clear is that, on the right, climate change is seen as a threat to the right’s worldview, and to the neoliberal economic worldview. It’s seen as a Marxist plot. They accuse climate scientists of being watermelons — green on the outside and red on the inside.

Q. It seems exaggerated, but your piece was about how the right is in fact correct.

A. I don’t think climate change necessitates a social revolution. This idea is coming from the right-wing think tanks and not scientific organizations. They’re ideological organizations. Their core reason for being is to defend what they call free-market ideology….

You can set up carbon markets, consumer markets, and just pretend, but if you want to get serious about climate change, really serious, in line with the science, and you want to meet targets like 80 percent emissions cuts by midcentury in the developed world, then you need to be intervening strongly in the economy, and you can’t do it all with carbon markets and offsetting… The market is not going to step up to this challenge. We must do more… These climate deniers aren’t crazy — their worldview is under threat. If you take climate change seriously, you do have to throw out the free-market playbook.

Q. What is the political philosophy that underscores those who accept climate change versus those who deny it?

A. The Yale Cultural Cognition Project has looked at cultural worldview and climate change, and what’s clear is that ideology is the main factor in whether we believe in climate change. If you have an egalitarian and communitarian worldview, and you tend toward a belief system of pooling resources and helping the less advantaged, then you believe in climate change. And the stronger your belief system tends toward a hierarchical or individual worldview, the greater the chances are that you deny climate change and the stronger your denial will be.

Environmental economist Gernot Wagner responded with a piece saying Klein was only half right:

Naomi Klein’s interview in Grist this week is smart, insightful, and half right. Her assessment of the obstacles to solving climate change — from ideology to misplaced faith in green consumerism — are exactly right.  And she’s right that fixing this problem means changing how the world does business.

But Klein is wrong in her more serious assertion, first articulated in her “Capitalism vs. the Climate” article in The Nation, that we can save the planet only if we abandon capitalism:

Responding to climate change requires that we break every rule in the free-market playbook and that we do so with great urgency.

The deeper problem is not that our markets are too free; it’s that they are woefully rigged in favor of pollution. Which is also the main reason the Earth finds itself in peril.

The “rigging” in favor of pollution Wagner refers to is the economists’ familiar negative externalities, and the too-common absence of rules that require polluters to pay.

Wagner concludes, “My real argument with Klein is that in trying to escape capitalism, she is trying to evade human nature. [The debate is] not about a full-scale assault on human desires, capitalism, and free markets. … It’s about freeing markets, and in the process freeing all of us to do the right thing.”

I think Klein has a good point concerning the ideological divide over climate change. Crudely speaking, leftists are all to willing to accept scientific claims implying a bigger role for government in the economy, while rightists are all too willing to reject scientific claims implying a bigger role for government in the economy. (And note that the Yale study she cited isn’t about bashing conservatives – they find that leftists are too willing to dismiss scientific findings challenging their views on nuclear waste disposal.)

But I’d like to insert my plea here: climate change science ought not to be a political issue. And, as a complement to that position, climate scientists ought also to recognize the limits of their expertise. The science can and should inform the public policy making process, obviously, but nothing in temperature data, computer modeling and the study of climate/cloud-cover interactions, etc., implies any particular policy conclusion.

It might be true, as Klein says, that we must “throw out the free market playbook” in order to achieve an emission cut “in line with the science.” And if it is true, it may also be quite reasonable for an analyst to weigh the costs and benefits of such a shift, and choose markets. Fortunately, I think Wagner is more right. In my view, we don’t need a government-led assault on markets to address environmental issues, we need rules that support markets.

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