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The Science May Be Settled, But the Economics Isn’t

The world’s scientists affirmed last week their increasing certainty—95% confidence—that humans are causing global warming by emitting greenhouse gases.

With human culpability all but certain and the potential for warming by 4.5°C in 100 years, economists can’t decide what should be done about it, or even whether any substantial effort should be undertaken to stop it.

In delivering a keynote address to a large group of economists this summer, Harvard’s Marty Weitzman described climate change as a hellish problem that is pushing the bounds of economics.

A year earlier, addressing an annual meeting of environmental economists, MIT professor Robert Pindyck suggested there was no strong economic argument for costly, stringent policies to halt expected warming. In contrast to the near certainty of climate science predictions, Pindyck said the economics of climate change is not well charted and that the case for aggressive climate policy relies on assumptions not supported by consensus. Read More »



The Price of Air Travel

The cost of air travel is going up, and airlines are counting on us not to notice.

I’m not talking about airfares, which have actually declined in real terms over the past decade, despite inching up in the past few years. And I don’t mean the ancillary fees to check a bag, check in at the airport, speak to a live agent, or pick your seat, though these, too, are going up. Instead, I’m talking about the cost of delays and schedule disruptions that waste travelers’ time and force them to travel earlier to their destinations or risk missing important meetings and events. 

Air travel in the U.S. is becoming less reliable and less resilient to shocks like isolated storms that can ripple through the system and impact passengers thousands of miles away. If anti-trust authorities approve the merger between American and US Airways, we should expect things to get worse. Read More »



How Shale Gas Can Benefit Us and the Environment

It took less than an hour for Apple to sell out the initial supply of its new iPhone 5. It’s thinner, lighter, faster, brighter, taller than its predecessors, and yet it costs the same. That’s called progress.

Elsewhere, progress is met by protest rather than praise.

A suite of technologies has brought vast supplies of previously unrecoverable shale gas within reach of humans, dramatically expanding natural gas reserves in the U.S. and around the world. Horizontal drilling and hydraulic fracturing have produced a fuel that can at once promote a cooler planet and an expanded economy, essentially eliminating the tradeoff between climate change mitigation and the pursuit of other public projects and, perhaps, economic growth. But unlike the iPhone, the productivity gain embodied in shale gas technologies doesn’t attract a cult following and its benefits get obscured.  Read More »



How Will California’s Parks Do Under Private Management?

California embarked this week on a grand experiment in common property resource management when, in order to help close a gaping budget hole, it turns over dozens of state parks to private firms and community coalitions.

Seventy of the state’s 278 parks were set to close July 1. But a last-minute change to the state budget will keep all but five open, though many will not be managed by the state. At least six parks will remain open under corporate contracts with firms like American Land and Leisure, which operates campgrounds in 12 states. Dozens more have been rescued, at least temporarily, by local municipalities, private donors, and non-profit organizations.

Economists have long-held that the tragedy of the commons — any individual has too little incentive to protect from exploitation a non-excludable resource he holds in common with potentially countless others — could only be overcome by state intervention or private ownership. Read More »



How California’s GMO Labeling Law Could Limit Your Food Choices and Hurt the Poor

The American Medical Association resolved this week that “there is no scientific justification for special labeling of bioengineered foods.”

The association has long-held that nothing about the process of recombinant DNA makes genetically engineered (GE) crop plants inherently more dangerous to the environment or to human health than the traditional crop plants that have been deliberately but slowly bred for human purposes for millennia. It is a view shared by the National Academy of Sciences, the World Health Organization, the Food and Agriculture Organization of the U.N., the European Commission, and countless other national science academies and non-governmental organizations. Read More »



Could It Be That U.S. Farm Policy Isn’t Making Us Fatter?

Leaders of the food reform movement insist on a wholesale remaking of U.S. agriculture, blaming government policy for industrial farming that supposedly adds food miles to our diets and inches to our waistlines. But their solution, a system of local “foodsheds,” wouldn’t save on greenhouse gas emissions and may well be worse for the environment, an argument advanced by economists here and elsewhere. Now it also seems that the federal farm program blamed for worsening obesity has actually kept us skinnier. 

That is the finding of agricultural economists Bradley Rickard, Abigail Okrent, and Julian Alston, who report (ungated) in Health Economics that “agricultural policies have discouraged food consumption and mitigated the effects of other factors that have encouraged obesity.” Read More »



How High Gas Prices Triggered the Housing Crisis

Republican presidential candidate Rick Santorum made headlines last week when he suggested that high gas prices made mortgages unaffordable, causing the recent housing bubble to burst and sending the economy into recession. It may sound far-fetched, but it is precisely the theory that I and a pair of coauthors presented in a working paper released five days before Santorum’s remarks.

We are actually a bit more nuanced, arguing that unexpectedly high gas prices triggered the collapse of the housing market — igniting a fire fueled by easy credit, lax lending practices, and speculation. It is a provocative claim and one with broad implications, but it is also a claim supported by economic theory and empirical evidence.

The federal government’s Financial Crisis Inquiry Commission asserted in its 2010 report that “it was the collapse of the housing bubble . . .that was the spark that ignited a string of events that led to a full-blown crisis in the fall of 2008.” And a broad, if not unanimous, consensus among economists suggests that the ongoing economic malaise was induced by a financial crisis caused by the housing crisis. Relatively less well-understood is what caused the housing crisis in the first place. Read More »



In Defense of the Christmas Tree Tax that Isn’t a Tax at All

Millions of Christmas trees will be hauled away this week — some will enjoy a useful life after death and many others will end up in the dumps. But record numbers of Christmas trees will also be boxed up and stored in closets till next year. And that has many Christmas tree growers feeling in the dumps, ever more so after anti-tax crusaders trashed a plan to rescue their declining industry by labeling it “Obama’s Christmas Tree Tax.”

The $0.15 fee on the sale of fresh Christmas trees hardly seems like the stuff of political scandal. But announced in November—just days before many Americans would make the trip to tree farms in search of the perfect tree—and branded by conservatives as an assault on Christmas and a sign of government overreach, the story quickly gained traction, with the Drudge Report driving nearly a million visitors to the Heritage Foundation, which broke the story. Before long, mainstream news outlets were reporting that the administration had caved to conservative backlash and decided to delay the “Christmas tree tax” indefinitely. Read More »