Who Controls the Switch on a Geoengineering Machine?

Most discussions about geoengineering start out with the tricky scientific issues but eventually get to the even trickier issue of governance. As we wrote in SuperFreakonomics:

As of this writing, there is no regulatory framework to prohibit anyone — a government, a private institution, even an individual — from putting sulfur dioxide in the atmosphere. (If there were, many of the world’s nearly eight thousand coal-burning electricity units would be in a lot of trouble.) Still, [Nathan] Myhrvold admits that “it would freak people out” if someone unilaterally built the thing.

The Benefits of the Safety Net

A new working paper (abstractPDF) by Hilary W. Hoynes, Diane Whitmore Schanzenbach, and Douglas Almond examines the effects of in utero and childhood access to the social safety net, specifically food stamps:

A growing economics literature establishes a causal link between in utero shocks and health and human capital in adulthood. Most studies rely on extreme negative shocks such as famine and pandemics. We are the first to examine the impact of a positive and policy-driven change in economic resources available in utero and during childhood. In particular, we focus on the introduction of a key element of the U.S. safety net, the Food Stamp Program, which was rolled out across counties in the U.S. between 1961 and 1975. We use the Panel Study of Income Dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes.

Return to Sender: What Can Postal Behavior Tell Us About a Nation?

I am not sure this is as meaningful as the authors think, but still it is an interesting experiment. From a new working paper called "Letter Grading Government Efficiency" by Alberto Chong, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer:

We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the U.S. and how long it takes.  About 60% of the letters were returned, taking over 6 months, on average.  The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants.  The evidence suggests that both technology and management quality influence the quality of government.

I am happy to read that final sentence but surprised it needed to be said. This paper may tickle your memory with thoughts of Stanley Milgram's "small-world experiment" (better known as "six degrees of separation") and Judith Kleinfeld's reassessment of that experiment as told in Duncan Watts's excellent book Six Degrees.

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.

The Economics of For-Profit Prisons

The Times-Picayune reports on Louisiana's prison ecosystem -- and the perverse incentives for sheriffs to keep inmate numbers high:

Louisiana's incarceration rate is nearly triple Iran's, seven times China's and 10 times Germany's.

The hidden engine behind the state's well-oiled prison machine is cold, hard cash. A majority of Louisiana inmates are housed in for-profit facilities, which must be supplied with a constant influx of human beings or a $182 million industry will go bankrupt.

Several homegrown private prison companies command a slice of the market. But in a uniquely Louisiana twist, most prison entrepreneurs are rural sheriffs, who hold tremendous sway in remote parishes like Madison, Avoyelles, East Carroll and Concordia. A good portion of Louisiana law enforcement is financed with dollars legally skimmed off the top of prison operations.

The Train, The Train! Federal Transportation Legislation: Be Careful What You Wish For

Hi all! Sorry I haven’t been writing much of late; I’ve been dealing with the minor matters of filing a dissertation and finding myself gainful employment. The first step is complete: I get to call myself a doctor now, though it is a source of considerable disappointment to my friends that after almost eight years of study I’m not the kind of doctor who can prescribe them medical marijuana. The second step is complete too: I’ll be joining the faculty at Clemson University in South Carolina as an assistant professor in the fall. I’m thrilled to be going to Clemson as I think very highly of the department, the setting, and winning college football.

Anyway, I’m going to try to get back in the habit of writing more regularly, this time about my dreams for transportation—which are turning out to be nightmares. Like one of those stories where a genie gives you three wishes and every one of them boomerangs. Or even better, a bad episode of Fantasy Island:

Solar Subsidies

We are installing over 30 solar panels on our roof. The City of Austin currently offers a rebate up to $15,000 of 60 percent of the cost, and the federal government gives a 30 percent credit on the remainder.  With those subsidies the rate of return on our own investment is 17 percent, making this is a superb deal for us.

A neighbor in the Netherlands has 4 solar panels on his roof, a strangely small number.  I asked why.  His answer:  The Dutch government pays up to €1500 if you install a solar installation.  Each solar panel costs him €450, with a fixed cost of about €200 for the installation. Thus his average rate of return on his 4 panels is about 25 percent, a great investment. 

Acemoglu and Robinson Answer Your Questions

Last week, we solicited your questions for economist Daron Acemoglu and political scientist Jim Robinson, who just published a new book called Why Nations Fail: The Origins of Power, Prosperity, and Poverty and are now blogging on a variety of interesting development topics.

Their thoughtful responses below cover everything from robber barons to the artificial construction of African nations to whether the race of a country's leaders determines its success.  A big thanks to Daron, Jim, and all our readers for another great Q&A.  

First, a note from Daron and Jim: "We thank everybody for these excellent questions and comments. We had to pick a few to be able to provide detailed answers.

Tax Deductions or Tax Expenditures?

Chances are, you’re going to spend tonight finalizing your taxes, making sure that you ferret every last deduction. And probably pretty pleased to be getting these deductions; but when you dig in a bit deeper, you may not be so sure — at least that’s what Betsey Stevenson and I argue in our latest column.

In fact, tax breaks are no different from either government handouts, or federal mandates, whether evaluated in terms of your finances, the government’s finances, or incentives:

Instead of looking at all the breaks for mortgage interest, health care, retirement savings and so on as deductions, picture the government writing you a check for each item. This equivalence between tax deductions and government spending leads economists to call them “tax expenditures.” Reformers have hit on an even more pointed description: spending through the tax code.

The Retirement Robbery

Since putting email back in its corral, I've turned some recovered time to reading actual books in print --- the latest being Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers by Ellen E. Schultz. If a nation of sheep shall beget a government of wolves, then the lesson from Retirement Heist is that today the shears are sharpened with numbers.

Retirement Heist is, as one blurb describes, a "meticulously researched and gripping as a crime thriller." Each chapter explains, with detailed research data and outrage-generating examples, yet another method corporations use to steal retirement benefits and mask the theft behind accounting shenanigans. It is one of the few books (since Cadillac Desert) to describe outrageous behavior so well that I threw it across the room.