Things you can do in authoritarian China that you can't do here

China plans next month to raise tax on regular gasoline by five fold and diesel fuel tax by eight fold, in a move to take advantage of falling crude prices and encourage energy conservation, state-run media reported Friday.

...

Government officials see the dramatic fall in global crude oil prices -- currently around $43 a barrel, down from a high of about $147 in July -- as "a perfect opportunity" for the increase, the report said.

Read the rest here. Of course, it's a pretty bad time to be raising taxes, but in the long run this is good policy. China and India and many other heavy polluters have been subsidizing gas consumption, not taxing it. You could probably make the argument that we in the US have also been subsidizing gas consumption on balance, when you take into account the highway subsidies.

But is there any country currently proposing to lower taxes, gas or otherwise, in this likely deflationary environment? Has any country ever tried lowering taxes in a deflationary environment? Is there any reason why? I see only two, niether of which make me optimistic about the future:
1) We have only the experience of the Depression, and only the Keynesian reaction, so we are too afraid or stupid to try anything else.
2) With voters paralyzed in fear/stupidity, the most successful politicians, i.e. the most venal, will sieze this "perfect opportunity" to expand their power.

Merry Christmas and to all a good night!

The Obama Effect: Al Gore starting to make sense

Business -- and by extension the capital markets -- need to change. We are too focused on the short term: quarterly earnings, instant opinion polls, rampant consumerism and living beyond our means. As we have often said, the market is long on short and short on long. Short-termism results in poor investment and asset allocation decisions, with disastrous effects on our economy. As Abraham Lincoln said at the time of America's greatest danger, "We must disenthrall ourselves, and then we will save our country."

At this moment, we are faced with the convergence of three interrelated crises: economic recession, energy insecurity and the overarching climate crisis. Solving any one of these challenges requires addressing all three.

For example, by challenging America to generate 100% carbon-free electricity within 10 years -- with the building of a 21st century Unified National Smart Grid, and the electrification of our automobile fleet -- we can encourage investment in our economy, secure domestic energy supplies, and create millions of jobs across the country.

We also need to internalize externalities -- starting with a price on carbon. The longer we delay the internalization of this obviously material cost, the greater risk the economy faces from investing in high carbon content, "sub-prime" assets. Such investments ignore the reality of the climate crisis and its consequences for business. And as Jonathan Lash, president of the World Resources Institute recently said: "Nature does not do bailouts."

Read the rest in the WSJ. I've never heard him make such sense. He seems to have read some basic microeconomics. What's wrong with the world? It must be the Obama Effect.

Now, the next lesson is public choice. That's where we disabuse ourselves of the dream that government can somehow address these problems in a better way than the market. I have hope, sincerely, that Al and Barack will eventually learn these lessons.

Addendum: Let me illustrate. The simplest policy improvement would be an increase in gas taxes. Will it happen? Probably not, it's unpopular.

Why did it take so long for this to happen?

Everything about Alison Gannett is green, from her straw-bale house to her solar-powered appliances. But when you're as serious about curbing carbon as she is, a mere hybrid won't do. That's why she spent $35,000 to install an extension cord on her Ford Escape Hybrid.

She is among a small but vocal — and growing — number of people who aren't waiting for automakers to deliver plug-in hybrids. These early adopters are shelling out big money to have already thrifty cars like the Toyota Prius and Ford Escape Hybrid converted into full-on plug-in hybrids capable of triple-digit fuel economy. "I love watching the mileage go up," says Gannett, a world champion extreme skier and dedicated eco-evangelist. "The highest I have gotten is 232 mpg. I average around 80-100 mpg."

Read the rest here.

Driving, much worse than nose-picking

From today's Post:

Motorists continue to grumble about record high gas prices, but a new study suggests there is at least one benefit: Fewer traffic fatalities.

...

Nationwide, traffic deaths last dipped below 37,000 in 1961. The number peaked in 1972, at about 55,000, and in recent years has hovered near 42,000, Sivak said.

High gas prices have changed the habits of commuters across the country. People are using public transportation, scooters and motorcycles, and working from home.

Lon Anderson, spokesman for AAA Mid-Atlantic, said he experienced the changes firsthand during a recent drive to Richmond. Traffic moved at a mere 70 mph.

"I can't remember when somewhere around 70 miles per hour was the average speed of traffic on 95," Anderson said of the interstate. "There are certainly many drivers out there who have taken some steps to reduce the amount of gas they are burning. . . . That is one of the few good sides to very high gas prices: That if people drive less, we're going to save lives."

But that's pretty important, life that is. And driving kills us in a lot of ways, from air pollution to unwalkable cities. Plus there are the other negative externalities which maybe don't kill us but detract from the quality of life, e.g. the isolating and anti-social nature of driving. I'm wondering why we have to wait for gas prices to curb this behavior. What happened to social disapprobation? Why is nose-picking in public not OK but driving is just fine, so long as you don't nose-pick while driving?

I believe it is because too many are confused about freedom, and particularly the connection between political and social freedom. We are too often willing to fight for social freedom, i.e. freedom from disapprobation, even at the expense of political freedom. Yes, this is a conservative position. It means I support Al Gore's disapprobation of driving, yet not his calls for government enforced higher gas mileage standards. Too many conservatives are not willing to make the trade off.

And too many libertarians don't even believe there is a trade off. Just more or less freedom. In fact, we can never be totally free. Instead, political and social freedom are substitutes to a large extent. This is why the socially restrictive Victorian era coincided with the greatest political freedom we've known, and the socially free 1960's coincided with the high tide of Marxism/Statism/Socialism.

But that's not to say there is no progress, or that libertarians are completely off base. Sometimes society gets more of both social and political freedom, and it is worth striving for. And I believe in constitutional guarantees of political freedom, precisely because politics is the most effective means of social progress. That is, many of our most unjust social traditions, e.g. slavery, ultimately had to be overcome in the political sphere. It took an Abe Lincoln to orchestrate emancipation. It took a Gandi to break down the unjust traditions of Hinduism. And maybe it takes an Al Gore or Obama or McCain to point out the injustice of environmental degradation. All of this entails political force, less political freedom. Without political power as the focal point, it seems social progress is terribly slow.

The bottomline is we must acknowledge the trade off, but favor political freedom over social freedom through heavy reliance on constitutional guarantees. Nose-picking is optional.

The Story of Stuff with Annie Leonard

Here it is. She claims to have 3 million viewers, so let's try to nip this in the bud.

This is a neatly packaged montage of all the familiar Marxist-Luddite gripes, and still without any real solutions proposed beyond "sustainable development, get involved, click around." This will always be the case because it is an intellectual fraud, most useful for rallying political movements, which in turn destroy millions of lives (USSR, Mao's China, Nazis).

As for her gripes, she is right to blame pollution and externalities, but what she fails to realize is that they are ultimately caused by a lack of property rights, not capitalism, profits, corporations, consumption, greed, etc. If we paid the full cost of disposing of our garbage, e.g. through a private dump rather than having goverment take it away magically, then we'd consume less and be more careful with our refuse.

Child labor is a bit more complicated, since we're talking about countries where child-slavery is still OK. Those countries have a lot of problems, chief among them is poverty. Capitalism can fix that. It worked in Europe, it can work anywhere. That's not to say that moral pressure from the world community isn't effective, especially in the short term, but ultimately we must let these countries get rich through capitalism and free trade. And remember that perhaps the most important thing we trade is ideas.

(Hat tip to Sammy, who also pointed me to this gem, a guy discussing the Georgia-Russia war with peanut butter on his face.)

Iowa flooding

"Cities routinely build in the flood plain," Enshayan said. "That's not an act of God; that's an act of City Council."

Read more from the Post.

How conservation happens

Through the right incentives, namely profit:

"The pressure is immense" to cut weight, said John Heimlich, chief economist for the Air Transport Association of America, an industry trade group. "Every penny more per gallon adds $195 million to the industry's expenses per year. You simply cannot make all of that up with fare increases."

"Reducing consumption is a certainty," Heimlich said. "You're always going to win by consuming less energy."

To that end, carriers have pulled out unused ovens, magazine racks and trash compactors during the past few years. Some removed paper manuals in the cockpit and installed electronic maintenance logbooks.

Fort Worth, Texas-based American Airlines created a Fuel Smart Team in 2005 as fuel prices started to go up. Tom Opderbeck, American's manager of strategic programs, said the team tried to cut weight in places that customers wouldn't notice. The team capped electrical outlets in the lavatories and cut the power converters from the wall. It took out phones in seat backs and removed the heavy telephone wiring that was folded inside. "I always think we've come to the end of the list, but we keep on finding new items" to remove, Opderbeck said.

Read the rest here. Do you think any government agency or non-profit would go to these lengths to conserve energy? I'm afraid dimming the lights for an hour won't cut it. But if you like that idea maybe we can agree on flipping the lights off completely on about 95% of government operations.

Addendum: While we're on the subject, it looks like biofuel subsidies are proving to be a monstrous reminder of the law of unintended consequences.

India's environmental disaster

While I still don't have pictures from my trip to India, I can't help spilling the beans on the most striking and surprising aspect, especially after reading Tyler Cowen's poignant dissection of Jeff Sach's book Common Wealth: Economics for a Crowded Planet. Per Tyler:

I am much more pessimistic, partly for reasons Sachs already outlines. I won't recapitulate all of my previous writings on the topic (follow the links here), so let me give a kind of "splat" response: Chinese CO2 emissions are much worse than we had thought, China resists outside pressure, Chinese governance is often of very poor quality, China is currently subsidizing energy consumption, China thinks it is our problem to solve, China won't automatically keep on becoming prosperous, the super eco-conscious Europeans in fact haven't made much of a dent in the problem in terms of percentage change, the U.S. has done better on carbon emissions than most of the Kyoto signatories, the price of oil rose fivefold in a relatively short period of time without much helping, a gradual increase in carbon taxes (in a Hotelling model) can lead to more extraction today thus worsening the problem, and if the rich countries massively cut their carbon consumption the prices of coal and oil would plummet and the incentive for someone to buy and smoke the stuff will be all that much stronger.

Much of this resonates with my experience in India. It was not a romantic vacation, it probably took years off my life. The air quality was so bad that in three weeks of travelling I never once observed anything like a crystal blue sky, really it looked more like a nuclear winter (believe me, pictures will confirm this). There was a severe drought pushing its way eastward from the Thar desert, effecting the entire northeast region in which I travelled, Mumbai, Delhi, and Rajasthan primarily. For instance, the Bharatpur wetlands bird sanctuary, a World Heritage site, done dried up. Read some of these ridiculous Rajasthan tourism sites for Ranakpur and Udaipur, the "romantic city of lakes" and "Venice of the East," etc. More like a dust bowl.

North of Mumbai, in the state of Maharashtra, we observed streets lined with trees, their trunks painted red and white to indicate government protection. The rest of the countryside was barren. In Mumbai and Delhi the problem was more due to streets jammed with all manner of transport and refuse, ox drawn carts, cows, auto-rickshaws, and dump-trucks serving the booming economy. Eventually, I developed terrible asthma and a hacking cough which only subsided once I reentered the 1st world.

One optimistic view, propounded by the likes of Jeff Sachs, is that India's environmental problems can be corrected through some combination of regulation, carbon taxes, and subsidies for alternative energy technologies. Another optimistic view is that this is but a temporary phase that all industrializing economies go through. Compare London in the 1950s to today. That is, eventually India will get rich and then enjoy the luxury of harping about the environment.

Like Tyler, I now have a more pessimistic view. Jeff Sachs places too much faith in government, especially 3rd world governments. I spent a few days with Vivek Pandit, a politician of sorts, who has spent 20 years battling slavery in India. He lives like the Godfather on a compound outside of Mumbai, surrounded by body guards and adoring tribals and Dalits who he's helped free. The love they have for him is undeniable. And he has succeeded in many ways, particularly by holding politicians feet to the fire and making them accountable to the law. While I was there he took a group of tribals to the unemployment office to get their promised benefits. After waiting in line all day, in the end most were denied because they couldn't read the application.

The point is that government, especially in a place like India, serves those who can take advantage of it. As such, it becomes a tool for special interests, perpetuated my the misplaced hopes of the disadvantaged. I simply don't trust the Indian government to produce effective environmental policy.

Jeff Sachs is right about one thing, that the solution will likely come in the form of new technology from European countries, the U.S., and Japan. But how many years will this take? And as the situation worsens, how many years will it take the largely illiterate and disadvantaged lower castes of India to figure out a) what's causing pollution, b) what are the long term effects, and c) how to avoid it? I'm with Jared Diamond on this: environmental collapse is a distinct possibility.