To Spur Technology Innovation, Stop Pulling on the Rope

Posted by Jim Harper

I spent the morning at The Atlantic‘s Washington Ideas Forum. Before the big names were to do their spiels during the afternoon today and tomorrow morning, there were a series of breakout sessions, among which was one on “Technology Innovation.”

Our suggested “points to ponder” were:

  1. Can our nation regain our competitive edge through innovation?
  2. Will our knowledge and information-based workforce continue to offer cutting-edge technologies to improve the way we live and work?
  3. What measures can we implement to foster creativity and encourage companies to grow intelligently? and
  4. Will the paradigm of how people work, think and communicate be meaningfully transformed as a result of technology? Or is this another short-term trend, with no long term changes?

At least one of the other participants thought the summary of the discussion I gave in the latter half was pretty good, so I’ll share my takeaway here roughly as I did there—maybe sounding just a little more “Cato-y” here.

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Soft Heart, Soft Head?

Posted by Jim Harper

Yesterday, I came across a short Atlantic essay on the plight of children in Accra’s Abogbloshie slum entitled “The Hardware Scavengers of Ghana.” One particular sentence stood out for succinctly crystallizing the problem, and for its near-perfect internal inconsistency: “These kids are shortening their lives, but they don’t have any other options.”

You see, if they have no other options, the toxic job of electronics recycling—burning insulation off copper wires, applying degreasing solvents with bare hands, and so on—is extending their lives, not shortening them. According to the underlying article and interview on Mongabay.com, many of the recyclers come from Northern Ghana to escape poverty, maltreatment, “food insecurity,” and sectarian strife. The choice is not between recycling and school. It is between encountering carcinogens and neurotoxins or encountering violence, starvation, and death.

The Atlantic and Mongabay.com articles focus on the environmental and biological consequences of e-waste, and the responses they broach do the same. The Ghanian government might limit import of used electronics, but this would shrink the nation’s access to valued and productive communications equipment. Had it the capacity, the government might try to prevent dumping of e-waste where these recyclers can access it.

Solving the problem of e-waste might be a comfort to readers of the Atlantic concerned with their own environment and susceptibility to cancer. But if the statement about poor Ghanians’ options is true, such “solutions” would consign children and young men to death of starvation, violence, and war. That’s not the outcome I would prefer, even if it’s hidden from me.

A couple of lessons emerge from this compact tale. One is: never, ever invite me to your cocktail party. I will go about picking the scab off group consensus on faraway economic and social problems. And I will say, “See? That redness and pus? You haven’t fixed this.”

More importantly, the solutions that extend the lives of electronic waste recyclers may have nothing to do with controlling “e-waste.” These articles frame the problem as we would in the green, wealthy west. Economic development of all kinds in Ghana may give these youth better options than e-waste recycling, according them sustenance and safety, and perhaps eventually access to education.

I don’t know what improvements in trade policy (ours or theirs), rule of law, taxation or regulation might bring the wealth to Ghana that sustains its people better. I wish Ghana the relative luxury of controlling toxic waste, moving people from slum to suburbs, and so on. But if softness in our hearts leads us to soft-headedly sweep Ghana’s poorest from bad health conditions into conditions of death by starvation and violence, I think that would compound the tragedy.

Laura Tyson’s Confused Case for a Second Stimulus

Posted by Alan Reynolds

I was a bit critical of Laura Tyson’s New York Times article on “Why We Need a Second Stimulus.” Apparently I wasn’t nearly critical enough.

The Nation and National Public Radio are advising President Obama to “stop listening to infrastructure-phobic advisers like Larry Summers and start taking counsel from Laura Tyson, a member of his Economic Recovery Advisory Board who argues that $1 trillion in infrastructure investment is needed over the next five years.”

At The Atlantic, senior editor (and Boston Globe columnist) Joshua Green thinks Laura Tyson’s article “underscored what a loss it is for the Obama administration that it couldn’t manage to find a place for her on its economic team.” Mr. Green can’t imagine why a Berkeley professor who wants to add an extra trillion to federal spending wouldn’t be the ideal budget director.

In the article that so impressed Mr. Green, Tyson wrote, “The primary cause of the [current] labor market crisis is a collapse in private demand… By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent.”

Combining “fiscal and monetary stimulus” in a single phrase is a clumsy way to conceal the irrelevance of   “fiscal stimulus” (debt-financed federal spending) to GDP growth in 2009. Fiscal stimulus means the Treasury sells more bonds. Monetary stimulus means the Fed buys more bonds. To discuss those transactions as if they had the same effect is just another mysterious Keynesian incantation.  

Tyson claims there is “too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth.” She wants much more spending on unemployment benefits (a paradoxical definition of a jobs program) and on aid to state and local governments (where unemployment rates are relatively low). 

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David Goldhill: “A Democrat’s Case For ‘No’”

Posted by Michael F. Cannon

David Goldhill has done it again.

You may recall his article, “How American Health Care Killed My Father,” from the September 2009 issue of The Atlantic.

Now, at HuffingtonPost, he comments on the health care legislation that may soon face a final vote (of some sort) in the House:

[C]ontinuing our Party’s almost unquestioned conflation of health insurance with health care, the central feature of the proposed “reform” is further extension of our flawed insurance-based system…[D]espite the Administration’s recent heated rhetoric, most of the entrenched health industry interests are quietly or openly in favor of this bill. Should the bill become law, I suspect we will look back at it as an industry bailout…

How…can Democrats in the depths of a recession support a massive tax increase on middle-class job creation…? How…could we justify diverting even more of middle class income to support our broken system of care, further starving families of funds for all their other needs? Most uninsured Americans lack insurance only temporarily; how many of them would trade lesser lifetime job prospects and lower disposable income for the short-term retention of health insurance?…

If the legislation had any real prospect of controlling health care spending, would the pharmaceutical industry be funding the “yes” campaign?

As a former Democrat who hung door knockers for Michael Dukakis in 1988, I know the heavy heart with which he writes.  Read the whole thing.

Watch the video to hear Goldhill’s story:

The Myth of ‘Market Failure’ in Health Care

Posted by Chris Moody

One argument in favor of a government overhaul of the health care system is that the free market had its chance, and failed when it comes to providing the best possible care.  But as David Goldhill discovered while researching for the September cover article in The Atlantic, the United States has anything but a free-market health care system.

He explains his findings below:

For real market-based reform, see Cato’s new Policy Analysis, “Yes, Mr. President: A Free Market Can Fix Health Care.“

I Would Rather You Just Said “Thank You, Private Schools,” and Went on Your Way…

Posted by Adam Schaeffer

Some well-known bloggers are being terrible bullies, beating up on private schools.

Felix Salmon kicks things off by hoping the government tightens the definition of a “charitable” organization and begins taxing private schools who don’t “do a bit more to earn it.” Matt Yglesias agrees that private schools are mooching deadbeats and ups the ante, calling them actively harmful as well. Finally, Conor Clarke at The Atlantic agrees, but makes the other two look like panty-waists by proposing the government radically narrow what is considered a charity in the first place.

Yglesias even has the temerity to indict private schools for the failure of NYC public schools:

And as best one can tell, their main impact on the common weal is negative, drawing parents with resources and social capital out of the public school system and contributing to its neglect. You’d have to believe that New York City’s public schools would be both better funded and free of this kind of nonsense if a larger portion of the city’s elite were sending their kids to them.

Really? Would we have to believe what Yglesias says? No, it’s not “the best one can tell.” According to the evidence, Yglesias’ breezy, offhand accusation is demonstrably wrong. Increased competition from private schools actually improves public school performance.

And the more kids who leave public to go private, the more money the schools have for the kids who remain.

What ingrates. They complain about the lost tax revenue while dismissing out of hand the billions of dollars that parents and donors spend every year to educate children outside the government system. They dismiss the fact that these parents and donors are saving taxpayers in the neighborhood of $60 Billion a year based on current-dollar public school spending and the number of kids in private schools.

Finally, if this is all about rich people getting a free ride, why aren’t these guys screaming about means-testing public schools? Why shouldn’t we charge rich parents tuition to attend public schools? If a charitable deduction for private schools is so bad, why isn’t a free public education even worse?

Cherry Picking Climate Catastrophes: Response to Conor Clarke, Part II

Posted by Indur Goklany

Conor Clarke at The Atlantic blog, raised several issues with my study, “What to Do About Climate Change,” which Cato published last year.

One of Conor Clarke’s comments was that my analysis did not extend beyond the 21st century. He found this problematic because, as Conor put it, climate change would extend beyond 2100, and even if GDP is higher in 2100 with unfettered global warming than without, it’s not obvious that this GDP would continue to be higher “in the year 2200 or 2300 or 3758”. I addressed this portion of his argument in Part I of my response. Here I will address the second part of this argument, that “the possibility of ‘catastrophic’ climate change events — those with low probability but extremely high cost — becomes real after 2100.”

The examples of potentially catastrophic events that could be caused by anthropogenic greenhouse gas induced global warming (AGW) that have been offered to date (e.g., melting of the Greenland or West Antarctic Ice Sheets, or the shutdown of the thermohaline circulation) contain a few drops of plausibility submerged in oceans of speculation. There are no scientifically justified estimates of the probability of their occurrence by any given date. Nor are there scientifically justified estimates of the magnitude of damages such events might cause, not just in biophysical terms but also in socioeconomic terms. Therefore, to call these events “low probability” — as Mr. Clarke does — is a misnomer. They are more appropriately termed as plausible but highly speculative events.

Consider, for example, the potential collapse of the Greenland Ice Sheet (GIS). According to the IPCC’s WG I Summary for Policy Makers (p. 17), “If a negative surface mass balance were sustained for millennia, that would lead to virtually complete elimination of the Greenland Ice Sheet and a resulting contribution to sea level rise of about 7 m” (emphasis added). Presumably the same applies to the West Antarctic Ice Sheet.

But what is the probability that a negative surface mass balance can, in fact, be sustained for millennia, particularly after considering the amount of fossil fuels that can be economically extracted and the likelihood that other energy sources will not displace fossil fuels in the interim? [Remember we are told that peak oil is nigh, that renewables are almost competitive with fossil fuels, and that wind, solar and biofuels will soon pay for themselves.]

Second, for an event to be classified as a catastrophe, it should occur relatively quickly precluding efforts by man or nature to adapt or otherwise deal with it. But if it occurs over millennia, as the IPCC says, or even centuries, that gives humanity ample time to adjust, albeit at a socioeconomic cost. But it need not be prohibitively dangerous to life, limb or property if: (1) the total amount of sea level rise (SLR) and, perhaps more importantly, the rate of SLR can be predicted with some confidence, as seems likely in the next few decades considering the resources being expended on such research; (2) the rate of SLR is slow relative to how fast populations can strengthen coastal defenses and/or relocate; and (3) there are no insurmountable barriers to migration.

This would be true even had the so-called “tipping point” already been passed and ultimate disintegration of the ice sheet was inevitable, so long as it takes millennia for the disintegration to be realized. In other words, the issue isn’t just whether the tipping point is reached, rather it is how long does it actually take to tip over. Take, for example, if a hand grenade is tossed into a crowded room. Whether this results in tragedy — and the magnitude of that tragedy — depends upon how much time it takes for the grenade to go off, the reaction time of the occupants, and their ability to respond.

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Response to Conor Clarke, Part I

Posted by Indur Goklany

Last week Conor Clarke at The Atlantic blog , apparently as part of a running argument with Jim Manzi, raised four substantive issues with my study, “What to Do About Climate Change,” that Cato published last year. Mr. Clarke deserves a response, and I apologize for not getting to this sooner. Today, I’ll address the first part of his first comment. I’ll address the rest of his comments over the next few days.

Conor Clarke: 

(1) Goklany’s analysis does not extend beyond the 21st century. This is a problem for two reasons. First, climate change has no plans to close shop in 2100. Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758. (This depends crucially on the rate of technological progress, and as Goklany’s paper acknowledges, that’s difficult to model.) Second, the possibility of “catastrophic” climate change events — those with low probability but extremely high cost — becomes real after 2100.

Response:  First, I wouldn’t put too much stock in analyses purporting to extend out to the end of the 21st century, let alone beyond that, for numerous reasons, some of which are laid out on pp. 2-3 of the Cato study. As noted there, according to a paper commissioned for the Stern Review, “changes in socioeconomic systems cannot be projected semi-realistically for more than 5–10 years at a time.”

Second, regarding Mr. Clarke’s statement that, “Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758,” I should note that the conclusion that net welfare for 2100 (measured by net GDP per capita) is not based on a belief.  It follows inexorably from Stern’s own analysis.

Third, despite my skepticism of long term estimates, I have, for the sake of argument, extended the calculation to 2200. See here. Once again, I used the Stern Review’s estimates, not because I think they are particularly credible (see below), but for the sake of argument. Specifically, I assumed that losses in welfare due to climate change under the IPCC’s warmest scenario would, per the Stern Review’s 95th percentile estimate, be equivalent to 35.2 percent of GDP in 2200. [Recall that Stern’s estimates account for losses due to market impacts, non-market (i.e., environmental and public health) impacts and the risk of catastrophe, so one can’t argue that only market impacts were considered.]

The results, summarized in the following figure, indicate that even if one uses the Stern Review’s inflated impact estimates under the warmest IPCC scenario, net GDP in 2200 ought to be higher in the warmest world than in cooler worlds for both developing and industrialized countries.


Source: Indur M. Goklany, “Discounting the Future,” Regulation 32: 36-40 (Spring 2009).

The costs of climate change used to develop the above figure are, most likely, overestimated because they do not properly account for increases in future adaptive capacity consistent with the level of net economic development resulting from Stern’s own estimates (as shown in the above figure).  This figure shows that even after accounting for losses in GDP per capita due to climate change – and inflating these losses — net GDP per capita in 2200 would be between 16 and 85 times higher in 2200 that it was in the baseline year (1990).  No less important, Stern’s estimate of the costs of climate change neglect secular technological change that ought to occur during the 210-year period extending from the base year (1990) to 2200. In fact, as shown here, empirical data show that for most environmental indicators that have a critical effect on human well-being, technology has, over decades-long time frames reduced impacts by one or more orders of magnitude.

As a gedanken experiment, compare technology (and civilization’s adaptive capacity) in 1799 versus 2009. How credible would a projection for 2009 have been if it didn’t account for technological change from 1799 to 2009?

I should note that some people tend to dismiss the above estimates of GDP on the grounds that it is unlikely that economic development, particularly in today’s developing countries, will be as high as indicated in the figure.  My response to this is that they are based on the very assumptions that drive the IPCC and the Stern Review’s emissions and climate change scenarios. So if one disbelieves the above GDP estimates, then one should also disbelieve the IPCC and the Stern Review’s projection for the future.

Fourth, even if analysis that appropriately accounted for increases in adaptive capacity had shown that in 2200 people would be worse off in the richest-but-warmest world than in cooler worlds, I wouldn’t get too excited just yet. Even assuming a 100-year lag time between the initiation of emission reductions and a reduction in global temperature because of a combination of the inertia of the climate system and the turnover time for the energy infrastructure, we don’t need to do anything drastic till after 2100 (=2200 minus 100 years), unless monitoring shows before then that matters are actually becoming worse (as opposing merely changing), in which case we should certainly mobilize our responses. [Note that change doesn’t necessarily equate to worsening. One has to show that a change would be for the worse.  Unfortunately, much of the climate change literature skips this crucial step.]

In fact, waiting-and-preparing-while-we-watch (AKA watch-and-wait) makes most sense, just as it does for many problems (e.g., some cancers) where the cost of action is currently high relative to its benefit, benefits are uncertain, and technological change could relatively rapidly improve the cost-benefit ratio of controls. Within the next few decades, we should have a much better understanding of climate change and its impacts, and the cost of controls ought to decline in the future, particularly if we invest in research and development for mitigation.  In the meantime we should spend our resources on solving today’s first order problems – and climate change simply doesn’t make that list, as shown by the only exercises that have ever bothered to compare the importance of climate change relative to other global problems.  See here and here.  As is shown in the Cato paper (and elsewhere), this also ought to reduce vulnerability and increase resiliency to climate change.

In the next installment, I’ll address the second point in Mr. Clarke’s first point, namely, the fear that “the possibility of ‘catastrophic’ climate change events — those with low probability but extremely high cost — becomes real after 2100.”

A New Regulation I Can Support

Posted by Sallie James

Normally I would be happy to leave labelling decisions to retailers and manufacturers, but here’s a proposal for a new mandatory labelling scheme that I can get behind.

James Gibney, a reporter from the Atlantic, called me last week to ask some questions about dairy supports. He was preparing a blog post to propose a new labelling idea that might help break the frustrating stranglehold that the farm lobby has over U.S. agricultural policy. Here’s James’ idea:

To wit, every product whose ingredients benefit from a subsidy should include the following language on the label:

“This product has been subsidized by the U.S. government at taxpayer expense. For more information, please visit usda.gov.”

And every product that benefits from tariff protection should have the following language on the label:

“This product is protected from foreign competition by U.S. import tariffs. Its price is higher as a result. For more information, please visit usitc.gov.”

I like it. For more on Cato’s work on agricultural policy, see here and here.

Who’s Blogging about Cato

Posted by Chris Moody

Here’s a round-up of bloggers who are writing about Cato research and commentary:

  • QandO‘s Michael Wade offered his own thoughts on the New York Times blogger who said Cato’s voice against bailouts has not met her “expectations of adequate noise.”
  • The Atlantic‘s Clive Crook reviewed the new Cato book, The Beautiful Tree, which explains how private education efforts are empowering children in Third World nations.
  • Blogging on Tax Day, Jacob Grier cited Charlotte Twight’s essay in Cato Journal on the history of income tax withholding in the United States.

Who’s Blogging about Cato

Posted by Chris Moody

Here’s a round-up of bloggers who are writing about Cato this week:

  • Writing at the Adam Smith Institute blog, Phillip Salter discusses Patrick J. Michaels’s proposal that scientific articles should be available online for public comment.
  • Penning his thoughts on Obama’s plan to raise taxes on oil and gas usage, Wintery Knight cites Jerry Taylor’s research that shows why similar price control programs didn’t work in the 1970s.
  • Reihan Salam quotes William Niskanen on The Atlantic‘s Washington blog in a post about the “starve the beast” theory that says lawmakers can slow government’s growth by lowering taxes and running up deficits.
  • Think Progress blogger Matthew Yglesias responds to Michael Cannon’s work on health care reform in a post about Obama’s White House health care summit.
  • Dr. Paul Hsieh of FIRM (Freedom and Individual Rights in Medicine) and Brian Schwartz of Patient Power cite John H. Cochrane’s Cato paper on free market solutions to health care security.