I watched the Democratic debate last night. I thought all the candidates did well on foreign policy but Senator Clinton’s answers were more specific and informed.
When asked whether, if they had "actionable intelligence" on Bin Laden’s location in Pakistan, they would strike even without the Pakistani government’s approval, Edwards and Obama jumped at the chance to show how tough and determined they were. Clinton was tough also but she said she would sure let the Pakistani government know what was happening before the missiles hit otherwise the Pakistani’s might think it was an attack from India. I think she could have jumped on Edwards and Obama for perhaps starting a nuclear war due to their inexperience but she didn’t and I suspect that the point may have been lost on the audience. In answering questions about troop withdrawal, Senator Clinton was also thinking through the details at a greater level than the other candidates mentioning, for example, that it was important to make plans for the Iraqi’s who have worked with US troops.
On economics, Obama was by far the best. Former Secretary of Energy, Bill Richardson, who performed poorly throughout the debate, said a carbon tax was a bad idea because it would raise prices to consumers which is why he supported cap and trade! Obama pointed our correctly that cap and trade would also raise prices but he nevertheless supported cap and trade because some sacrifices were necessary.
On energy and economics, Clinton was very poor. She made some crazy argument that mandating energy efficiency was the way to get us out of the looming recession – as if wishing for greater efficiency would make it so.
Edwards didn’t say much specific on economics and so didn’t make too many pure gaffes but he scared me with all of his talk about how going after corporations was personal.
Their voting records carry a lot more signal:noise ratio than these silly and easily
gamed debates.
Who cares about the debates? If Senator Obama wins in New Hampshire the Democratic Primary seasons is essentially over.
But mandating greater energy efficiency works. It is not wishful thinking. And if you dislike mandates, mere promotion of efficiency also has worked. Examples include CAFE standards, efficiency standards for appliances and heaters, more efficient lighting, building codes for insulation, ad nauseam.
Just wonder: are people really that stupid that you have to mandate them what is good for them?
Edwards didn’t say much specific on economics and so didn’t make too many pure gaffes but he scared me with all of his talk about how going after corporations was personal.
The guy’s a trial lawyer. How could you expect anything less?
Greg Mankiw, economic advisor to Romney and previously G.W. Bush, agrees with you that Obama nailed the economics of climate change. Here’s he is quoting Obama and then commenting on it on his blog:
SEN. OBAMA: Well, I agree with Bill, that I think cap-and-trade system makes more sense. That’s why I proposed it because you can be very specific in terms of how we’re going to reduce the greenhouse gases by a particular level. Now what you have to do is you have to combine it with a hundred percent auction. In other words, every little bit of pollution that is sent up into the atmosphere that polluter is getting charged for it. Not only does that ensure that they don’t game the system, but you’re also generating billions of dollars that can be invested in solar and wind and biodiesel.
I do disagree with one thing, though, that Bill said, and that is that on a carbon tax the cost will be passed onto consumers and that won’t happen with a cap-and-trade. Under a cap-and-trade there will be a cost. Plants are going to have to retrofit their equipment, and that’s going to cost money, and they will pass it onto consumers. We have an obligation to use some of the money that we generate to shield low-income and fixed-income individuals from high electricity prices, but we’re also going to have to ask the American people to change how they use energy. Everybody’s going to have to change their light bulbs. Everybody’s going to have to insulate their homes. And that will be a sacrifice, but it’s a sacrifice that we can meet. Over the long term it will generate jobs and businesses and can drive our economy for many decades.
[Mankiw]: For the passages I put in bold, Bill Richardson and Barack Obama deserve special commendation, for opposite reasons. As a former energy secretary during the Clinton administration, Richardson has presumably studied these issues. But here he demonstrates extraordinary ignorance (or perhaps extraordinary disingenuousness) about the economic impact of cap-and-trade systems. By contrast, Obama shows extraordinary clarity and honesty about the effects of the policy he is proposing.
Lemmuslemmus… that doesn’t seem to solve any problem. If you are more efficient then you can use the spared energy…to get other things – and as a whole even more energy can be consumed…. Today we are much more efficient then 30 years ago and yet we use more energy!
Thus, it seems to me that mandating efficiency won’t solve any collective problems. Now..it solves personal problem. However – are people really that stupid that they must be told what is good for them?
Andy, when people face proper price signals, they will generally make the correct decisions, maximizing benefits minus costs.
However, when there are large externalities, as their are with energy, they people do NOT face the right price signals. They do not pay the full cost of the energy they use — other people pay some of the costs.
In such cases, the best solution is to internalize the externality, either via clear property rights (you have to pay me for the potential lung cancer or climate change damage you do to me), or Pigovian taxes (e.g. a carbon tax that increases the relative price of carbon based fuels to account for their full costs). People can still use energy, but they will want to do so more efficiently and reserve it for situations where the benefits exceed the full costs, including externalities.
When both of these solutions are infeasible, a mandate can improve welfare. In other words, no people don’t usually need to be told what’s good for themselves (although better information, e.g. labeling, can be beneficial). But, yes, people do need to be told what is good for OTHER people or they won’t necessarily take it into account in their decisions.
Obama becomes Osama by one letter transposition. I wonder if such subtle emotions unconsciously influence how people vote!
While perhaps Edwards lacked pure gaffes, he did skew Blinder’s result of “30-40 million jobs potentially being offshorable” into “30 million Americans COULD lose their jobs” and thus we need a new tax policy and new trade policy. What a meaningless statement — you know anyone COULD lose their job? Such a scare tactic is just as bad as using terrorism threats to justify the sacrifice of civil liberties.
Can we all agree that there is no difference between “cap and trade” and “carbon tax” except for the initial allocation of the spoils? Once they are running, all players see the same marginal cost for a ton of pollution.
On economic issues Hillary seemed to move to the left. She quite openly said she’d raise corporate taxes and income taxes for the wealthy…more than just rolling back Bush tax cuts. She seems to have realized she has to win the primary, no longer a given, before she moves to the center for the general election.
I wonder how much of Edwards’ rhetoric he believes. Surely he must realize that companies don’t hire for the fun of it. but for profit. So if he taxes, and demonizes, and regulates them to death, they’ll hire fewer, not more people. I think it’s mainly hot air…but from Edwards, maybe not. And that’s even worse than if he were just using rhetoric to appeal to his base. I’m reading Atlas Shrugged right now. I think Rand goes way too far. Edwards though is surely a great example of the anti-industrialist, anti-profit,anti- self-reliance, populist mongering that she so opposed.
andy,
good point about saved money being used to buy other stuff the production of which also takes up energy (assuming constant energy prices). Whether efficiency standards ultimately save energy is an empirical question, and I don’t have the expertise to submit an estimate.
However, I don’t see the connection to the statement “people know what’s best for themselves, hence no problem”.
If you force people to use more efficient appliances, they will have more resources afterwards – that will be later used for other things. If you lower someone’s electric bill by 50%, there is high chance that he uses the spared money and buy something that…ultimately uses the same energy. We DO use much more efficient things today, yet we use much more energy as well.
The point Andy is raising is called the Jevons paradox. (see article at http://en.wikipedia.org/wiki/Jevons_paradox). There are several replies to this argument. Andy ignores all of them and assumes that the Jevons paradox is insurmountable.
Lemmuslemmus: the original quote was “mandating efficiency works”. I just don’t understand what “works” is supposed to mean. If it is supposed to mean “makes people better of”, then it hinges on the assumption that the government knows some things better then people/markets. If it is supposed to mean something else, I would be interested in the explanation.
The discussion about externalities reminds me of another government program that tries to save the planet by mandating inefficiency. Bio-fuels. It seems tome that they are trying it both ways…. Actually I think you CAN reduce CO2 emissions by mandating inefficiency…just look into the history. So whatever the government mandates is supposed to reduce the emissions – be it efficiency or not….
ben_q:
First argument: I am saying that there is no direct link between efficiency and avoiding externalities that are result of SOME use of the product. The problem is NOT the overuse of the resource. The problem is externality and mandating efficiency is probably the least reasonable way to do it.
Second argument: even if increased efficiency does not reduce the total amount of resources used, this ignores the additional benefits associated with increased efficiency and increased use. If you use this statement as an argument for mandating efficiency, you are saying that government knows more then the market does.
Third, fourth: “peak oil” is not a problem of externalities. The market is supposed to solve this. Otherwise we are supposing that the government knows better then the markets/people.
It boils down to the question: what was meant by saying that mandating efficiency “works”?
In mind mandating efficiency “works” at conserving scarce resources like energy and at limiting externalities like pollution.
And if higher CAFE standards cost 5000 more traffic fatalities per year, do they still “work”?
andy is arguing the essential truth that energy efficiency is not necessarily economically efficient. In fact, that some improvement in energy efficiency requires a government mandate is almost prima facie evidence that it is economically inefficient.
Externalities aside, arguing that governments must mandate energy efficiency demands an explanation of exactly what market failure the mandate is supposed to be correcting.
Against my better judgment, I have to ask how you reduce emissions by mandating inefficiency.
The alternative is not mandating inefficiency: The alternative is having no mandates and letting markets do what markets do best.
Goodness of fit:
You’re only half right. The general theory (ignoring institutional issues) was figured out in the early 1970s by Marty Weitzman in his article on prices vs. quantities in QJE and has been applied in the 1990s by Resources for the Future to the specific problem of CO2.
The general rule is: If the marginal benefit curve for clean-up is flatter than the marginal cost curve, and uncertainty about the marginal cost curve is greater than or equal to uncertainty about the marginal benefit curve, then a tax is always better than a system of marketable permits such as cap and trade. (This is stated as a sufficient condition for simplicity–the necessary and sufficient conditions are weaker but messier.) Essentially, when imposing too much or too little cost is the main thing to worry about, then taxes are better. If you reverse the relative flatnesses and uncertainties then cap and trade is better; intuitively, when you know there is a critical threshold quantity you need to hit to avoid big losses, then quantity targets are better than taxes, because it’s hard to calibrate the tax precisely enough to guarantee hitting that level given cost uncertainty.
No, it is not disingenuous. Not when andy said at Jan 6, 2008 4:50:24 PM…
Sorry, I don’t get it. We were explicityly talking about mandating EFFICIENCY. We were not talking about taxing/forbidding externalities.
Once the externalities have been captured via carbon tax or cap and trade, then arbitrary mandates for energy efficiency become superfluous. In the absence of charging for the externalities, mandated energy efficiency is extremely unlikely to capture the actual cost of the externalities exactly or even closely.
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