Bastiat's Bastions

In great haste, the U.S. House of Representatives passed the new climate change bill that attempts to halt global warming. This bill with nearly 1200 pages of text, 300 pages of which arrived only at 3 a.m. Friday morning, was passed by that evening in a very close vote . You can bet that it includes a lot of pork to buy the votes of some congressmen. Buried text in those 300 pages that were rushed through are sure to contain unpopular provisions used to purchase votes to pass this bill. Logrolling in this way amounts to taking two bills that cannot get a majority on their own and fusing them together so that both get passed.

In addition to the pork in the bill, making it much more costly than needed to meet its goal, we should take a close look how well the bill can be expected to meet any goals of halting or delaying the impact of global warming. We should never forget that global warming is not a national problem, but a global one. What is done to reduce greenhouse gases in one place can be undone elsewhere.

The prevailing international agreement on global climate change, the Kyoto Accord, allows developing nations, particularly India and China, to continue to increase their greenhouse gas emissions as the developed nations reduce their emissions. So as the U.S. decreases its use of coal, China, which has been building many coal-fired generators, will be able to purchase the same coal that would have been used in the U.S. and burn it in their new power plants. The result is cheaper power in China than in the U.S. and more manufacturing there with less here.

There is a new round of talks to work toward a new international agreement on climate change to begin in Copenhagen, where Obama hopes that the new climate change bill can help him lead these talks. The U.S. is one of the few countries not to sign the Kyoto Accord, so Kyoto is likely to be the starting point for any new agreement. There is a provision in the new bill that allows tariffs to be placed on imports from China or other developing country that does not adopt similar regulations to reduce greenhouse gas emissions, but China has had increasing leverage over our policies with their increasing holdings of American debt and American dollars, as well as the weight of many other countries having already agreed to Kyoto. Increased tariffs on Chinese imports merely threaten to repeat the trade war of 1930s that were precipitated by the Smoot-Hawley tariffs imposed by the U.S. that prolonged and deepened the Great Depression. This is something that no one wants to repeat, especially given the existing global depression.

One misleading argument made by the administration is that the new climate change bill will bring about an explosion of new jobs in alternative energy sources. Of course, many jobs in traditional energy areas will be lost. However, to maximize “number of jobs” should never be a social goal. We could easily increase the number of jobs by prohibiting efficient technologies. For instance, after the city of Bordeaux in the mid 1800s suggested that a break in the railroad from Paris to Spain would increase employment by requiring cargo to be unloaded and reloaded there, the 9^th century economist and pamphleteer, Bastiat, facetiously suggested that by replacing the train altogether with what he called “a negative railroad,” so that a long line of people would just hand packages from one to another, would increase employment enormously. Of course, it should then be obvious that either these cargo handlers could only be paid a pittance, or the cost of such transportation would lead to other methods of transporting goods from place to place, such as by donkey and wagon, and no one would be employed with a negative railroad.

Too often we fail to see that people do not want work for work’s sake, but want it for what they can get for their effort. We can all work more without producing any more than before, and then we will have wasted our efforts in unproductive ways. More so-called “green jobs” might be available after this bill, but this does not mean that these jobs will be producing as much as we had been before.  More work and less to show for that work does not sound like progress.

The truth is that energy costs, under this bill, will undoubtedly rise, making it unbearable for a poor person to live in the areas of our country with many heating or many cooling days, as in the Gulf South where I live or in Buffalo, New York. Industries that are heavily dependent on energy are likely to become decrease. Transportation, upon which most trade is based, will fall off and demand in all physical goods will fall. The steel industry, which is already in trouble in the U.S., will face further trouble as using coal becomes almost prohibitive, so steel production is likely to move out of the U.S. In addition, since cheap electric power is necessary for aluminum production from bauxite, another industry will likely leave this country.

Of course, if global warming is the threat we are told, then perhaps such action is necessary to keep other wealth from being destroyed, such as the many buildings, homes, factories and farmland in low-lying areas. What are our alternatives? How effective are the actions that are being proposed and how costly are they likely to be? Bjorn Lomborg of the Copenhagen Consensus asked another question, “what global problems are there that we could do with our limited resources to help the planet and its people?” Lomborg and his associates looked closely at various contenders for global priorities and try to prioritize solutions to the world’s problems.

They examined estimates of the costs and benefits of various world problems and concluded that fighting global warming was not a high priority. The reason is that there is very little that fighting global warming will do. With spending the huge amounts that have been proposed, the climate change models that have been proposed, will at most delay the effects of global warming by six years. His talk at the TED (Technology, Entertainment and Design) Conference explaining the work of the Copenhagen Consensus on setting global priorities is very powerful and worth hearing.  The bottom line is that while global climate change has gotten much of our attention with so much focus on the issue, there is very little we can do to stop it and so much more we can do that will be effective by tackling other issues, such as AIDS prevention and fighting malaria. Perhaps, with so little effect we have on global warming climate change legislation amounts to tilting at windmills.

Passing laws in haste, having them railroaded through, or perhaps “negative railroaded” through, should be cause for suspicion. Still, the “cap and trade” provisions of the bill are worth consideration and are based on ideas economists have suggested at least since the 1970s. Discussion of why capping emissions and then allowing trading of “emissions rights” makes sense will have to wait for the next installment: “Climate Change Legislation: The What and Why of Cap and Trade.”

-MC

There are many words used to describe people who have some strong difficulty that might put them at a disadvantage to others. Yet, I am constantly reminded by a major finding in my discipline, economics, in one of its core concepts called “comparative advantage.” The idea is that any person who can interact with others has a place in the society where they can be productive and can engage in trade that is both beneficial to them and to other members of the society. Even someone who is especially good at everything is in need of trading with others: being able to do all things does not mean that a person can do all things, since we all face only 24 hours in a day and cannot possibly do all things.

Now, I should point out that having a place to produce goods or services that others will demand does not mean that all of us are especially good at any one thing, nor does it mean that all of us can provide others with goods or services of sufficient value that we can support ourselves without help of others. It does mean we all have a place and something we can do to help provide something to others of value. I often mention in classes that there are two paths to comparative advantage: one is to be relatively good at that one thing, and the other is to be relatively bad at everything else.

Still, there are some people who face certain substantial difficulties in life that it is amazing that they excel and even lead their fields in what they have chosen to do. Here are some personal recollections of three people I have come across at one time or another who were so astounding to me that the difficulty in their life was, for a time, invisible to me. Perhaps, I am just not that observant.

Walter Oi

Walter Oi is one of those economists whose articles were required readings in economic theory classes in graduate school. The most important of his theoretical works was an article titled “A Disneyland dilemma: Two-part pricing for a Mickey Mouse Monopoly.” The subject of that paper is something that I teach to my MBA students in managerial economics.
More socially importantly though, his paper in the American Economic Review in 1967, “The Economic Cost of the Draft,”  and his related book, The Costs and Implications of an All-Volunteer Force, were instrumental in bringing an end to the military draft in the nation, showing that the draft was a more costly way to raise a military force than was an all-volunteer force of the same size.

In graduate school at Virginia Tech (better known as VPI back then), on Wednesday evenings and Friday afternoons, we had seminars that all graduate students were expected to attend. These seminars almost always had guest lecturers. One Wednesday night I arrived right after Professor Oi had been introduced. I do not recall the subject of that evening’s lecture. Professor Oi, though of Japanese descent, spoke perfectly clear English, as he had grown up in California (and was one of those Japanese Americans sent to a concentration camp during WWII). While his English was perfectly clear, when he furiously wrote equation after equation on the blackboard I had trouble reading his handwriting on the board, even though my own handwriting is difficult to make out (one reason I am a fan of Powerpoint). I could make out a few lower-case deltas and alphas in the equations and could read some of it, but with great difficulty.

While after about 30 years I do not recall exactly what Professor Oi’s lecture was about, I do recall that it was brilliant, as his work usually was. At the end of his lecture, the moderator thanked him for coming and giving his talk, and Dr. Oi received the usual round of appreciative applause. As he was leaving, I discovered the reason for Dr. Oi’s illegible blackboard handwriting when a German Shepard came around from the other room to Dr. Oi’s side. It was his seeing-eye dog. As it turns out, Oi, who received his Ph.D. from the University of Chicago in 1961could not read ordinary text at all when he began college.

Incidentally, Oi also once served as the Vice-Chair of the President’s Commission on Employment of People with Disabilities. For more on Oi, this Wikipedia entry is rather accurate.

Vernon Smith

Several years after I finished my degree at Virginia Tech, I was at a meeting of the Public Choice Society (devoted to using economic methods and theories to study political, sociological and other non-market activities), which met jointly with the Economic Science Association (devoted to experimental methods) in Tucson. At that time, Vernon Smith, who is credited for beginning the study of experimental economics was at the University of Arizona in Tucson, as was Gordon Tullock, one of my Virginia Tech professors, who was one of the most influential originators of public choice economics. About 10 or so years later, Smith, along with the psychologist, Daniel Kahneman won the Nobel in economics in 1999. While there in Tucson, Vernon Smith, invited me and several other young professors out with him and his graduate students, to a Western bar, which had a country and western band.

Smith was friendly and courteous, but a barroom was obviously not home for him. Some years later, Smith began to talk about his Asberger’s Syndrome, which is a type of Autism. As a result, Smith, unlike many of us, seems to function just fine for long periods of time isolated from others. Actually, Smith’s autism may have worked well for him, allowing him to become a very prolific writer, even for someone who is such an original thinker. (For more on Smith, see
http://en.wikipedia.org/wiki/Vernon_Smith.)

Evelyn Glennie

Some years later, sometimes in the 1990s, I attended the meetings of the Atlantic Economic Society to present one of my papers. One of the more enjoyable aspects of the Atlantic meetings is that they often arrange for attendees to go to some very nice cultural event and at reduced rates. I went to hear the Philadelphia Symphony at one meeting, but I especially recall hearing the National Symphony at the Kennedy Center in Washington at another.

While I still recall the grandeur of the Kennedy Center, mostly I recall the performance. The audience was told that the performance was being recorded for later broadcast on National Public Radio or for Public Television. There were just two pieces on the program, with the second being a rare percussion concerto. The percussion concerto called for the soloist, Dame Evelyn Glennie, to play almost 30 different percussion instruments that were arranged around the stage. Dame Glennie must have been in her mid thirties at the time, and this very beautiful and talented woman came to the stage in a flowing, gauzy white dress that made her appear as a forest faery as she flitted about the stage from instrument to instrument the way a humming bird flies from blossom to blossom. What was out of place, though, in this most formal of musical performances for a soloist with the National Symphony at the Kennedy Center, was that she was barefooted. I thought perhaps this was to make as little noise as possible as she went from drum to marimba to water tympani across the stage. She finished the evening with a brilliant encore with just her and a snare drum on the stage.

The next morning, I had a 7:30 flight out of Reagan National Airport. This flight was one of the few I have been on where they showed an in-flight interview program. Imagine my surprise to see an interview with the very performer featured at the performance the evening before, Evelyn Glennie. I was even more surprised when the interviewer asked Dame Glennie how long she had been completely deaf. Yes, this Scottish musician, and the only solo symphonic percussionist in the world at the time (she still may be for all I know), was completely deaf. Anyone who has ever performed with a musical ensemble, a band, a choir, an orchestra, a trio or quartet, knows that being able to hear the others you are performing with is essential for proper balancing, blending and timing. Then I understood the reason for her bare feet at this performance. Bare feet enabled her to “listen” to the rest of the orchestra through her feet from the stage floor.

You can hear Dame Glennie talk about listening as a deaf person and, more importantly, as a deaf musician at the TED conference. Listening to her over and over (and “listening with my whole body”), I still cannot detect any signs of deafness.

Extraordinary people and the rest of us

Some people are just extraordinary and would be extraordinary almost no matter what difficulty faced them, making their adversities seemingly disappear before their brilliance. Most of us are not so gifted. Each of us does, however, have something to offer, something to make the world better for others, some comparative advantage, even if it is just that one thing we can do. We should all understand and appreciate others for what they do for us, from the musician that thrills us, to the shortstop who amazes us, to the doctor who saves the life of a child, and on to the person who takes away our garbage or cleans restrooms. Everyone has something of value to contribute, and they should be valued and appreciated for making our lives better.

The question posed at the beginning was “what was the right word for those with disabilities?” Under various circumstances, any of those words may be appropriate, but remember that most of us have some area where we fall short, for some of us it is noticeable and for others, our disabilities are as invisible as Professor Oi’s and Dame Glennie’s disabilities were to me. I am constantly reminded of the words of the great American humorist, Will Rogers, who noted “everybody’s ignorant, only on different subjects.” We all fall short somewhere, even the brilliant and the beautiful. The word I tend to prefer is “human.”

-MC