Month: February 2018

I’m not sure environmentalists understand what the word “consumption” means to economists.

PNRJ market failure, public policy , , , , , , , , , , ,

Feb 25 JDN 2458175

Several times now I’ve heard environmentalists repeat variants of this line: “Capitalist economies depend on consumption; therefore capitalism is incompatible with environmental sustainability.”

A recent example comes from this article on QZ arguing that “conscious consumerism” isn’t viable for protecting the environment:

In short, consumption is the backbone of the American economy—which means individual conscious consumerism is basically bound to fail. “70% of GDP in the US is based on household consumption. So all the systems, the market, the institutions, everything is calibrated to maximize consumption,” Brown told me in a later interview. “The whole marketing industry and advertising invents new needs we didn’t know we had.”

Consumption. You keep using that word… I do not think it means what you think it means.

To be clear, let me say that I basically agree that “conscious consumerism” isn’t good enough. There are a few big things you can do to reduce your carbon footprint, like moving to California (or better yet, Scandinavia), becoming vegetarian, driving a hybrid car (or not driving at all), and not flying on airplanes. Aside from that, your consumer choices are not going to have a large impact. There is a huge amount of greenwashing that goes on—products that present themselves as eco-friendly which really aren’t. And these things by themselves are not enough. A 2012 study by the European Roundtable on Sustainable Consumption and Production found little or no difference in long-run carbon footprint between people who claim to be “green consumers” and people who don’t.

Moreover, there is a strong positive correlation between a country’s GDP and its carbon footprint. The list of countries with the highest carbon emissions looks a lot like the list of countries with the highest GDP.

But there is still substantial variation in the ratio of GDP to carbon emissions. Scandinavia does extremely well, at over $5,000 per ton (as does France, thanks to nuclear energy), while most European countries make about $3,000 per ton, the US is at about $2,000 per ton, and the very most carbon-intensive economies like China, the UAE, and South Africa only make about $1,000 per ton. China produces more carbon emissions per capita than Denmark despite having only one-third the standard of living (at purchasing power parity). Emissions also vary a great deal by states within the US; California’s per-capita emissions are comparable to France’s, while Wyoming’s are worse than the UAE’s.

This brings me to my main point, which is that economists don’t mean the same thing by the word “consumption” that environmentalists do. The environmentalist meaning might be closer to common usage: When something is consumed, we think of it as being destroyed, despoiled, degraded. (It’s even an archaic euphemism for tuberculosis.) So I can see why you would think that if our economy is 70% “consumption” that must make capitalism terrible for the environment: An economy that is 70% destruction, despoliation, and degradation does sound pretty bad.

But when economists use the word “consumption”, what we actually mean is private household expenditure. Our economy is 70% “consumption” in the sense that 70% of the dollars spent in GDP are spent by private individuals as opposed to corporations or the government. Of the $19.7 trillion of US GDP, $13.6 trillion was personal consumption expenditures. That’s actually 69%, but it’s okay to round up to 70%. The rest is made up of $3.4 trillion in government spending, $3.3 trillion in private investment, and a loss of $0.6 trillion from our trade deficit.

There’s no particular connection between private household expenditure and destruction, despoliation, or degradation. In fact, the most destructive form of GDP is obviously military spending, which is not counted as “consumption” in the National Income and Product Accounts but rather as “government expenditure”. Military spending is almost pure waste from an ecological perspective; it consumes mind-boggling amounts of fossil fuels in addition to causing death and destruction. The US military produces almost as much total carbon emissions as the entire country of Denmark.

In fact, the vast majority of private household expenditure in highly-developed countries is in the form of services—over $9.2 trillion in the US. The top four categories for expenditure on services in the US are housing/utilities, healthcare, finance, and food service. I can at least see how housing and utilities would be related to ecological impact—concrete and steel are very carbon-intensive, as is electricity if you’re not using nuclear or renewables. But healthcare, finance, and food service? When environmentalists point to the fact that 70% of our economy is consumption as evidence of the fundamental unsustainability of capitalism, this amounts to asserting that the reason we can’t prevent global warming is that there are so many nurses, accountants, and waiters.

Of course, most people don’t quite grasp what economists mean when we use the word “consumption”, so it makes for a nice talking point for environmentalists. You can conjure images of degradation and destruction while citing the respected authority of the National Income and Product Accounts. If you were already left-wing otherwise (as most environmentalists are), you can make it seem as though the problem is capitalism itself, the very structure of an economy built upon “consuming” the Earth.

In reality, there is enormous variation between countries in terms of their carbon efficiency, and in fact the most carbon-efficient nations are all those that have the highest degrees of political and economic freedom—which is to say, social democracies. One can debate whether social democracies like Denmark and Sweden are “truly capitalist”, but they definitely have free-market economies with large private sectors. On a global and historical scale, there’s really not that much difference between Denmark and the United States (compare to the USSR, or China, or Burkina Faso, or Medieval Japan, or Classical Rome). And if the US isn’t capitalist, who is?

My advice? Don’t talk about consumption at all. Talk about carbon emissions. Don’t ignore variation in GDP/carbon ratios: If the world copied China, we’d all have a per-capita income of $15,500 and emissions of 7.6 tons of carbon per person per year; but if the world copied Denmark, we’d all have a per-capita income of $51,000 and emissions of 6.8 tons of carbon per person per year. (Granted, even 6.8 is still too high; the targets I’ve seen say we need to be at about 3.0 by 2030. But Denmark has also been trending downward in emissions, so we could copy them on that too.) Reducing our standard of living wouldn’t save us if it meant being like China, and maintaining it wouldn’t hurt us if it meant being like Denmark.

I definitely agree that focusing on consumer choices isn’t good enough. Focus on policy. Carbon taxes, bans on unconventional extraction (e.g. offshore drilling, fracking), heavy investment in solar and nuclear energy, large reforestation projects, research into soil sequestration and ocean seeding. Demand these things from all politicians of all parties at all levels of government always. Don’t take no for an answer—because millions of people will die if we don’t stop climate change.

But I don’t think nurses, accountants, and waiters are the problem—and it doesn’t hurt for people to become vegetarian and buy hybrid cars.

You know what? Let’s repeal Obamacare. Here’s my replacement.

PNRJ heuristics and biases, public policy , , , , , , , , , , , ,

Feb 18 JDN 2458168

By all reasonable measures, Obamacare has been a success. Healthcare costs are down but coverage rates are up. It reduced both the federal deficit and after-tax income inequality.

But Republicans have hated it the whole time, and in particular the individual mandate provision has always been unpopular. Under the Trump administration, the individual mandate has now been repealed.

By itself, this can only be disastrous. It threatens to undermine all the successes of the entire Obamacare system. Without the individual mandate, covering pre-existing conditions means that people can simply wait to get insurance until they need it—at which point it’s not insurance anymore. The risks stop being shared and end up concentrated on whoever gets sick, then we go back to people going bankrupt because they were unlucky enough to get cancer. The individual mandate was vital to making Obamacare work.

But I do actually understand why the individual mandate is unpopular: Nobody likes being forced into buying anything.

John Roberts ruled that the individual mandate was Constitutional on the grounds that it is economically equivalent to a tax. This is absolutely correct, and I applaud his sound reasoning.

That said, the individual mandate is not in fact psychologically equivalent to a tax.

Psychologically, being forced to specifically buy something or face punishment feels a lot more coercive than simply owing a certain amount of money that the government will use to buy something. Roberts is right; economically, these two things are equivalent. The same real goods get purchased, at the same people’s expense; the accounts balance in the same way. But it feels different.

And it would feel different to me too, if I were required to actually shop for that particular avionic component on that Apache helicopter my taxes paid for, or if I had to write a check for that particular section of Highway 405 that my taxes helped maintain. Yes, I know that I give the government a certain amount of money that they spent on salaries for US military personnel; but I’d find it pretty weird if they required me to actually hand over the money in cash to some specific Marine. (On the other hand, this sort of thing might actually give people a more visceral feel for the benefits of taxes, much as microfinance agencies like to show you the faces of particular people as you give them loans, whether or not those people are actually the ones getting your money.)

There’s another reason it feels different as well: We have framed the individual mandate as a penalty, as a loss. Human beings are loss averse; losing $10 feels about twice as bad as not getting $10. That makes the mandate more unpleasant, hence more unpopular.

What could we do instead? Well, obviously, we could implement a single-payer healthcare system like we already have in Medicare, like they have in Canada and the UK, or like they have in Scandinavia (#ScandinaviaIsBetter). And that’s really what we should do.

But since that doesn’t seem to be on the table right now, here’s my compromise proposal. Okay, yes, let’s repeal Obamacare. No more individual mandate. No fines for not having health insurance.

Here’s what we would do instead: You get a bonus refundable tax credit for having health insurance.

We top off the income tax rate to adjust so that revenue ends up the same.

Say goodbye to the “individual mandate” and welcome the “health care bonus rebate”.

Most of you reading this are economically savvy enough to realize that’s the same thing. If I tax you $100, then refund $100 if you have health insurance, that’s completely equivalent to charging you a fine of $100 if you don’t have health insurance.

But it doesn’t feel the same to most people. A fine feels like a punishment, like a loss. It hurts more than a mere foregone bonus, and it contains an element of disapproval and public shame.

Whereas, we forgo refundable tax credits all the time. You’ve probably forgone dozens of refundable tax credits you could have gotten, either because you didn’t know about them or because you realized they weren’t worth it to you.

Now instead of the government punishing you for such a petty crime as not having health insurance, the government is rewarding you for the responsible civic choice of having health insurance. We have replaced a mean, vindictive government with a friendly, supportive government.

Positive reinforcement is more reliable anyway. (Any child psychologist will tell you that while punishment is largely ineffective and corporal punishment is outright counterproductive, reward systems absolutely do work.) Uptake of health insurance should be at least as good as before, but the policy will be much more popular.

It’s a very simple change to make. It could be done in a single tax bill. Economically, it makes no difference at all. But psychologically—and politically—it could make all the difference in the world.

Stop telling people they need to vote. Tell them they need to cast informed votes.

PNRJ education, ethics, public policy , , , , , , , , , , , , , , ,

Feb 11 JDN 2458161

I just spent last week’s post imploring you to defend the norms of democracy. This week, I want to talk about a norm of democracy that I actually think needs an adjustment.

Right now, there is a very strong norm that simply says: VOTE.

“It is our civic duty to vote.” “You are unpatriotic if you don’t vote.” “Voting is a moral obligation.” Etc.

The goal here is laudable: We want people to express the altruistic motivation that will drive them to escape the so-called Downs Paradox and actually go vote to make democracy work.

But the norm is missing something quite important. It’s not actually such a great thing if everyone just goes out and votes, because most people are seriously, disturbingly uninformed about politics.

The norm shouldn’t be that you must vote. The norm should be that you must cast an informed vote.

Best if you vote informed, but if you won’t get informed, then better if you don’t vote at all. Adding random noise or bias toward physical attractiveness and height does not improve electoral outcomes.

How uninformed are voters?

Most voters don’t understand even basic facts about the federal budget, like the fact that Medicare and Social Security spending are more than defense spending, or the fact that federal aid and earmarks are tiny portions of the budget. A couple years ago I had to debunk a meme that was claiming that we spend a vastly larger portion of the budget on defense than we actually do.

It gets worse: Only a quarter of Americans can even name all three branches of government. Almost half couldn’t identify the Bill of Rights. We literally required them to learn this in high school. By law they were supposed to know this.

But of course I’m not one of the ignorant ones, right? In a classic case of Dunning-Kruger Effect, nobody ever thinks they are. When asked to predict if they would pass the civics exam required to obtain citizenship, 89% of voters surveyed predicted they would. When they took it, only 17% actually passed it. (For the record, I took it and got a perfect score. You can try it yourself here.)

More informed voters already tend to be more politically engaged. But they are almost evenly divided between Democrats and Republicans, which means (especially with the way the Electoral College works) that elections are primarily determined by low-information voters. Low-information voters were decisive for Trump in a way that is unprecedented for as far back as we have data on voter knowledge (which, sadly, is not all that far back).

To be fair, more information is no panacea; humans are very good at rationalizing beliefs that they hold for tribal reasons. People who follow political news heavily typically have more distorted views on some political issues, because they only hear one side and they think they know but they don’t. To truly be more informed voters we must seek out information from reliable, nonpartisan sources, and listen to a variety of sources with differing views. Get your ideas about climate change from NPR or the IPCC, not from Huffington Post—and certainly not from Fox News. But still, maybe it’s worth reading National Review or Reason on occasion. Even when they are usually wrong, it is good for you to expose yourself to views from the other side—because sometimes they can be right. (Reason recently published an excellent article on the huge waste of government funds on building stadiums, for example, and National Review made some really good points against the New Mexico proposal to mandate college applications for high school graduates.)

And of course even those of us who are well-informed obviously have lots of other things we don’t know. Given my expertise in economics and my level of political engagement, I probably know more about politics than 99% of American voters; but I still can’t name more than a handful of members of Congress or really any state legislators aside from the ones who ran for my own district. I can’t even off the top of my head recall who heads the Orange County Water District, even though they literally decide whether I get to drink and take a shower. I’m not asking voters to know everything there is to know about politics, as no human being could possibly do such a thing. I’m merely asking that they know enough basic information to make an informed decision about who to vote for.

Moreover, I think this is a unique time in history where changing this norm has really become viable. We are living in a golden age of information access—almost literally anything you could care to know about politics, you could find in a few minutes of Google searching. I didn’t know who ran my water district, but I looked it up, and I do now: apparently Stephen R. Sheldon. I can’t name that many members of Congress, but I don’t vote for that many members of Congress, and I do carefully research each candidate running in my district when it comes time to vote. (In the next California state legislature election, Mimi Walters has got to go—she has consistently failed to stand against Trump, choosing her party over her constituency.)

This means that if you are uninformed about politics and yet still vote, you chose to do that. You aren’t living in a world where it’s extremely expensive or time-consuming to learn about politics. It is spectacularly easy to learn about politics if you actually want to; if you didn’t learn, it was because you chose not to learn. And if even this tiny cost is too much for you, then how about this? If you don’t have time to get informed, you don’t have time to vote.

Voting electronically would also help with this. People could, in the privacy of their own homes, look up information on candidates while their ballots are right there in front of them. While mail-in voter fraud actually does exist (unlike in-person voter fraud, which basically doesn’t), there are safeguards already in widespread use in Internet-based commerce that we could institute on electronic voting to provide sufficient protection. Basically, all we need to do is public-key signing: issue every voter a private key to sign their votes, which are then decrypted at the county office using a database of public keys. If public keys were stolen, that could compromise secret-ballot anonymity, but it would not allow anyone to actually change votes. Voters could come in person to collect their private keys when they register to vote, at their convenience weeks or months before the election. Of course, we’d have to make it user-friendly enough that people who aren’t very good with computers would understand the system. We could always leave open the option of in-person voting for anyone who prefers that.

Of course, establishing this norm would most likely reduce voter turnout, even if it did successfully increase voter knowledge. But we don’t actually need everyone to vote. We need everyone’s interests accurately represented. If you aren’t willing to get informed, then casting your vote isn’t representing your interests anyway, so why bother?

False equivalence is not centrism

PNRJ core principles, ethics, public policy , , , , , , , ,

False equivalence is not centrism

Feb 4 JDN 2458154

Turning and turning in the widening gyre

The falcon cannot hear the falconer;

Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world,

The blood-dimmed tide is loosed, and everywhere

The ceremony of innocence is drowned;

The best lack all conviction, while the worst

Are full of passionate intensity.

~ W.B. Yeats, The Second Coming


 Centrism is not very popular these days, but I believe this is because neither its alleged adherents nor its alleged opponents actually have a clear understanding of what centrism is supposed to be. Most of what is called “centrism” in this polarized era (the US is now more politically polarized than it has been in decades) is actually false equivalence.

Most people who express pride in their “centrism” adopt a heuristic which basically amounts to taking the two positions that are most loudly proclaimed in public and averaging them. One side says “Kill all puppies”, the other side says “Don’t kill puppies”, and they proudly and self-righteously declare that the only sensible policy is to kill precisely 50% of the puppies. Anyone who says “the two parties are the same” or “liberals deny science too” is guilty of this false equivalence—and it’s all too common.

But this is not what centrism is supposed to be. A good centrist isn’t someone who looks at their existing Overton Window and chooses the mean value. A good centrist is someone who understands and appreciates Horseshoe Theory. Horseshoe Theory says that the political spectrum is not actually a straight line from left to right; it’s more of a horseshoe shape, where the far-left and the far-right curl down and toward one another. A good centrist is someone who values the top of the horseshoe, more strongly than they value whatever particular policies might move you toward the left or the right edge.

What does the top of the horseshoe represent? Democracy.

A good centrist is someone who really, truly believes in defending democracy.

What the far-left and the far-right have in common is authoritarianism:

For those on either edge of the horseshoe, people who disagree with (the collectivization of all wealth/the superiority of my master race) aren’t simply wrong, they are evil. Persuading them to vote my way is a waste of time. Freedom of speech is dangerous, because it allows them to spread their evil ideas. It would be better to suppress freedom of speech, so that only people who know the truth (read: agree with me) are allowed to speak.

Along similar lines, Slate Star Codex recently published an excellent blog post on how people seem to separate into two very broad political worldviews: There are Mistake Theorists, who think that most of the world’s problems are due to honest ignorance and error; and there are Conflict Theorists, who think that most of the world’s problems are due to the malign influence of evil enemy factions. The far-left and the far-right are overwhelmingly composed of Conflict Theorists. A good centrist is a Mistake Theorist through and through.

Being a good centrist means fighting to defend the institutions that make freedom possible. Here is a whole list of policies that neither the far-left nor the far-right particularly values that we as centrists must:

  1. Voting rights: We must fight against voter suppression and disenfranchisement wherever it occurs. We must stand up to defend the principle “one person, one vote” wherever necessary.

  2. Equality under the law: We must protect the rights of everyone to have equal representation and equal standing as citizens—including, but by no means limited to, women, racial minorities, LGBT people, and people with disabilities.

  3. Election reform: We must find ways to undermine gerrymandering, the Electoral College, and the campaign finance system that allows corporations and wealthy individuals to exert disproportionate influence.

  4. Freedom of speech: We must protect the right of everyone to speak, including those whose views we find abhorrent. Our efforts should be focused most on those who have the least representation in our discourse.

  5. Individual privacy: We must fight against the creeping rise of the surveillance state and the use of extra-legal means of intelligence gathering, particularly in domestic spying. We should be outraged that the House of Representatives voted to extend the NSA’s warrantless wiretap authority after what Edward Snowden revealed about the NSA.

  6. Demilitarization and deincarceration: We must fight to contain or reverse the expansion of military and penal force that has given the United States not only a military larger than the next ten countries combined, but also the world’s highest rate of incarceration.

On some of these issues we might find agreement with the left or (less likely) the right—but even when we don’t, we must press forward. In particular, the goal of equality under the law often aligns with the goal of left-wing social justice—but there are cases where it doesn’t, cases where hatred of White straight men or a craving for vengeance against past injustice drives the left to demand things that would violate this principle. And the atavistic joy of punching Nazis in the face must never overwhelm our sacred commitment to the principles of free speech.

This doesn’t mean we can’t also adopt detailed policy views that align with the left or the right (or both). I for one support single-payer healthcare (left), progressive taxation (left), renewable energy (left), open borders (left), zoning reform (right), reductions in corporate taxes (right), free trade (right, or so I thought?), and a basic income (both—yet strangely we can’t seem to make it happen).

But being a good centrist means that these detailed policy prescriptions are always less important to you than the core principles of democracy itself. When they find out that the rest of the country is against them on something, a leftist or a rightist starts looking for ways to undermine the public will and get the policy they want. A centrist accepts that they have been outvoted and starts looking for ways to persuade the majority that they are mistaken.

Centrism is about defending the guardrails of democracy. False equivalence is not centrism; it is an obstacle to centrism. It prevents us from seeing when one side has clearly damaged those guardrails much more than the other. So let me come out and say it: At this historical juncture, in the United States, the right wing is a far greater threat to the core principles of democracy than the left. This is not to say that the left is inherently incapable of threatening democracy, or never will do so in the future; but it is to say that right here, right now, it’s the right wing we should be worried about. Punching Nazis will never be as threatening to the core of freedom as warrantless wiretaps or the discrediting of the mainstream press.