Economics – Page 127 – a sibilant intake of breath

Starting over from 1769

In 1769, James Watt invented a steam engine that worked well enough to be widely adopted by industry. By doing so, he effectively kicked off the industrial revolution: with coal-fed steam engines emerging as the first alternative to animal power that didn’t depend on being beside a river or on a windy ridge. As the recently concluded conference in Bali shows, there were consequences of that invention and the series of successor ideas it kicked off that could not have been anticipated at the time (though Svante Arrhenius identified the possibility of CO2 causing anthropogenic warming back in 1896).

If we could do the whole thing over, what would we do differently? For the purposes of this thought experiment, imagine that we know about the ecological consequences of fossil fuel based industrialization, but we don’t have access to specific knowledge about how to build 21st century engines, power plants, etc. We know about ozone and CFCs, about heavy metal poisoning and nuclear waste. We do not know how to build a modern wind turbine or supercritical coal plant. We have just learned how to build Watt’s engine, and know nothing more.

I think it is virtually certain we would still choose to kick things off with coal and steam, even if we had the best interests of all future generations in mind. At the outset, the benefits of that kind of industrialization accrue both to those alive and to those who will come after. These benefits include many of the bits of technology that make our lives so much longer, healthier, and leisure-filled than those of the vast majority of our forebears. The idea that life in a pre-industrial society was somehow superior is plainly contradicted by archaeological data: you can argue that people were somehow happier while living with constant parasites and disease and dropping dead at thirty, but it is a lot more credible to argue the converse.

What, then, would we do differently? We would invest differently – putting a lot more effort into the earlier development of non-fossil options. We would probably try to limit population growth. Aside from some relatively minor cases like ozone depleting CFCs, it isn’t clear that we have made a great many straightforward ecological mistakes. Rather, the fundamental problem seems to be that of scaling: too much being demanded of the natural world, in conditions where individuals make choices that do not give due consideration to the welfare of their fellows and of future generations.

While future technologies like carbon capture and storage could play a significant role, the most important elements of an effective climate strategy have existed for a century. Fossil fuel generation capacity must be phased out and replaced with renewable options; transportation needs to to shift to low-carbon and eventually no-carbon forms; the forests and other carbon sinks must be protected and enhanced; and capacity to adapt to change must be developed. While the specific approaches we take in relation to these strategies could benefit from more knowledge about the future, their basic outline is already plain.

Now that we can no longer claim – as a society – to live in a state of deprivation, we have no excuse for continuing to rely upon the descendants of Watt’s machine.

Salmon farming and sea lice

Recent work by Martin Krkosek of the University of Alberta has demonstrated strong links between the practice of salmon aquaculture and the incidence of sea lice infestations that threaten wild populations. One study used mathematically coupled datasets on the transmission of sea lice (Lepeophtheirus salmonis) on migratory pink (Oncorhynchus gorbuscha) and chum (Oncorhynchus keta) salmon. They concluded that:

Farm-origin lice induced 9–95% mortality in several sympatric wild juvenile pink and chum salmon populations. The epizootics arise through a mechanism that is new to our understanding of emerging infectious diseases: fish farms undermine a functional role of host migration in protecting juvenile hosts from parasites associated with adult hosts. Although the migratory life cycles of Pacific salmon naturally separate adults from juveniles, fish farms provide L. salmonis novel access to juvenile hosts, in this case raising infection rates for at least the first 2.5 months of the salmon’s marine life (80 km of the migration route).

Packing fish together in pens that are open to the sea is an almost ideal mechanism for breeding and distributing parasites and disease. In nature, you would never find salmon packed 25,000 to an acre. Keeping them in such conditions – and making them grow as quickly as possible – generally requires chemical manipulation. The earlier discussion here about antibiotic use and its role in the emergence of resistant bacteria is relevant.

These concerns also exist in addition to the fundamental reason for which fish farming cannot be sustainable: it relies on catching smaller and less tasty fish to feed to the tastier carnivorous fish that people enjoy. It thus lets us strip the sea bare of salmon or cod or trout and compensate for some period of time by using cheaper fish as a factor for their intensive production. Given that those cheaper fish are caught unsustainably, however, fish farming simply delays the emergence of truly empty oceans. And the industry is trying to have farmed salmon labelled ‘organic.’ Ludicrous.

Source: Krkosek, Martin et al. “Epizootics of wild fish induced by farm fish.” Proceedings of the National Association of Sciences. October 17, 2006, vol. 103, no. 42, 15506-15510.

P.S. Shifting Baselines also has some commentary on sea lice and salmon farming.

Rejecting Canada’s new copyright act

As a student, I was constantly being called upon to support various causes, through means ranging from making donations to attending rallies. Usually, such activities have a very indirect effect; sometimes, they cannot be reasonably expected to have any effect at all. Not so, recent protest activities around Canada’s new copyright act: a draconian piece of legislation that would have criminalized all sorts of things that people have legitimate rights to do, such as copying a CD they own onto an iPod they own.

Defending the fair use of intellectual property has become a rallying point for those who don’t want to see the best fruits of the information revolution destroyed by corporate greed or ham-fisted lawmaking in the vein of the much-derided American Digital Millennium Copyright Act. At their most controversial, such acts criminalize even talking about ways to circumvent copyright-enforcement technology, even when such technology is being mistakenly applied to non-copyrighted sources: such as those covered by the excellent Creative Commons initiative or those where fair use is permissive for consumers. Watching a DVD you own using a non-approved operating system (like Linux) could become a criminal offence.

For now, the protests seem to have been successful. Of course, the temptation for anyone trying to pass a controversial law is to hold off until attention dissipates, then pass it when relatively few people are watching. Hopefully, that will not prove the ultimate consequence of this welcome tactical victory for consumer rights.

Trains and buses

Commenting on the possibility of Seattle installing a streetcar system, Dan Savage has argued: “People like trains. People hate buses.” Though public transportation policy is hardly his area of expertise, he does understand how people think and he is able to express himself forcefully and directly. On some level, it is definitely true. I like trains and subways. In London, I took the subway all the time; not once did I ever take a bus. Taking the train from Oxford to London feels like a luxury; taking the bus feels like a jerky, tedious chore.

In Heat, George Monbiot argues that the solution is to make buses nicer: cleaner, newer, and with attractive add-ons like wireless internet. He also argues that inter-city buses should avoid city centres, with all the nightmares of traffic and fiddly intersections they inevitably involve. While that would improve point-to-point travel in the UK, it doesn’t really reveal the reasons for which buses are treated with everything from moderate dislike to outright disdain. Is it a class issue? Lisa Simpson called the bus “”the chariot of the poor and very poor alike.” Is it a practical matter of comfort and efficiency, as Monbiot describes? If so, can it be overcome through practical measures like those he suggests. Are buses doomed to forever be an inferior good?

It is generally recognized that increasing bus services is the cheapest way of expanding public transport – both in terms of capital considerations and overall lifetime costs. That said, if transit use is significantly hampered by the dislike people feel for buses, perhaps alternatives should be more strongly considered. Arguably, this is especially true when it comes to people who have the financial means to use a car instead. If they get driven off the public transit system as soon as they hit that level of affluence, the system remains dominated by users without a great deal of political influence. In an argument akin to those about two-tier healthcare, it is possible that the self-exclusion of the wealthy from the public system perpetuates mediocrity.

One way or another, we need to hope that the private vehicle is reaching its apex in human history. Even with the eventual development of electric vehicles and other low or zero-emission options, the sheer amounts of space and resources devoted to producing and maintaining private transportation infrastructure are probably not sustainable. Given that it will be politically impossible to drag people from their cars kicking and screaming, we need to think seriously about how to encourage voluntary shifts to public or non-motorized transport. Better bike infrastructure and public transit seems crucial tot that campaign.

Positive externalities and the environment

When you see “environment” and “externality” in the same sentence, it is a safe bet that the issue being discussed is negative externalities associated with production or consumption. These are certainly critical, but they are not the only area in which environmental thought and economic theory on externalities intersect. The positive externalities associated with new technologies also bear consideration. When a firm or individual invents something that provides major overall benefits, many of those will accrue to other people. This is good from the perspective of those able to benefit from the new technologies, but it is theoretically bad for innovation overall. If I suspect that most of the gains for my new engine, battery, or vaccine technology will accrue to other people, I will not devote as much of my time and resources to developing such innovations as I would if I believed I would personally get all the benefits.

As with intellectual property rights in general, the issue of balance here is a critical and difficult one. We want to encourage people to design and build better solar cells, wind turbines, and power plants. They could arguably be best encouraged to do so by giving them extensive property rights over what they come up with: lengthy patents and the right to collect royalties from all users. That said, such a restrictive system could sharply limit distribution. Once we have a good technology, we want to see it widely deployed – including in places where people have urgent sustenance needs and cannot be fairly called upon to pay heavy royalty fees.

One established way to square this circle is with prizes. The X-Prize assisted the development of (highly greenhouse gas intensive) private space technology. Prizes may also be used successfully to encourage the development of vaccines and treatments for poor world diseases like malaria. Richard Branson has created a prize for straight-out-of-the-air carbon capture. A few big prizes for things like lowering the cost and efficiency of renewable power sources might help to overcome institutional hesitation within innovative firms, as well as get some clever people tinkering in their garages.

The existence of positive externalities associated with new technology also provides strong justification for other governmental interventions: including direct government research and governmental support for private and academic efforts. Internalizing the full costs of pollution is exceedingly important if we aim to achieve environmental protection within a free market system; internalizing the benefits of innovation may also help to bring that about.

For a much more detailed discussion, see: Jaffee, Adam et al. “A tale of two market failures: Technology and environmental policy.” Ecological Economics. Volume 54, Issues 2-3, 1 August 2005, Pages 164-174.

Boomtowns and bitumen

Since 1999, the population of Fort McMurray has nearly doubled. Primarily, this is on account of the oil sands: unconventional petroleum reserves whose exploitation is being driven by high prices and geopolitics. The demand for labour is dramatically increasing its price, both directly and indirectly. Apparently, inexperienced truck drivers can expect to make $100,000 per year. Shell has also just opened a 2,500 unit housing complex for its oil sands employees, part of their $12 billion in local infrastructure spending.

With oil around $90 a barrel and the atmosphere still being treated as a carbon dump, this is not terribly surprising. That said, such projects are certain to develop increasing momentum of their own. Once they bring enough jobs and money, they are hard for a provincial government to not support – especially if many of the environmental costs are being borne by people outside the province or by future generations. Internalizing environmental externalities through taxation or regulation becomes progressively more difficult as the incentive of certain parties to preserve the status quo increases. Such asymmetries are likely to give oil sands development a harmful legacy in terms of general policy development, in addition to its climate change effect and local environmental impacts.

Materialism

The terms ‘materialism’ and ‘materialist’ seem to be popularly misunderstood. As such, it bears mentioning that there are two wildly different interpretations of what these terms mean.

Perhaps the more common interpretation is based around a desire for material possessions. In this view, a ‘materialist’ is someone who continually wants to own more things.

A much more interesting definition holds that being a ‘materialist’ means that you believe everything in the universe is made of comprehensible materials, interacting with each other on the basis of laws we can understand. This viewpoint definitely raises important questions in philosophy – and potentially lethal ones in theology – it is also much more worthy of consideration than the fact that neighbour X might want a bigger car than neighbour Y.

Meat and antibiotics

Quite a while ago, I wrote about connections between human disease and the factory farming of animals. Recently, some new observational data has supported the link between the two. In the Netherlands, a new form of the superbug MRSA has emerged. It is strongly resistant to treatment with tetracycline antibiotics: a variety heavily used on livestock. The animals need the drugs because they are kept in such appalling conditions (unhygienic and constrained) that they would get infections too easily otherwise.

Xander Huijsdens and Albert de Neeling found that 39% of pigs and 81% of pig farms in the Netherlands were hosts to the potentially lethal antibiotic resistant bacteria. People who came into contact with pigs were 12 times more likely to contract this form of MRSA than members of the ordinary population; those who come into contact with cattle are 20 times more susceptible. The strain has since been found in Denmark, France, and Singapore. A study conducted by the University of Guelph found the strain in 25% of local pigs and 20% of pig farmers.

Maintaining the effectiveness of antibiotics for the treatment of people is highly important for human welfare. Antibiotics are one of the major reasons why modern medicine is valuable: they help people die dramatically less often after childbirth and surgery than was the case before their development. They have also helped to make diseases that would formerly have been probable death sentences treatable. The fact that we are allowing farms to deplete their value so that they can produce meat more cheaply (by forcing more animals closer together in less clean conditions) seems profoundly unwise. In Pennsylvania, legislators have even banned farmers who produce hormone and antibiotic milk from saying so on their packaging – on the grounds that it would make consumers unduly worried about the other milk on offer.

McKinsey climate change study

McKinsey – a major consultancy – has released a report (PDF) on the costs of reducing greenhouse gas emissions in the United States. The general conclusion is a familiar one: that existing technologies and emerging technologies with a high probability of success can collectively reduce emissions by a very considerable degree at modest cost. Specifically, the study argues that 3.0 to 4.5 gigatonnes of CO2 equivalent can be averted by 2030, at marginal costs of under US$50 per tonne. Business as usual would see present emissions of 7.2 gigatonnes grow to 9.7 gigatonnes by 2030: almost twice what the whole planet can handle.

The executive summary linked above is well worth reading, as it is rich with detail. It stresses how abatement will not happen through a few big changes: many thousands of emitting activities must be incrementally reformed. That said, 40% of the abatement they describe would actually save money in the long term (for instance, by replacing existing systems with more energy efficient varieties).

Perhaps the most interesting element in the whole report is the abatement curve on the fifth page of the executive summary. It ranks a collection of mitigation activities from those that produce the highest level of economic benefit per tonne to those that are most costly. For instance, increasing the efficiency of commercial electronics could save $90 per tonne of CO2 equivalent. Other win-win options include residential electronics, building lighting, fuel economy standards for cars and trucks, and improvements to residential and commercial buildings. Cellulosic biofuels are net winners, though of a lesser magnitude, as is changes to soil tillage to boost the strength of carbon sinks. The most expensive abatement options include carbon capture and storage, the use of solar electric power, and the use of hybrid cars (the single most expensive option listed).

This is quite an encouraging view. Achieving substantial reductions within a developed economy for under $50 a tonne is promising in itself. It also suggests that international abatement prices could be even lower, given how insane things like tropical deforestation are from an economic perspective, once climate change is taken into account.

One Laptop Per Child

People who do not spend half their lives on the internet may not have heard about the One Laptop Per Child Program. This non-profit initiative has produced an inexpensive laptop meant to be used as an educational tool by children in the developing world. The device has been reviewed by the New York Times and, while it is limited in some ways, it seems to serve its intended purpose very well. Furthermore, it does some things that no other available laptop can, such as on-the-fly mesh networking: where computers close together automatically link up, allowing internet connections to be shared and collaboration within applications. It uses a $10 battery that is good for four times more charges than a normal laptop battery, while also providing six hours of power with the screen’s backlight engaged or 24 hours without. The machines also have built-in video cameras and microphones.

Through the ongoing Give One, Get One promotion, people can spend $400, receive one laptop for themselves, and donate one to a child in the developing world. Needless to say, one of these would make an amazing Christmas gift for a young person (the keyboard is apparently too small to be used comfortably by adults). Dust-proof and spill-proof, these things seem to be safe in the hands of the average child. Not only do they come with some very neat software, they really embrace the philosophy of letting children learn how it all works. One button reveals the code behind any website or program being used on the machine: potentially breeding a new generation of skilled programmers.

That last part is important. Some people have argued that laptops are hardly a priority in a world where people lack access to the basic requirements of life. In many places, that is certainly true. At the same time, having access to technology of this kind can help both individuals and societies push themselves along the path to development. It is more rewarding and sustainable, in the long run, to do that through the accumulation of expertise and skill than by continuing to rely upon what can be caught in nets, cut down, or dug out of the ground.