Category: Economics

Matters of money

What to do about climate change

Recently, I suggested that perhaps there is a division between ethical questions that are hard to answer and those where the answers are merely deeply inconvenient.

Something a bit similar is probably true of climate change policies. There are a few things we should obviously do, but many large questions outstanding.

Something clear: carbon pricing

For example, I think it’s clear that we need an economy-wide price on carbon. Every activity that produces greenhouse gas (GHG) pollution causes harm that isn’t reflected in its price. When you buy a car, or gasoline, or a laptop, or airline tickets, the cost should include some reckoning of how much harm is being done by the GHG pollution you are causing. As I mentioned before, the purpose of this extra cost isn’t to pay compensation to the victims, but rather to discourage the harmful behaviour. As such, the price on carbon needs to be set high enough to drive people to change their behaviour.

There are those who object to the idea of pricing carbon at all – often because they distrust capitalism and market mechanisms. I can understand the sentiment, but I think the urgency of climate change obligates us to develop mechanisms that are capable of working within the general systems we have. Carbon pricing fits the bill. (More on my fantasy climate policy is here).

Something uncertain: nuclear power

One question with no clear answer is what ought to be done with nuclear power. In a weird reversal of their stereotypical roles, The Economist is now calling nuclear power “the dream that failed” while George Monbiot is emphatically encouraging the British government to stick with nuclear because of the importance of cutting GHG pollution.

I have written before about the tricky balance involved in the nuclear decision (PDF). I don’t think the answer is clear. Nuclear power stations have certainly played a role in making GHG pollution levels lower than they would have been in a world without nuclear power. At the same time, nuclear power stations are dangerous, both in terms of accidents and the proliferation of nuclear weapons. In terms of cost, I still think the figures that are available are too contradictory and untrustworthy to be used as the basis for sound decision-making.

One shot

In the end, humanity only has one shot at this. We have one planet that we will warm to a greater or lesser degree and one global civilization that we will power to a greater or lesser degree in one way or another. We have options with varying levels of risk and types of risk (risks of doing nothing, risks of geoengineering, etc). Finally, we have governments that have largely failed to appreciate the seriousness of the issue, and a powerful assortment of industries dependent on fossil fuels that have been very effective at pressuring governments to do nothing major about the problem of climate change.

One way or another, the people who are young today will probably live to see which way the world will go. If we keep burning fossil fuels in the way we are now, the best science suggests that we are headed for a world more than 4°C warmer with sea levels several metres higher and other serious unpredictable effects. Alternatively, if we get serious about the multi-decadal project of decarbonizing the global energy supply, people who are young today may live to see the emergence of a global civilization that runs on renewable forms of energy within a stable climate.

P.S. I think the question of what individuals can most productively do in response to climate change is pretty clear: lobby your elected representatives. If you really want to focus on reducing your personal impact instead of changing the system, the best choice may be to travel less, eat less meat, and avoid having children.

Index tracker three years in

Three years ago, a discussion began on this site about which investments might do the best job of growing faster than the rate of inflation. It’s a pretty important question for anyone who hopes to attain a reasonable degree of financial security. Bank accounts, government bonds, and GICs all pay well below the rate of inflation, meaning that those who are prudent enough to set money aside actually pay a penalty for doing so.

Based on the way in which equities have consistently outpaced commodities and bonds over the last few decades, my guess was that a low-fee index-tracking mutual fund was probably the best bet for ordinary investors hoping to achieve growth at a reasonable level of risk.

I bought some units of the ING Direct Streetwise Balanced Growth Fund for $8.18 each on 20 May 2009. The unit price has since risen to $9.61 – an increase of 17.5% over three years, after fees. That almost certainly beats the pace of inflation, but I am not sure how it compares to alternative investments that could have been made at the same time. Given how much the price of gold has shot up lately, I suspect it would have been a better investment for the 2009-2012 span. That said, given that gold doesn’t actually produce any return, I suspect the index tracker will dramatically outperform it over a multi-decadal timescale. Time shall tell.

P.S. I really wish there was a low-fee index tracking option that didn’t include investments in the oil, gas, and coal industries. It is particularly troubling that every major Canadian financial institution seems to invest in oil sands development.

Timex Expedition

Recently, the Mondaine watch I got at the Museum of Modern Art in New York stopped working. It was under warranty, so I sent it to the address listed on the warranty card as an expedited parcel. It was returned to me as undeliverable.

While I am figuring out how to convey it to them, I got an inexpensive Timex Expedition watch as a replacement. I used very similar watches back in elementary school. I remember getting a new one every time the battery on one died, for about $40 apiece. They are about the same price now and – after a couple of days of using it – I can say that it is the best watch I have used in a while.

It has three alarms, and it very easily lets you set one for weekdays and one for weekends. It has an accurate chronometer and countdown timer. The controls are intuitive (or perhaps I remember from elementary school). You can press one button to display an alternate timezone (I have mine on GMT / UTC.). It has a big button on the front that makes it light up in an effective but unobtrusive way (much less annoying than checking your cell phone). And it’s good to 100m underwater – a position that if I ever reach, I will probably have already died reaching. It shows the time, day, date, and day of the week at a glance, and I think it takes less thought to comprehend the time expressed digitally. Analog watches always make me pause a moment to interpret them.

The watch is small and light and comes with a comfortable and reasonably attractive-looking strap. It definitely isn’t dressy, but it is highly functional and attractively priced.

We’re made of cheap stuff

As a child, I visited Vancouver’s Science World on what was probably a monthly basis. I knew most of the stage shows by heart (‘Arcs and sparks’ was the most energetic, complete with exploding pickle), along with the dramatic vocal introduction at the OMNIMAX theatre.

One display I remember well was located in the main atrium area. It was a scale that weighed you and then told you in a robot voice how much it would cost to buy lab-grade versions of all the chemicals that comprise you. It would say: “You contain $1.24 worth of carbon” or “You contain $0.03 worth of iron”. At the end, it said that you had a monetary value of X amount “give or take a few cents”.

In a way, the display illustrates that is remarkable about biology. You can take utterly mundane stuff – air and soil – and turn it into astonishingly complicated chemicals and structures, everything from the complex fragrances of flowers to DNA to the core of an oak tree to a human brain. Botany and plant cultivation are a kind of alchemy precisely because of how they allow the transformation of garden-variety raw materials into complex products. You can have all the materials necessary to make a wombat, but there is really no way to put them together in the right way unless you have a couple of fertile wombats on hand as well.

The same reality intersects with the practice of organ donation. Right now, a mass of a few kilograms located inside my thoracic cavity might be a highly-valuable liver or kidney. Without the benefit of a functioning circulatory and immune system – or, failing that, proper care and refrigeration – it becomes a near-worthless lump of meat in just a few hours. We’re made of cheap stuff; the added value is in the organization.

Ending drug prohibition

Earlier, I wrote about whether the phrase ‘greenhouse gas pollution’ is accurate, and whether it might be useful for building political will to do something about climate change. The phrase is accurate – CO2 is an unwanted by-product of various processes and it does harm to people all over the world – and it may be a useful way to remind people that ‘greenhouse gas emissions’ are a real problem that needs to be dealt with. It calls to mind phrases like “make the polluter pay [for the cost of cleaning up pollution]”.

I wonder whether a similar change in language might be helpful for opposing unreasonable drug laws. Mention ‘marijuana legalization’ and the eyes of the people around you will glaze over. They have heard the debate, they have their view, and they probably don’t care about it too strongly one way or the other.

Maybe we can do better by saying things like: “End marijauana prohibition” or “End the prohibition of drugs”.

People remember the prohibition of alcohol, the way it failed, and the problems it caused. It enriched organized crime and pushed alcohol use underground. It led to inferior and dangerous kinds of alcohol being sold. It cost tax revenues, crowded the prisons, and so on. All this is true of drug criminalization today. Most of the problems associated with drugs only exist because they are illegal, or are made much worse because they are illegal. Drug prohibition turns the drug trade into a violent, dangerous business and it turns ordinary people who use substances that are often more benign than alcohol or tobacco into criminals.

Al Capone was the natural consequence of alcohol prohibition. His successors created by the drug war may be less famous – and they may kill more people in Mexico than in Chicago – but their business has arisen for exactly the same reason, and operates according to the same logic. Stratfor describes what has been happening recently in Mexico as “a stalemate” “between the Sinaloa Federation, Los Zetas and the government” and argue that it has produced 50,000 deaths. That is more than 16 times the number of people killed in the terrorist attacks of September 11th, 2001. It’s about 6% of the number of deaths associated with the 1994 Rwandan genocide.

Ending drug prohibition just makes sense. It is both unethical and ineffective for governments to try to control what consenting adults do with their bodies. Their efforts to assert that control are doing demonstrable harm. Perhaps by speaking about the situation in terms of ‘ending prohibition’ rather than ‘legalizing’ this or that, the political debate can be moved forward just a little.

The government that hammers tent pegs up our noses

A pattern seems to have developed in the legislative politics of a certain northern country.

The people in power boast that they are going to do something dramatic but somewhat foolhardy: “Watch! I am going to hammer this tent peg up your nose!” or “Let’s make the census optional!” or “Let’s throw people in jail for harmless marijuana offenses!” or “Let’s allow the police and spies to watch everybody’s internet use!”.

After this declaration is made, both the political opposition and experts in the field bring up some of the very reasonable objections to the proposal: “What about my brain?” or “The whole point of a census is that everyone completes it” or “That’s pointless vindictiveness for a non-offence to society” or “That’s an insanely over-reaching way to catch only the stupidest criminal web users”.

But the issue has already become a matter of pride and honour for the government of the day, so they cannot back down or change plans. Occasionally, public and political opposition to the proposal are strong enough to stop it, at which point the government becomes bitter and petulant, stressing how everyone will need to live with the terrible consequences of not following the government’s plan. Often, however, they are able to circle up successfully around their bad idea and turn it into law.

This pattern of behaviour is likely to persist for as long as the opposition is leaderless and split.

Even those who favour the party in power probably realize that the political system only works properly when there is a credible opposition. If there is nobody else who looks capable of forming a government, there are few real checks on the power of the people in charge. That leads to them expressing their own psychological excesses and frustrations in ill-conceived legislation, which is bad for everybody.

Canada’s coinage

The way you treat different denominations of currency probably says something about both your temperament and about the relative values of different currency units.

When I get pennies, for example, I discard them at the first opportunity. Pennies just aren’t worth carrying around.

Dimes and nickels, I put in a big glass jar. In times of extreme cash need, I may pick out a bunch to buy some ramen noodles.

Quarters and loonies I save for laundry.

Twonies (Toonies?) I save for coffee.

I am pretty happy about the relative sizes of Canada’s denominations. It’s good that the more valuable coins are generally larger. I feel a bit like pennies are a waste at this point. I suppose how you feel about them depends on how many small cash transactions you undertake each day.

350.org oil sands petition

As usual, Bill McKibben is saying sensible things and calling for appropriate actions. He is a non-Canadian who is concerned about the ethics of digging up and burning the oil sands, in a world where the climate is changing at a frightening pace.

He is asking Canadians to sign a petition:

“As a Canadian, I stand with people all over the world who are opposed to burning the oil sands, and demand that our leaders stop their campaign to discredit the movement to stop the pipeline.”

Please consider signing. He is hoping to get 10,000 signatures before he visits Vancouver in March.

Ironic liberal / big government libertarian

When I think about how to characterize my political views, it seems as though there are philosophical positions that I find appealing, but which need to be tempered in response to the strong counterarguments against them.

Ironic liberalism

I can see the sense in what Richard Rorty calls ‘ironic liberalism’. All that old-fashioned stuff about the rights of human beings deriving from god is woefully out of date. All the evidence we have suggests that there is no god (or, if there is, that it is a malicious or indifferent entity). Furthermore, the conversation in political philosophy has largely abandoned theological justifications. Now, we don’t have a terribly convincing story about where rights come from. That being said, I think it is clear that treating people as bearers of rights is a good way of ordering the world. As I understand it, ironic liberalism is about taking that observation and running with it. We have no fundamental reason for believing that people have rights, but the world seems to work better when we act as though they do – so let’s act that way, and let the feelings and consequences follow. Let’s take it seriously when someone asserts that they have a right to do something or have something provided for them (though, upon reflection, we may disagree with their claim). Similarly, we should take it seriously when someone asserts that their rights have been violated.

Rights are not an inherent property of the universe, but they are a good concept that allows us to evaluate the rightness or wrongness of different kinds of human interaction.

Big-government libertarianism

In my experience, libertarians say two kinds of things: rather convincing ones, and exceptionally stupid ones.

A good example of the first case is: “People should have the right to do what they wish with their bodies”. I don’t think it’s an absolute right, necessarily, and I realize that there are situations where people can be pressured into acting against their own best interests. That being said, the general principle that people have a greater interest in their bodies than anybody else – and that our bodies can realistically be thought about as our own property – seems convincing to me.

This general libertarian strand, which asserts that we should be free to make choices as we like so long as they do not harm other is both convincing and politically pertinent. It is connected to debates on topics like drug policy and legislating morality.

A good example of a stupid thing libertarians say is: “We don’t need to regulate health or the environment, because the market will handle it”. Without government regulation, I am sure the abuses committed by corporations and individuals agains their fellow citizens would be hugely more severe. Nuclear power plants would probably routinely dump radioactive waste directly into rivers; sugar pills would get sold as essential medications; the most awful stuff would end up in the meat people buy; and problems like climate change and ozone depletion would be totally ignored, at least until they became incredibly extreme.

Libertarians simply fail to understand how willing people are to act in a selfish way that is harmful to their fellow human beings. The allure of the quick buck at somebody else’s expense is considerable, as demonstrated by much of human history.

We need government to act as a fair dealer, and as an entity that thinks about the long term. Government needs to do things like recognize when dangerous excesses are building up in the economy – whether they take the form of frothy stockmarket conditions, bubbles in property values, or overly rapid inflation. We need a government that acts as an effective intermediary between individuals and large, powerful entities like corporations. We also need a government that keeps itself honest, by having mechanisms to prevent the capture of politicians or civil servants by the industries that they are meant to regulate.

We also need government to provide things that are good for society as a whole, but which individuals are usually unwilling to provide. This includes assistance to the sick, mentally ill, homeless, and so on. It includes education for everybody and fair access to the legal system. We need to have a government with the resources to perform these tasks well. That is partly because it is good for everybody when these kinds of public goods are provided. It is also because the provision of such goods is necessary to respect the rights of individuals (even if those rights are just a highly convenient fiction).

To summarize, we should take rights seriously even if we cannot say with an entirely straight face that they even exist. At the same time, we should be libertarians who truly recognize the essential and unique role played by government and who are happy to make the contributions in terms of time, taxes, and political participation that it takes to keep an effective government operating.

Open-source Mac software

There seems to be some useful software here: Open Source Mac – Free Mac software, all open-source, all OS X.

For the unfamiliar, open-source software is software where the authors provide the underlying computer code to everybody. That lets you examine how it really works, compile it to run on a range of machines, and make custom modifications.

Much open source software is free.

P.S. While I am appreciative of free and open-source software, there are a few pieces of commercial software that I really wish I could buy for a bit less money: the latest version of Photoshop, a copy of Office for my laptop, a commercial version of PGP, etc. EndNote would also be useful, as I ramp up research for my doctoral thesis.