Cross-posted from Legal Planet.
Deregulation is one of Mitt Romney’s five steps in his plan to add jobs. But how do we supposedly know that deregulation will add jobs? It’s a fascinating story, featuring a Nobel laureate’s economic model. The model is very fancy, lots of complex math, but it’s justified on the basis of a discredited study.
The story begins with a new white paper from the Romney campaign. Four leading economists attempt to provide an explanation of the campaign’s job claims. In terms of deregulation, the white paper says, “Recent research by Ellen McGratten and Nobel laureate Edward Prescott concludes that higher regulatory costs reduced both R&D and fixed investment during the financial crisis and its aftermath; and regulations continue to increase.” So getting rid of regulations will increase jobs, apparently. This one paper is the sole basis given for the Romney claim (along with some figures about the length of the Federal Register.) As it turns out, even if the paper were valid, it would really only show that regulatory costs might have contributed to the recession. But let’s move on to the paper itself.
I was definitely curious about McGratten and Prescott, and after a bit of a search I was able to find their paper. Their model is based on real business cycle theory, which holds that economic ups and downs are caused by unexpected shocks to the economy rather than internal factors like collapsing financial markets or technology bubbles. McGratten and Prescott argue that a “key factor” involved in the recession was the diversion of capital to meeting rising regulatory costs under Obama. (On its face, this seems a bit implausible since the recession began before Obama was in office, it hit a lot of other countries besides the U.S. that aren’t subject to U.S. regulations, and it’s been getting better even though more regulations are being created. But I’m not a Nobel-prize winning economist, so I guess I get more easily fixated on inconvenient facts.)
Full textCross-posted from Legal Planet.
Obesity is an environmental issue because the food system (from farm to table) uses a lot of energy and produces significant water pollution. More food equals a bigger environmental footprint. Sweetened soft drinks are a good example: they use corn sweetener, and corn production has a large footprint because so much fertilizer is required. There is a growing epidemic of obesity and of childhood obesity in particular.
The New Scientist has a very thoughtful review of the evidence regarding the connection between sweetened soft drinks and obesity. The evidence is mixed, but favors the existence of a link — especially if you exclude studies financed by the food industry or by researchers with other close ties to the industry. So there’s some reason to think that New York’s recent ban on supersized soft drinks may reduce obesity. That would be good for the environment, and good for the health of the individuals involved. However, it’s not a slam dunk in terms of proof of causation.
What about personal liberty? It’s at least irksome for the government to tell us what size drink we can order, though I find it hard to believe that it strikes at the heart of personal freedom. (I guess that’s part of why I’m not a libertarian.) On the other hand, as New York’s mayor has pointed out, you can still drink just as much soda if you’re willing to order two drinks instead of one. And many of the consumers are probably minors whose liberty is more constrained, though one might argue that the government would do better to try to educate parents. Of course maybe this drink regulation is just the first step on a slippery slope, and eventually the government will force us all onto a diet of unseasoned tofu! Another reason I’m not a libertarian is that I think it’s a bit premature to worry about this possible slippery slope. ( As long as we’re making a list, a third reason is that, unlike a certain vice presidential candidate, I outgrew Ayn Rand’s pop version of Nietzsche in high school.)
Overall, New York’s effort strikes me as a useful experiment which could shed light on the causal link between sugary drinks and obesity. It would be nice, however, if some other jurisdiction would try an alternative instrument such as a tax on sugary soft drinks or some other market mechanisms, for comparison purposes.
Full textBen Somberg posted here recently about the Republican platform and the environment. He noted that the platform uses a discredited estimate of regulatory costs, calls for making environmental regulations into guidance documents for industry, and proposes a moratorium on new regulations for the indefinite future.
Unfortunately, that’s only the tip of the iceberg. If you can think of an anti-environmental measure proposed by any Republican since Reagan took office, there’s a good chance you’ll find it tucked away somewhere in this platform. Since there are so many of them, it’s helpful to organize the proposals into four bins: (a) regulatory reform; (b) climate change and energy; (c) wildlife, water and property rights; and (d) enforcement.
Regulatory Reform. As Ben noted, the platform calls for a moratorium on all new regulations pending White House review of all existing ones. New regulations will also be difficult to enact, if and when the White House review ever concludes. The platform would require congressional approval for all new major rules. The overall goal is to shift the balance away from the environment: “Reining in the EPA” is critical, and we need to put increased weight on “economic development and private property rights,” as compared with health and safety. In short, “The bottom line on regulations is jobs,” not protecting workers from on-the-job hazards, not protecting consumers from defective products, not protecting people who breathe from polluted air, and so on.
Climate Change and Energy. The platform would prohibit EPA regulation of greenhouse gases, and pledges to resist any possible new cap-and-trade law. For the nuclear industry, the platform promises faster processing of pending applications for new plants and more proactive search for permanent waste disposal. The real emphasis is on encouraging the fossil fuel industry, with more drilling offshore, in ANWR, and on federal lands; approval of the Keystone pipeline; leaving regulation of fracking to the states, and encouraging coal production by ending “the EPA’s war on coal.” Mass transit is apparently getting too much funding for the GOP’s taste: highway funds should be used only for highways, rather than transit, and we need to reassess California’s “high-speed train to nowhere,” as it refers to a train linking Los Angeles and San Francisco. (Which one of those is "nowhere"?) In order to speed energy and other projects, the Platform says, we need to limit current requirements for environmental impact statements. If you were to just ask what measures would most benefit the fossil fuels sector, you could do a pretty good job of figuring out the platform’s proposals.
Full textCross-posted from Legal Planet.
There has been considerable discussion of Governor Romney's views about the causes of climate change and about policies such as cap and trade. It's not easy, however, to find detailed documentation. For that reason, I've assembled as much information as I could find about what Romney has said and done over the years, with links to sources (including video or original documents when I could find them).
Jan. 2003. Romney takes office as Governor of Massachusetts.
July 21, 2003. In a letter to New York Governor George Pataki, Romney says : “Thank you for your invitation to embark on a cooperative northeast process to reduce the power plant pollution that is harming our climate. I concur that climate change is beginning to effect on [sic] our natural resources and that now is the time to take action toward climate protection. . . . I believe that our joint work to create a flexible market-based regional cap and trade system could serve as an effective approach to meeting these goals.”
Jan. 2004 to July 2005. “During his first 18 months as governor of Massachusetts, Mitt Romney spent considerable time hammering out a sweeping climate change plan to reduce the state's greenhouse gas emissions.” (L.A. Times).
Full textCross-posted from Legal Planet.
On Tuesday, the D.C. Circuit decided American Petroleum Institute (API) v. EPA, an interesting case dealing with nitrogen oxide (NO2) levels. The standard is supposed to include a margin of safety.Under the Clean Air Act, EPA sets National Ambient Air Quality Standards (NAAQS) for airborne substances that endanger human health or welfare. EPA set such a standard for NO2 in 1971 and finally got around to revising the standard in 2010.
The innovation in the new NO2 standard is that it’s a one-hour standard covering peak exposures, and all air monitors in an area must hit the standard. The previous standard was an annual average, so local, temporary peaks could be quite a bit higher. The evidence showed that the earlier average standard did not protect people against respiratory problems from spikes in nitric oxides, particularly if they were near freeways.
Two industry groups sued to overturn the new standard, but it was unanimously upheld by a panel containing two very conservative judges and one more liberal one. The court was distinctly unimpressed by the industry claims. In response to a claim that EPA violated its own rules because it relied on a study that wasn’t peer-reviewed, the court wrote, “Perhaps the API should have had its brief peer-reviewed.” The court faulted the industry brief for deleting crucial language when quoting an EPA document, among other errors.
Full textCross-posted from Legal Planet.
In some situations, voluntary efforts leads other people to join in, whereas in others, it encourages them to hold back. There’s a similar issue about climate mitigation efforts at the national, regional, or state level. Do these efforts really move the ball forward? Or are they counterproductive, because other places increase their own carbon emissions or lose interest in negotiating?
A common sense reaction is that every ton of reduced carbon emissions means one less ton in the atmosphere. But things aren’t quite that simple. If we mandate more efficient cars, a number of other things might happen besides the immediate drop in emissions per mile: people might increase their driving because they don’t have to pay as much for gas; the same number of less efficient cars could be sold, but in other countries; or the reduced demand for gas might lower prices, leading to higher gas sales somewhere in the world. Other countries might feel that if we’re cutting emissions they can wait a little longer to address the issue.
There are also many reasons why our program might reduce emissions elsewhere. Automakers might prefer to produce the same models for multiple markets, here and elsewhere. Or the new technology may be appealing to consumers in other places. Other places might see our regulations and decide to copy them. And seeing that we are taking action could increase confidence that a bargain can be reached, improving prospects for negotiations.
There’s necessarily an element of speculation in all of this. We can’t run experiments in which sub-global mitigation takes place on some planets while others do nothing pending a global agreement. In a recent paper, I’ve tried to look at what limited evidence and modeling seems relevant. On balance, the optimistic view seems more plausible. Acting locally while thinking globally may not be the ideal strategy, but it’s the best we have right now.
Full textCross-posted from Legal Planet.
The Romney website portrays regulation as a huge drag on the economy. But it can’t decide who’s to blame. Is it all Obama’s fault? Or not just Obama, but a whole succession of Presidents, many of them presumably Republicans? Or is it bureaucrats who have overpowered all of these Presidents? The website goes around in circles, embracing each of these theories even though they contradict each other.
The website begins by placing the blame on developments during successive Presidencies — presumably that includes at least Obama and Bush, since “successive” implies at least two in a row. (Poor W, now taking the rap for having a pro-regulation Administration!)
But the website has another theory, too, which contradicts the first one. According to this second theory, the problem isn’t caused by Presidents at all, not even Obama. Instead, the root of the problem is that “federal agencies today have near plenary power to issue whatever regulations they see fit” with “little or no presidential oversight.” Presidents aren’t really to blame, then.
But the website doesn’t stick to this theory. It says that the worst example of bad regulation is the “Obama administration’s war on carbon dioxide.” Note that now it’s Obama’s fault, not the bureaucracy’s.
Full textCross-posted from Legal Planet.
It got less attention than it should because it was upstaged by the Supreme Court’s healthcare decision, but last week’s D.C. Circuit ruling on climate change was almost as important in its own way. By upholding EPA’s regulations, the court validated the federal government’s main effort to control greenhouse gases. To the extent that the case got public attention, it was because the court affirmed EPA’s finding that greenhouse gases endanger human health and welfare. However, I want to focus on a much more technical, but practically very important question about the scope of the EPA regulations. Specifically, the issue is whether EPA was correct that the Clean Air Act unambiguously requires sources emitting more than certain amounts of greenhouse gases to use best available control technologies, even if they did not exceed threshold levels for conventional pollutants. What follows is necessarily technical, although I’ve tried to explain the issues so that interested non-lawyers can follow the discussion.
Some background is necessary to even understand the issue. As a key source of regulatory authority for regulating greenhouse gases, EPA has relied on the PSD (Prevention of Serious Deterioration) section of the Clean Air Act. The statute requires EPA to set air quality standards for certain key pollutants, the so-called criterion pollutants. The PSD provisions apply to areas in which those standards have been met for a particular pollutant. There are special requirements for new sources in such areas.
This brings us to the question of what any pollutant means. There are two relevant sections of the statute. First, under section 165, any “major source” must use the “best available control technology for each pollutant subject to regulation under this chapter.” Second, under section 169, a major source is defined as one that emits more than specified amounts of “any air pollutant.”
Full textFollowing is the first of two Dan Farber blog entries reposted today from LegalPlanet.
Bureaucrats aren’t very popular. But consider the alternatives when it comes to dealing with environmental problems. Basically, bureaucrats are part of the executive branch of government. For instance, the head of EPA is appointed by the President and can be removed by the President at any time. (A few agencies such as the SEC enjoy some protection from presidential removal power, but that’s not true for any of the environmental agencies.) I explained in my last post why the free market won’t generally solve environmental problems. So that leaves the three branches of government: the courts, the executive branch, and Congress.
Most people who don’t like regulations also don’t like the idea of using courts to solve social problems. In the case of environmental problems, the reluctance is well-founded. Major pollution problems involve very technical scientific and engineering issues, complex economics, and hard tradeoffs. Courts don’t have great expertise in any of those areas. In addition, the practicalities of mega-cases involving millions of plaintiffs and dozens or hundreds of pollution sources are more than a little daunting.
If not the courts, how about Congress? There is a school of thought that Congress should set more specific standards rather than giving EPA the authority to translate general policies into specific numbers. That would reduce EPA’s policy role, but would leave EPA with a big enforcement role much like the IRS’s. How many people who hate EPA love the IRS?
It’s also doubtful that Congress could work out the specific numbers — unless, that is, it developed a staff with just as many engineers, scientists, economists, and other experts as EPA has. In that case, Congress would essentially have its own in-house EPA. The only difference would be that essentially the same people would report to Congress rather than the President. Given that both Congress and the President are elected by the same voters, it’s hard to see any big advantage to the shift.
Full textThe following is the second of two Dan Farber blog entries reposted today from LegalPlanet.
The key to understanding the economics of environmental protection is the concept of externalities. An externality is simply a cost that one person or firm imposes on another. In general, an externality means that an activity is causing more harm than it should.
Of course, a company or individual could decide to voluntarily correct the problem to eliminate the externality. But if the cost is significant, many people will not be altruistic enough to bear a heavy cost in order to help someone else. And corporations, which have a fiduciary duty to protect their own shareholders, are not in the business of being altruistic toward outsider.
If only a few people are on the receiving side of the externality, they might be able to enter a contract with the creator of the externality to take care of the problem. But that’s obviously not going to be practical in complicated situations with multiple victims (and perhaps multiple sources), like urban air pollution. For instance, a negotiation involving all the major polluters and residents of Houston would be a nightmare.
Another solution, favored by some libertarians, is for the recipients to sue. But this is also problematic except in very simple situations. Imagine a lawsuit by all the residents of Houston against all the pollution sources in the city. This would be immensely complicated and expensive litigation, and in the end the decision would fall on a judge or jurors with no expertise in the problem.
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