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Weekend Reflection Points

The lead article in the current AER is available here (gated, apparently, though the link isn’t working; h/t Tom Bozzo [on FB] and Brad DeLong; I was using the paper copy). The most interesting part so far: the authors only considered the documented costs of air pollution—not land, not water—in deriving the (embarrassingly negative) ROI figures for coal and oil.

As Cousin Lucia and Tom Zeller, Jr., note today, the cost of water pollution makes oil power plants an even worse option.

In such a context, Europe in general and Germany (the top maker of solar panels until China recently passed them) in particular rubs in our faces that they’re winning on the alternative-energy sources front (h/t Barry Ritholtz):

The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.


Meanwhile, back in the U.S., it is no secret that Brad and Robert Waldmann are on one (affirmative) side of the TARP-was-a-success argument, and I’m on the other.* But even the Success crowd may pause to wonder if the short-term “profit” was a good long-term strategy:

Some large U.S. banks would have stronger capital bases to better deal with today’s market stresses had regulators not relaxed bailout repayment criteria in late 2009, a new government audit showed on Friday.

Bank of America (BAC.N) Citigroup (C.N), Wells Fargo (WFC.N) and PNC Financial (PNC.N) were allowed exit the Troubled Asset Relief Program without raising as much equity capital as initially prescribed by the Federal Reserve, the TARP Special Inspector General said in the report.

Following bank stress tests earlier in 2009, the Fed gave several banks guidance that they must raise $1 in common equity for every $2 in TARP bailout funds repaid — a formula meant to enable them to withstand future stresses.

But this standard — which was never previously made public — was quickly relaxed, allowing Bank of America, Citi and Wells Fargo to repay taxpayers nearly simultaneously in December 2009,** raising a combined $49.1 billion in equity capital.

Enforcement of the $1 in equity for every $2 repaid guidance would have required $57.5 billion in equity capital to be raised by the three institutions. PNC was later allowed to exit TARP under similar relaxed guidance. [emphasis mine]

The most recent SIGTARP report (28 July 2011), uses the word “Bailout” only once in its 304 pages—and that’s in the title of testimony by Sheila Bair, ““Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on The Changing Role of the FDIC before the Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs; Committee on Oversight and Government Reform, U.S. House Of Representatives.”

Noted for the record: Patch uses the same article (with minor customization) in multiple locales, highlighting it as a “local” piece. I defer to Felix as to whether this is in keeping with the rest of their “business model.”

As Dan Becker can tell you, the small business “ownership society” is not for the faint of heart. Nor, as anyone who thinks about it for more than three seconds can tell you, is it a primary driver of employment growth. Yet when the most visible and successful Management Consultancy in the United States thinks about growth, its two primary points are “take monies from the government” and “expand small businesses.” But give them credit for recognizing a point that is often obscured by H1-B trolls technology firm leaders such as Meg Whitman:

[I]t’s not just the young who can help fill the skills gap; older, experienced workers can play a part, too. In the US aerospace sector, 60 percent of the workforce is over 45. A practical response would be for governments to remove barriers—particularly those related to the provision of health care and to benefits rules—that prevent older workers from staying in the workforce longer. Germany and the Netherlands raised the participation rate of the 55-to-64 age group by 21 and 24 percentage points, respectively, between 1990 and 2009. In the Netherlands, there were significant changes to pensions and welfare benefits to improve incentives to work longer, coupled with initiatives to change public perceptions, improve employability, and reduce discrimination against older workers. [emphasis mine]

It’s nice to see McKinsey endorsing Medicare For All.

*As a general rule, the Econ-first analysts are affirmatives, the finance-grounded ones are negative. If you have to think about why that would be: one group makes its living finding $100 bills on the sidewalk that the other one swears cannot exist. As the Mark Thomas of the world would note, the issue of priors might need to be addressed.

**The reason December 2009 is important is that it meant that monies that otherwise would have to have been used to shore up capital were instead paid out as bonuses by the now-uncontrolled banks, or, in Reuterspeak, “keen to escape executive compensation restrictions associated with the bailout funds.”

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Being Early to the Party: Bad for Links, But Good for Information

Yahoo! News, Tuesday early afternoon

Dr. Black, Wednesday, just before noon.

Brad DeLong, about fifteen minutes after Dr. Black

Me, Monday morning.

But this isn’t a “First Mover” claim. It’s a note that there are no “savings” in getting rid of the website. There aren’t even the “registration fee” that applies to private enterprises. Commenter Bryan at Skippy notes:

The Federal government is the registrar for the .gov TLD [Top Level Domain], so the only cost is storage and bandwidth on government servers.

The cost of locating and removing a site is probably the equivalent of 20 years of ignoring it.

So not only is “the Sheriff” going after chump change, the actions aren’t even going to save any money.

The difference between Joe Biden and Paul Ryan appears to be that one isn’t even talking about real money.

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Joseph Stiglitz: Of the 1% by the 1% for the 1%

by Daniel Becker

This is an interview of Joseph Stiglitz on Democracy Now regarding his article in the current Vanity Fair.  He discuss the issue of income inequality, taxes, etc and how it has set us up to be less of a land of oportunity than what old Europe was.

A few quotes:

The question was, if people were getting rewards for contributing to our society, a theory that was in the 19th century called “marginal-productivity theory,” then you could say, “OK, those who contribute more should get more.” But what we saw in that crisis was that these titans of the financial industry got mega-bonuses while their companies were making mega-losses.

And with this one percent getting so much, there’s only one place really to get that extra revenue. The good news is it’s relatively easy. You have 25 percent—almost 25 percent of the income in the upper one percent, you raise their taxes by a few percentage points, and you get an awful lot of money.

This raises a very important point that I raise in my article, which is that much of the wealth of this one percent comes not from hard work, not from innovation, but from good investments in Washington, investing in political capital.

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CGI, Day 4 – Clean Technology and Smart Energy: Deploying the Green Economy

Moderator is John Holdren, Science and Technology Advisor to President Barack Obama and Director, White House Office of Science and Technology Policy. Participants are:

Ms. Al Dossary is introduced as one of the few, if not the first, female business leader in Saudi Arabia. (See her comments later for a variant opinion,)

Mr. Holdren opens by speaking of the three levels of technology adoption:

  1. Barrier Busting: “overcoming obstacles to the use and diffusion of technologies” that are available today.
  2. Incentivizing: changing the economic or the regulatory landscape to make socially- and environmentally-attractive technologies more attractive.
  3. Inventing and Improving: R&D demonstration that makes technologies with improved characteristics and lower costs.

Mr. Hattem, whose duty is “to direct capital to people and places that are currently outside of the economic mainstream,” means that his attention focuses on rural areas, and works with a data focus to ensure that the returns are realized.

Ms. Al Dossary, an English Literature major who is very fond of Disneyland, found herself moving the business into new directions, concentrating on “the carousel of progress,” and noting that she has often failed but ends up ahead.

Mr. van Oostrom moved primarily into green building technologies after meeting with Al Gore. Discovered that there was abundant information about how to build green buildings, and moved to that space.  Decided to make buildings “for half the money, in half the time, and completely carbon-neutral” after finding abundant support for the transition within his firm—middle and upper managers enthusiastic about being at the forefront.

Mr. Hattem notes that the emphasis on building development has to be on energy efficiency. (He points out that NYC is relatively energy efficient even now)  Concentrated on the transition in lending and investment practices in NYC and applied the information gained there to developing structures and investments in green technology.  Seeing even residential buildings being developed with expectation of cutting energy demand by 30% or more through technology such as using solar panels to provide hot water.

Ms. Al Dossary emphasizes that it is necessary to link green technology with people’s interests, not the glories of the technology. We are presenting it as reducing electricity and water bills and providing a better environment for your kids. Competition abides: the more competition in the marketplace, in the presentation of the products, improves results.

Mr. Holdren notes that Ms. Mumpuni has been working from the ground up, and her effort has often been more successful than the governments that have been pushing from the top.  Ms. Mumpuni takes a “community-based approach”; what has worked have been to utilize the local resources—especially water—with local people developing and maintaining (and therefore having a sense of ownership of) the microhydro technology.  One of the things she noted is that the microhydro technology leverages the existing environment—maintaining the local forests instead of cutting them down enabled leveraging the existing terrain without having to engage in destruction, creative or not—and therefore makes adaptation easier.  She has been expanding and adopting this practice into the rest of the Asia-Pacific area and Africa.

Ms. Mumpuni re-emphasizes that development and dissemination of Green Technology must be done on a community basis.  This is, she says, essential to the small (ca. 1,000 household) villages that are attempting to move to greener technologies.  She is later asked what effect those community developments have on the larger utility companies in Indonesia.  She noted that the initial reactions—once the communities became prominent enough—was that the large companies had government support to force the communities to buy power they did not need.

However, as a woman, she was able to outwait the system.  Over the next four years, she got the government to start buying power from the communities, and the result over time was that the government and the utility companies (which no longer needed to maintain so many long, “technologically inappropriate” power delivery lines) realized that the “creative destruction” (not her phrase) could be good for everyone. (AB readers note especially: the restriction in this case was first supported by the so-called “private enterprise.”)

Mr. Holdren notes that in many cases the pitch for alternative energy is “you will have to pay more, but the externalities are worth it.”  Conrad van Oostrom notes that “the real economics” (Mr. Holdren’s phrase) works well for new buildings, where you can (for instance) “bring forward” the energy savings over the next ten years. (Businesses understand Present Value.) We are seeing that many new cities in China and India are being built using green technology.

The difficult part is retrofitting buildings, where there have to be multiple negotiations with existing tenants. Even there, though, it is much less difficult to do that when you can give them “a real guarantee” that their future energy costs will be reduced by 30-50%.

Mr. Holdren then asks Gary Hattem to provide a macroeconomic perspective on what retrofitting and green technology development is and will be doing for the job market.  Mr. Hattem notes that they are doing detailed studies of how the ARRA dollars generally and are working to align policies to workforce training for where the jobs actually will be.

Mr. Holdren asks Ms. Al Dossary if she, as “a business leader and a woman,” is an inspiration to other women in Saudi Arabia and the Middle East. Ms. Al Dossary notes that women in Saudi Arabia and the Middle East are “not really interested in [being on the] media that much. There are so many successful stories for women.…I’m just in front of the TV; that’s the difference.”

António Guterres, the UN High Commissioner for Refugees, asks about the “Small is beautiful, big is necessary” conceit, especially the last part. He notes that they had a very successful experience installing solar energy in a refugee camp, but did not see any expansion of solar into other areas; no one overcame the institutional and cultural issues.

Ms.Mumpuni notes that they need to create trust be able to address the needs of the community.  She always tells them in advance that there must be continual community participation, from the planning to the maintenance, or her organization cannot risk its reputation on working with them.  Effect is that the community has customization and ownership, which goes a long way to overcome those issues.

Remy Chevalier of the Environmental Library Fund asks about the lighting of green technology buildings. Mr. van Oostrom notes that, in Western Europe, the issues of heating and cooling have been solved entirely for purposes of a “green building.”  The issue is lighting.  There has been some progress from the use of smart glass technology.  One thing that has helped in their buildings is to automatically have the lights go off at 6:30pm in the commercial buildings, while allowing people to press a button to relight the area. (I’ve worked in buildings that were set up that way in the U.S. as well.)  This simple move cut electricity costs by about 20%.  Mr. Hattem notes in that context that 1.6 billion people in the world do not have access to electricity, and that solar has become “an access point” for both the technology and distribution.

Ms. Mumpuni is asked about costs.  She notes that production via microhydro costs depend on geographic situation: from about $800 per Kw installed to as $4,000 per Kw installed.  But again there have been breakthroughs that are reducing that cost steadily: now producing a “community hydro” that produces ca. 500 Watts –enough energy to power to run five (5) to ten (10) houses—for about $1,500.

Ms. Al Dossary—asked to discuss possible obstacles to expansion into the “new clean energy” in Saudi Arabia—notes that, “Nothing is everlasting, not even water” and urges people to investigate all types of alternative energies, even as the Saudis are.

An audience member asks about the best retrofit idea.  Mr. Hattem notes that the best innovation is not going to come from the technology, but from the users and the culture.  “Technology is there now.”  Mr. van Oostrom says that it is “all about business models” now; the technology is there and ready; have to convince current residents to do things.

Ms. Mumpuni notes that in the developing world, the people need the technology: lights for children to read, to be able to cook (see the Cookstoves Initiative announced on Day 2; for a dissenting view of that initiative—though not the idea that people need energy to cook—see this guest blog at Bill Easterly’s Aid Watchers).  In that context, people use energy as they need it, not because it is accidentally left on.

Mr. Holdren notes that about one-third of what we need to do in the next twenty years is such “low-hanging fruit” that we should be able to realize it.  Putting a full price on carbon emissions would reach the next third.  It is the final third—new innovations,

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Goldman Does Something Good

The lower the fee, the more money raised by the IPO that actually goes to pay back the taxpayer.

Doesn’t change that Michael Moore’s analysis of GM is likely much more true than not (especially the likely reasons for the abrupt sidelining of Ed Whitacre), but every little bit helps.

In related news, it’s Economists (and the NYT) 0, Market 1 (h/t for the latter link, Don Marron).*

*I don’t believe Andrew was the only economist gulled by Niedermayer’s tripe. For instance, Brad DeLong also linked to it, and was an early detractor of the plan for it. But it should be noted that Niedermayer’s ignorant review was thoroughly dissected by “melly mel” long before Andrew discovered that he had “missed” it.

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Public Works on a Vast Scale?

I spent the last hours of last night watching the PBS “Human Experience” episode on the Civilian Conservation Corps. A few million people put to work: for long hours, living in Army barracks, with all but $5 of their pay having to be sent home every week. Gosh, sounds just right as part of FDR’s Conservative First 100 Days.

The documentary makes a couple of things clear: (1) it kept about 3,000,000 people busier than they would have been otherwise* and (2) when the time finally came to enter WW II, those three million were in better shape than they would have been, and were prime volunteers without whom results might have been very different.

Even independent of what it produced, what’s not to like? No wonder it was the most popular Depression-Era program.

Doesn’t it seem like something the new Administration might have wanted to emulate? Well, it did…

In late March of 2008, Neil Maher, guest-blogging at The Edge of the American West, was clear: even as the crisis was growing, a New and Improved CCC would prepare the U.S. for the next fifty years, even as the old one prepared it for the fifty that followed it.

Brazil has recently begun looking back to Franklin Roosevelt’s CCC to help solve that country’s economic and environmental problems…The goal of Brazil’s CCC-like program, which the Nature Conservancy helped initiate, is to plant one billion trees over the next ten years across the country’s Atlantic Forest. Rather than funding the program by increasing taxes, Brazil will rely on novel market mechanisms including the sale of sequestration vouchers on the international carbon market, obtained through the program’s reforestation efforts, as well as the collection of water use fees in the reforested regions. Similar tree-planting programs reminiscent of Franklin Roosevelt’s CCC are also now operating in China along the Yangtze River and through Wangari Maathai’s Greenbelt Movement in Kenya. Even war-torn Afghanistan has created its own “Afghan Conservation Corps.”

The United States needs to follow suit, and the upcoming election is a good place to start. Hillary Clinton openly calls for the creation of a “green economy” centered on a cap and trade system for carbon emissions that will help create five million new jobs. Barack Obama wants to develop a program that rewards those who plant trees, restore grassland, or undertake farming practices that capture carbon dioxide from the atmosphere. Even John McCain, who claims fellow Republican and early conservationist Teddy Roosevelt as his hero, proposes to limit carbon emissions as president. A new and improved Civilian Conservation Corps, one which enrolls women as well as men and focuses its efforts on fighting global warming, would allow all of these candidates to turn campaign rhetoric into post-election reality.

Catching up on my blog reading today, I came across a recent Andrew Samwick post in which he reposted a link from December of 2008—just after the election—to this NYT article:

President-elect Barack Obama promised Saturday to create the largest public works construction program since the inception of the interstate highway system a half century ago as he seeks to put together a plan to resuscitate the reeling economy….

Mr. Obama’s remarks showcased his ambition to expand the definition of traditional work programs for the middle class, like infrastructure projects to repair roads and bridges, to include new-era jobs in technology and so-called green jobs that reduce energy use and global warming emissions. “We need action — and action now,” Mr. Obama said in an address broadcast Saturday morning on radio and YouTube….

It would cover a range of programs to expand broadband Internet access, to make government buildings more energy efficient, to improve information technology at hospitals and doctors’ offices, and to upgrade computers in schools.

“It is unacceptable that the United States ranks 15th in the world in broadband adoption,” Mr. Obama said. “Here, in the country that invented the Internet, every child should have the chance to get online.”

Twenty months later, I can’t even find an outline of this in the policies proposed or passed.

Whither the New CCC? Whither preparation for competing with the Chinese in the mid- and late 21st century? Whither developing job skills to ensure that broadband isn’t just something Google sells to Verison? Who will be the people ready to maintain and repair solar cells?

*Let’s face it: it’s a difficult job, spent away from home and family, for basically room and board and a (very) little l’argent de poche. Not the type of job you keep if you get a letter from your spouse saying that the local Woolworth’s is paying $1.00/hour.

(cross-posted from Skippy the Bush Kangfaroo)

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Time Series Analysis

From what I can tell, this is an accurate sequence:

  1. 6 August 2001: Presidential Daily Briefing (PDB) given to GWB entitled “bin Ladin Determined to Strike in US.”
  2. 11 September 2001: On the 36th Anniversary of Augusto Pinochet’s US-President-ordered, CIA-supported, Coup in Chile, Bin Laden’s forces, weel, strike in the US.
  3. ca. 26 October 2004: Anthony “Van” Jones signs “truth petition” which requests investigation into, among other things, “unanswered questions that suggest that people within the current administration may indeed have deliberately allowed 9/11 to happen.”
  4. 04 September 2006: Condoleezza Rice admits (1) above publicly at the 9-11 Commission hearings, eliminating the last vestige of plausible* deniability about foreknowledge of the attacks within, and at the highest levels of, the Administration.
  5. 06 September 2009: Three years and three days after Ms. Rice admitted that the GWB Administration—in the kindest possible interpretation—allowed 11 Sep 2001 to happen,** Van Jones resigns from the current Administration because he (along with John Men are from Mars, Women are from Venus Gray, a former Bush Administraion official, and a previous Ambassador to Iraq) exercised an American’s First Amendment rights (“to petition the government for a redress of grievances“) with a resulting inquiry that confirmed the justness of the original Petition.

Don’t worry; nothing to see there. Right?

*No, declaring that you considered the PDB to be a discussion of “history” is not plausible in any real sense of that word.
**Whether as an act of malice or incompetence is left as an exercise, with the clear possibility of a spectrum of answers depending upon which officials are discussed.

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Some Fairly Pleasant CO2 Arithmetic

Posted by Tom Bozzo

From last week’s Conference on Postal and Delivery Economics, a paper [*] on Bank of America Corporation’s environmental footprint offered the following observations:

  • BAC’s U.S. CO2 footprint is approximately 2.2 million metric tons per year.
  • Most of that is from electricity and natural gas use (for lighting, heating, and computing).
  • One of their corporate sustainability goals has been to reduce emissions by 9% from 2004 levels by 2009 (ca. 200,000 MT/year).

Now, the authors put their economist caps on, and in a pretty good demonstration that some useful economics requires no advanced math at all, looked at the cost of picking the low-hanging fruit instead of the high-hanging fruit:

  • The three lowest-cost mitigation methods could reduce emissions by 280,000 MT and save them $2.5 million per year on net. None of these involve carbon credits (which are also relatively cheap but have positive cost).
  • Their four highest-cost options could cut out 313,000 MT at a cost of $78 million/year.
  • However, the fourth highest-cost option — the carbon credits — would, added to the three low-cost options, let them reduce their footprint by more than 20% without significantly denting the low-cost method’s savings.
  • For the most part, BAC doesn’t seem to be especially uniquely situated to capture these savings.

In contrast, we have the possibly endangered Mitch McConnell arguing on the Senate floor that the

“cap and trade” approach to cutting carbon dioxide emissions would unleash “the largest restructuring of the American economy since the New Deal.”

The implication, of course, is that requiring even modest emissions reductions would impose large costs on the U.S. economy. For at least the first 10-20% or so, the BAC case shows that’s just totally untrue; the first few percent can be extracted just by reducing gross wastes (like improving the light/heat production ratio for lighting) and lot more isn’t especially expensive with proper planning, i.e. rolling energy efficiency improvements into the processes of replacing or refreshing fixed capital.

And I can’t help but say that with the McCain campaign trying to suggest that He Cares (if not as much as about selling McCain ’08 golf apparel), I’d like to see the roll call on the measure. (Update: a cloture motion failed in the Senate, with surrogates expressing support for the bill on behalf of the absent presidential candidates. The 84-vote total makes me think some senators didn’t want their preferences recorded.)

[*] Jody Berenblatt, Lawrence Buc, and Peter Soyka, “Bank of America, Mail, and the Environment.” BAC is their employer or client, and not mine.

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