You Ought to Have a Look: Hillary and Jeb Offer Climate Opinion

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary. 

This week, the royal families of Clinton and Bush offered up their 2016 campaign insights on climate change.  People have been very interested in what they would say because, as Secretary of State, Clinton gave hints that she was even more aggressive on the issue than her boss, and Bush is the son of GHW Bush, who got us into this mess in the first place by going to Rio in 1992 and signing off on the Climate Treaty adopted there.*

Hillary Clinton unveiled her “climate plan” first.  As feared, it’s a step-up over Obama’s, with an impossibly large target for electricity production from renewable energy. While her fans were exuberant, noticeably absent from her plan were her thoughts on Keystone XL pipeline and a carbon tax.

Manhattan Institute scholar Oren Cass (whose take on the carbon tax we’ve featured previously) was, overall, less than impressed. Calling Hilary’s climate plan a “fake plan” in that it really would have no impact on the climate. Cass identifies what Hilary’s “real” plan is—pushing for a $100+ billion annual  international “Green Climate Fund”  (largely populated with U.S. dollars) to be available to developing countries to fight/prepare for climate change. 

Reserve Requirements Basel Style: The Liquidity Coverage Ratio

Over the last couple of decades, reserve requirements all but vanished as a means of bank regulation and monetary control. But now a new variation on reserve requirements is being introduced through the capital controls of the Basel Accords.

Canada, the UK, Sweden, Australia, New Zealand, and Hong Kong have all abolished traditional reserve requirements. In many other countries, reserve requirements have become a dead letter. In the U.S., for instance, the Fed under Alan Greenspan reduced all reserve requirements to zero except for transactions deposits (checking accounts), while permitting banks to evade reserve requirements on transactions balances by using sophisticated computer software to regularly “sweep” those balances into money market deposit accounts, which have no reserve requirement. In 2011 Congress went a step further by allowing the Fed to eliminate all reserve requirements if it so desired. The Eurozone, for its part, began with a reserve requirement of only 2 percent, which was reduced to 1 percent in January 1999.

There were good reasons for this deregulatory trend. Economists consider reserve requirements an implicit tax on banks, requiring them to hold non-interest earning assets, while central banks considered changes in such requirements too blunt an instrument for monetary control. The Fed discovered the latter shortcoming when, in the midst of the Great Depression, having just gained control over the reserve requirements of national banks, it doubled them, contributing to recession of 1937.

Boston Beats Beijing in Olympics Contest

News comes this morning that Beijing has been awarded the 2022 Winter Olympics, beating out Almaty, Kazakhstan. Which touches on a point I made in this morning’s Boston Herald: 

Columnist Anne Applebaum predicted a year ago that future Olympics would likely be held only in “authoritarian countries where the voters’ views will not be taken into account” — such as the two bidders for the 2022 Winter Olympics, Beijing and Almaty, Kazakhstan.

Fortunately, Boston is not such a place. The voters’ views can be ignored and dismissed for only so long.

Indeed, Boston should be celebrating more than Beijing this week. A small band of opponents of Boston’s bid for the 2024 Summer Olympics beat the city’s elite – business leaders, construction companies, university presidents, the mayor and other establishment figures – because they knew what Olympic Games really mean for host cities and nations:

E.M. Swift, who covered the Olympics for Sports Illustrated for more than 30 years, wrote on the Cognoscenti blog a few years ago that Olympic budgets “always soar.”

“Montreal is the poster child for cost overruns, running a whopping 796 percent over budget in 1976, accumulating a deficit that took 30 years to repay. In 1996 the Atlanta Games came in 147 percent over budget. Sydney was 90 percent over its projected budget in 2000. And the 
Athens Games cost $12.8 billion, 60 percent over what the government projected.”

Bent Flyvbjerg of Oxford University, the world’s leading expert on megaprojects, and his co-author Allison Stewart found that Olympic Games differ from other such large projects in two ways: They always exceed their budgets, and the cost overruns are significantly larger than other megaprojects. Adjusted for inflation, the average cost overrun for an Olympics is 179 percent.

Bostonians, of course, had memories of the Big Dig, a huge and hugely disruptive highway and tunnel project that over the course of 15 years produced a cost overrun of 190 percent.

Read the whole thing.

Of Rotten Eggs and Guilty Minds

It isn’t every day that a person can go to his or her job, work, not participate in any criminal activity, and still get a prison sentence. At least, that used to be the case: the overcriminalization of regulatory violations has unfortunately led to the circumstance that corporate managers now face criminal—not just civil—liability for their business operations’ administrative offenses.

Take Austin and Peter DeCoster, who own and run an Iowa egg-producing company called Quality Egg. The DeCosters plead guilty to violating certain provisions of the Food, Drug, and Cosmetic Act because some of the eggs that left their facilities contained salmonella enteritidis, a bacterium harmful to humans. They were sentenced to 90 days in jail and fined $100,000 for the actions of subordinates, who apparently failed, also unknowingly, in their quality-control duties.

In other words, the “crime” that the DeCosters were convicted of didn’t require them to have put eggs with salmonella into interstate commerce, or even to have known (or reasonably been able to foresee) that Quality Egg was putting such eggs into interstate commerce. It didn’t even require the quality-control operator(s) most directly involved in putting the contaminated eggs into interstate commerce to have known that they were contaminated.

Mission Creep in Syria

This week, the United States and Turkey agreed on a deal to expand cooperation in the fight against ISIS, in part through the creation of an ‘ISIS-free zone’ in Northern Syria. The scope of the agreement is unclear, not least because Turkish officials are hailing it as a ‘safe zone’ and a possible area for refugees, while U.S. officials deny most of these claims. U.S. officials are also explicit that the agreement will not include a no-fly zone, long a demand of U.S. allies in the region.

But what’s not in doubt is that the United States and Turkey plan to use airstrikes to clear ISIS fighters from a 68-mile zone near the Turkish border. The zone would then be run by moderate Syrian rebels, although exactly who this would include remains undefined.

Over at the Guardian today, I have a piece talking about the many problems with this plan, in particular the fact that it substantially increases the likelihood of escalation and mission creep in Syria:

“The ambiguity around the ‘Isis-free zone’ creates a clear risk of escalation. It’s unclear, for example, whether groups engaged in fighting the regime directly will be allowed to enter the zone and train there, or only those US-trained and equipped rebels focused on Isis. US officials have been keen to note that Assad’s forces have thus far yielded to American airstrikes elsewhere in Syria – choosing not to use their air defense system and avoiding areas the US is targeting - but that is no guarantee that they would refrain from attacking opposition groups sheltering inside a safe zone.”

The plan is just another step in the current U.S. approach to Syria, which has been haphazard and ill-thought out. The United States is engaged in fighting ISIS while most fighters on the ground want to fight the Assad regime, a key reason for the abysmal recruitment record of the U.S. military’s new train-and-equip programs in Syria. Increased U.S. involvement in Syria risks our involvement in another costly, open-ended civil war.

Taking Another Look at the Cecil the Lion Story

There is something fishy about Cecil the lion story. Don’t get me wrong, I find trophy hunting nauseating. Still, why on earth would Walter Palmer pay $50,000 to kill a lion? Per capita GDP in Zimbabwe is $936 per year (2014 dollars). If Palmer wanted to do something illegal, he could have killed a lion for fraction of the price. (I assume that any lion would do. Palmer happened to get “unlucky” and kill the most famous lion in Zimbabwe.)

Goodness knows that magnificent wild animals get slaughtered throughout Zimbabwe – for food, skin and horns – on a daily basis and for free. The culprits include hungry locals, corrupt parks officials, members of the military and government officials. It is very likely that Palmer believed (or wanted to believe) that he was buying a legal kill and outsourced the details (permits, etc.) to the locals. That does not make Palmer innocent. He should have known better than go on a safari to a failed state – with no property rights and the rule of law. That said, the story should be understood in the proper context: it is not individual hunters, but poverty and corrupt government that are destroying Zimbabwe’s wildlife.

For more on this, see my article in the Financial Times here.

India’s Faltering Economic Revolution: Lost Opportunity, Lost Future

Last year Narendra Modi won an unusually strong majority in India’s parliamentary election. Modi subsequently visited the U.S. and was warmly welcomed by both the Obama administration and Indian-Americans.

Although ethnic Indians circled the globe as entrepreneurs and traders, the Delhi government turned dirigiste economics into a state religion. Mind-numbing bureaucracies, rules, and inefficiencies were legion.

Eventually modest reform came, but even half-hearted half-steps generated overwhelming political opposition. Last May the Hindu nationalist Bharatiya Janata Party, led by Modi, handed the venerable Congress Party its greatest defeat ever. He seemed poised to transform his nation economically.

As the anniversary of that visit approaches, the Modi dream is fading. He simply may not believe in a liberal free market.

Moreover, few reforms of significance have been implemented. The failures overshadow the Modi government’s successes and highlight its lost opportunities. Critics cite continuing outsize budget deficits and state direction of bank lending.

Former privatization minister Arun Shourie observed last December: “when all is said and done, more is said than done.” Unfortunately, Modi has missed the “honeymoon” period during which his political capital was at its greatest. Time is slipping away.

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