Topic: Government and Politics

Do Industrialized Countries Have a Responsibility for the Well-Being of Developing Nations?

Conor Clarke’s second comment at The Atlantic blog on the study, “What to Do About Climate Change,” was that:

Goklany’s estimates are based on global aggregates that hide the unequal distribution of the climate change burden. Yes yes, I know Manzi will say that’s not decisive: As long as global GDP is higher, we can redistribute our way out of the problem more effectively tomorrow than we can today. I would be more comfortable with that debate if I thought vast international restributions of income in the name of global equity were more likely tomorrow than they are today.

RESPONSE:

Global greenhouse gas controls will also have uneven consequences. First, cost of controls will vary from country to country, and sector to sector. Second, because the impacts of climate change will also vary from area to area, the benefits of control will necessarily be uneven. They will also vary over time. In fact, for some sectors, some areas may benefit even under the IPCC’s warmest scenario, at least through the foreseeable future.  For example, through at least 2085, climate change would increase the global population at risk of water stress (see Figure 2, here).  Therefore controlling climate change would exacerbate the global population at risk of water stress. So both the costs and benefits of climate change controls will also be distributed unevenly. Third, as noted here, implementing climate change controls that go beyond no-regret actions requires that today’s poorer generations  delay solving the real problems they face here and now and instead put resources into solving the hypothetical problems that may (or may not) confront tomorrow’s far wealthier — and technologically better-endowed — populations. Nothing equitable about that.

Conor Clarke’s third comment was:

… I’m suspicious of the ethical calculus that says we should not focus on one large global problem because larger global problems might exist. [Emphasis in the original.] That kind of moral math rarely corresponds to the political reality. (Do you think the average congressperson opposed to Waxman-Markey has trouble sleeping at night over new cases of malaria or global hunger?) Nor does it correspond to the historical responsibility: Industrialized nations are more responsible for the global problems created by climate change than the problems of population growth.

RESPONSE:

I am puzzled as to why Conor suggests we should focus on one large global problem — presumably climate change — when larger global problems might exist. Why should we focus on any problem when other larger ones are unresolved?

Nevertheless, Conor is correct, political decisions are rarely based on ethical calculus — the more’s the pity.

In any case, my paper doesn’t advocate twiddling our thumbs when it comes to climate change. Yes, it doesn’t advocate aggressive action (going beyond no-regret actions) to control climate change in the near to medium term. Instead it focuses on increasing adaptive capacity, technological prowess, and sustainable economic development which would enable society to respond to whatever problems it may face in the future, including climate change. As the paper shows, aggressive mitigation would not be the best approach to advance human well-being and deal with today’s urgent problems while advancing the ability to address tomorrow’s problems (see Table 5, here).

Specifically, it would reduce vulnerability to today’s urgent climate-sensitive problems — e.g., malaria, hunger, water stress, flooding, and other extreme events — that might be exacerbated by climate change.  Second, it would strengthen or develop the institutions needed to advance and/or reduce barriers to economic growth, human capital, and the propensity for technological change. Together, these two elements would improve both adaptive and mitigative capacities, as well as the prospects for sustainable economic development. Third, my paper advocates implementing no-regret mitigation measures now, while expanding future no-regret options through research and development of mitigation technologies. Fourth, it would let the market pick winners and losers among the various no-regret options. Fifth, it would continue research into the science, impacts and policies related to climate change, and monitoring of impacts to provide early warning of any “dangerous” impacts were they to be manifested.

Although Conor is probably correct in suggesting that politicians rarely undertake any ethical calculus in arriving at their decisions, many have nevertheless asserted that reducing greenhouse gas emissions is a moral imperative. See, e.g., here. But what is the basis for this claim?

These claims are never accompanied by any analysis that compares the magnitude and urgency of climate change versus other problems that humanity faces today or in the foreseeable future. The only such comparative analyses that have been undertaken are those done as part of Lomborg’s Copenhagen Consensus exercise and my Cato paper [and their prior versions, see, e.g., “Potential Consequences of Increasing Atmospheric CO2 Concentration Compared to Other Environmental Problems.” Technology 7S (2000): 189-213 and Copenhagen Consensus 2004.].  And these provide no support for the oft-repeated but unsubstantiated claim that climate change is a moral imperative given the many other real problems that exist today.

Finally, Conor raises the issue of historical responsibility of industrialized nations for global warming.  As Henry Shue, an Oxford ethicist, notes, “Calls for historical responsibility in the context of climate change are mainly calls for the acceptance of accountability for the full consequences of industrialization that relied on fossil fuels.” [Emphasis added.] But a fundamental premise behind these calls is that the “full consequences of industrialization” are negative. This is one more unsubstantiated claim.

In fact, by virtually any objective measure of human well-being — e.g., life expectancy; infant, child and maternal mortality; prevalence of hunger and malnutrition; child labor; job opportunities for women; educational attainment; income — humanity is far better off today that it was before the start of industrialization, due to the cycle of progress and economic surpluses fueled for the most part by fossil fuels. In addition, hunger and child labor are as low — and job opportunities for women as high — as they are today partly due to the direct effect of fossil fuel powered labor saving technology.  This is clearly true for industrialized countries. Figure 1 shows that life expectancy — perhaps the single most important indicator of human well-being — increased for the U.S through the 20th century, even as CO2 emissions, population, affluence, and material, metals, and organic chemical use increased. Matters have also improved in developing countries. And global life expectancy increased from 31 years in 1900 to 47 years in the early 1950s to 69 years today.

Goklany 

Notably, much of the improvement of human well-being in developing countries is due to the transfer of technology (including knowledge) from industrialized countries to developing countries. Moreover, a substantial share of the income of many developing countries comes directly or indirectly from trade, tourism, aid, and remittances from industrialized countries.  Consequently, developing countries are far ahead of today’s industrialized countries at equivalent levels of economic development.

For instance, as noted here (pp. 20-21):

in 2006, when GDP per capita for low income countries in PPP-adjusted terms was $1,327, their life expectancy was 60.4 years, a level that the U.S. first reached in 1921, when its GDP per capita was $5,300. Surprisingly even Sub-Saharan Africa, the world’s developmental laggard, is today ahead of where the U.S. used to be. In 2006, its per capita GDP was at the same level as the U.S. in 1820 but the U.S. did not reach Sub-Saharan Africa’s current infant mortality level until 1917 when, and life expectancy until 1902, by which time the U.S. was far wealthier. [All GDP figures are in terms of real 1990 dollars, adjusted for purchasing power.]

Thus, empirical data do not support the underlying premise that industrialization of today’s developed countries has caused net harm to developing countries.

So what is it that industrialized countries have a “historical responsibility” for?  For the diffusion of knowledge and technology that they developed and which helped developing countries improve their well-being, and for helping increase incomes in the latter through trade, aid, remittances, and tourism?

As noted at Reason on-line: “Who knows, in accounting for both benefits and damages [associated with greenhouse gas emissions], Bangladesh would not end up owing the United States!”

Government-Run Health Care Will Cost Much More than the Politicians Are Telling Us

As my Cato colleague Chris Edwards has documented, government programs and contracts inevitably cost much more than first projected. This pattern of inaccuracy exists for several reasons, one of which is that politicians have an incentive to lowball cost figures. But a big reason for the mistaken numbers is that government budget estimators do not understand the degree to which people will alter their behavior to get their hands on other people’s money.

I explained recently on Fox Business Network that this means any government-run health care scheme will be much more expensive than we are being told today.

 

Our friends at Reason TV address this issue in a very compelling three-minute video that looks at how government programs — especially for health care — have cost several times more than politicians claimed when the legislation was first adopted.

Politicians and Economic Policy

A recent study compared the members of the lower house in the Canadian legislature to the members of the U.S. House of Representatives. 

The findings reveal large differences between the two nations in the backgrounds of their federal politicians.

  • Share of members with a business or private sector background: Canada 61% vs. U.S. 17%
  • Share of members with a background in politics (meaning a prior elected office or a prior job working for a politician): Canada 9% vs. U.S. 71%

Perhaps this explains why Canada’s economic policies have been far superior to U.S. policies in recent years.

The Boys Who Cried “Racist”

Some people on the left can’t see any excuse for opposition to collectivism except racism. (Which is, of course, as Ayn Rand said, “the lowest, most crudely primitive form of collectivism.”) Today it’s Paul Krugman:

But they’re probably reacting less to what Mr. Obama is doing, or even to what they’ve heard about what he’s doing, than to who he is.

That is, the driving force behind the town hall mobs is probably the same cultural and racial anxiety that’s behind the “birther” movement, which denies Mr. Obama’s citizenship.

That is, Paul Krugman can’t understand why people would oppose government control of health care — or skyrocketing deficits, or a federal takeover of education, energy, and finance along with health care — unless they’re driven by racism. But he’s not the only one who sees racists under every bed. Take Washington Post cultural writer Philip Kennicott yesterday, in an essay titled “Obama as the Joker: Racial Fear’s Ugly Face”:

[T]he poster is ultimately a racially charged image. By using the “urban” makeup of the Heath Ledger Joker, instead of the urbane makeup of the Jack Nicholson character, the poster connects Obama to something many of his detractors fear but can’t openly discuss. He is black and he is identified with the inner city, a source of political instability in the 1960s and ’70s, and a lingering bogeyman in political consciousness despite falling crime rates…

Superimpose that idea, through the Joker’s makeup, onto Obama’s face, and you have subtly coded, highly effective racial and political argument. Forget socialism, this poster is another attempt to accomplish an association between Obama and the unpredictable, seeming danger of urban life.

He’s talking about a poster that depicts Obama as the Joker from last year’s Batman movie over the word SOCIALISM. It’s not a very effective poster; what does the Joker have to do with socialism? But it’s ridiculous to see racism in it.

More serious thinkers also try to tar the entire limited-government argument with the brush of racism. Take Cass Sunstein, the celebrated Harvard law professor who has been appointed to a high position in the Obama White House. In his 1999 book with Stephen Holmes, The Cost of Rights: Why Liberty Depends on Taxes (and you wonder why Obama chose him?), he made such a sweeping argument, called out here by Tom G. Palmer:

[I]mmediately after gallantly conceding that ‘‘Many critics of the regulatory-welfare state are in perfectly good faith’’ (p. 216) they turn around to tar all critics of the welfare state with the charge of racism: ‘‘But their claim that ‘positive rights’ are somehow un-American and should be replaced by a policy of nonintervention is so implausible on its face that we may well wonder why it persists. What explains the survival of such a grievously inadequate way of thinking? There are many possible answers, but inherited biases — including racial prejudice, conscious and unconscious — probably play a role. Indeed, the claim that the only real liberties are the rights of property and contract can sometimes verge on a form of white separatism: prison-building should supplant Head Start. Withdrawal into gated communities should replace a politics of inclusion’’ (p. 216).

The classical liberal ideas of individualism, individual rights, property rights, “negative liberties,” and limited government date back hundreds, even thousands, of years. They find their roots in the Greek and Hebrew conceptions of the higher law, the Scholastic thinkers, the Levellers’ ideas of self-ownership and natural rights, the political theory of John Locke, the economic analysis of Adam Smith, and the political institutions of the American Founding. To suggest that the case for freedom and limited government — or the application of that theory to contemporary proposals for the expansion of government — must be attributable to racism is uncharitable, ahistorical, thoughtless, and indeed contemptible.

It cannot be the case that every parody of a president who happens to be black is racist. And it is not good for democracy to try to counter every opposing argument with such a blood libel. The good news for advocates of limited government is that our opponents are displaying a striking lack of confidence in the actual arguments for their proposals. If they thought they could win a debate on nationalizing health care, or running trillion-dollar deficits, they wouldn’t need to reach for such smears.

Why I Despise Government, Reason 9,358

Leaving work yesterday for some softball games, I wound up caught in terrible traffic on 15th Street, which is a major D.C. artery for commuters going to Viriginia. This is never a good street to be on since it carries people looking to head south on I-395 and those who want to turn right on Constitution Avenue and then go west into Virginia.

After a 30+ minute crawl to travel three blocks, I finally got close to Constitution Avenue, where the road widens to three lanes, one of which is only for right turns. But since a large number of drivers want to turn right, it is very common for drivers also to turn right from the center lane — which normally is very efficient since Constitution Avenue has three lanes and the traffic flows more smoothly with two lanes of traffic making the right turn.

But when I made the right turn, I discovered why traffic was so snarled on 15th Street. There was a cop standing in the middle of Constitution Avenue waiting to snare drivers turning right from the center lane. Along with many other drivers that day, I got caught and lost another 10 minutes waiting for a ticket. But the $25 ticket is not what got me so irritated. It was the fact that thousands of commuters had to deal with horrible traffic (not only because people like me suddenly got stopped and traffic behind us also had to stop, but also because people in the right-turn-only lane also could not move with the cop blocking traffic) because some bureaucrat from the National Park Police found an easy way to fill his ticket quota.

If the private sector operated the roads (permit me to engage in some libertarian fantasizing), this would never happen. Because of a desire to please drivers (customers), the folks in charge of the road would have made right turns an option from the center lane. But when government sees a bottleneck, the reaction of politicians and bureaucrats is to figure out how to fleece people for more money — not to make travel safer and quicker.

Now, perhaps, you will understand why I chose this license plate.

License plate

Sotomayor Confirmed, Constitutional Debate Continues

All Americans should take pride in seeing our first Hispanic Supreme Court justice (not counting Benjamin Cardozo).  While this moment should have belonged to Miguel Estrada—who was denied even a vote by an unprecedented Democratic filibuster—we should nevertheless celebrate Sonia Sotomayor’s rise from very humble beginnings to reach the highest court in the land.  Although her selection represents the very worst of racial politics—she is not a leading light of the judiciary and would not have been considered had she not been a Hispanic woman—her career achievements show that the American Dream endures.

What makes the American Dream possible, however, is the rule of law, which in this country is ultimately guaranteed by the Constitution.  The Constitution provides for a very specific government structure, with checks on each branch’s powers designed to maximize liberty and eliminate arbitrary and capricious rule.  To that end, officers of the judicial branch—judges—are to make their decisions irrespective of the race, religion, or riches of those who come before them.  And judges are to interpret the Constitution as written text.  If they set aside the text and rule based on their own notions of fairness, then they act as unelected legislators or, worse, extra-constitutional amenders of our founding document.

Nominee Sotomayor knew all this, which is why the testimony she gave at her confirmation hearings disclaimed many of her previous speeches and writings, even going so far as to reject President Obama’s “empathy” standard—the idea that a judge applies the law differently when a litigant is sympathetic in some politically correct way.  While she was evasive most of the time—reason enough to vote against her—when she did say something about judicial philosophy, it was often indistinguishable from the words of John Roberts or Samuel Alito (as evidenced by the frustration of left-wing commentators).  And for good reason: in poll after poll, the American people overwhelmingly support a vision of the judicial role as one of enforcing the law as written, not of imposing their own policy preferences or vision of justice.

Kudos from this exercise go to those Republicans whose hard questions and thoughtful statements elevated the discussion of the Constitution beyond mere abstractions, so Americans could better understand the significance of ideological differences over the judicial role, or the use of foreign law in interpreting the Constitution, or property rights, or employment discrimination.  In walking away from so many controversial positions, Sonia Sotomayor established a new standard to which all future nominees will at least have to pay lip service.  While confirmation was almost a foregone conclusion from the start because of the Democrats’ strong Senate majority, the Republicans played well the cards they had been dealt by engaging in a serious discussion about constitutional interpretation and jurisprudential philosophy.

A Want Ad for God

The press is still abuzz over Tim Geithner’s behind-closed-doors tirade against critics of the Obama administration plan to tighten financial regulation. As Mark Calabria writes below, Geithner offered a simple message to Fed chair Ben Bernanke, FDIC chair Sheila Bair, and others: “[Y]ou’ve been heard, so you were ‘included,’ now shut up.”

But while Bernanke, Bair, et al. quibble over details of the Obama plan, Geithner should be more concerned about the glaring flaw at its center: the idea that government can conjure up a “systemic risk monitor” that will identify and avoid future market bubbles.

Many of the great bubbles in financial history grew out of some belief that “everyone” (including financiers, politicians, and regulators) was confident was true, yet it turned out to be wrong (either because it was always wrong, or conditions changed in some unforseen way). Some examples:

  • The supply of Dutch admiral tulip bulbs was constrained though they were in heavy demand, so the 17th-century tulip mania was good investing.
  • The supply of land in the South Seas and the Mississippi Valley was fixed, so the 18th-century land-buying mania was good investing.  
  • The emergence of a nationwide U.S. marketplace in the early 20th century was a watershed event, so the post-WWI stock frenzy was good investing.
  • The emergence of the Internet marketplace, combined with path dependency and network effects, was another watershed event, so buying “dotcom” stock was good investing.
  • And of course, until the last few years,”everyone knew” that investing in real estate and mortgages was “safe as houses.”

That last bullet wasn’t just the belief of “greedy investment banks,” but also of government officials and regulators. My colleagues Peter Van Doren and Jagadeesh Gokhale have a forthcoming paper that notes, in part, that despite the populist rhetoric now being bandied around, banking is heavily regulated under international rules. However, those rules assume that investment in mortgages and mortgage-backed securities is low-risk (and indeed the rules push money toward those investments).

The paper also quotes numerous top-tier economists who claimed the soaring house prices of the past decade were supported by “the fundamentals,” or that a bubble wouldn’t threaten the broader economy. (Their paper doesn’t mention — but could — that Fannie Mae and Freddie Mac, along with their bureaucratic and congressional overseers, believed those firms’ investments in riskier mortgages were “safe as houses.”)

Everyone “knew” housing was a sound investment. It just turned out that everyone was wrong.

Hence the problem with a “systemic risk monitor:” Such a monitor would have to know when everyone is wrong — including financial experts and government analysts. And the monitor would need the power to force everyone to act contrary to their beliefs and instead obey the monitor’s judgment — and not fall prey to public and political demand that the monitor be replaced because “everyone knows” his judgment is flawed.

It seems the Obama administration is creating a position for God. But I doubt that God will leave his current job.

Someone might object: We wouldn’t have needed God to realize that there was a housing bubble over the past decade. But the problem with bubbles is that they only become apparent — and policies against them only become politically defensible — once they collapse.

And even then they might not be recognized. Consider another asset that experienced a dramatic price spike and collapse in the last decade: oil. Ah, someone might argue, there wasn’t really an oil bubble; we’re just experiencing a temporary decrease in demand. Oil is a scarce commodity with strong price inelasticities, and its price will soar over the long term. But the same was said of admiral tulip bulbs, and South Seas and Mississippi Valley land, and housing in high-demand areas.

What would happen if a systemic risk monitor were to come to Washington and immediately mandate that we abandon ”energy sustainability” policies because they’re premised on a bubble? Would he be right? Who would believe him? And would politicians and the public stand behind this judgment?