Today is the 101st anniversary of Milton Friedman’s birth. Here’s a reminder of why that’s worth celebrating.

I’ll have more on what Milton Friedman can still teach us, particularly in the school choice movement, in the coming days.

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

We and our apparently few friends tend to shriek with horror when governments try to centrally plan economies because, of course, planning places arbitrary prices on things and dictates how much of what will be made during the next five years. But we should be equally horrified when government tries to invent costs and then impose them upon us.

Such is the case with the “social cost of carbon” (SCC), a completely mis-named concept which purports to accurately estimate damages associated with global warming caused by pernicious fossil fuel-fired economic activity.

First of all, “carbon” has nothing to do with global warming. In its purest crystalline form, a gram will set you back about $50,000—a.k.a. a 5‑carat diamond. Other allotropes include graphite and buckyballs–geodesic-dome like molecules composed of 60 carbon atoms. Combusted (oxidized) carbon-containing compounds are the materials that produce carbon dioxide (CO₂). Uncombusted methane (CH₄) along with carbon dioxide can slightly enhance the earth’s natural greenhouse effect. 

Further, there are two sides to the industrial coin, not just negativity (i.e., social costs). It’s obvious that the combustion of carbon-containing compounds has driven a lot of civilization—a byproduct is the fact that you aren’t dead yet (life expectancy, pre-industrial revolution in Europe was around 35) and the fact that—in real dollars—you’re about ten times richer than your great-grandparents were.

So, what the government (e.g., the EPA) is really talking about is “The One-Tailed Effect of Oxidizing Carbon-Containing Compounds,” acronymed OTEOCCC, which just isn’t as catchy as SCC, which sounds like a Division I Football conference.

Currently, there are several proposed legislative amendments floating around Congress that are aimed to limit how the EPA can use the government’s assessment of the social costs of carbon.

Limiting the EPA’s use of the SCC in considering regulations would be a wise move since the government’s SCC calculations are incomplete, subjective, and seriously lagging the science of climate change.

The government’s Interagency Working Group on the Social Costs of Carbon, back in 2010, defines the social costs of carbon this way:

The SCC is an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year. It is intended to include (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change.

Its determination of the SCC has significant ramifications, as the Interagency Working Group is quick to point out:

Under Executive Order 12866, agencies are required, to the extent permitted by law, “to assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” The purpose of the “social cost of carbon” (SCC) estimates presented here is to allow agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts.

Recently, the Interagency Working Group reconvened and made good on its promise to update their 2010 findings. In doing so, they increased their estimate of the SCC by about 40 percent.

Increased!? How on earth, you may wonder, could they have increased their SCC estimates since 2010 when paper after scientific paper shows that the equilibrium climate sensitivity—that is, how much global warming will result from a doubling of the atmospheric carbon dioxide concentration—is much lower than most pre-2010 determinations? The Interagency Working Group even recognizes that the climate sensitivity “is a key input parameter” to their SCC models.

Simple: The updated SCC calculations are made without “revisit[ing] other assumptions with regard to the discount rate, reference case socioeconomic and emission scenarios, or equilibrium climate sensitivity” [emphasis added].

How convenient is that? The updated SCC, which the White House requires to be used in the cost/​benefit analyses of new regulations, completely ignores progress made in the basic science of climate change—progress which suggests that the future impacts from climate change are overestimated by some 50 percent.

And if failing to keep up with the science of a “key input parameter” to their calculation isn’t enough, the Interagency Working Groups makes several other egregious decisions in arriving at their SCC determination.

These other missteps were the subject of testimony of economist Robert Murphy from the Institute for Energy Research before the Senate Committee on Environment and Public Works a couple of weeks back.

Murphy’s testimony focused on two main areas (more details here and here): 

1) The arbitrary (and improper) selection of the discount rate.

2) The government’s use of its assessment of the global costs rather than the domestic costs of carbon emissions.

The discount rate is basically how much one is willing to pay now to avert future damages. The lower the discount rate, the more costly (in today’s dollars) future damages become. The SCC is very sensitive to the discount rate used in the SCC models. The Interagency Working Group assessed the SCC under assumptions of a discount rate of 2.5 percent, 3 percent and 5 percent. The SCC is about 5 times greater using a 2.5 percent rate than a 5 percent rate. Murphy argues that by federal guidelines (OMB Circular A‑4), the Interagency Working Group should also have considered the SCC under a 7 percent discount rate. And had they done so, they very likely would have found the SCC to be negative (i.e., that carbon emissions conferred a net benefit to society). But that would have been an inconvenient result, so the Interagency Working Group ignored that federal guideline.

They also dismissed the directive to report the costs and benefits from a domestic perspective, where costs are only considered to be a fraction of the total global costs (according to the Interagency Working Group, between 7 percent and 23 percent). Considering a 7 percent discount rate and the new science indicating a lower climate sensitivity and almost assuredly, the domestic costs would approach zero (if not, in fact, be negative).

This gives rise to a situation where the EPA regulations on carbon dioxide emissions would lead to net costs to the United States and benefits to the rest of the world.

This is called “foreign assistance,” but seems to be absent in government accountings of such. So much for transparency.

But regardless of what you call it, the government’s determination and use of the social cost of carbon is simply a bad idea. The extreme sensitivity to its input parameters means that the final answer is easily molded to be whatever the user desires it to be. And since the current government user desires a limit on carbon dioxide emissions, the SCC is positive and has gotten larger just in time for the new round of proposed regulations and executive actions—ignoring new climate science in the process. 

Further, if they are going to speak about global costs, they had better note that the poor and developing world is seeing large increases in life expectancy and wealth as fossil fuel-generated electricity finally reaches the poor, just as happened here in the first half of the 20^th century.

We think the blunders the Obama administration has committed in setting their “price” of carbon dioxide and methane (as opposed to the silly “carbon”) may be actionable, action we’d be happy to contribute to.

References:

Interagency Working Group on the Social Costs of Carbon, 2010. Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, http://​www​.epa​.gov/​o​t​a​q​/​c​l​i​m​a​t​e​/​r​e​g​u​l​a​t​i​o​n​s​/​s​c​c​-​t​s​d.pdf

Interagency Working Group on the Social Costs of Carbon, 2013. Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, http://​www​.white​house​.gov/​s​i​t​e​s​/​d​e​f​a​u​l​t​/​f​i​l​e​s​/​o​m​b​/​i​n​f​o​r​e​g​/​s​o​c​i​a​l​_​c​o​s​t​_​o​f​_​c​a​r​b​o​n​_​f​o​r​_​r​i​a​_​2​0​1​3​_​u​p​d​a​t​e.pdf

Knappenberger, P.C., and P.J. Michaels, 2013. Policy Implications of Climate Models on the Verge of Failure. American Geophysical Union Science Policy Conference, Washington DC, June 24–26, 2013, Paper CC-15.

Recent protests by fast food workers have renewed interest in the minimum wage. Often, these protests focus on the inability of an individual worker to support a family on the minimum wage. Such a question spurred McDonald’s to release a mock budget for low wage workers. McDonald’s first mistake, however, was in accepting the premise of the question. 

Whoever claimed the minimum wage was supposed to be enough to support a family? Certainly, when I started my first job flipping burgers at Burger King, I didn’t take that job expecting to support a family. It was an avenue to earn some spending money (I wasn’t born a Kennedy, so my family could not provide a generous allowance) and a way to learn some basic job skills. I haven’t been alone in viewing minimum wage restaurants jobs in that light. According to the Bureau of Labor Statistics, in 2012 (latest numbers) over half of minimum wage workers are under age 25. In fact, only 3 percent of workers over the age of 25 earn at or below the minimum wage. Two-thirds of minimum wage workers only work part-time, again illustrating the point that these jobs aren’t viewed as a career but rather the first rung on the job ladder.

The biggest driver of who works at minimum wage is education. Only 8 percent of minimum wage workers have a college degree. Around one third lacks a high school degree. Cost of living also drives the difference. Despite the higher state minimum wages found in the Northeast, about half of all minimum wage workers live in the South, a relatively more affordable place to live. Sadly, opponents of the current minimum wage level are getting their wish, but not in the way they wanted. Since 2010, the number of minimum wage workers has declined by over 800,000. Given the increase in minimum wage in 2009 and the relatively weak labor market, I think it’s a safe bet that most of these workers left the labor force rather than received a big raise. 

Even if all minimum wage workers were trying to support a family on their own, I ultimately do not believe it’s the role of the government to inject itself into consensual private agreements. Nor do I believe it’s the role of the government to pick sides in private disputes. The government has no more moral authority to choose the “right” wage for someone than I do. Only free individuals can make those choices for themselves. Even if it wasn’t a policy choice about freedom of contract, do we really want, as a matter of policy, to encourage a large portion of individuals in their 30s and 40s to make a career of flipping burgers? I certainly didn’t start my job at Burger King with the intention of staying. 

Just as President Obama has vowed to regain the initiative and push forward with his economic and education policy agenda, an organization called The First Five Years Fund has released a new poll asking the public about Pre‑K policy. According to the poll, Americans know what they want (More federally funded Pre‑K!), and know when they want it (NOW!).

Encouraging as this must be for supporters of a larger federal role in early education, opinion polling is not a good way to design policy—any more than it is a good way to design bridges. There is an aspect of bridge construction in which public opinion does properly figure: assessing demand. But when it comes to actually designing the structure that will carry living, breathing people across a gorge, public opinion plays little role. The reason is obvious: most people lack the time, skills, and knowledge to design bridges. They know what they ultimately want out of civil engineering projects, but they don’t know how best to achieve their goals.

It’s the same with education policy, and indeed with policy generally. Contrary to the apparent assumption of these early education advocates, it is not inherently obvious that increased federal Pre‑K spending will ensure that children get a strong start in life. As it happens, there is a great deal of evidence that past and current federal Pre‑K programs have proven expensive failures and have even, in some cases, done harm. Nor is the advocates’ currently favored policy–federally subsidized state Pre‑K programs–an obviously good idea. Some states with universal Pre‑K programs have actually seen their 4th grade test scores decline relative to the national average. There is no clear pattern of success.

Because of that fact, this is precisely not the sort of policy that should be expensively promoted at the federal level. If states wish to gamble that they can succeed where others have failed, then their residents should be the ones who put their money on the line. That approach has the merit that state politicians can be more easily held accountable than federal ones—voters have fewer issues on which to decide whom to support or oppose at the state level.

Well-meaning as the First Five Years Fund and its philanthropic backers no doubt are, their effort to design policy based on public opinion polling is badly misguided. It is little better than a schoolyard taunt that “everyone else wants to do it.” Serious people, people who actually want to achieve their stated goals and not simply win a political contest, can do better.

This is a great day. For years, Bono has been something of a pain, banging on about the need for billions of dollars in Western foreign aid to Africa. I have criticized him for ignoring the real source of African poverty – lack of capitalism – on numerous occasions.

But, unlike many who hate capitalism without reservation, Bono is open to changing his mind. Here is Bono giving capitalism its due recognition during a recent speech at Georgetown University. As the musician put it, when it comes to poverty “free enterprise is a cure.” 

Indeed, the evidence is overwhelming.

According to the World Bank, global poverty is declining rapidly. In 1981, 70 percent of people in poor countries lived on less than $2 a day, while 42 percent survived on less than $1 a day. Today, 43 percent live on less than $2 a day, while 14 percent survive on less than $1. “Poverty reduction of this magnitude is unparalleled in history,” wrote Brookings Institution researchers Laurence Chandy and Geoffrey Gertz in a recent paper. “Never before have so many people been lifted out of poverty over such a brief period of time.”

As far as Africa goes, inflation adjusted per capita incomes rose by an astonishing 97 percent between 1999 and 2010. That is good news for Africa and for humanity. More people should recognize it.

Way back in 2011—when “Snowden” was just a quiescent indie band from Atlanta—I wrote two posts here at the Cato blog trying to suss out what the “secret law” of the Patriot Act that Sen. Ron Wyden (D‑OR) and others were raising alarms about might involve: “Atlas Bugged” and “Stalking the Secret Patriot Act.” Based on what seemed like an enormous amount of circumstantial evidence—which I won’t try to summarize here—I speculated that the government was likely engaged in some kind of large scale program of location tracking, involving the use of the Patriot Act’s Section 215 to bulk collect cell phone location records for data mining purposes.

I remained reasonably confident in my guess until the disclosure of the Section 215 bulk call records program, which was soon followed by insistent public statements from NSA officials that they did not collect location records “under this program.” That ubiquitous qualifier certainly left some wiggle room, but naturally the government collects location information in some circustances for intelligence purposes—at the very least when it has a FISA warrant for full electronic surveillance of a specific target—and it seemed only natural that if the government was engaged in bulk location tracking and data mining, it would obtain that information in tandem with its bulk collection of call detail records. So, I concluded, I had probably guessed wrong: The secret Section 215 program did involve bulk collection of phone records—but not phone location records.

Then, last week, Wyden gave a barnburner of a speech on NSA surveillance at the Center for American Progress—one that makes me think I may have guessed correctly after all. Between his talk and the question and answer sessions that followed, Wyden explicitly mentioned location tracking no fewer than five separate times—discussing it far more frequently than the program we actually know about, involving bulk collection of call records:

[A]s you listen to this talk, ponder that most of us have a computer in our pocket that potentially can be used to monitor us 24/7. […]

 This is particularly true if you’re vacuuming up cell phone location data, essentially turning every American’s cell phone into a tracking device. We are told this is not happening today, but intelligence officials have told the press that they currently have the legal authority to collect Americans’ location information in bulk. […]

The piece of technology we consider vital to the conduct of our everyday personal and professional life hapens to be a combination phone bug, listening device, location tracker, and hidden camera. […]

Today, government officials are openly telling the press that they have the authority to effectively turn Americans’ smart phones and cell phones into location-enabled homing beacons. […]

These smartphones that everybody’s got in their pockets […] can be used as a tracking system for everyone in this room, 24/7.

This is not exactly subtle. Wyden’s constant references to location tracking in this context would be nothing short of bizarre unless he had reason to believe that the governments assurances on this score are misleading, and that there either is or has been some program involving bulk collection of phone records. Wyden, of course, would know full well whether there is or is not any such program via his role on the Intelligence Committee—and his focus on location tracking over the activities we know NSA is engaged in, such as monitroing of Internet communications and bulk collection of phone records, would be an inexplicable obsession if he knew that no such program existed.

There’s another hint along these lines early in the talk, when Wyden says that “secret rullings of the Foreign Intelligence Surveillance Court have interpreted the Patriot Act as well as section 702 of the FISA statute in some surprising ways.” Wyden says that these rulings “can be astoundingly broad” and then adds: “The one that authorizes the bulk collection of phone records is as broad as any I have ever seen.” (Emphasis mine.) That’s a very specific word choice: not broader than any he has seen, or the broadest ruling he has seen—even though a ruling authorizing bulk collection of every American’s phone records would be the broadest anyone without access to classified information had ever seen—but rather as broad. As in: there are other rulings of comparable breadth, perhaps allowing bulk collection of other types of information about all Americans. Wyden gestures in this direction again later, calling it “especially troubling” that “there is nothing in the Patriot Act that limits this sweeping bulk colection to phone records.”

If this sounds like overreading, consider that actually it’s consistent with several Senators’ previous efforts to hint at the nature of their concerns without directly exposing classified programs. As Wyden noted at the outset of his talk, he and his colleague Mark Udall (D‑CO) may not be able to “tap out the truth in Morse code,” but they have “tried just about everything else we could think of to warn the American people.” That means they have often, without explicitly disclosing classified information, given some very strong hints to what they were concerned about to those of us paying close attention. For instance, as I noted in one of those prior posts, Sen. Udall frequently explained his concerns using the same specific, and rather curiously worded example, warning that Section 215 gave the government “unfettered” access to “business records ranging from a cell phone company’s phone records to an individual’s library history.” (Emphasis mine.) The pointed contrast between “an individual’s” library records and “a cell phone company’s” phone records was, in retrospect, about as close as Udall could come to explicitly warning that phone records were being collected in bulk, not merely for specifically targeted individuals. Perhaps this talk was as close as Wyden can come to warning us—without coming right out and saying it—that there’s a bulk location tracking program yet to be disclosed.

The Congressional Budget Office has released its cost estimate of the Obama administration’s one-year repeal delay of ObamaCare’s employer mandate and anti-fraud provisions. The CBO expects the Obama administration’s unilateral rewriting of federal law (my words, not CBO’s) will increase federal spending by $3 billion in 2014 and reduce federal revenues by a net $9 billion, thereby increasing the federal debt by $12 billion. If President Obama keeps this up, Congress may have to raise the debt ceiling or something.

Where is that $3 billion of new spending going? The CBO estimates the administration’s action will lead to about half a million additional people receiving government subsidies, including through ObamaCare’s Exchanges:

All told, as a result of the announced changes and new final rules, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in CBO’s May 2013 baseline, primarily because of the one-year delay in penalties on employers. Of those who would otherwise have obtained employment-based coverage, roughly half will be uninsured and the others will obtain coverage through the exchanges or will enroll in Medicaid or the Children’s Health Insurance Program (CHIP), CBO and JCT estimate.

Which makes the president’s delay of the employer mandate and anti-fraud provisions consistent with his administration’s goal of hooking enough voters on government subsidies to affect electoral outcomes and votes in Congress.