Latest Cato Research on Environmental Regulation https://www.cato.org/rss/research/environmental-regulation en Property Rights as a Foundation for Conservation https://www.cato.org/multimedia/cato-daily-podcast/property-rights-foundation-conservation?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Holly Fretwell, Caleb O. Brown <p>Are property rights the enemy of conservation? Holly Fretwell of the Property and Environment Research Center comments.</p> Mon, 02 Sep 2019 16:55:00 -0400 Holly Fretwell, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/property-rights-foundation-conservation Steve H. Hanke discusses Universal Time Zones on CNN's Fareed Zakaria GPS https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-universal-time-zones-cnns-fareed-zakaria-gps?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Sun, 25 Aug 2019 12:05:00 -0400 Steve H. Hanke https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-universal-time-zones-cnns-fareed-zakaria-gps Save the Endangered Species Act with Common Sense https://www.cato.org/publications/commentary/save-endangered-species-act-common-sense?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <div class="lead text-default"> <p>The Endangered Species Act has been called the strongest environmental law Congress has ever written because it gives the government almost unlimited power to regulate private landowners with the objective of saving wildlife, fish, and even insects. Environmental groups that <a href="https://naturalresourcereport.com/2011/12/failures-and-abuses-of-the-endangered-species-act/" target="_blank">relish seeing this law enforced </a>are upset that the Trump administration is <a href="https://www.foxnews.com/science/trump-overhauling-enforcement-of-endangered-species-act" target="_blank">proposing</a> to change how the law is administered.</p> </div> , <div class="text-default"> <p>The Fifth Amendment to the Constitution forbids the taking of private property for public use without compensation. The Endangered Species Act violates the spirit, if not the letter, of this amendment.</p> <p>Under the law, if you have an endangered species on your land, or if the government thinks you might have an endangered species on your land, or if the government knows you don't have an endangered species on your land but thinks that you might someday have that species on your land, then the government can so strictly regulate your land that you can't get any economic use out of it. For example, the government told Louisiana landowners that they <a href="https://www.wsj.com/articles/the-feds-bungle-frog-hospitality-1538329013" target="_blank">couldn't develop their property</a> because it was defined as "critical habitat" for a rare frog — even though the frog didn't, and couldn't, live on the land without completely removing existing trees and replacing them with other species.</p> <p>Effectively, the government is requiring some private landowners to house and feed certain species of wildlife at the landowners' expense. Moreover, the government can force this without providing any compensation at all. The law doesn't require the government to consider the cost of its regulation, so government officials can write overly strict rules just in case it might help a species.</p> <p>Yet there is little evidence that giving the government this power has done much to save species. The few species that have recovered from danger did so mostly for other reasons.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.</p> </div> </div> </aside> , <div class="text-default"> <p>For example, America's symbol, the bald eagle, was once considered endangered. But scientists agree that it recovered primarily because the Environmental Protection Agency <a href="https://www.edf.org/news/25-years-after-ddt-ban-bald-eagles-osprey-numbers-soar" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.edf.org/news/25-years-after-ddt-ban-bald-eagles-osprey-numbers-soar&amp;source=gmail&amp;ust=1566328152960000&amp;usg=AFQjCNFHuawtDw2Q0Cgy5r8oIfR7f-RHpw">banned the use of the pesticide DDT </a>a year before the Endangered Species Act was passed.</p> <p>Moreover, the Endangered Species Act may actually do more harm than good to endangered species. To avoid regulation, the law gives private landowners incentives to do everything they can to <a href="https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1002&amp;context=nwrchumanconflicts" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article%3D1002%26context%3Dnwrchumanconflicts&amp;source=gmail&amp;ust=1566328152960000&amp;usg=AFQjCNG4WEQADlXDB1HsYChh3_EQzAjTUw">keep endangered species off their land</a>, leading to the phrase, "shoot, shovel, and shut up."</p> <p>This entire system is unfair because it forces a few people to pay the costs for something that benefits everyone else. While it is unknown whether the Supreme Court would agree that the law is unconstitutional, we shouldn't have to ask it because we shouldn't have imposed such an inequitable burden on a few people in the first place.</p> <p>The Trump administration has proposed to revise how the law is administered in several ways. Among other things, the proposed rules would allow the government to consider the costs of its regulation and would impose less intrusive regulations for the protection of species that are considered "threatened" as opposed to "endangered."</p> <p>While these changes may ease the burden on some private landowners, Congress and the administration could do much more to assure species recovery without imposing the costs on a few landowners. Carrots work better than sticks, meaning we can save more species by rewarding people for doing so rather than punishing them for having those species on their land.</p> <p>First, a share of public land recreation fees should go into trust funds for protecting endangered species. To adequately fund this program, federal agencies such as the National Park Service, Forest Service, and Bureau of Land Management should be allowed to charge for all recreation on public lands.</p> <p>Currently, most public land recreation, including hunting, fishing, hiking, boating, and off-road vehicles, is free. It is perfectly fair to ask people who use public lands to pay such fees, and many will be happy to pay such fees knowing that by doing so they are helping to save endangered species.</p> <p>Second, on a case-by-case basis, it may be appropriate to give people ownership rights to selected species. In Britain, wildlife are owned by the owners of the land the wildlife use, which can give landowners incentives to protect such wildlife. Giving Americans similar ownership rights can help save many species.</p> <p>People go to great lengths to save rare breeds of dogs, cattle, and other domestic animals, not for any economic reward but simply for the pride in doing so. Creating ownership rights in some species of wildlife can put this energy to work in saving rare species.</p> <p>Saving endangered species is important, but imposing the costs of doing so on a few people is unfair, counterproductive, and may be unconstitutional. Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.</p> </div> Tue, 20 Aug 2019 14:16:00 -0400 Randal O'Toole https://www.cato.org/publications/commentary/save-endangered-species-act-common-sense Who Benefits When Firms Game Corrective Policies? https://www.cato.org/publications/research-briefs-economic-policy/who-benefits-when-firms-game-corrective-policies?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mathias Reynaert, James M. Sallee <div class="lead text-default"> <p>Sometimes firms comply with a regulation by gaming the measure targeted by policy rather than by changing their behavior. This relates to Goodhart's Law, which posits that "when a measure becomes a target, it ceases to be a good measure." We study how gaming of this sort can impact consumers who rely on manipulable measures for making choices in a market. Gaming erodes consumer information and induces mistakes. But when the gaming is done in reaction to a regulatory constraint, it lowers the costs to firms, which benefits consumers via pass-through. The impact of gaming on consumer welfare is thus ambiguous, even when the gaming completely fools consumers, and the net effect depends critically on whether gaming is done in response to a policy.</p> </div> , <div class="text-default"> <p>We explore the impact of gaming on consumer welfare both theoretically and empirically for the case of automobile fuel-consumption ratings. We do three things: First, we use a novel data set to measure on-road fuel consumption and document gaming of fuel-consumption ratings, which escalates dramatically following the introduction of regulations that target this rating. Second, we develop a theoretical model that derives the impact of gaming on buyer welfare in a setting where sellers game energy-efficiency ratings, which buyers use to evaluate products. Third, we conduct welfare analysis using estimates of the automobile demand system to quantify the welfare effects identified by our theory.</p> <p>Our empirical analysis considers the introduction of stringent corrective policy in the EU automobile market. Prior to 2007, there were no policies in Europe that hinged directly on fuel-consumption ratings; since then, both EU standards and nation-specific tax schemes have created policy incentives that reward lower laboratory fuel-consumption test ratings. To measure gaming, we compare the laboratory ratings, which form the basis of policy, with direct measures of on-road fuel consumption that we construct from a data set that tracks fuel consumption and kilometers traveled for a panel of more than 250,000 drivers for a period of 12 years in the Netherlands. Using these data, we estimate the percentage difference between the laboratory test and on-road performance (which we call the performance gap) for each vehicle vintage and model.</p> <p>We document a sharp rise in the performance gap coincident with policy change. Vehicles produced before 2007 show a small, relatively stable performance gap. Vehicles produced after that exhibit a large and rising performance gap, so that 2014 model-year vehicles have performance gaps in excess of 50 percent on average. The rise in the performance gap implies that around 65 percent of the gains in fuel economy since the introduction of policy, as measured by laboratory tests, are false. Using conventional estimates of lifetime distance traveled and a social cost of carbon at $40 per ton, the difference between apparent and actual emission reductions amounts to $1.2 billion annually from 2010 to 2014 when extrapolated to all of Europe. We interpret the rise in the performance gap as evidence of gaming in response to policy incentives, in the spirit of Goodhart's Law, and then turn our attention both theoretically and in welfare simulations to our central question: Who benefits when firms game corrective policy?</p> <p>Our theoretical model considers a monopolist who sells a good to a representative consumer. The good has some attribute that is desirable to consumers, but it also creates a negative externality that motivates corrective policy. The attribute closely matches the role of fuel economy ratings in the automobile market. The attribute is not directly observable, however, so consumer demand and government regulation are based on a measure provided by the seller. The seller can change the measure either by changing the true attribute or by gaming, both of which are costly.</p> <p>In our model, we allow that some fraction of gaming is undetected by buyers. In the absence of policy, this means that gaming lowers buyer welfare for two reasons. First, gaming causes buyers to misoptimize (choose the wrong quantity of the good), which leads to a loss in buyer surplus that we call choice distortion. Second, gaming causes the seller to raise prices because buyers perceive an improvement in the product. This price effect further reduces buyer surplus.</p> <p>Corrective policy disrupts this logic by flipping the sign of price effects. Regulation raises the cost of production. Gaming allows the seller to lower its costs, and this benefits buyers through lower prices in the same way a reduction in a tax would. When this price effect dominates choice distortions from faulty information, buyers benefit from the seller's gaming even when they are fooled by it.</p> <p>We focus on buyer surplus as a notion of the private surplus of consumers that consider buying the good. This is narrower than consumer surplus, which would encompass the externality, but gaming will also impact the level of the externality. The ultimate effect of gaming on the environment depends on the sophistication of the policymaker, who may increasingly tighten policy to achieve real gains, and of the buyers, who may expand the overall size of the market when they mistakenly perceive lower costs of ownership.</p> <p>Next, we set out to quantify the price effect and choice distortions in our empirical setting. We demonstrate that the price effects and choice distortions identified by our theory have direct empirical analogs in a discrete choice setting. We then estimate a demand model of the European car market that provides us estimates of consumer preferences and the marginal costs of products. Given these preferences and costs, we calibrate the incidence of gaming for a range of alternative assumptions regarding consumer awareness, policy stringency, and the degree of gaming.</p> <p>We find robust results that align with our theoretical predictions. When there is no corrective policy and when consumers are fooled by gaming, we find that lowering perceived fuel costs through gaming leads to modest losses in buyer surplus. A significant majority of these losses come through the price effect. As a result, firm profits rise with gaming, and this comes at the expense of lower buyer surplus.</p> <p>As suggested by the theory, the welfare effects of gaming change when we introduce a corrective policy. We model a mandated decrease in average fuel-consumption ratings that firms comply with via shifting their sales mix toward more efficient models. When firms comply honestly, private consumer surplus falls substantially, as consumers are forced into less desirable products. When we allow firms to relax this regulatory constraint by gaming to meet the standard, we find beneficial price effects for buyers that consistently dominate choice distortions so that the net impact of gaming is to raise buyer surplus. Gaming with or without a policy induces a similarly sized choice distortion, but we find that this is an order of magnitude smaller than the price effect for a significant range of parameter choices. These results provide empirical validation for our theoretical prediction: gaming benefits consumers in the presence of stringent policy, even when buyers are fooled. We also show that a corrective policy roughly triples the private benefit to a single firm that games when all others are honest, which implies that policy amplifies competitive pressures that incentivize gaming.</p> <p><strong>NOTE:</strong><br />This research brief is based on Mathias Reynaert and James M. Sallee, "Who Benefits When Firms Game Corrective Policies?," Energy Institute at Haas Working Paper no. 289, April 2018, <a href="https://ei.haas.berkeley.edu/research/papers/WP289.pdf" target="_blank">https://ei.haas.berkeley.edu/research/papers/WP289.pdf</a>.</p> </div> Wed, 14 Aug 2019 00:00:00 -0400 Mathias Reynaert, James M. Sallee https://www.cato.org/publications/research-briefs-economic-policy/who-benefits-when-firms-game-corrective-policies Grizzly Bears and Endangered Species Recovery https://www.cato.org/multimedia/cato-daily-podcast/grizzly-bears-endangered-species-recovery?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Brian Yablonski, Caleb O. Brown <p>Species recovery is a key goal of the Endangered Species Act. So why are recovering species so rarely removed from the list? Brian Yablonski of the Property and Environment Research Center comments.</p> Thu, 18 Jul 2019 12:59:00 -0400 Brian Yablonski, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/grizzly-bears-endangered-species-recovery Redefining “Waters of the United States” https://www.cato.org/regulation/summer-2019/redefining-waters-united-states?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mon, 10 Jun 2019 03:00:00 -0400 Jonathan H. Adler https://www.cato.org/regulation/summer-2019/redefining-waters-united-states Five Questions for 3,508 Economists https://www.cato.org/regulation/summer-2019/five-questions-3508-economists?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mon, 10 Jun 2019 03:00:00 -0400 Michael L. Davis https://www.cato.org/regulation/summer-2019/five-questions-3508-economists De-Sludging California’s Prop 65 https://www.cato.org/regulation/summer-2019/de-sludging-californias-prop-65?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mon, 10 Jun 2019 03:00:00 -0400 Michael L. Marlow https://www.cato.org/regulation/summer-2019/de-sludging-californias-prop-65 Chris Edwards discusses the Restore Our Parks Act and the National Park Service maintenance backlog on Gray TV https://www.cato.org/multimedia/media-highlights-tv/chris-edwards-discusses-restore-our-parks-act-national-park-service?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Thu, 25 Apr 2019 12:31:00 -0400 Chris Edwards https://www.cato.org/multimedia/media-highlights-tv/chris-edwards-discusses-restore-our-parks-act-national-park-service WaPo Embraces Its Inner Malthus https://www.cato.org/publications/commentary/wapo-embraces-its-inner-malthus?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Thomas A. Firey <div class="lead text-default"> <p><em>Washington Post</em> political reporter Colby Itkowitz writes:</p> </div> , <div class="text-default"> </div> , <blockquote class="blockquote"> <div> <p>During floor debate ahead of a vote on the Green New Deal, Sen. Mike Lee (R-Utah) told his colleagues that if they really want to address environmental concerns they'll encourage people to couple off and have more babies. … This recommendation, to add more people to the planet, doesn't track with science or reason. A 2017 <a href="https://iopscience.iop.org/article/10.1088/1748-9326/aa7541">research article determined</a> that one way an individual could contribute to eliminating greenhouse gases is to have one fewer child.</p> </div> </blockquote> <cite> </cite> , <div class="text-default"> <p>That's the nut from her snide web article, "<a href="https://www.washingtonpost.com/politics/sen-mike-lee-says-we-can-solve-climate-change-with-more-babies-science-says-otherwise/2019/03/26/67f91b2e-4fed-11e9-88a1-ed346f0ec94f_story.html">Sen. Mike Lee Says We Can Solve Climate Change with More Babies. Science Says Otherwise</a>." <em>Post</em> national correspondent James Hohmann deemed the article noteworthy enough to be the "Hot [Read] on the Left" in his "<a href="https://www.washingtonpost.com/news/powerpost/paloma/daily-202/2019/03/27/daily-202-trump-faces-many-obstacles-if-he-s-serious-about-trying-to-make-republicans-the-party-of-health-care/5c9a544a1b326b0f7f38f26f/">Daily 202</a>" newsletter.</p> <p>Problem is, Itkowitz seems to not understand the point Lee was trying to make. Instead, she "talks past" him — something all-too-common in politics, but not something reporters should do. Worse, if history is a guide, her view is more likely to prove a-scientific and unreasonable than his.</p> <p>Here's the story: Last Tuesday, the Senate held a floor debate and vote on the so-called "Green New Deal" — which is to say the Senate engaged in silly Republican grandstanding over a silly Democratic proposal. As part of the debate, <a href="https://www.lee.senate.gov/public/index.cfm/speeches?ID=2271BAF4-7F34-4BE8-81C5-B621E9BAF878">Lee delivered a floor speech</a> that featured everything from a picture of a machine-gun-firing, bazooka-toting Ronald Reagan riding a velociraptor waving an American flag (<a href="https://www.sltrib.com/news/politics/2019/03/26/sen-mike-lee-criticizes/">no, really</a>), to references to <em>Star Wars</em> tauntauns and the Hanna-Barbera Aquaman's giant seahorse, to <em>Sharknado 4</em> and Austin Powers' Dr. Evil. That is, Lee met double-silliness with more silliness.</p> <p>One can argue that this was inappropriate for a Senate debate, especially on a serious topic like climate change. But then, comedy can be an effective means to truth.</p> <p>Toward that end, at the conclusion of his speech Lee offers a serious point. Itkowitz selectively quotes it; here's the complete section:</p> </div> , <blockquote class="blockquote"> <div> <p>The Green New Deal is not the solution to climate change. It's not even part of the solution. It's part of the problem. The solution to climate change won't be found in political posturing or virtue signaling like this. It won't be found in the federal government at all.<br /><br />You know where the solution can be found? In churches, wedding chapels, and maternity wards across the country and around the world. This, Mr. [Senate] President, is the real solution to climate change: babies. Climate change is an engineering problem — not social engineering, but the real kind. It's a challenge of creativity, ingenuity, and technological invention. And problems of human imagination are not solved by more laws, but by more humans.<br /><br />More people mean bigger markets for innovation. More babies mean more forward-looking adults — the sort we need to tackle long-term, large-scale problems. American babies, in particular, are likely going to be wealthier, better educated, and more conservation-minded than children raised in still-industrializing regions. As economist Tyler Cowen recently wrote on this very point, "by having more children, you are making your nation more populous — thus boosting its capacity to solve [climate change]."<br /><br />Finally, Mr. President, children are a mark of the kind of personal, communal, and societal optimism that is the true prerequisite for meeting national and global challenges together. The courage needed to solve climate change is nothing compared with the courage needed to start a family. The true heroes of this story aren't politicians or social media activists. They are moms and dads, and the little boys and girls they are — at this moment — putting down for naps, helping with their homework, building tree houses, and teaching how to tie their shoes.<br /><br />The planet does not need us to "think globally and act locally" so much as it needs us to think family and act personally. The solution to climate change is not this unserious resolution, but the serious business of human flourishing — the solution to so many of our problems, at all times and in all places: fall in love, get married, and have some kids.</p> </div> </blockquote> <cite> </cite> , <div class="text-default"> <p>No doubt, the Utah senator's comments were, at least in part, his own virtue-signaling to his predominantly Mormon constituency. But he draws on an important economic idea: at the margin, human beings have a positive effect on the world. Human ingenuity, hard work, preferences, and values create goods, and among those goods can be improved environmental quality. Julian Simon popularized this idea in his 1981 book <em><a href="https://www.amazon.com/product-reviews/069109389X">The Ultimate Resource</a></em>, and it has been restated in recent years by, among others, Cowen in his new book <em><a href="https://www.amazon.com/Stubborn-Attachments-Prosperous-Responsible-Individuals/dp/1732265135">Stubborn Attachments</a></em> (reviewed by Pierre Lemieux <a href="https://object.cato.org/sites/cato.org/files/serials/files/regulation/2019/3/regulation-v42n1-9_3.pdf#page=9">here</a>), Bryan Caplan in his 2011 book <em><a href="https://www.amazon.com/Selfish-Reasons-Have-More-Kids/dp/0465028616">Selfish Reasons to Have More Kids</a></em>, and my Cato colleague Marian Tupy and BYU economist Gale Pooley in their <a href="https://www.cato.org/publications/policy-analysis/simon-abundance-index-new-way-measure-availability-resources">2018 paper on the "Simon Abundance Index."</a></p> <p>Itkowitz claims "science and reason" say different. To justify that, she links to <a href="https://iopscience.iop.org/article/10.1088/1748-9326/aa7541/pdf">a 2017 paper</a> that actually <em>doesn't</em> determine "that one way an individual could contribute to eliminating greenhouse gases is to have one fewer child," but rather examines Canadian high school science textbooks' recommendations for reducing greenhouse gas emissions. A possible strategy — one that <em>none</em> of the textbooks recommend, which the paper's authors lament — is to "have one fewer child." That paper, in turn, cites <a href="https://www.sciencedirect.com/science/article/abs/pii/S0959378008001003?via%3Dihub">a 2009 paper</a> that estimates the carbon emissions resulting from an offspring, including a share of the subsequent emissions of that offspring's descendants. Not surprisingly, that's a big number, dwarfing the carbon-reduction benefits of such common strategies as recycling, switching from gasoline-powered cars to hybrids and electric cars, and upgrading lightbulbs. (My takeaway from the 2017 paper is how pointless many of the commonly advocated carbon-reduction strategies are.)</p> <p>The 2009 paper is a mathematical modeling exercise under various assumptions, resulting in different estimated marginal "carbon legacies." But that doesn't show Itkowitz is right and Lee's being foolish because the paper ignores Lee's point about the effects of population change on innovation and living standards.</p> <p>From tin shortages in the ancient world, to <a href="https://www.cato.org/pubs/regulation/regv27n1/v27n1-1.pdf">William Strong Newberry's 1875 (yes, <strong>18</strong>75) warning</a> that the world was running out of oil, to <a href="https://www.mdpolicy.org/research/detail/a-doomsday-prophesy-50-years-later">Paul Ehrlich's <em>Population Bomb</em></a>, to Jimmy Carter's <a href="https://www.cato.org/blog/four-decades-moral-equivalent-war">moral equivalent of war</a>, population growth has placed humanity on the Malthusian edge of poverty and privation — or so we keep being told. But we never fall off that edge. In fact, we keep moving away from it: we grow fatter (alas), longer-lived, and more comfortable. The reason is simple: more people means more innovation and resource availability, which means a higher standard of living rather than the opposite.</p> <p>That doesn't mean humanity is guaranteed to find some easy, innovative way to cut greenhouse gas emissions. As my Cato colleague Peter Van Doren noted, both Lee's optimism and Itkowitz's pessimism are attitudes (probably correlated to their politics) rather than testable, scientific hypotheses. That said, history suggests it's more likely that humanity will find innovative ways to cut emissions, or geo-engineer around climate change, or accommodate change, than that reducing (or government constraining) population growth will save us from a much warmer world — or that there will be no future environmental quality innovations.</p> <p>All that said, some legitimate criticisms can be made of Lee's remarks. Government <em>can</em>be a useful tool for addressing externalities, just as it can also be a terrible tool. And there are plenty more examples of people showing the "courage" to start families than there are of policymakers showing the courage to address difficult policy problems (e.g., entitlements insolvency, government debt, pork and rent-seeking, better childhood education…) Those criticisms would have made good reading, as would a broader discussion of <a href="https://www.econlib.org/library/Enc/bios/Malthus.html">Malthus</a> and neo-Malthusianism, government intervention, and population change. Unfortunately, instead of that, readers got was the equivalent of the aforementioned Reagan–velociraptor picture.</p> </div> Thu, 11 Apr 2019 10:50:00 -0400 Thomas A. Firey https://www.cato.org/publications/commentary/wapo-embraces-its-inner-malthus George Selgin on the doubtful economics of the Green New Deal on BBC’s In the Balance https://www.cato.org/multimedia/media-highlights-radio/george-selgin-doubtful-economics-green-new-deal-bbcs-balance?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Sat, 06 Apr 2019 11:01:00 -0400 George Selgin https://www.cato.org/multimedia/media-highlights-radio/george-selgin-doubtful-economics-green-new-deal-bbcs-balance Ryan Bourne discusses socialism and the Green New Deal on WFMD's Your Financial Editor https://www.cato.org/multimedia/media-highlights-radio/ryan-bourne-discusses-socialism-green-new-deal-wfmds-financial?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Sat, 30 Mar 2019 10:59:00 -0400 Ryan Bourne https://www.cato.org/multimedia/media-highlights-radio/ryan-bourne-discusses-socialism-green-new-deal-wfmds-financial Utility Energy Efficiency Initiatives Are Good Policy https://www.cato.org/regulation/spring-2019/utility-energy-efficiency-initiatives-are-good-policy?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 08 Mar 2019 11:34:00 -0500 Martin Kushler, Ed Vine, Ken Keating https://www.cato.org/regulation/spring-2019/utility-energy-efficiency-initiatives-are-good-policy A Cautionary Tale about Energy Efficiency Initiatives https://www.cato.org/regulation/spring-2019/cautionary-tale-about-energy-efficiency-initiatives?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 08 Mar 2019 11:31:00 -0500 Kenneth W. Costello https://www.cato.org/regulation/spring-2019/cautionary-tale-about-energy-efficiency-initiatives Why the U.S. Can't Afford a Green New Deal https://www.cato.org/publications/commentary/why-us-cant-afford-green-new-deal?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Jeffrey Miron, Laura Nicolae <div class="lead text-default"> <p>As the list of Democratic presidential candidates grows, so do their promises. So far, the candidates have largely embraced the same policy focus: expanded entitlement spending to guarantee new welfare benefits.</p> </div> , <div class="text-default"> <p>Massachusetts Sen. Elizabeth Warren <a href="https://www.nytimes.com/2019/02/19/us/politics/elizabeth-warren-child-care.html" target="_blank">recently endorsed</a> a universal federal provision of child care. Vermont Sen. Bernie Sanders <a href="https://www.chicagotribune.com/news/nationworld/ct-bernie-sanders-2020-policy-agenda-20190219-story.html" target="_blank">has long supported</a> "Medicare for All," and businessman Andrew Yang is perhaps best-known for his <a href="http://time.com/5528621/andrew-yang-universal-basic-income/" target="_blank">advocacy of a universal basic income</a>. Meanwhile senators <a href="https://www.huffingtonpost.com/entry/cory-booker-green-new-deal_us_5c1415ffe4b05d7e5d81f322" target="_blank">Cory Booker</a>, <a href="https://thehill.com/homenews/campaign/427386-kamala-harris-endorses-ocasio-cortezs-green-new-deal" target="_blank">Kamala Harris</a>,<a href="https://thehill.com/policy/energy-environment/426582-gillibrand-backs-green-new-deal-to-fight-climate-change" target="_blank"> Kirsten Gillibrand</a> and others have all backed the <a href="https://www.congress.gov/bill/116th-congress/house-resolution/109/text" target="_blank">Green New Deal,</a> which promises to address climate change and inequality by providing universal health care and creating millions of jobs.</p> <p>While reasonable people can disagree on some aspects of these proposals, one fact is uncontroversial: the United States cannot afford them.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Given that the US cannot afford its existing entitlement programs, adopting the massively expensive policies proposed by Democratic candidates would be foolish.</p> </div> </div> </aside> , <div class="text-default"> <p>Congressional Budget Office projections of the federal debt make this point compellingly. According to <a href="https://www.cbo.gov/system/files?file=2018-06/53919-2018ltbo.pdf" target="_blank">CBO projections</a>, federal debt held by the public, currently at 78% of America's gross domestic product, or GDP, will approach 100% in the next decade and reach 152% by 2048. Cutting the debt-GDP ratio to its 1957-2007 average within 25 years <a href="https://www.brookings.edu/wp-content/uploads/2016/06/longterm_fiscal_imbalance_gale.pdf" target="_blank">would require</a> policymakers to permanently reduce spending or increase taxes by 3.8% of GDP, which amounts to about $800 billion, or <a href="https://www.cbo.gov/publication/53627" target="_blank">24% of federal revenue</a>.</p> <p>Distinguished economists have <a href="https://www.aeaweb.org/aea/2019conference/program/pdf/14020_paper_etZgfbDr.pdf" target="_blank">recently argued</a> that debt may be less costly in the future because of low interest rates. This assumes we can forecast future rates. In reality, estimates of long-run interest rates differ widely and <a href="https://www.brookings.edu/research/the-equilibrium-real-funds-rate-past-present-and-future/" target="_blank">are highly uncertain</a>. Rates have stayed low over the last decade due to a <a href="https://www.federalreserve.gov/newsevents/speech/yellen20160826a.htm" target="_blank">combination of factors</a>, such as monetary policy, weak foreign demand and deleveraging in the wake of the 2008 recession. These forces are unlikely to play as important a role in the future.</p> <p>More importantly, while low interest rates might permit running a long-term deficit that is stable relative to GDP, standard forecasts, such as those from CBO, project rising deficits.</p> <p>Some Democrats have <a href="https://www.politico.com/story/2019/02/06/alexandria-ocasio-cortez-budget-1143084" target="_blank">also claimed </a>that federal debt is not a constraint by relying on "Modern Monetary Theory" (MMT), which argues that central banks can issue enough money to fund federal expenditures with little threat of inflation. But the stable inflation of recent years is precisely <a href="https://www.frbsf.org/our-district/files/SARB-2014-Williams_Web_PDF-final.pdf" target="_blank">due to</a> central banks' intentional pursuit of price stability as the primary objective of monetary policy. If monetary policy were to focus on funding government spending instead, the threat of inflation would increase rapidly.</p> <p>Several Democrats have also advocated increasing taxes, but the revenue generated would not come close to funding their proposals. Warren has campaigned for two new wealth taxes that are estimated to increase federal revenue by about <a href="http://gabriel-zucman.eu/files/saez-zucman-wealthtax-warren.pdf" target="_blank">$210 billion</a> annually. New York Rep. Alexandria Ocasio-Cortez supports a 70% marginal tax rate on income over $10 million, which is estimated to generate an additional<a href="https://taxfoundation.org/ocasio-cortezs-70-percent-tax-rate-deter-innovation/" target="_blank"> $20 billion</a> to <a href="https://www.washingtonpost.com/business/2019/01/05/ocasio-cortez-wants-higher-taxes-very-rich-americans-heres-how-much-money-could-that-raise/?noredirect=on&amp;utm_term=.45a0f631c098" target="_blank">$70 billion</a> per year, assuming that wealthy Americans are not discouraged from working. Even if the US adopted all three of these new taxes, annual federal revenue would increase by at most $280 billion.</p> <p>The additional revenue would hardly make a dent in the cost of Democrats' policy proposals. For example, Yang's plan for a universal basic income is estimated to cost <a href="https://www.cnbc.com/2018/07/12/ray-dalio-addresses-benefits-pitfalls-of-universal-basic-income.html" target="_blank">$3.8 trillion </a>annually, and the Green New Deal would likely cost upwards of <a href="https://www.bloomberg.com/opinion/articles/2019-02-08/alexandria-ocasio-cortez-s-green-new-deal-is-unaffordable" target="_blank">$6.6 trillion per year</a>. Revenue from all three tax increases would fund less than 10% of either of these programs, let alone help pay down existing debt.</p> <p>Supporters claim that although Medicare for All would <a href="https://www.mercatus.org/publications/federal-fiscal-policy/costs-national-single-payer-healthcare-system" target="_blank">massively increase</a> government spending, it <a href="https://www.cnbc.com/2017/09/13/bernie-sanders-unveils-medicare-for-all-plan-with-16-co-sponsors.html" target="_blank">would be offset</a> by decreases in private spending that leave total health care expenditures unchanged. While this is plausible in the short run, little evidence suggests that public health care spending would grow more slowly than private spending in the future. Public health care spending in the US <a href="https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#item-start" target="_blank">has grown faster</a> than private spending over the past 30 years, and other countries with publicly-funded health care systems <a href="https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS" target="_blank">have continued</a> to see increases in expenditures as a share of GDP. An aging US population is likely <a href="https://publichealthonline.gwu.edu/cost-of-aging-healthcare/" target="_blank">to increase</a> health care costs in the future, regardless of whether those costs are paid by government.</p> <p>Given that the US cannot afford its existing entitlement programs, adopting the massively expensive policies proposed by Democratic candidates would be foolish. Instead, the federal government should cut entitlement spending and look for cheaper ways to address problems like climate change.</p> <p>Instead of the Green New Deal, the federal government could adopt a revenue-neutral carbon tax to decrease emissions without exacerbating the fiscal imbalance. Economists from across the political spectrum <a href="https://www.washingtonpost.com/business/2019/01/17/this-is-not-controversial-bipartisan-group-economists-calls-carbon-tax/?noredirect=on&amp;utm_term=.74439259cb4a" target="_blank">support</a>carbon taxation as the most cost-effective way to address climate change. And a carbon tax would be<a href="https://www.nytimes.com/2018/10/08/climate/carbon-tax-united-nations-report-nordhaus.html" target="_blank"> most effective</a> if uniformly adopted by other countries, too.</p> <p>At a minimum, the US should slow the growth of entitlement spending to no more than the average growth of GDP. Reasonable approaches include increasing the age of eligibility for Social Security and Medicare, modifying the indexation of Social Security benefits or tightening eligibility requirements for disability insurance. These reforms would keep entitlement spending affordable, unlike current policy.</p> <p>Reasonable people can disagree on the benefits of federal welfare programs, the appropriate level of redistribution or optimal cost-cutting reforms. But everyone should agree that restoring fiscal sanity in the United States requires significant cuts to federal entitlement spending. The policies advocated by Democratic candidates will only make things worse.</p> </div> Sun, 24 Feb 2019 11:18:00 -0500 Jeffrey Miron, Laura Nicolae https://www.cato.org/publications/commentary/why-us-cant-afford-green-new-deal A More Future-Focused Government Would Have Radical Policy Implications https://www.cato.org/publications/commentary/a-more-future-focused-government-would-have-radical-policy-implications?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Ryan Bourne <div class="lead text-default"> <p>The reaction was predictable.</p> </div> , <div class="text-default"> <p>Last week’s Climate Strike by schoolchildren was met with an inane debate about whether or not the pupils were right to “play truant”.</p> <p>This dialogue of the deaf was a missed opportunity. Politicians should take seriously the protesters’ demand that they “recognise that young people have the biggest stake in our future”.</p> <p>How we weigh policies which differentially impact today’s adults and future generations has been a recurring undercurrent of the last decade of British politics — including on deficit reduction and Brexit. It’s time we asked whether we get the balance right.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>The children who went on strike last week were right to argue that future generations get a raw deal in policymaking. But this is a structural flaw of government action that extends far beyond carbon emissions.</p> </div> </div> </aside> , <div class="text-default"> <p>Government policies shape the use of vast economic resources. Underpinning all decisions are judgements about the relative importance of the present against the future.</p> <p>State action to curb carbon emissions, for example, requires avoiding cheaper fuels today for investment in technologies with future payoffs.</p> <p>End-of-life healthcare, in contrast, means expending resources today that society could otherwise deploy into research and development spending or tax cuts to induce innovation and higher living standards in future.</p> <p>Climate policy is all about balancing the interests of current and future populations.</p> <p>Comparing different policies over time requires governments to assume a “social discount rate” — a rate of interest that means that future costs and benefits can all be examined at their present value. The higher the discount rate is, the less we are willing to give things up today for benefits in the future.</p> <p>But it is not obvious at all what that social discount rate on government projects should be.</p> <p>People usually have a clear preference for the present over the future, meaning that the discount rate would be positive. We could invest money that we do not spend on reducing carbon emissions, after all, and it will return more over time.</p> <p>This, and the fact that unforeseen events may wipe out the earth at any moment, leads many to argue for policies to be present-biased.</p> <p>But this can lead to difficult moral territory. As George Mason University’s Tyler Cowen has outlined, a positive discount rate of two per cent implies that one life today is worth seven in 100 years; a five per cent rate means that a life today is worth 132 after a century.</p> <p>Moreover, with issues with potentially big externalities, such as climate change, one could argue that discounting downplays the very real impacts that today’s decisions will have on distant generations. Cowen himself argues then that the correct social discount rate is near zero.</p> <p>The discount rate we apply to the economic analysis determines the starting point for the debate on cutting carbon emissions.</p> <p>The Nobel Prize winning economist William Nordhaus used a discount rate closer to market interest rates to argue that modest carbon emission reductions over future decades were optimal. Lord Stern’s report for the UK government famously used a tiny discount rate, resulting in the call for more urgent and drastic action.</p> <p>When children claim that the government is not focused enough on their future, they are implicitly saying that the discount rate applied is currently too high. This makes a stronger case for more carbon mitigation today, assuming that it works and does not lead us to ignore other unforeseen important issues.</p> <p>But the implication of demanding that the government stop thinking in such a short-termist way could extend well beyond CO2.</p> <p>The past eight years have seen much discussion on how deficit reduction insulated pensioners at the expense of working-age welfare recipients, for short-run electoral gain.</p> <p>This is just one manifestation of what happens when governments seek reelection at the expense of long-term thinking. There are no end of examples of government policies which amount to channelling money or resources to certain groups today, rather than maximising the sustainable future growth of the economy.</p> <p>Yet if we really placed equal moral weight on future generations, this would imply that the best social use of resources would be to generate robust long-term sustainable growth.</p> <p>A future-obsessed government would probably be spending far less on welfare, pensions, and healthcare for current generations — all programmes that do not add to the long-term productive capacity of the economy.</p> <p>Instead, it would be seeking to ensure that resources remained where they were most likely to generate innovation, which would compound to deliver huge gains over time.</p> <p>The children who went on strike last week were right to argue that future generations get a raw deal in policymaking. But this is a structural flaw of government action that extends far beyond carbon emissions.</p> <p>If they really care about future generations, kids today should be bunking off school to demand policies to deliver robust long-term economic growth.</p> </div> Tue, 19 Feb 2019 09:54:00 -0500 Ryan Bourne https://www.cato.org/publications/commentary/a-more-future-focused-government-would-have-radical-policy-implications Alexandria Ocasio-Cortez's Green New Deal Is a Radical Front for Nationalizing Our Economy https://www.cato.org/publications/commentary/alexandria-ocasio-cortezs-green-new-deal-radical-front-nationalizing-our?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Ryan Bourne <div class="lead text-default"> <p>Details of Rep. Alexandria Ocasio-Cortez's long-awaited <a data-track-label="inline|intext|n/a" href="https://www.congress.gov/bill/116th-congress/house-resolution/109/text%20" target="_blank">Green New Deal</a> have dropped. On Thursday, alongside Sen. Ed Markey of Massachusetts, she published a resolution and Q&amp;A document that laid out the aims and tools intended to transform the United States into a zero net emissions economy.</p> </div> , <div class="text-default"> <p>At least, that's how it was sold.</p> <p><a data-track-label="inline|intext|n/a" href="https://assets.documentcloud.org/documents/5729033/Green-New-Deal-FINAL.pdf " target="_blank">Delve into the text</a>, and the climate change-curbing veneer amounts to a Trojan horse for a bigger nationalization of the economy than seen under President Franklin D. Roosevelt. The sponsors themselves say their goal is the "<a data-track-label="inline|intext|n/a" href="https://assets.documentcloud.org/documents/5729035/Green-New-Deal-FAQ.pdf " target="_blank">massive transformation</a> of our society" in a progressive image, rather than simply stopping global warming.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Alexandria Ocasio-Cortez's Green New Deal is the biggest single government expansion since the 1930s, masquerading as climate policy.</p> </div> </div> </aside> , <div class="text-default"> <p>How else can one explain policies that include a federal jobs guarantee, economic security for those unable to work, provision of housing, free health care, higher education for all and a family living wage? Besides the plan's calls for electrifying the whole transport system and undertaking a crippling federal financing of renewable energy over 10 years, it reads like a wish list for socializing the economy.</p> <p>It is hard to make a good faith critique of this plan, because it features a nearly complete denial of trade-offs or costs. This is surprising given that Ocasio-Cortez herself has a <a data-track-label="inline|intext|n/a" href="https://www.bostonglobe.com/news/politics/2018/06/27/alexandria-ocasio-cortez-championed-social-justice-boston-university/hijSs266a6aQe6cSR1E1uI/story.html " target="_blank">degree in economics</a>, for which the study of trade-offs is the basis. </p> <p>Take the environmental policy proposals, for example. <a data-track-label="inline|intext|n/a" href="https://www.theatlantic.com/science/archive/2019/01/do-most-americans-believe-climate-change-polls-say-yes/580957/ " target="_blank">Most Americans believe</a> that climate change is happening, is influenced by human activity and has social costs. The idea that private action alone cannot overcome this, and governments must act, is a reasonable view. </p> <p><strong>The cost of going 'green'</strong></p> <p>But even in some parallel universe where it was possible to implement an agenda that would replace the whole country's energy supply with government-financed renewables, refurbish every building to improve energy efficiency, eliminate gas burning cars, build extensive high-speed rail and cut the number of flights and cows to near zero, the cost would be astronomical. </p> <p>Previous estimates from Stanford engineers of meeting power demand through clean, renewable zero-emission energy sources put capital costs at <a data-track-label="inline|intext|n/a" href="http://web.stanford.edu/group/efmh/jacobson/Articles/I/CombiningRenew/CONUSGridIntegration.pdf " target="_blank">$14.6 trillion</a> (almost three-quarters of current <a data-track-label="inline|intext|n/a" href="https://data.worldbank.org/indicator/NY.GDP.MKTP.CD " target="_blank">annual GDP</a>). The running costs, coupled with all the other environmental programs, would therefore take up a huge chunk of economic resources, effectively cutting vast private sector activity.</p> <p>That's why the resolution seeks to mobilize society as in World War II, which Ocasio-Cortez <a data-track-label="inline|intext|n/a" href="https://www.foxnews.com/politics/ocasio-cortez-calls-climate-change-our-world-war-ii-warns-the-world-will-end-in-12-years " target="_blank">claims</a> is the appropriate analogy.If the nation can be convinced the overwhelming social goal is countering the existential threat of climate change at all costs, then people would be willing to make sacrifices — be it lost economic growth, fewer flights or less beef.</p> <p>Yet it's difficult to make that case when you then tack on a myriad of unrelated policies to the program. According to the resolution, decarbonization must also be supported by a massive expansion of social spending. Ocasio-Cortez's plan suggests it's not true that we must take a hit today to ensure the planet's future — according to this we'll be richer too!</p> <p>Just to ram home the absence of trade-offs, we are also told this will be financed by printed money. Ocasio-Cortez subscribes to the view that governments can apparently spend and spend forever, with the only constraint being the capacity of the economy. Yet, even under the crank Modern Monetary Theory model that recommends this, inflation will surely result from so much new government spending.</p> <p>By investing in inefficient energy sources and taking labor and capital away from productive industries, economic capacity will shrink as well — making this outcome more likely.</p> <p>Ordinarily, a pitch to put society on a war footing to adopt expensive power sources, restrict people's ability to fly and eat what they want, and redistribute vast new sums of printed money would be considered politically bonkers. Yet remarkably, Democratic presidential candidates, including Sens. Kamala Harris, Elizabeth Warren and Kirsten Gillibrand, have endorsed this resolution.</p> <p>It's easy to think they've lost their minds. But maybe they've noted that it's easy to label those who disagree on climate policy as being "deniers" of science itself. By tagging this a "Green New Deal," Democrats can shift debate toward radical unrelated positions, denouncing those who oppose them as wanting to kill the planet itself.</p> <p>Make no mistake, this green-painted Trojan horse is filled with the biggest single government expansion the United States has seen since the 1930s.</p> </div> Mon, 11 Feb 2019 10:18:00 -0500 Ryan Bourne https://www.cato.org/publications/commentary/alexandria-ocasio-cortezs-green-new-deal-radical-front-nationalizing-our Randal O’Toole discusses the “Green New Deal” on KHOW’s The Jon Caldara Show https://www.cato.org/multimedia/media-highlights-radio/randal-otoole-discusses-green-new-deal-khows-jon-caldara-show?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 08 Feb 2019 10:41:00 -0500 Randal O'Toole https://www.cato.org/multimedia/media-highlights-radio/randal-otoole-discusses-green-new-deal-khows-jon-caldara-show How Far Should Blame for Asbestos Go? https://www.cato.org/publications/commentary/how-far-should-blame-asbestos-go?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Walter Olson <div class="lead text-default"> <p>American law tends to favor people who sue large corporations for liability, particularly plaintiffs who've contracted mesothelioma or other ailments after being exposed to the mineral asbestos, used for decades as a construction material. But is it reasonable to order manufacturers that never made, distributed, or sold asbestos to pay for its ill effects anyway, on the grounds that they had reason to foresee that the mineral would be used in conjunction with the products they did make?</p> </div> , <div class="text-default"> <p>The Supreme Court considered that question when it heard <a href="http://www.scotusblog.com/case-files/cases/air-and-liquid-systems-corp-v-devries/" target="_blank"><em>Air and Liquid Systems v. DeVries</em></a> in October. Questions of tort law like this generally stay in the state court system and seldom make it to SCOTUS. But the Air and Liquid Systems case is an exception. It arises from maritime law, a sector of common law entrusted to the federal judiciary and ultimately to the high court.</p> <p>In the cases at hand, the Third Circuit court of appeals ruled that Navy sailors harmed by breathing asbestos fibers could sue the makers of various ship components that had been delivered in "bare-metal" form, but were subsequently clad in asbestos insulation or connected using asbestos gaskets.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Thanks to its role overseeing maritime law, the Supreme Court will soon rule on liability limits for manufacturers adjacent to the asbestos industry.</p> </div> </div> </aside> , <div class="text-default"> <p>While the "bare-metal" liability question before the Court will directly affect only cases filed under maritime law, it could easily influence parallel cases arising on dry land. For example, plaintiffs who worked in the automotive trade have sued manufacturers of metal brake components that cut into asbestos pads causing fibers to be released, even though the components themselves contained no asbestos.</p> <p>Modern asbestos litigation, the largest body of injury litigation in history, has been described as an unending quest for the solvent defendant. Within 30 years of the first breakthrough court decisions in the 1970s, pretty much all makers of the product had been forced into bankruptcy, including many building-materials companies that used the product as one ingredient in products like flooring and roof shingles. Many of the most obvious defendants were either immune from suit—the U.S. Navy in particular, whose commissioning, building, and operation of ships <a href="https://reason.com/archives/2007/02/13/dangerous-when-in-power" target="_blank">accounted for a large share of exposure</a>—or could be made to pay out only under relatively ungenerous workers' compensation laws. By century's end, lawyers were suing an estimated 2,400 companies. As billion-dollar payouts roll on, lawyers continue to develop new legal theories to sue <a href="https://reason.com/archives/1998/06/01/thanks-for-the-memories" target="_blank">more and more</a> peripheral defendants in hopes of finding firms that can actually afford to pay judgments.</p> <p>Thus far, bare-metal liability has not proved a greatly persuasive theory with judges. While Maryland's high court adopted it in a 2015 case, most other state courts, even those in relatively liberal California and Washington, have declined to do so, as did the Sixth Circuit federal court of appeals. When the Third Circuit ruled otherwise, it created a split with the Sixth, making certiorari review by the Supreme Court more likely.</p> <p>At oral argument in October, all four liberal Justices were outspoken in pushing the case for expanded liability, even as Justice Samuel Alito and other conservatives wondered where the doctrine would stop. Would ashtray manufacturers, having facilitated smoking, be liable for its harms?</p> <p>One argument, advanced repeatedly in plaintiff-side briefs and echoed by Justice Sonia Sotomayor at argument, is that maritime law takes a particular interest in the welfare of seafarers, and a rule that permits them to win more lawsuits advances their welfare.</p> <p>But libertarian law professor Richard Epstein, who filed an <a href="https://www.supremecourt.gov/DocketPDF/17/17-1104/54231/20180713164536339_20180713%20Epstein%20Amicus%20Brief%20ISO%20Petitioners.pdf" target="_blank">amicus brief</a> siding with the manufacturers, has the better of the argument. To begin with, he identifies and criticizes the use of legal doctrine here to serve as surrogate (and extremely costly) social insurance: "the bankruptcy of parties that should be liable is no reason to impose onerous liability on parties that should not be liable."</p> <p>Unpredictable liability drives up the cost of government contracting and, to the extent it falls on shipbuilding, the cost of navigation, another concern of maritime law. Liability for innocent businesses constitutes "a disguised welfare scheme that is inferior in every way to that which is already in place through the United States Navy, which follows its own protocols and is thus virtually certain not to take into account any supposed warnings that the bare metal manufacturer could issue."</p> <p>The Court is likely to rule on <em>Air and Liquid Systems v. DeVries</em> some time this spring.</p> </div> Fri, 28 Dec 2018 08:53:00 -0500 Walter Olson https://www.cato.org/publications/commentary/how-far-should-blame-asbestos-go The Perils of a Carbon Tax https://www.cato.org/regulation/winter-2018-2019/perils-carbon-tax?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Thu, 13 Dec 2018 15:30:00 -0500 Michael L. Marlow https://www.cato.org/regulation/winter-2018-2019/perils-carbon-tax Robert A. Levy discusses Weyerhaeuser Company v. United States Fish and Wildlife Service and other topics on The Bob Harden Show https://www.cato.org/multimedia/media-highlights-radio/robert-levy-discusses-weyerhaeuser-company-v-united-states-fish?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Wed, 28 Nov 2018 11:11:00 -0500 Robert A. Levy https://www.cato.org/multimedia/media-highlights-radio/robert-levy-discusses-weyerhaeuser-company-v-united-states-fish In Weyerhaeuser, the Frog Never Had a Chance https://www.cato.org/multimedia/cato-daily-podcast/weyerhaeuser-frog-never-had-chance?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Holly Fretwell, Caleb O. Brown <p>The <em>Weyerhaeuser</em> decision handed down by the U.S. Supreme Court was nominally about protecting a frog's (potential) habitat. Holly Fretwell of the Property and Environment Research Center says protecting endangered species requires a deeper dive into the workings of the Endangered Species Act. We spoke in October before the decision was handed down.</p> Tue, 27 Nov 2018 16:17:00 -0500 Holly Fretwell, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/weyerhaeuser-frog-never-had-chance Wild Horses, Property Rights, and Public Lands https://www.cato.org/multimedia/cato-daily-podcast/wild-horses-property-rights-public-lands?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Hannah Downey, Caleb O. Brown <p>Wild horses don't care who owns the land under their hooves, but the apparent conflict between horses and property owners isn't as intractable as you might think. Hannah Downey of the Property and Environment Research Center explains.</p> Tue, 20 Nov 2018 15:11:00 -0500 Hannah Downey, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/wild-horses-property-rights-public-lands Ratifying Kigali Amendment Is All Pain, No Gain https://www.cato.org/publications/commentary/ratifying-kigali-amendment-all-pain-no-gain?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Patrick J. Michaels <div class="lead text-default"> <p>With the election over, pressure is sure to build on <span data-behavior="rolloverpeople" target="_blank"><a data-nid="261287" href="https://thehill.com/people/donald-trump" target="_blank">President Trump</a></span> to submit the <a href="https://www.unenvironment.org/news-and-stories/news/kigali-amendment-montreal-protocol-another-global-commitment-stop-climate" target="_blank">Kigali Amendment</a> on hydrofluorocarbons to the Senate. It is an amendment to the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer. HFCs are currently the refrigerants of choice, appearing everywhere from your home heat pump to your car's A/C.</p> </div> , <div class="text-default"> <p>On June 4, 13 Republican senators sent a <a href="https://www.eenews.net/assets/2018/06/12/document_daily_01.pdf" target="_blank">letter</a> to President Trump urging him to submit Kigali to the Senate for ratification. They said it would result in a lot of HVAC sales. Together with the 49 Democrats, that would leave the amendment only five votes short of the 67 needed to ratify or amend a treaty.</p> <p>Kigali is no gain and all loss for almost everyone. The effect of HFCs on stratospheric ozone has been estimated from very <a href="https://agupubs.onlinelibrary.wiley.com/doi/full/10.1002/2015GL065856" target="_blank">slim</a> (a theoretical reduction of 0.035 percent is too small to measure) to <a href="https://www.ncbi.nlm.nih.gov/pubmed/17748353" target="_blank">none</a>. But the effect on wallets will also be stratospheric.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Kigali is a big wealth transfer from the people of the U.S. to Honeywell, Dupont, and big machine producers like Carrier. That's not exactly Making America Great Again.</p> </div> </div> </aside> , <div class="text-default"> <p>While HFCs are out of patent and cost a mere $7 a pound, their patented replacements, branded as Solstice (Honeywell) and Opteon (Dupont) go for around $71 a pound. They are known as Hydrofluoro-olefins (HFOs). The raw material cost (not including labor and installer markup), to fill a new residential HVAC system will be about $1,000 more than the cost of HFCs. Your existing unit likely cannot use HFOs, so you’re going to have to shell out several thousand more for a new heat pump, along with the installation cost. All of this will be required when your old HFC-driven system goes on the fritz.</p> <p>Recognizing the virtually nonexistent ozone-depletion potential of HFCs, proponents of Kigali switched to global warming, saying banning HFCs will prevent 0.5°C of dreaded global surface heating. That’s an awful lot more than the mere 0.1 degree that the United Nations’ Intergovernmental Panel on Climate Change (IPCC) says that continued use of HFCs will cause this century.</p> <p>This was also mirrored by Andrew Jones, who runs the policy-tracking firm <a href="https://www.climateinteractive.org/" target="_blank">Climate Interactive</a>. He told <em>Science</em> magazine that “I’m not really buying it”, meaning the 0.5°C saving, and also noting the IPCC figure.</p> <p>A Senate ratification is likely going to be on the fast track to the Supreme Court.  Because the ozone-depleting effects are, at most <em>de minimus</em>, and the (purported) climate effects are, relatively speaking, orders of magnitude larger, the Kigali Agreement is about global warming. It should therefore be an amendment to the 1992 United Nations’ Framework Convention on Climate Change, not the <a href="https://www.state.gov/e/oes/eqt/chemicalpollution/83007.htm" target="_blank">Montreal Protocol</a>.</p> <p>The 0.5&amp;degrees; warming, absent an effective Kigali Agreement, is predicated upon the notion that there will be, in the words of the four scientists who <a href="https://www.atmos-chem-phys.net/13/6083/2013/" target="_blank">calculated</a> the outlier number, a “complete market saturation” with HFCs by 2050, which continues as population and air conditioning demand increases to the year 2100. It seems hard to believe that refrigeration technology will be so stagnant. If the same applied to automobiles, all U.S.-built economy cars would be Ford Pintos and Chevrolet Vegas.</p> <p>The June 4 letter from the Republican Senators projects dramatically increased sales of HVAC equipment as a result of Kigali. Given that the average home unit lasts around 15 years, after that time each replacement will be a much more expensive chiller run on a refrigerant costing ten times as much as what it replaces. Owners, employees, and stockholders of the big HVAC companies will no doubt be very happy with Kigali—and the rest of us, well, not so much. Kigali is a big wealth transfer from the people of the U.S. to Honeywell, Dupont, and big machine producers like Carrier. That’s not exactly Making America Great Again.</p> </div> Fri, 09 Nov 2018 10:40:00 -0500 Patrick J. Michaels https://www.cato.org/publications/commentary/ratifying-kigali-amendment-all-pain-no-gain Kelleher v. New York State Department of Environmental Conservation https://www.cato.org/publications/legal-briefs/kelleher-v-new-york-state-department-environmental-conservation?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Ilya Shapiro, Trevor Burrus, Patrick Moran <div class="lead text-default"> <p>Nearly two decades ago, Denis and Carol Kelleher purchased a plot of land in a developed neighborhood. They spent $450,000 on the plot and planned to build a small summer home. But they encountered a problem: a creek ran adjacent to the property, and the town required them to have buffers between the proposed house and the creek. They cooperated fully with the town’s permitting process, even redesigning the house to make it more environmentally friendly. Despite this effort, New York’s Department of Environmental Conservation (DEC) was not satisfied, and it refused the Kellehers’ application to build even a modest home. To add insult to injury, the Kellehers’ investment has almost entirely vanished — they’ve lost 98 percent of their property value due to New York’s burdensome regulations.</p> </div> , <div class="text-default"> <p>When the government takes a landowner’s property for public use, it must provide just compensation under the Takings Clause of the Fifth Amendment. This applies not only when the government physically takes land, but also when a regulation diminishes the property’s value, as happened to the Kellehers. The Supreme Court’s 1978 opinion in <em>Penn Central Transportation Co. v. City of New York</em> established the framework evaluating for regulatory takings claims. Under <em>Penn Central</em>, courts must consider the economic impact of a regulation, the regulation’s impact on investment-backed expectations, and the character of the government action. This test has been notoriously difficult for courts to apply, however, and lower courts often let just one <em>Penn Central</em> factor dispose of the entire claim.</p> <p>That’s what happened when the Kellehers brought a takings claim in an attempt to recover their losses. The New York Appellate Division agreed that this was a “text book case” of a taking, yet nevertheless dismissed their claim under New York’s “absolute-right” rule — which provides that if a regulation is passed that restricts land use, and someone later buys an affected plot of land, they are barred from bringing a takings claim. Since New York passed its environmental regulations in 1973, and they purchased the property in 1999, the Kellehers were out of luck.</p> <p>Cato has filed an amicus brief in support of the Kellehers’ petition to the Supreme Court. We argue that the <em>Penn Central</em> test was never intended to limit the Takings Clause in such a drastic way. In fact, the Supreme Court has repeatedly found that the Takings Clause does not have a time limit. Yet New York’s “absolute-right” rule puts an expiration date on the Takings Clause, reduces <em>Penn Central</em> to a single-factor test, and hands undeserved victories to the government. In fact, the government wins in 90 percent of takings cases where <em>Penn Central</em> is applied, and lower courts are in need of direction on how to apply the <em>Penn Central</em> test.</p> <p>Not only have the Kellehers lost nearly half a million dollars, but they have also lost nearly two decades simply trying to build a home on their private property. If <em>Penn Central</em>’s confusing terms were simplified — especially the concept of “investment-backed expectations” — perhaps lower courts would finally apply this test in a consistent manner and give property owners a chance to prevail when the government goes too far. The Court should take the case to clarify the <em>Penn Central</em> test and affirm that the government cannot put a time limit or a dollar amount on the Takings Clause.</p> </div> Mon, 29 Oct 2018 09:13:00 -0400 Ilya Shapiro, Trevor Burrus, Patrick Moran https://www.cato.org/publications/legal-briefs/kelleher-v-new-york-state-department-environmental-conservation