The magic of markets

Great post today by Econ blogger Mark Thoma, explaining how the "magic of markets" is limited- we can get the miracle of socially optimal production and consumption only when a variety of prerequisites are met. Along the way, it also explains how the government loan program that led to the Solyndra debacle is even now, after Solyndra's collapse, still not much of a risk to taxpayers, and in fact the program has also done some good along the way by effecting hiring during poor economic times. Take a look!

Shifting demand

Right on the heels of my post about the FDA comes the most lethal bout of food poisoning in some time: the cantaloupes of Rocky Ford. 13 deaths and at least 72 illnesses are truly a tragedy. I haven't seen any reporting about the source of the contamination, but hopefully someone is looking into that. A sad time for consumers and a sadder time for Colorado, where the pain is sure to linger as their good name is tarnished. For Marion Nestle, the issue this raises is why we don't have one central food safety organization: the second link above is to the CDC web page, and of course the FDA and even the USDA are involved with agricultural products. Many of my colleagues would see this as a good reason to cut back wasteful government spending: I agree, but I think this also points out the need for effective, not absent, government.

Energy green as cash

Nice post on Marginal Revolution today by Alex Tabarrok on the crazy subsidies for green energy. Recognizing the externalities, it makes good sense to support wind farms and other green sources of energy, but it's entirely possible to go too far, as Spain did a few years ago. The current programs supporting energy make it possible for someone to build a wind farm by putting up only about 10% of the costs, since the government will fund the rest to the tune of billions of dollars. That just can't be the best use of government money! How about some feed-in tariffs like we heard about earlier? It's one thing to be supporting green energy, but it's another to be building wind farms for people and giving them the profits from operating the farms. This process needs to be improved. I'll see if I can talk to a friend who works down at the DOE to see if she or a colleague can come talk to us about it.

No Winter Crabs

One of our class presenters asked how we'd feel if crabbing in the Bay was banned for awhile to restore crab populations. In fact, that's already the policy and it has been for a few years- during the winter. Virginia has voted to continue the ban on winter crabbing and Maryland will likely follow suit. With all the damage that the Bay sustained this year, including the aftereffects of Irene dumping huge amounts of sediment, this seems inevitable. While the resurgence in the population observed in the spring was good news, there is still a long way to go before we can look at our crabs with as much comfort and confidence as we look at our rockfish population.

When waste is efficient

It's "efficient" from the perspective of oil producers to burn off natural gas coming from their oil wells because it would cost more to set up the infrastructure to use the gas than they expect to get from producing and selling the gas. Some believe it can be economic to capture the gas and are setting up facilities, but for now, burning it is the way to go. If the true costs of this were imposed on the producers, no doubt they'd change their tune, but until the externalities get internalized, it's efficient to be wasteful.

Maathai, Nobel Laureate, dies

Her life's work was economic in nature: she taught women to plant trees in part to provide for their own future, as environmental stability helps the watershed, saving women from the difficult task of walking long distances to bring water for their families. Also, trees provide wood, used in fires that provide heat and the opportunity to cook. Non-market benefits, to be sure, but very real nonetheless.

“When our resources become scarce, we fight over them,” she told a Norwegian television station near the time of her award. “In managing our resources and in sustainable development, we plant the seeds of peace.”

Amen!

This is the first post of material for Quiz #3.

Cutting back on energy in Japan

For obvious reasons the Japanese didn't have as much access to power this summer as they usually do, so they did what they do best: work together to overcome difficulty. In February earthquake and tsunami survivors were orderly in the chaos, and now too the country banded together to turn off the AC's and even lights, working under unpleasant conditions. And let me add that summers can be pretty unpleasant: for most of Japan, June means the rainy season, and August is an inferno. I'll never forget the day I arrived in Japan for the first time: for some reason our jet stopped a short distance from the terminal and we walked down a stairway onto buses to get inside, and when the door to the aircraft opened up, a cloud of hot humidity swallowed me, leaving me feeling like I was swaddled in blankets. Bottom line: I tip my cap to the Japanese for making the tough choice to push through a sweltering summer with limited power.