February 22, 2010

It Is Not Too Late If We Act Now

It is not very often that we get credible ecological news that is not full of bad news and projections. Well, I am glad to say that the following is a recent study that actually suggests that humans have not lost the race yet. Yes we are on our way towards catastrophic outcomes but we are not there yet and interestingly enough we can avoid the worst outcome if we are smart enough to change our ways and work meaningfully towards redemption.

The Stockholm Resilience Center, at Stockholm University is self described as a center of Research for Governance of Social-Ecological Systems. The Centre released a few months ago a major study undertaken by 28 world renown scientists in which they have established a new area in planetary management. Their first study describes nine planetary boundaries (listed at the bottom of this entry) that they believe humanity must not cross . The study goes on to say that human activity has thus far resulted in breaching three of these boundaries (the stared ones)but not the other six.

We are currently living in the geologic era known as the Holocene which started around 10,000 years ago. As we all know, it was during the Holocene that agriculture was developed, civilization prospered and industrialization became the norm. But unfortunately we are entering the Anthropocene, a new geological age in which human activities have grown as to form a major threat to the health of the earth.

Will we have the wisdom to adopt the right policies and change our behavior so as to avoid catastrophy? Yes we still can do that but time is quickly running out.

The nine Planetary Boundaries

1. Strategic ozone layer
2. Biodiversity
3. Chemical Dispersion
4. Climate Change ***
5. Ocean Acidification ***
6. Freshwater consumption & the global hydrological cycle
7. Land System Change
8. Nitrogen & Phosphorus inputs to the biosphere & ocean ***
9. Atmospheric aerosol loading

*** Transgressed boundary.

February 14, 2010

Pigouvian Taxes

Sovereign debt , as a potentially crippling fiscal problem world wide, has risen to the forefront over the past few months. Whether it is the US, Europe, Japan or many other developed and developing countries the sovereign debt watch is on.

The major metrics of a pending sovereign debt crisis that have been in vogue for decades used to be applied only to developing countries. Unfortunately this is no longer the case. The Herculian efforts by governments all over the world; the developed in particular; to avoid a repeat of the debilitating depression of the 1930's has forced these countries to increase substantially their fiscal stimulus programs. In a sense the monetary and fiscal policies adopted by the officials of all of these countries have been very successful. A worst case scenario has been avoided.

But as economics has always taught us, There Ain't No Such Thing AS A Free Lunch; TANSTAAFL. Yes we avoided a deep recession and the top officials can pat themselves on the back for this. But maybe not. Is the cure at least as expensive or maybe even more so than the ailment that it saved us from? That is , currently, the $64,000 question or maybe I should say the $64 billion question?:-)

Often, our efforts at prescribing remedies are counter productive because of what is inherent in problem solving. We always seem to target the symptom rather than the disease. As a result we inevitably move from one crisis to the next as a result of the law of unintended consequences.

In our efforts to save the system and to prevent a major economic depression we proceeded to throw money at the problem in order to generate more final demand and thus put more people to work. What we did not stop to consider is the major question of how are we going to pay back all of these funds that we have borrowed? It seems that we did what we always do, shift the burden onto the future generations. The debt will not come due for some decades ,right? Wrong.Well informed individuals know that more debt implies more taxes in the future and so they take corrective by refusing to own the highly risky debt. Once we find out that the debt service is too large and that we cannot keep on rolling the debt unto the future then we will have no choice but to become deadbeats. That is where we are at the moment. The question is which country is going to go under first? Would it be Greece or would it be one of the other PIIGS? How about the UK, or evn Japan or the US? If any of these countries default would they set up a contagion that will devastate all the current international financial sytem as we know it?

Believe it or not there is a potential mechanism that if adopted could go a long way towards addressing the real cause of this issue and not only the surface phenomenon. The solution that I am about to propose is not new, actually,N.G Mankiw wrote about it in 2007.

"The scientists tell us that world temperatures are rising because humans are emitting carbon into the atmosphere. Basic economics tells us that when you tax something, you normally get less of it. So if we want to reduce global emissions of carbon, we need a global carbon tax. ...

The idea of using taxes to fix problems, rather than merely raise government revenue, has a long history. The British economist Arthur Pigou advocated such corrective taxes to deal with pollution in the early 20th century. In his honor, economics textbooks now call them “Pigovian taxes.”...some taxes align private incentives with social costs and move us toward better outcomes."

I would love to see a carbon tax levied not only in the major industrial countries but all over the globe with all the proceeds dedicated to lowering the sovereign debt. Such a tax could be a first step towards internalizing the negative externalities of all the production inthe world economy. If that leads to less and more efficient production then all of us will be winners.

February 06, 2010

Another Attempt of Government Takeover. When Will This Assault on Our Right to be Exploited Stop?

You'd think it would be a no-brainer that instead of the US government giving money and guarantees to the lenders of student loans it could give the money directly to students or to colleges. Of course, that's "government takeover" and we know how free we want to be. Right? That's the argument, like soup de jour, being used by the freedom-loving conservatives today. Don't get me wrong, I often order the soup of the day--which has a different substance and flavor from place to place.

Of course, I don't want the government to take over my civil liberties, but if, as we proudly claim, the government is of, by, and for the people, our government has to provide equal opportunities to the people to reach their own potential. Freedom is connected to action, but without any good choices freedom doesn't mean much. If I'm only free to read, say, do "whatever" I want while being locked up in the basement, then this is not true freedom.

Likewise, I'm not free to pursue higher education if the price of attendance is out of my reach. Being free to choose from lender A or lender B isn't a good option if it means that either choice will bankrupt me by graduation day.... Assuming I could get those burdensome loans to begin with.

Four months ago, it appeared that Obama's proposal to overhaul the student loan business would materialize, but, guess what, the lobbyists haven't given up. Now, how would they succeed in stopping a sensible proposal [yeah, I know, they've done it many times before, stopping good legislation from going forward] in Democratic-controlled Congress? Want a wild guess? Money is buying votes in a climate of failed Democratic leadership to get things done.

Now that SCOTUS has ruled corporations have the same First Amendment rights the sky is the limit. Lots more corporate money will be available to educate the public now. It won't be long when corporations will obtain Second Amendment rights too.

I'd be remiss if I didn't mention that there's a critical mass of the American public that supports politicians who work against the public interest. Also, the phrase, "government takeover" apparently motivates millions of Americans to defend their freedom of choice to remain toothless!