Worthwhile Canadian Initiative

Can evolution save the elephant?

For centuries, elephants with large tusks have been targetted by hunters and poachers. The "unnatural selection" in favour of smaller-tusked elephants has resulted in a dramatic decrease in average tusk sizes right across Africa.

Smaller tusks increase an individual elephant's probability of survival, by making him or her a less attractive target for poachers. But what if all elephants' tusks decrease in size? Can evolution save the elephant?

Do Japanese emission controls contribute to global warming?

Japan has one of, if not the, strictest emission control regimes in the world. Upon purchase, when a car is three years old, and every two years after that, each car must undergo a rigorous and sometimes costly Sha-ken inspection. These ensure that it meets tough emission standards and is in sound mechanical condition.

Sha-ken makes it expensive for Japanese car owners to keep an older car on the road. Yet these regular inspections, combined with other factors - congested roads that ensure most cars have very low mileage, a relatively temperate climate, underground parking - mean that a five or seven year old Japanese car is typically in excellent condition. The net result is that Japan exports used cars at low prices to Australia, New Zealand, India, South Africa, Botswana, Zambia, and just about every country where right-hand-drive (RHD) cars are used. 

Baboons’ deathly rational calculus

 

Baboon checking out the buffet at Storms River Mouth restaurant

Baboons are rational. They minimize the effort required to attain a given number of calories or, alternatively, maximize the amount of calories obtained from a given amount of effort. Given a choice between spending hours searching for fruit and seeds, or scarfing some left over potato chips, they’ll take the leftovers every time. Once they learn that humans keep bananas and other delicious food lying around in their kitchens, they break into homes, or enter through any open window, and pilfer anything edible.

Their behaviour can be explained by a rational model of crime: steal if the benefits of doing so are greater than the expected probability of getting caught times the anticipated penalty if caught.

Toilets, Governments and Incentives

In my morning newspaper, I came across a hardware store flyer advertising a great new innovation – toilet with pump!  Essentially, along with your regular toilet, an additional water storage tank and pump is installed that allows you to store recycled water used from your sink, tub, or shower and then use it when you flush. 

My trip to see the oil sands

Last month, the Canadian Association of Petroleum Producers organised a field trip for a group of economics professors to see a couple of the oil sands installations. I once wrote somewhere that the oil sands are the most important Canadian economic fact of our time, and I jumped at the offer to join the tour. I'm glad I did. There are many very good articles out there describing what is going on in northeast Alberta - much better than I could write - but reading those accounts is most emphatically not the same as seeing the installations in person.

Other people who have gone more often and seen more will have longer and better stories to tell. What follows are my impressions of what I saw and learned.

Goodbye carbon taxes, hello atmospheric user fees

Economists (at least those who believe in global warming) frequently argue that the best way to discourage overuse of fossil fuels is with a carbon tax. A carbon tax reflects unpriced, external or social costs; the environmental damage created by fuel consumption. With a carbon tax in place, people will only consume fuel if the benefits they receive from doing so are greater than the costs - both the private costs, reflected in the pre-tax price, and the environmental costs, reflected in the carbon tax.

Unfortunately, taxes have a negative image. For example, in the US, almost every Republican member of Congress has signed a pledge that they will never vote for a policy that increases tax rates. 

Elinor Ostrom, you were turtley right

Mother turtle laying eggs on banks of Rideau River

Elinor Ostrom, Nobel-prize winning political economist, died on June 12, 2012. That same day, a mother turtle pulled her way out of the Rideau River, and made her nest on the river bank.

 

A turtle's idea of a good nesting place is somewhere with soft, loose earth, sand or gravel. For an urban turtle, that means, say, a playground sandbox, or some freshly-turned up earth on a construction site. The turtle pictured made her nest on nice bit of fresh gravel right beside a road, just off a popular dog-walking trail.

A turtle nest can be seen as a common property resource. A long tradition in economic thought argues that such resources will inevitably be neglected, untended, and over-exploited. Turtle eggs will be dug up by dogs, trampled on by careless walkers, or harvested by people dedicated to eating local, organic produce - the tragedy of the commons.

Who benefits from the oil sands? Who benefits from saying that only Alberta does?

This didn't pass my sniff test:

The economic benefits of oil sands development, while considerable, are unevenly distributed across the country, making interprovincial tensions understandable. While provinces other than Alberta are projected to benefit, modelling by the Canadian Energy Research Institute projects that 94 per cent of the GDP impact of oil sands development will occur within Alberta. With so much benefit concentrated in one province, one can hardly call fast-tracking oil sands expansion a nation-building project. Little wonder that the promise of benefits from oil sands development is cold comfort for Ontarians and Quebeckers as the once-dominant manufacturing sector struggles to reinvent and revitalize itself.

Did you read "94 per cent of the GDP impact of oil sands development will occur in Alberta" and interpret it as "94 per cent of the economic benefits of oil sands development will occur in Alberta"? I'm convinced that that the vast majority of the people who read that passage on the Globe's op-ed page interpreted it that way. And I'm only slightly less convinced that the author meant his readers to interpret it that way. Of course, that would be the wrong interpretation.

For reasons I'll get to later, there seems to be a concerted effort to convince Canadians that almost no-one outside Alberta is seeing any economic benefits from high oil prices. For the most part, these efforts appear to be enjoying some measure of success. But the fact of the matter is that the oil sands have increased incomes across Canada to an extent much greater than that paragraph implies.

"Does Canada have Dutch disease?" is a question without a meaningful answer

The debate about whether or not Canada has "Dutch disease" can never get very far, because there is in fact no clear notion what it is. As far as I'm concerned, the term has by now been stripped of meaning: people are using the definition that is most convenient for their purposes.

So in this post, I'm going to summarise some of the points that have been raised:

Pigou and Paternalism

Here is a question from the final exam for my public finance course:

A typical person’s demand for potato chips is given by p=5-q where q=the number of packages of chips purchased, and p is the price of chips in dollars per package. The marginal cost of producing potato chips is $1 per package. The potato chip market is competitive, so p=MC. Dr. Economides estimates that each package of potato chips consumed creates marginal damage of $0.50. 

1. Illustrate these facts with a diagram.
2. Define the phrase “Pigouvian tax”
3. Show how a Pigouvian tax could be used in this example to improve efficiency.
4. Calculate the revenue raised by the Pigouvian tax. Show on your diagram, and calculate, the efficiency gain created by the tax.
5. Opponents of the tax on potato chips take a careful look at Dr. Economides’ study. It turns out that the only people harmed by potato chip consumption are potato chip eaters themselves, as potato chip consumption is associated with bad skin, weight gain and depression. Does this strengthen or weaken the argument for taxing potato chips?

Solutions to parts 1 to 4 are here. The interesting part is question 5: if potato chips only harm potato chips eaters, does that strengthen or weaken the case for taxation? Vote here to express your opinion (only the first 200 answers will be counted).

Riding the Loser Cruiser

People will use public transit if it's the lowest cost way of getting from point A to point B. Costs have three components.

The first is money costs – the cost of gas or a bus fare or a train ticket.

The second is time costs – the opportunity cost of time spent driving or riding or walking or cycling.

The third is psychic costs or benefits – the satisfaction of putting pedal to metal, the quiet relaxation of sitting on the Skytrain and gazing out over the North Shore mountains and, last but not least....

Social status.

Collective Disasters and Individual Responsibility: Lessons from the Kobe earthquake

Japan's 1995 Kobe earthquake resulted
in the loss of 6,432 lives, and the complete destruction of over one hundred thousand buildings – a loss of homes comparable to that caused by Japan’s recent tsunami. 

The people of Japan rebuilt then. Can they rebuild now?

(In the pictures: a post-earthquake collapsed expressway; Kobe's expressway today).

LED holiday lights and the rebound effect

The holiday light market is now dominated by energy-efficient LEDs. According to BC Hydro:

The big difference is that they use up to 90 per cent less energy than incandescent lights, which means your holiday lighting charges could be as much as 90 per cent less than if you used incandescent lights only.

The charges could be 90 percent less. But will they be?

I'm writing this on March 8th. When I look out the window, I see my neighbour's holiday lights still shining brightly, even though we're closer to Easter than Christmas. Yes, I have a few lights up too.

Fiscal Policy, the Environment, and How Not to Solve Policy Problems

Canada and by extension the Canadian government faces a number of challenges. There are two in particular I find fascinating:

A new Canadian economics blog!

Andrew Leach is an environmental economist at the University of Alberta, and he has started a blog: Rescuing the frog. I have just subscribed to his feed, and you should, too.

Over-selling soap

The news item dominated the New York Time's "Most Popular" list for weeks: For your dishwasher's sake - go easy on the detergent. According to the authoritative appliance repairman cited by the Times, “Most people use 10 to 15 times the amount of soap they need, and they’re pouring money down the drain."

Wait a sec - if there's one thing that economists agree on, it's that people never knowingly pour money down the drain. So what's going on?

The NDP's misdiagnosis

A couple of weeks ago, the NDP suggested removing the GST from heating bills, and I bemoaned the idea as just another example of a policy designed to fit a communications strategy instead of the other way around. I was hoping that the proposal would do the decent thing and go away quietly, but the NDP has apparently given it a budget generous enough to air some ads. If you judge policies by how effective its communications strategy is, the initial reviews are positive.

The rest of this post is for the dwindling band of citizens who adhere to the quaint notion that politics should be about policies.

Philanthropy and the public good

I'm just back from visiting the Getty Villa and I don't know what to make of it.

On the one hand, this is a model of what can be achieved through private philanthropy. J. Paul Getty built the villa to house his collection of Greek and Roman antiquities. The building, grounds, and setting are gorgeous, the antiquities truly impressive, the staff friendly and helpful and - best of all - due to Getty's generosity, admission is free.

Should Greenpeace just give up?

The Onion has just run a piece imagining the thoughts of suicidal blue whales:

Claiming that their miserable lives had become too depressing to endure, the world's remaining blue whales surfaced Monday and desperately pleaded with environmentalists to immediately cease all conservation efforts so the species could "just be done with it and finally go extinct."

Incomprehensibly huge disasters

There is a tribe in the Amazon whose members can only count to five. Any amount greater than five is simply "many." We're surrounded by numbers in the millions (executive salaries), billions (Canadian government debt), and trillions (US government debt). But how much better are we than Amazon tribespeople in understanding what these amounts mean?