Month: July 2010

Costing legislation

In the United States, the Congressional Budget Office has a mandate to provide non-partisan advice on the economic and budgetary decisions on the wide array of programs covered by the federal budget. They have a staff of 235, and a budget of $44 million per year.

By contrast, Canada’s Parliamentary Budget Officer (PBO) has a staff of 11, and can only undertake analyses on a selected subset of bills. This is problematic for a few reasons. For one, it gives the impression of some level of partisanship, when the PBO can choose which bills to study and when to release results. For another, it leaves Members of Parliament ill informed about what the costs associated with legislation will be. They really ought to have an accurate non-partisan analysis before the second reading vote.

Perhaps it would make sense if Canada enlarged the role of the PBO, to include a mandatory analysis on any piece of legislation likely to cost over a certain amount, such as $500 million. By making the selection of projects for analysis largely automatic, the PBO would be made to seem non-partisan. The quality of the data that drives Parliamentary decisions would also likely be improved.

Baseload solar in Italy

I mentioned before how, by using molten salt as a heat collecting medium, concentrating solar power plants can achieve higher temperatures and continue to produce electricity after dark. Now, the first facility with that capability is being built.

The Archimede Solar Thermal Power Plant is being built in Italy, at a cost of 60 million Euros. It will put out only five megawatts of power (as much as three and a half large wind turbines), but hopefully it will serve as a proof of concept for more ambitious facilities.

US Senate fails again on climate

So, it seems the possibility of a cap-and-trade system in the United States to help deal with climate change has been killed by Congress, at least for the moment. As I have argued before, if the current generation fails to take action to prevent dangerous or catastrophic climate change, that failure is what history will remember us by. We will be remembered as the people who had all the necessary information, but who were so selfish and dysfunctional that they couldn’t step up and take even the first small step.

I remain unimpressed with humanity.

Carbon pricing and competitiveness

Writing in The Globe and Mail, Roger Martin and Alexander Wood argue that carbon pricing could make Canada more economically competitive:

The logic underlying such an argument is fairly straightforward. Carbon pricing can help drive innovation in technologies and business models that promote resource efficiency, particularly in relation to energy. For a country such as Canada, which annually ranks among the most energy-inefficient economies in the world, this presents a huge opportunity. That is because there is an increasingly strong case for how improving resource efficiency translates into improvements in productivity, which is the Holy Grail of competitiveness for economies such as Canada’s.

Every new argument in favour of carbon pricing is potentially useful, given the key role such policies seem likely to play in encouraging the transition to zero carbon forms of energy. Quite possibly, it is especially useful to develop strong economic arguments, so as to be able to respond to the frequent assertion from those who don’t want to take action on climate change that carbon pricing would cause serious economic harm.

Emotional responses to oil production

When I was a child, I remember seeing working on terrestrial or offshore oil rigs as an heroic profession: using knowledge and technology to do something difficult and important, at considerable risk to your personal safety. No doubt, that view was partly formed through exposure to advertising. Like the military and space programs, oil companies realized a long time ago that the combination of high technology with human dedication is an image that people find compelling. Throw together footage of people in hardhats riding helicopters between giant machines, with intense music in the background, and you can pretty easily create a sense of your company and personnel as impressive. Nonetheless, it still has a certain emotional validity, as long as the interactions you think about are all the voluntary ones: companies accessing oil reserves and then upgrading their crude contents into useful products that serve important functions.

Of course, when you start to think about the involuntary interactions, the waters get substantially muddied. Oil producers and users are both guilty of putting their own needs and desires ahead of those who are inevitably harmed as a consequence of their activities, through routes like air and water pollution and climate change.

Now, when I see ads for oil companies, I respond to them like personal insults. They look like taunts from powerful and politically influential companies that are fully aware of how much damage they are causing, but are happy to continue to do so, while continuing to try to foster the image I used to hold of them as brave technical experts.

Of course, there are still people out there who factually reject the idea that oil production and use causes significant suffering for third parties. From that mindset, it is almost inevitable that you would end up with a profoundly different view of oil producers and consumers. It is not all that surprising, then, that deep aesthetic and political disagreements about how the industry should be treated are ongoing.

Now, it seems like a real shame that so much energy, effort, and money have gone into building up an industry that has proven to be so harmful. If all the intellectual effort that has gone into extracting and processing fossil fuels during the last few decades had been applied instead to the development and deployment of renewable forms of energy, we would be a lot farther along the path to carbon neutrality today.

Top Secret America

Over the last couple of years, The Washington Post has undertaken a major project to document the growth of the government security apparatus in the United States. It is entitled: ‘Top Secret America.’

Three long and interesting articles are now online:

One inescapable conclusion is that none of this – the massive secret compounds, the turf wars between agencies, and the changes in how government functions – could be undone quickly or easily.

It is just a new reality for the United States.

Health care and Canadian provincial budgets

Earlier, I wrote about Peter Singer’s highly defensible view that how rationing medical care is both inevitable and desirable, when done properly. The demand for medical services will always exceed the share of society’s wealth we are willing to devote to keeping people healthy and alive. As such, the important thing is to make sure we get good value for our spending, and that the way in which health services are assigned to individuals is fair and ethical.

Because of economic and demographic trends, Canadian provinces are going to have to make some tough choices when it comes to health spending. A recent article in The Economist described the scope of the challenge:

Health spending, which is administered by the provinces, has increased from nearly 35% of their budgets in 1999 to 46% today. In Ontario, the most populous province, it is set to reach 80% by 2030, leaving pennies for everything else the government does, not counting tax increases or new federal transfers. The biggest culprit is prescription drugs, which have seen their share of public-health spending triple since 1980.

Clearly, provinces need to spend money on things aside from prescription drugs. Admitting that, however, leaves the problem of determining how health spending should be allocated.

Certainly, part of that needs to involve cost-benefit analyses that compare different courses of treatment. In situations where a superior treatment exists, but which is far more costly, it may be necessary to make only the cheaper treatment generally available, so as to more effectively serve overall health outcomes. Of course, such choices are unlikely to be popular. Other likely measures will include restricting which treatments are covered, increasing the co-payments that patients make, and continuing to employ measures like bulk purchasing to reduce costs. More controversial measures could include things like taxes on unhealthy foods and further efforts to discourage smoking and drinking, while encouraging exercise.

Medical technology will almost certainly continue to advance in the decades ahead (though issues like emerging antibiotic resistant pathogens could actually set us back in some areas). At the same time, an aging population will almost certainly increase the quantity of medical services demanded, while decreasing provincial tax revenues. Hopefully, the combination of technical improvements and necessary budget constraints will produce outcomes that at least remain consistent with those that exist today, and which hopefully improve over time.

The least ethical choice is probably to fund the medical expenses associated with the demographic transition by heaping yet-more debt on future generations. Between climate change, nuclear proliferation, and all the other frightening legacies we are passing on to them, I think they have been given quite enough to deal with already.

What else can be done to constrain the total cost of medical services, while ensuring that those that are purchased are deployed both fairly and effectively?

Legalize, regulate, provide treatment

Just as XUP is pointing out how it makes sense to legalize and regulate prostitution, The Economist is making that case for gambling. Of course, the argument works for drugs too – better to have their production and distribution legal and regulated by the state than criminalized, marginalized, and ultimately more harmful. All of these activities will inevitably cause some level of suffering, but their treatment as criminal offences simply serves to increase how much of that arises. This is unescapable, since those involved in criminal activities have no recourse to police protection and assistance, safety and quality control will always be poor, and criminalizing ‘vices’ puts an unsustainable and inappropriate burden on the justice system.

One further measure I would suggest is that producers of drugs – and purveyers of sex and gambling – should have to pay taxes on their revenues that are devoted specifically to helping people who are addicted to their wares. The treatment options provided should be based on the best available medical evidence, and be run by organizations at arms length from both the companies and the government (to avoid the kind of political bickering threatening Vancouver’s InSite harm reduction project). The taxes should be set at a level that ensures that anybody who wants to get treatment is able to do so for as long as they need it.

Humans have many weaknesses, with addictions among the most serious. By legalizing and regulating drugs, gambling, and prostitution, the harm associated with these activities can be minimized. At the same time, the reality that many people cannot overcome addictions on their own must be recognized through the provision of effective and accessible treatment.

Climate change and capitalism

A number of times, discussions on this site have questioned how the reality of climate change should affect our political philosophy, when it comes to supporting or opposing capitalism. For both practical and theoretical reasons, I have been of the view that replacing capitalism is not a sensible goal, for those deeply concerned about climate change. Capitalism has virtues that may not be present in alternative systems – and what serious alternatives really exist at this point? – and there is no reason to be confident that an alternative system will be able to address climate change, even after we have put in all the time and effort that such a major societal reorganization would require.

Capitalism also includes powerful tools that could be applied to problems like tackling climate change. By establishing a carbon price, emissions reductions can be made to occur in the places where doing so is cheapest. That has benefits in terms of how quickly and cheaply emissions can be cut. It also has benefits for liberty, since it changes the incentives that people face, without forcing them to make one choice or another.

The urgency of climate change is another major reason to focus on the changes that are absolutely necessary, while leaving grand experiments for a more relaxed period in history. Preventing temperature increase of over 2°C above pre-industrial levels requires very aggressive cuts in global emissions. They need to peak as soon as possible (the sooner, the lower total costs will be) and fall to a dramatically lower level by 2050. Given that this is the lifetime of assets being constructed right now, from highways to buildings to power plants, the need to start changing incentives is urgent. It is much more plausible that this could be achieved by incorporating carbon pricing into our existing economic and political framework than it is to think we could launch a whole alternative structure quickly and effectively enough to achieve that result.

Must capitalism be discarded in order to address climate change, or is reform sufficient? Thinking strategically, what should those who are intensely concerned about climate change work to achieve, in terms of political and economic reforms? What real alternatives to capitalism as now practiced are there, and what would the likely benefits and problems associated with them be?