Archive for ‘Environment’ Category
Much has been written about the difference between public goods and private goods, including issues of fungibility versus liquidity in the allocation of each (public goods are fungible rather than liquid, private goods can be both. Fungible means that something of worth can only be replaced in-kind, in a largely 1:1 transaction. Non- fungible or liquid means that the item can be exchanged for something else of different worth/value)). Less attention has been devoted to the issue of public and private bads, including the responsibility of the state in addressing each. In light of the disasters that have befallen NZ in the last year, it is worth pondering the latter.
The Pike River mine disaster is an example of a private bad. It was human caused, being the result of bad management decisions and poor safety standards within the mine, and affected its employees and profits. However, its impact on the public good was minimal. Even so, lax mine inspection regulations contributed to the explosion and loss of life, which is a public bad because state inaction facilitated the collective tragedy, and the adverse economic impact of the mine’s closure on the local community is also a public bad because it negatively impacts on the community through no fault of their own. The question is, what role does the state have, other than the policing in the aftermath of the event, in addressing the public bad aspects of the disaster?
The Christchurch earthquakes are clearly a public bad. The combined into a prolonged natural disaster, largely unforeseen. The government mobilised resources to address the aftermath, efforts that are still ongoing. But is there a private bad element to the quake? Did shoddy construction contribute to the loss of life and property? Were regulatory loopholes exploited that exacerbated the impact of the quakes, and if so, what is the state’s role in rectifying those areas in which standards and procedures were skirted. Is it a matter for the industries involved to resolve privately? What happens when private insurers renege on coverage or attempt to minimise payouts? Does the state have a responsibility to cover the difference in the public interest? Or is that purely a private matter?
The Rena shipwreck is most interesting because it clearly combines the two forms of bad. It started out as a private bad caused, apparently, by gross human error. National’s response was predictable: it waited for the parties to the contract of the vessel to negotiate a response. And waited. After four days of calm weather and no private response, a storm blew through and began to break the ship apart, spilling part of its load and fuel from ruptured fuel lines. When leaked oil and containers began to hit Bay of Plenty beaches, the disaster became a public bad, at which time the government belatedly intervened, mostly in a support rather than in a leadership role. This is due to its continued preference for the contracting parties to assume the responsibilities incumbent upon them for having caused a private bad with public ramifications. Meanwhile the environmental impact of the wreck continues to grow, with the costs of the clean up rising and the negative economic impact on local businesses likely to be significant in the measure that the spill is not contained promptly and the clean up process stretches into months.
In other words, a private bad caused a public bad with private bad implications. Since the National government believes in the primacy of the market and private sector, it has left the bulk of the response to the parties involved, and called for volunteerism (another private act) in its approach to cleaning the beaches.
All of this is quite predictable. The quest for privatisation of the public sphere over the last two decades has reduced the concept of public goods and bads while expanding that of private goods and bads. Left to their own devices in a deregulated public space, private actors will minimize costs and increase risks in the pursuit of profitability. Should an accident such as Pike River or Rena occur, the payouts involved are considered to be acceptable given that they will be less than the costs of compliance in a tightly regulated commercial environment. The calculation is that the costs of occasional “one-offs” (which are not) will be less than the costs of ongoing regulatory compliance. In coal mining and shipping, accidents are not occasional happenstances but regular occurrences so the industries involved are have prepared accordingly (by establishing contingency funds for such events). The difference is that when a private bad becomes a public bad, they have limited contractual responsibility in addressing the latter. It is up to the state to recoup the costs of the public side of the bad incurred, which means taxpayers will have to foot the bill for the legal expenses involved in the court cases taken against the private parties responsible. In some cases–Pike River looks to be one–the state will do nothing of the sort because the public bad aspects are considered to be small, incidental, and not worth prosecution.
It appears that in the rush to privatise sight was lost on the potential public bad caused by private bads. Commercial de-regulation in the pursuit of competitiveness and trade ignores the fact that the private parties in contractual relationships with each other are not, by definition, responsible for the public good. As such, the public bad potential of a private bad event is discounted, in part because private parties know that governments will be loathe to charge them the full costs of a public bad response less they be seen as anti-business. In an age when the private sector rules over the public interest, few governments will be courageous enough to incur the wrath of major commercial actors regardless of the latter’s responsibility in causing a public bad.
The problem is compounded by the hollowing out of state regulatory agencies, particularly in their operational capabilities as well as their policy scope. Insufficient regulatory enforcement (such as it is) due to reductions in state regulatory agency workforces, combined with reductions in quick response assets in agencies responsible for disaster relief and mitigation, force the state to contract out the latter in an environment made riskier by de-regulation. Since the skill sets required for disaster relief are often very specialised and limited, given the geographic and logistical difficulties presented by specific scenarios in the time-sensitive context in which the public bad occurs, this places private actors with such skills in a de facto monopoly position over the response in their areas of expertise. This allows them to extract monopoly rather than market rents from the state when contracting such assignments.
The private bad-focused approach can be seen as short-sighted in the measure that de-regulation facilitates private actor irresponsibility, which in turn leads to higher costs for the state in the event that a private bad becomes a public bad. Seen another way, robust state regulation of private industries with potentially injurious public consequences may in fact be more of a cost-savings over the long-run given the inevitability of private sector accidents that negatively impact on the public good.
This is the crux of the matter, and it is the one that should be reflected upon when issues of off-shore drilling, mining, nuclear energy and other private industrial ventures with potentially public bad implications are discussed.
Posted on 22:17, January 18th, 2011 by Lew
In my view, one of the more shameful episodes in the Canterbury earthquake was the call by some for retailers to implement so-called ‘efficient’ pricing of crucial goods such as water. Among these was University of Canterbury economist Eric Crampton, whose article on the topic was even printed in the papers. Read his blog post In defense of price gouging. I often agree with Eric, but on this topic I just don’t.
I’m no big-city economist, and I seem to have misplaced the argument I wrote on the topic at the time, but essentially the problem is: if nothing is done, the resource just runs out and people who need it can’t get it. Absent some mechanism (rationing, gouging, &c) the criterion for access to the resource is speed and/or ruthlessness — the person who goes down to the supermarket & fills their ute with bottled water wins; everyone else has to rely on other means, such as asking their neighbours or others for help. I see efficient pricing as simply a means to shift the the criterion for access from ‘speed+ruthlessness’ to ‘accessible wealth+ruthlessness’. Those neither speedy nor wealthy (that is, almost everyone) will have to fall back on those same social structures of cooperation and goodwill to get their water in either case, and I don’t accept that privileging those with cash on hand is much of an improvement over privileging those who can get through the gate quickest.
However there is a non-economic factor to consider: in times of disaster, social cohesion is crucial. To large extent it operates on the notion that both the mighty and the humble are brought low; that we’re all in this together, and when the chips are down, Jack’s as good as his master. A resource allocation mechanism which punctures these illusions so as to damage social cohesion, such as by turning the poor against the rich, must deliver an enormous efficiency benefit in order to offset the harm it causes by sapping the goodwill upon which disaster recovery thrives. At a time when the foremost objective should be to promote social cohesion, ‘efficient’ pricing is an ugly imposition of individualism on the collective spirit.
Anyway, the point of this post wasn’t to relitigate that, or to criticise Eric, so much as to say that — by contrast — reports of price-gouging in post-flood Queensland have drawn a firm response from officials. Fair Trading Minister Peter Lawlor warned retailers of the possible strategic consequences of gouging:
More robust still was the statement from Ipswich Mayor Paul Pisasale, the same who warned looters that they would be used as flood markers if caught:
This suggests a vigilante streak and willingness to bring the coercive force of the state to bear for social, rather than strictly regulatory reasons, and this is not usually a beneficial trait in a civic leader. However I think in cases like this there is some justification for such a stance. Pisasale’s position is a manifestation of the ‘Queensland culture’ called upon by Premier Anna Bligh in her speeches, and which may now be her political legacy. If it all came to pass, perhaps a disgruntled gouger might take legal action against Pisasale or his agencies for harrassment; but this would be an uphill battle, because Pisasale enjoys the protection of being right in the eyes of his society. After all; the only thing most Aussie battlers hate more than a government bureaucrat is a disaster profiteer. He is on firm ground as a representative of his people, because his representation rings true. His commitment is to the cohesion of his society. He is doing what crisis leaders do; efficiency be damned.
VEXNEWS‘ headline, while verbose, really does nail it: GREEDY GERRY: Heartless Harvey fiddles at lavish Gold Coast party while Queensland drowns.
That’s Gerry Harvey, of Harvey Norman; and John Singleton, who (with Harvey) owns a thoroughbred brokerage aptly named ‘Magic Millions’. This photo and others were taken at its launch while much of the rest of the state of Queensland was underwater. From the article, with my emphasis:
Context, however, is everything. There’s a good reference to the fall of Rome in there, but here’s the real bit of background which brings it home:
Well, you would — but in fact, it’s worse than that. Many of those worst affected by flooding actually aren’t insured for it — because insurers expressly exclude flood damage from their policies. Most cover storms (falling water in the local area) but not flooding (rising water, or that which originated elsewhere). The Queensland Department of Primary Industry has a summary:
It makes sense, as an insurer, to decline to offer cover for anything which might actually cost money; and there abides a regulatory environment which permits insurers to do just this. The topic, and related problems resulting from poor government policy, are covered in some detail in a column by La Trobe University disaster researcher Rachel Carter in today’s Australian. Consequently, despite the present floods being declared the most severe disaster in Queensland’s history and with some discussion today that it may be the worst in the history of the Commonwealth, insurers were, a few days ago, saying that the losses to their industry would be modest.
(Sidebar: if you’ve not connected the dots, this is the same insurance industry to which the Key government intends to deliver ACC early in their second term. Don’t say you weren’t warned.)
And so it is as it ever was: even in an affluent, modern first-world democracy with strong disaster-response agencies, which likes to regard itself as an egalitarian nation where the “little guy” gets a fair suck of the sav — when push comes to shove the big guys make out like bandits, and the little guy goes under.
In both cases, literally.
Having neglected my bloggerly duties these past six weeks (in fact, I’ve been neglecting all my duties which aren’t strictly in service of looking after my family and keeping my job), I had resolved to write something about one of the many momentous events which have taken place recently. There are many to choose from. Some topics (Pike River; Wikileaks; Foreshore and Seabed for instance) are no longer immediate; others (the re-emergence of Winston Peters, commencement of the NZ general election campaign and its forerunner the Botany by-election) are not yet sufficiently well-formed for me to quite know what to say about them yet. Yet others (notably the shooting of Gabrielle Giffords, Wikileaks and the Urewera Terra trials) have been more ably dealt with by Pablo and/or so many others, such that anything I could say would be redundant. There’s already enough peoples’ two cents rattling around in the hollow urn of internet discussion. In the context of these events other things I was meaning to write about (such as the manvertising topic Pablo discussed before the break) seem a bit trivial.
Add to all of this, today there is really only one story; that an area twice the size of Texas — the canonical measure of a really big thing — is underwater in Queensland; including much of Brisbane. The coverage put out by the Australian media, and in particular the ABC, is first-rate, and the best I can do is commend it to your attention.
There is one point, however, that I don’t think has been made strongly enough: and that’s that events such as these are a consequence of climate change. While it is fashionable for climate change deniers to mock those pointing to the increasing frequency and severity of snowstorms, cold snaps, hurricanes and torrential rainfall events as evidence for ‘global warming’; implying that climate science proponents try to take everything as evidence of ‘global warming’, the fact is that the term ‘global warming’ was retired and replaced with ‘climate change’ because the thesis isn’t just that the planet will get warmer.
That’s part of it, but the events — snowfall and what not — being pointed to are not climate; they are weather. The relationship between climate and weather is a lot like the relationship between mathematics and arithmetic — indistinguishable if you don’t understand them, but fundamentally of a different order. Weather, like arithmetic, is by and large small, trivial, unarguable stuff — stuff which is more or less self-evident. It rained this much last week; 2+2=4 — whereas climate, and mathematics, are bigger, more open-ended and by definition less quantifiable. Mistaking ‘weather’ for ‘climate’ is an immensely useful rhetorical device, and one which I believe has not been sufficiently well guarded-against by those whose task it is to argue the climate change case. But even though it may not have been made clear to the degree necessary for broad public and political comprehension, this distinction is well understood by those working in the field and anyone who cares to acquaint themselves even scarcely with the material. And fundamentally the take-away is this: climate change caused by the increased quantity of greenhouse gases in the atmosphere, to the extent that it takes place, will have unpredictable flow-on effects such as increased frequency and severity of severe weather events, and not just heat waves and droughts such as ‘warming’ would suggest.
The XKCD comic above (of which some years ago, my wife bought me the t-shirt) shows the Cosmic Microwave Background radiation spectrum. This has nothing much to do with climate change, but it is a famous proof of the scientific method: a near-perfect agreement between theory and actuality which is pretty fundamental to our understanding of a bunch of stuff. Science’s only defence; the only thing which gives it any importance or makes it any use at all, is that it works. When properly applied, it predicts actual events. The Queensland floods, as well as other such events, are happening as predicted, and anyone who tells you otherwise is either ignorant, or having you on, or both. In Andrew Bolt‘s case, it’s both. Queenslanders — and others similarly impacted by such events — need neither.
Astronomers have apparently discovered — for the first time — a planet which is both the correct size and the correct distance from its star to support life. And it’s only (all intended irony) 20 light years away!
Ever-pessimistic, I await the inevitable debunking of this epochal development. But I’m not as bad as some people on twitter, who believe that we’ll just give up on the planet we currently have as we redouble efforts to reach the new one. Sheesh.
Update 20101014: Another group of astronomers, searching for the same planet, have been unable to find any evidence that the planet even exists. Oh well.
Here’s a conspiracy theory. Building, demolition, waste/fill disposal and other resource consent regulations are being suspended in Canterbury following the recent earthquake. Indications are that exemptions to the RMA regime will be granted by order in council, and (among other things) the norm will be to permit building and reconstruction work to take place without delay, the consents being — here’s a phrase — restrospectively validated. It’s plausible that this will serve as a pilot scheme for the government’s next tranche of deregulation in the building industry and resource management sector.
I’m not a civil engineer or an expert in either town planning or disaster reconstruction. But I have a few concerns. There are obvious concerns with the possible quality of workmanship in the immediate term given the new lack of oversight which, at its most lax, could permit any chap with a hammer and a can-do ethic to undertake their own structural work which will need to be be certified (or not) after the fact; other concerns around the likelihood that rights of objection to resource consent applications will apparently be severely curtailed in order to expedite the reconstruction.
But my main concern is over the longer term. A government which has declared itself the enemy of all environmental regulation — in the local government sector, overseen by Rodney Hide, in particular — is making a There Is No Alternative argument to use Canterbury as the test-bed for its latest massive (and this time rather ad-hoc) deregulation project. The project will have two different and contrasting sets of outcomes. In the short term, the volume of reconstruction and reconstruction work will pick up swiftly, providing a shot in the arm both to a flagging construction sector and to a region whose core industries, particularly manufacturing, were hit hard by the economic downturn. This will begin to peak through the coming year or so, coincidentally about the time it takes to get many resource consent applications underway, and not coincidentally, about the time of the next general election. The adverse consequences of a less-regulated construction and resource management sector — let’s coin the term ‘creaky buildings’ — won’t begin to appear until well after that time.
So, expect the 2011 general election to be fought substantially on this topic of deregulation, particularly of the local government sector, and to be fought on the front-foot with Canterbury as the key battleground. The predominant line in rhetoric will be “under the RMA, nothing would have been rebuilt yet”, and we’ll hear all the same assurances as we heard last time. And based on the rapid development and booming construction sector in that region, similar reforms will be proposed across the country. After all, if it’s good enough for Canterbury, why not everywhere else? And just as before, when the creaky buildings constructed under this regime begin to creak, there’s an even chance it’ll be a Labour government which picks up the pieces. Not only is there No Alternative, for a government focused on the short and medium term with an imperative to grow now and pay the bills later, there is no downside.
I had meant to write something substantive on the politics-of-not-playing-politics evident in all aspects of the Christchurch earthquake and its aftermath, but circumstances have conspired to prevent me from doing so. I also have two deadlines in the coming week. So just a quickie, via George Darroch: What climate activists need to learn from the NRA and the gun-control wars.
I’ve made the argument before that climate change, having as it does the weight of scientific orthodoxy behind it, should be an easy win in the battle of ideas. That it isn’t, I believe, is due less to the powerful business cartels and their conspiratist minions arrayed against it, and more down to poor strategy and coordination on the part of those responsible for ensuring that the findings of the science are adequately promulgated throughout society, and for ensuring the policy responses to the problem are appropriate.
As gun control advocate Robert Walker argues in the linked post, those people — both the scientists and the political actors — can learn an awful lot from the NRA. Despite being pretty far out on the lunatic fringes even in the US political context, the NRA has simply phenomenal support both among gun users and those for whom the specifics of the debate have no direct relevance. They have this degree of support largely because they have succeeded in propagandising that issue to the point where its symbolic aspects matter more than its functional, material aspects. Doing this — breaking your topic from being a policy matter to being a symbolic matter in the public consciousness — is hard and complicated work, and you have to fight as if you mean to win; to not underestimate your enemy or permit your campaign to be hijacked by incompetence and vainglory. But if the NRA can do it with an issue like gun ownership, arguing for which on rational policy bases is deeply problematic, then surely those responsible for climate science can do as much. How they might do so is sketched in Walker’s article.
No time for anything substantive, but here are a few thoughts, in no particular order:
Posted on 12:30, July 20th, 2010 by Lew
$176.4 trillion = estimated value of water in Lake Taupo
(Assuming 59 cubic kilometres of water at $2.99 per litre.)
Well, this sort of reasoning is good enough for the NZ Herald, why shouldn’t it be good enough for anyone else?
Hat-tip: Berend de Boer, Libertarian-Nut-Job-in-residence at the Dim-Post. Thanks Berend. Always good for a laugh.
The uncontrolled oil spill in the Gulf of Mexico has turned into what looks to be the US’s worst environmental disaster. 40 days into the spill the well is still spewing 19,000 barrels (79,000 gallons) of oil per day into the deep waters 50 miles off of southern Louisiana. If ever there was an environmental event that could be called “catastrophic,” this is it. Estimates are that the oil slick (which is far more extensive in the middle layers of the Gulf than at the surface) will reach the Florida panhandle within days, the western Florida coast within weeks, and if the prevalent currents take hold it, the Florida Keys, Florida Straits, Cuba and South Florida Atlantic Coast by mid July. Estimates of when the spill will be contained range from August to December. If it is the latter, the slick could well be in New England given the flow rate of the Gulf Current. If a hurricane hits (the Atlantic/Caribbean hurricane season started on June 1), then all bets are off. Whatever happens, the economic costs of the disaster are already mind-boggling and wide-spread, which at a time when the US was just starting to emerge from a deep recession is a catastrophe all of its own.
By now everyone who follows the news knows that British Petroleum is the lessee of drilling rights in that part of the Gulf and owner of the drilling platform that exploded and collapsed with the loss of 11 lives that led to the leak. BP’s inability to staunch the flow after nearly a dozen unsuccessful attempts has been matched by the the wait and see response of the US government, which initially relied on BP assurances that the leak was not as big as is now known and that a capping solution was possible within a few weeks. Now that oil has fouled the Louisiana, Mississippi and Alabama coast lines on its way to Florida, public anger against BP and the Obama has started to boil over. A few days ago the US public was treated to the spectacle of James Carville, the well-known Clinton political advisor, ranting on national television against the Obama administration for its slow response (Carville is a Louisiana native). His rant was remarkable only because he is a loyal Democrat, since a host of Tea Party spokespeople, Republican Party figures and the baying hounds at Fox News and talk back radio have all lambasted the president for his lackadaisical approach to the crisis. A recent opinion poll shows that a quarter of those polled blame BP for the accident, a quarter blame Obama, and the rest blame both.
That is pretty rich. During the W. Bush administration regulations on off-shore drilling were relaxed and wilderness areas opened to oil exploration. Common emergency cutoff safeguards were abandoned as the GOP-controlled Congress approved policies of oil industry self-regulation. Dick Cheney chaired the White House energy task force, which was staffed by oil industry heavyweights including the infamous Ken Lay of Enron fame. Their recommendations, many of which passed into law, were that “less is more is less” when it comes to oil: the less US regulation the more domestic production. The more domestic production the less dependence of foreign oil. The entire federal regulatory and oversight apparatus charged with oil industry supervision adopted this mantra, which was spearheaded by Bush appointees whose idea of environmental protection was to make industrial polluters plant trees in the neighborhoods in which they operated or designate areas under their control as wildlife refuges.
The Obama administration had nothing to do with this. Its main fault lies in that, in an effort to appear centrist and “pro-business” it has allowed BP to lead the repair operation even though BP initially lied about the extent of the leak or about the fact that there had been multiple warnings from its own engineers that the well was showing signs of blowing in the weeks before the explosion. The timing of the disaster was both unfortunate and fortuitous, as, following the “less is more is less” line of thought, the Obama administration just approved new off-shore drilling rights off the lower US East Coast, a decision it may now have to review in view of the fact that, unlike the Gulf of Mexico coastline, the US Eastern Seaboard holds a majority of the population and important commercial and military ports as well as providing the jump-off point for Trans-Atlantic sea traffic. An uncontrolled oil spill in the Gulf of Mexico is a disaster; a similiar uncontrolled oil spill off the northern coast of Florida or the coasts of Georgia, North and South Carolina would be apocalyptic.
The situation has gotten so desperate that experts are now debating the merits of the so-called “nuclear option:” a plan to detonate a nuclear explosive 15000-18000 feet under the surface so as to melt the surrounding rock into a glass-like “plug” (the wellhead itself is just a mile (3,800 feet or 1600 meters) down). This is also called the “Russian option” because Russia has reportedly used this technique to cap runaway natural gas wells (the Russians have not said anything in public to confirm or deny these stories). Trouble is, no one knows if the nuclear option will work, or what its collateral effects will be. As one Canadian blogger reportedly wrote: “What s worse than an uncontrolled deep water oil spill? A radioactive deep water oil spill.”
So the situation is grave. But in the their effort to place the blame on Obama, the Republican Party and its tea bagger/media loudmouth cohort have shown that they are craven hypocrites with no sense of fair play. In their attempts to divert attention from oil industry greed and failures onto the Obama administration, they reveal themselves as complete weasels. Take, for example, Sarah Pains claim that Obama was moving slow on the crisis because he had taken money from BP. Well, the “took the money” part is true. The Obama/Biden campaign received US 70,000 dollars from BP, which also gave US$38,000 to the McCain/Palin campaign. But the oil industry as a whole gave the McCain/Palin campaign US$ 1.3 million and the Obama/Biden campaign US$900,000. It is axiomatic in US politics that lobbying groups paper the wallets of both sides of the political spectrum, with big business and Wall Street favouring the GOP and unions, high tech and other public interest groups favouring the Democrats. Thus the claims that Obama is in BP’s pocket are refuted by a simple perusal of the public record (to be fair, Palin may not have the attention span or time to peruse the public record given that she reads “all” of the newspapers and is busy with her Fox TV Show and book tours).
Obama’s detractors are also stupid. After years of clamouring for “less government,” this motley crew of “conservative” champions of free enterprise now whine about a lack of government response to a disaster created by the very private industry that they helped free from government regulations in the first place. The Obama administration may have been slow off the mark in its response to the crisis, but that is precisely because it relied on private industry–in this case BP–to be upfront and honest about he scope of the disaster. Now that it is clear that BP was dishonest, and that this dishonesty is endemic in the oil industry when it comes to environmental safeguards, the government turns out to be the default option after all, but this time in a reactive rather than a proactive role such as what existed before Bush 43 laid waste to the federal regulations governing off-shore drilling.
Obama may rue the fact that his first two years have been consumed by problems that were not on his agenda when he came into the office. But for those salivating at the prospect of a GOP sweep in the 2010 midterm elections, the oil spill may prove to be even more problematic because no matter how they may try to spin it, it was the Republicans who set the stage for the disaster to happen. Whatever flaws his administration has, Obama gave private industry a chance to fix the problem, and it is only after BP’s repeated failures that it is now considering direct intervention in the capping efforts. So much for him being a commie, and if the Democrats have any sense of irony, then so much for a Republican landslide in November.