Green Hubris: The Flub of Rome

21 Sunday Jun 2015

Posted by in Global Warming

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paleo hubris

The Papal Encyclical published last week has generated controversy for venturing into areas about which Pope Francis, and for that matter the Catholic Church, has absolutely no authority or expertise. Pope Francis has noble aims. His compassion for the poor is admirable and even poignant. Nevertheless, the Pope errs in his assessment of scientific, technological and economic issues, and he fails to reference or consider mountains of evidence that contradict the views that dominate this encyclical. It should come as no surprise that he has been swept along by the Leftist orthodoxy, of which he has long been a part.

On one hand, Pope Francis expresses a viewpoint that is almost universally shared: that we are stewards of the natural world and have a moral obligation to treat it well for the benefit of others now and in the future. However, he also believes in the unproven proposition of anthropomorphic global warming (AGW), that human activities are causing global temperatures to rise inexorably. He takes the questionable view that ongoing technological advances will benefit only the rich, leaving the poor behind in increasingly desperate circumstances. And he recklessly questions the morality of free markets and capitalism, asserting that they benefit only the rich and work against the interests of the broader masses.

One of the most interesting pieces of commentary on the Encyclical appeared in The Wall Street Journal, entitled “The Pope’s Green Theology“, written by Fr. Robert Sirico, a Catholic priest. (If the link doesn’t work, Google “wsj Sirico Green Theology”.)

“… capitalism has spurred the greatest reduction in global poverty in world history: The number of people living on $1.25 a day fell to 375 million in 2013 from 811 million in 1991, according to the International Labor Office. This is only one statistic among reams of evidence that vindicate capitalism. An honest debate among experts will lay this canard to rest.

The encyclical unwisely concedes too much to the secular environmental agenda, for example, by denigrating fossil fuels. But it also voices moral statements dismissing popular, ill-conceived positions. The repeated lie that overpopulation is harming the planet—expressed by even some of the advisers for the Vatican—is soundly rejected.“

Much of the evidence on global temperatures contradicts the Pope’s position, yet he sides with the groupthink of the environmental Left based on model predictions that have been consistently wrong over several decades. The models have drastically over-predicted global temperature trends, even before the “pause” in warming that began in the late 1990s.

It is rather early in the game for the Catholic Church to take such an unequivocal position on an issue as far afield from matters of religious faith as climate science. As Dr. Tim Ball notes, the Catholic Church has not always bet well on science, going back to its denunciation of Galileo almost 400 years ago. Apparently, any lessons learned from that episode about the process of scientific inquiry have been forgotten. Matt Ridley has a great (if lengthy) essay on the politics of science and the damage that politicized climate science has done to the cause of real understanding:

“Expertise, authority and leadership should count for nothing in science. The great Thomas Henry Huxley put it this way: ‘The improver of natural knowledge absolutely refuses to acknowledge authority, as such. For him, scepticism is the highest of duties; blind faith the one unpardonable sin.’ Richard Feynman was even pithier: ‘Science is the belief in the ignorance of experts.’”

Climate science is really in its infancy. Recorded history of the climate is in its infancy as well. The scant evidence of global warming during the 20th century is well within the range of natural variation estimated for the past 8,000 years, according to a study by a former lead author for the Intergovernmental Panel On Climate Change (IPCC). For the Pope, or anyone else, to make strong claims about “the science”, or to prescribe draconian limits on individual liberty in an effort to plan “the climate”, is hubris of the first order. That’s ironic given the Pope’s condemnation of what he characterizes as mankind’s Promethean hubris, as if making the world more livable was sinful. The Encyclical condemns technological progress, going so far as to denigrate the use of air conditioning. That attitude is driven by objections to energy use; nevertheless, the Pope reveals a deep mistrust of technology and betrays the soul of a Luddite.

Patrick J. Michaels of CATO’s Center for the Study of Science wrote about the Pope’s climate views and the morality of “dense energy” in April:

“Abundant and dependable energy frees mankind from a menial existence, allowing us to use our given talents for the greater good. The mental capital of the poor in the underdeveloped world is untapped without dense energy. The burning of dung for cooking is a major cause of early death from pulmonary disease. The massive deforestation that must occur without dense energy amplifies floods from ubiquitous tropical downpours.“

Here is a link to some very sarcastic commentary from Brendan O’Neil at Reason on the Pope’s “Dotty Green Theology“. O’Neil mentions the tyrannical fantasies dancing in the minds of some on the environmental Left:

“Christianity’s end-of-worldism is getting a new airing in the apocalypse obsession of greens, who warn of an eco-unfriendly End of Days. Its promise of Godly judgement for our wicked ways has been replaced by greens’ promise that we’ll one day be judged for our planetary destructiveness. A leading British green has fantasised about ‘international criminal tribunals’ for climate-change deniers, who will be ‘partially but directly responsible for millions of deaths.'”

Let’s hope the Pope isn’t on board with that, though he did propose that a worldwide governing body take charge of environmental issues. Please, no favors! John Hinderaker, in the context of the Encyclical, discusses the regressive impact of policies that raise energy prices. That’s consistent with the Pope’s green objectives. Hinderaker cites figures showing that those earning less than $30,000 per year in the U.S. spend 23% of their after-tax income on energy, compared to just 7% for those earning $50,000 or more.

It is extremely late in the game for the Pope to inveigh against capitalism, with all evidence pointing to the long-term success of free markets in lifting the poor from the depths of privation. In fact, the Encyclical is strongly reminiscent of the Malthusian “Limits to Growth” published by the Club of Rome. That “study” contained what has proven to be among the worst collections of prognostications of all time, and the Club persists in purveying doom and gloom to this day.

I have written before on Sacred Cow Chips about Pope Francis’ statist, anti-market inclinations. From that post:

“… it is not just the secular Left that fails to recognize the inherent conflict between big government and religious liberty. Pope Francis himself seems oblivious to the dangerous implications of big government for religious freedom. His apostolic exhortation for greater reliance on the state to care for the poor simultaneously embraces socialism and condemns capitalism. I take no issue in principle with the provision of a social safety net, but the Pope should be more results-oriented in assessing different forms of social organization and their impacts on poverty. Big government typically fails to achieve the kinds of humane objectives usually espoused by the Left. The sad ‘road to serfdom’ has played out too many times in the past.“

Should Foreign Goods Be Pricey?

18 Thursday Jun 2015

Posted by in Free Trade

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Even ardent supporters of the Pacific trade deal get one thing wrong consistently: promoting free trade is not so much about domestic producers, jobs and export promotion as it is about consumers, prices and improved access to imports. The latter are the real rewards of trade, while the former are more appropriately viewed as payments. This was the subject of “Free Trade Lets You Make a Deal” on Sacred Cow Chips in April., in which I quoted Greg Mankiw:

“A nation benefits from imports, [Adam Smith] argued, because they expand its opportunities for consumption. Exports are necessary only because other nations have the temerity to want to be paid for the goods they provide.“

Free trade is a process of exploiting exchanges that are mutually beneficial, but based on the commentary in the press and social media, one would think it was something harmful. You could hardly blame anyone from drawing that impression based on the way governments negotiate trade deals. Last month, Don Boudreaux had a humorous take on this in “If Buying A Car Were Like Negotiating A Trade Deal“. The parties just can’t tolerate a better deal!

To draw another analogy, when IKEA opens a store in a new town, consumers are excited about the goods available there, and about the new shopping experience. When the circus comes to town, people are thrilled by the “imported” entertainment. They are not especially antagonized about the extra spending this might entail, or the extra hours they might have to work in order to afford it. Of course, the cheaper, the better. Yet when it comes to foreign trade, the general commentary turns this logic on its head: you’d think our concerns centered around a desire for more expense and that our access to new goods is a nuisance!

Opposition to trade deals among progressives is based on classic protectionist sentiment. This usually ends in protecting rents earned by interests that would rather not face competition. Nothing could be more corporatist in its effect. But it is obviously counter-productive to argue in support of industries that cannot compete internationally, so opponents retreat to accusations that trading partners cheat by selling below cost or manipulating their currencies. If so, those policies represent gifts to the U.S. It would be wonderful for the country if the flow of gifts from abroad continued indefinitely, but that is not sustainable. As matters are rationalized over time, and they will be, opportunities will present themselves to U.S. producers, who may well be in better stead by virtue of the earlier gifts from abroad. Don’t look a gift horse in the mouth by favoring domestic rent seekers.

Like Boudreaux, I support trade deals like the Trans-Pacific Partnership (TPP) “with my nose held tightly“. Deals like this generally do reduce trade barriers, though they invariably involve politically-motivated nonsense like the imposition of cross-country rules and regulations that negate some of the economic gains.

Caroline Baum has a good summary of legislation related to the TPP, which involves the president’s “fast-track” negotiating authority as well as assistance to “workers who are adversely affected by a trade agreement“. The trade deal, fast track and trade assistance have created strange political bedfellows and estrangements. Baum notes the confusion surrounding the real benefits of trade from fast track’s biggest proponent:

“Obama’s entire trade pitch – ‘the more we sell abroad, the more jobs we create at home’ – is a thinly disguised mercantilist argument: the idea that a country can export its way to prosperity. It’s a mistake to think that the advantages of free trade are limited to the export side.“

Some otherwise strong supporters of free trade are opposed to granting Obama fast-track authority, despite the fact that the last six presidents have had that authority. I am as skeptical about Obama’s leadership and negotiating skills as anyone, and I have little faith that he would keep sight of the main objective, were he actually sitting at the negotiating table. That would be lower trade barriers, not the environment or any other intrusion into the domestic policies of other parties to the deal. If our domestic regulatory standards are tougher or involve greater expense than those abroad, that should be afforded by greater U.S. productivity, not by making our producers uncompetitive on international markets. And if that is the case, our standards should be reassessed, we should recognize the prohibitive impact that our standards could have on the costs of our trading partners, and we should hope for those partners to eliminate any additional barriers to our goods.

I am also opposed to making the trade deal hinge on the extension of tougher intellectual property (IP) rights to poor Asian nations, though that is certain to be part of the negotiations.  There is disagreement among economists about whether such an extension of IP rights would be good or bad.

I would like to see Congress grant Obama fast-track authority, but only because Congress will still have the authority to approve or reject a final deal. The promise of reductions in trade barriers is unequivocally positive. We’ll have to evaluate the downside when the deal goes before Congress.

The Government Inequality Machine

17 Wednesday Jun 2015

Posted by in Big Government

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Cronyism cartoon

Some perceive the government as an ideal agent of redistribution, but they fail to apprehend the many ways in which government policy undermines equality. Scott Sumner and Kevin Erdmann have written an excellent essay on this point entitled “Here’s What’s Driving Inequality” at National Review. They focus on three areas of government action with the unavoidable side-effect of upward redistribution: housing policy (at all levels of government), regulation, and excessive protections for intellectual property.

Sumner and Erdmann briefly cover Thomas Piketty’s controversial view that wealth becomes increasingly concentrated under conditions of secular stagnation. However, they note that over the past few decades:

“... almost the entire change in the share of domestic income going to capital in major developed economies was explained by rising rents on residential real estate. Non-rental capital income (including the corporate sector) still has a fairly stable share of domestic income.“

Housing policy has driven rents upward in myriad ways. For example, restrictive zoning laws, environmental regulation of new building and regulation of bank lending have all made homeownership less feasible and renting more expensive. If you’re already in your own home, you’re safe! If not, welcome to the have-nots! Here’s a story on government insurance programs that offer massive subsidies to wealthy homeowners. All these redistributional effects are compounded by a tax code that has inflated housing prices through the home mortgage interest deduction, and at the same time inflated rents via the incidence of higher taxes on rental income and real estate capital gains.

Regulation of private business activity is often viewed naively as a necessary, protective function of government, but regulation acts in perverse ways:

“Unfortunately, many government regulations tend to favor larger firms. In recent years we have seen the passage of some extremely complex regulations involving thousands of pages of rules, such as Sarbanes-Oxley, Dodd-Frank, and the Affordable Care Act. The Food and Drug Administration, the Department of Defense, and the public health-care complex tend to create opportunities for uber-firms within industries, which act as clearinghouses for public contracts and regulatory demands.”

Large firms tend to pay higher wages and salaries than small firms. By favoring large firms, regulation in turn favors their relatively high-income workers. In addition, regulation such as occupational licensing, labor regulations and local wage controls damage the health and growth potential of small firms and the mobility of individuals at the bottom of the economic ladder.

Finally, Sumner and Erdmann discuss the often bizarre extension of intellectual-property (IP) rights and the way it favors large firms:

“Copyright protections once lasted for 14 years, applied only to maps and books, and could be renewed once if the author was still alive. Now they’ve been extended to many other products, extend for 50 years after the death of the author, and last for at least 95 years for corporations. These extensions are widely seen as reflecting the lobbying power of companies such as Disney. In the high-tech sector, patents are often granted for seemingly minor and obvious innovations.“

Sacred Cow Chips featured a piece on IP several months ago called “Is The Patent a Perversion?” The Libertarian view of IP is skeptical, to say the least, and favors limited protection at most. In that post, I quoted Jeffrey Tucker of the Beautiful Anarchy blog:

“Through intellectual property laws, the state literally assigned ownership to ideas that are the source of innovation, thereby restricting them and entangling entrepreneurs in endless litigation and confusion. Products are kept off the market. Firms that would come into existence do not. Profits that would be earned never appear. Intellectual property has institutionalized slow growth and landed the economy in a thicket of absurdity.“

There is little doubt that economic mobility is not well served by excessive grants of IP rights that extend monopolies indefinitely.

Government fosters inequality in many other ways. The mere existence of a confiscatory mechanism for legal revenue collection, and a complex bureaucracy in charge of distributing the spoils and making rules, will always attract high-powered rent-seeking resources and encourage cronyism. It is a graft machine. The very complexity of the tax code creates fertile ground for transfers via obscure breaks and carve-outs, while higher tax rates on others are required to fund the exceptions. Here’s another: the Export-Import Bank, which subsidizes exports for large corporations. A nice run-down of some of the many areas of “Welfare for the Rich” was provided a few years ago by Robert P. Murphy in The Freeman.

Unfortunately, direct efforts by the government to help the poor are often mere palliatives. At the same time, many of these programs are notorious for destroying work incentives, which undermines equality and economic mobility.

Government is simply not as well-suited to promoting equality as well-functioning markets, free of government meddling and government grants of monopoly. Profits in such markets attract new resources that compete away excess returns and bid prices downward, actions that tend to promote equality. The opportunity to compete without restraint not only vitiates artificial or permanent claims to profits; along with strong property rights, it encourages invention, economic mobility and growth.

More Unpleasant Obamacare Arithmetic

15 Monday Jun 2015

Posted by in Obamacare, Uncategorized

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How-the-ACA-Works

States with expanded Medicaid eligibility may be more vulnerable to adverse selection, hastening the death spiral of their Obamacare insurance exchanges relative to states without expanded Medicaid. This is because 1) the expanded, eligible Medicaid population is young, and 2) pricing (net of subsidies) and benefits on the exchanges encourage sicker individuals to purchase plans with richer benefits. The Political Calculations blog presents this case in “How Medicaid’s Expansion Tips the Scales Against Obamacare“:

“… we observe that the states that did not expand their Medicaid programs have a much larger share of their ACA-enrollment occurring in the lower-tier metal plans that would tend to be favored by healthier individuals. Meanwhile, in the states that expanded the enrollment of their Medicaid programs under the law, we find that a significantly larger portion of their ACA enrollments were in the plans that would be favored by less healthy individuals.

In fact, we see that in Medicaid expansion states, 13.2% of their ACA enrollment occurred in the highest-tier Gold and Platinum level plans, while non-Medicaid expansion states saw 7.7% of their enrollment for these highest tiers of health insurance coverage.

The seemingly small 5.5% difference between these two figures becomes exceptionally significant when you consider how extremely concentrated health care expenditures are in the United States, where just 5% of U.S. patients are responsible for generating 50% of all health care spending in the nation.“

It will be difficult to confirm this hypothesis using data on premium increases, or actual exchange failure, until the temporary risk corridors and transitional reinsurance program expire. However, this year, several of the states in which proposed premium increases are the largest have expanded Medicaid eligibility. Robert Laszewski has a good discussion about some the reasons for the large premium increases in Forbes. It’s early and there are signs that it will get worse.

As noted last week on this blog, Medicaid itself does not stack up well in terms of how highly it is valued by recipients and the moral hazard inherent in the program. Here we see an additional bug: expanded Medicaid appears to siphoning away younger potential enrollees from the exchanges in those states, worsening the problem of adverse selection, which will negatively affect their claims experience.

Medicaid and Value Mislaid

12 Friday Jun 2015

Posted by in Obamacare

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Medicaid-Agency-Cartoon

A new paper on the MIT Econ department web site finds that the “welfare benefit to recipients from Medicaid per dollar of government spending range from $0.2 to $0.4, depending on the framework ….” Those estimates are from “The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment” by Amy Finkelstein, Nathaniel Hendren, and Erzo F.P. Luttmer (Hat Tips: Marginal Revolution, John Crawford). A major share of the increase in the number of insured individuals under Obamacare stems from Medicaid enrollments, so the efficacy of the program is of great interest as the nation considers possible changes to the health care law.

The value of Medicaid to recipients is low in part because the coverage is incremental to the uncompensated medical care they would have received without coverage. So perhaps it’s not too surprising that if “… Medicaid recipients had to pay the government’s average cost of Medicaid, they would rather be uninsured.” That’s why I think some of the commentary on this result is a little unfair, such as the way it’s presented by Megan McArdle. There are clearly other reasons why Medicaid receives a low valuation by recipients, however. For example, the authors find that the program entails substantial costs of moral hazard, which may mean that recipients are in poor health relative to reimbursement levels, take risks that they would avoid in the absence of coverage, or simply over-utilize services for which they would be unwilling to pay, even if the cash were made directly available. While it doesn’t receive much focus from the authors, low reimbursement rates discourage providers from accepting Medicaid patients. That would certainly reduce one’s willingness to pay for the coverage.

Finkelstein, Hendren and Luttmer estimate that 40% to 80% of Medicaid’s welfare value derives from “a transfer component, as opposed to its ability to move resources across states of the world.” The transfers go to providers who, in the absence of Medicaid coverage, would offer “implicit insurance” in the form of uncompensated care. As noted above, that’s a good thing. Providers should be compensated rather than relied upon as a charities, though there are strong indications that compensation is inadequate.

The authors also estimate the value of Medicaid as a “redistribution tool” relative to the earned income tax credit (EITC). At best, they find that recipients would slightly prefer Medicaid cuts to equivalent reductions in the EITC (though the comparison suffers from some conceptual shortcomings). Unsurprisingly, the outcome depends upon how highly the “transfers” to health care providers are valued by enrollees. So the program seems to do poorly in the eyes of recipients, who would likely prefer outright transfers of cash. I would speculate that many recipients would prefer a voucher with which they could purchase coverage levels of their choice, retaining any excess not spent.

The “Value of Medicaid” study suggests that the program is unsuccessful in delivering value to recipients and taxpayers. Obamacare reform should include fundamental changes to the Medicaid program, measures that restore individual choice and the private market for health coverage, and provisions to increase competition in the health care and insurance markets. Eliminating prohibitions on the sale of health insurance across state lines would be a good start. Reforms should also combat excessive regulation of health care providers, such as eliminating the electronic health records mandate and reforming the inflexible system of compensation based on relative value units. Market-oriented reforms and competition can reduce costs and make health care more affordable, aiding in the delivery of greater benefits to all segments of society.

Obamanomics and Opportunity Knocked Off

10 Wednesday Jun 2015

Posted by in Regulation

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find-govt-worker

Another Obama fallacy and a new, binding constraint on voluntary private arrangements: in the latest example of administrative rule-making gone berserk, the Obama Administration (via The Department of Labor) is proposing a drastic change in the definition of an exempt employee, increasing the salary threshold for the exemption from $23,660 to as much as $52,000. This is likely to change the status of a large number of workers, but as Warren Meyer explains, not in the way the administration hopes.

Obama and his advisors imagine that this change will actually increase the incomes of a large number of workers — that employers will begin paying overtime to hard-working supervisory and administrative employees. Meyer quotes Politico‘s headline: “Barack Obama poised to hike wages for millions.” But employers are not indifferent to the cost of a given labor input.

As Meyer asserts, currently exempt employees who now earn a salary between the current and the new thresholds may well be converted to hourly, non-exempt employees. And those now working extra hours are likely to be working fewer hours under the new rules. In fact, they may well see their hours and incomes reduced. Some employers will be able to automate certain tasks to compensate for the reduction in labor input, as Meyer suggests. Or perhaps more part-time workers will be hired.

There is another issue at stake, however, in addition to the mere calculation of workers X hours X the wage rate. Meyer expresses disgust at the way the new threshold could change relationships between employers and certain employees. As he tells it, the change will convert ambitious young managers into clock-punchers. In case that sounds too much like a negative personality change, a more sympathetic view is that many workers do not mind putting in extra hours, even as it reduces their effective wage. They have their reasons, ranging from the non-pecuniary, such as simple work ethic, enjoyment and pride in their contribution to reward-driven competitiveness and ambition. Hours worked gives exempt employees an additional margin along which to prove their value to the enterprise. Obama’s proposal takes that away, which may penalize employees with less talent but strong ambition. Opportunity’s knock is getting softer.

OTC Birth Control vs. State Control

09 Tuesday Jun 2015

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cartoon_dancing

Why would the Progressive Left oppose over-the-counter birth control? Let us count the reasons…

Senator Cory Gardner (R-CO) has proposed a bill to eliminate the federal requirement that a doctor’s prescription is needed to obtain birth control. According to Gardner,

“Most other drugs with such a long history of safe and routine use are available for purchase over the counter, and contraception should join them.”

Six other Republicans have signed-on as co-sponsors. The change is sensible on many levels, from improving access to birth control to reducing health care costs, yet the Left and some so-called women’s advocates have reacted with horror. Most of what follows is discussed in two articles, “Why Liberals Oppose Over-the-Counter Birth Control“, by Jillian Kay Melchior, and “Republicans Push For Over-The-Counter Birth Control, Liberals Immediately Oppose The Plan“, from Before It’s News (BIN).

  1. “Free” birth control was offered under Obamacare. The Left claims that the OTC proposal is a conspiracy to eliminate federal funding of birth control and shift the cost burden back to women. Yet the bill does not change the coverage requirement in any way.
  2. The Left claims that the change to OTC will increase the cost of birth control. On one level, this is the same as #1. However, some have argued that the change will actually drive up the cost of contraception, and that’s a whole different level of delusional economics. Filling prescriptions involves much greater use resources than OTC, particularly the time of the physician and staff, the pharmacist, and the buyer. OTC would also remove a barrier to competition in the provision of birth control, which would reduce costs.
  3. Some physicians require an examination and even tests before they’ll write a birth control prescription, which can run into hundreds of dollars. Naturally, many of them would like to retain this flow of business, yet according to Melchior, “…the World Health Organization and the American Congress of Obstetricians and Gynecologists have confirmed that doctors can safely prescribe the pill without a full examination.” Freeing women of the need for a doctor’s blessing would  improve access unambiguously.
  4. Melchior also reports that “Planned Parenthood alone makes around $1.2 billion each year from contraceptive services.” Naturally, Planned Parenthood would like to protect that flow of revenue, but the availability of OTC birth control would expose it to competition.

What nonsense people spout in defense of their political agenda, not to mention their rents! The proposal for OTC birth control should be a slam-dunk liberalization, one that no self-respecting Liberal or Libertarian should oppose. But apparently, for the Progressives, helping women is secondary to preserving state control and the “statist quo”.

Fitting Data To Models At NOAA

08 Monday Jun 2015

Posted by in Global Warming

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Dilbert Made Up Numbers

If the facts don’t suit your agenda, change them! The 18-year “hiatus” in global warming, which has made a shambles of climate model predictions, is now said to have been based on “incorrect data”, according to researchers at National Oceanic and Atmospheric Administration (NOAA). Translation: they have created new data “adjustments” that tell a story more consistent with their preferred narrative, namely, that man-made carbon emissions are forcing global temperatures upward, more or less steadily. The New York Times’ report on the research took a fairly uncritical tone, despite immediate cautions and rebuttals from a number of authorities. On balance, the NOAA claims seem rather laughable.

Ross McKitrick has an excellent discussion of the NOAA adjustments on the Watts Up With That? blog (WUWT). His post reinforces the difficulty of aggregating temperature data in a meaningful way. A given thermometer in a fixed location can yield drifting temperatures over time due to changes in the surrounding environment, such as urbanization. In addition, weather stations are dispersed in irregular ways with extremely uneven coverage, and even worse, they have come and gone over time. There are gaps in the data that must be filled. There might be international differences in reporting practices as well. Sea surface temperature measurement is subject to even greater uncertainty. They can be broadly classified into temperatures collected on buoys and those collected by ships, and the latter have been taken in a variety of ways, from samples collected in various kinds of buckets, hull sensors, engine room intakes, and deck temperatures. The satellite readings, which are a recent development, are accurate in tracking changes, but the levels must be calibrated to other data. Here’s McKitrick on the measurements taken on ships:

“… in about half the cases people did not record which method was used to take the sample (Hirahari et al. 2014). In some cases they noted that, for example, ERI readings were obtained but they not indicate the depth. Or they might not record the height of the ship when the MAT reading is taken.“

The upshot is that calculating a global mean temperature is a statistical exercise fraught with uncertainty. A calculated mean at any point in time is an estimate of a conceptual value. The estimate is one of many possible estimates around the “true” value. Given the measurement difficulties, any meaningful confidence interval for the true mean would likely be so broad as to render inconsequential the much-discussed temperature trends of the past 50 years.

McKitrick emphasizes the three major changes made by NOAA, all having to do with sea surface temperatures:

  1. NOAA has decided to apply an upward adjustment to bring buoy temperature records into line with ship temperatures. This is curious, because most researchers have concluded that the ship temperatures are subject to greater bias. Also, the frequency of buoy records has been rising as a share of total sea temperature readings.
  2. NOAA added extra weight to the buoy readings, a decision which was unexplained.
  3. They applied a relatively large downward adjustment to temperatures collected by ships during 1998-2000.

Even the difference between the temperatures measured by ships and buoys (0.12 degrees Celsius), taken at face value, has a confidence interval (95%?) that is about 29 times as large as the difference. That adjustments such as those above are made with a straight face is nothing short of preposterous.

A number of other researchers have weighed in on the NOAA adjustments. Carl Beisner summarizes some of this work. He quotes McKitrick as well as Judith Curry:

“I think that uncertainties in global surface temperature anomalies is [sic] substantially understated. The surface temperature data sets that I have confidence in are the UK group and also Berkeley Earth. This short paper in Science is not adequate to explain and explore the very large changes that have been made to the NOAA data set. The global surface temperature datasets are clearly a moving target.“

There are a number of other posts this week on WUWT regarding the NOAA adjustments. Some of the experts, like Judith Curry, emphasize the new disparities created by NOAA’s adjustments with other well-regarded temperature series. It will be interesting to see how these differences are debated. Let’s hope that the discussion is driven wholly by science and not politics, but I fear that the latter will have a major impact on the debate. It has already.

Major Mistake: The Minimum Opportunity Wage

06 Saturday Jun 2015

Posted by in Price Controls

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City leaders in St. Louis and Kansas City are the latest to fantasize that market manipulation can serve as a pathway to “economic justice”. They want to raise the local minimum wage to $15 by 2020, following similar actions in Los Angeles, Oakland  and Seattle. They will harm the lowest-skilled workers in these cities, not to mention local businesses, their own local economies and their own city budgets. Like many populists on the national level with a challenged understanding of market forces (such as Robert Reich), these politicians won’t recognize the evidence when it comes in. If they do, they won’t find it politically expedient to own up to it. A more cynical view is that the hike’s gradual phase-in may be a deliberate attempt to conceal its negative consequences.

There are many reasons to oppose a higher minimum wage, or any minimum wage for that matter. Prices (including wages) are rich with information about demand conditions and scarcity. They provide signals for owners and users of resources that guide them toward the best decisions. Price controls, such as a wage floor like the minimum wage, short-circuit those signals and are notorious for their disastrous unintended (but very predictable) consequences. Steve Chapman at Reason Magazine discusses the mechanics of such distortions here.

Supporters of a higher minimum wage usually fail to recognize the relationship between wages and worker productivity. That connection is why the imposition of a wage floor leads to a surplus of low-skilled labor. Those with the least skills and experience are the most likely to lose their jobs, work fewer hours or not be hired. In another Reason article, Brian Doherty explains that this is a thorny problem for charities providing transitional employment to workers with low-skills or employability. He also notes the following:

“All sorts of jobs have elements of learning or training, especially at the entry level. Merely having a job at all can have value down the line worth enormously more than the wage you are currently earning in terms of a proven track record of reliable employability or moving up within a particular organization.“

The negative employment effects of a higher wage floor are greater if the employer cannot easily pass higher costs along to customers. That’s why firms in highly competitive markets (and their workers) are more vulnerable. This detriment is all the worse when a higher wage floor is imposed within a single jurisdiction, such as the city of St. Louis. Bordering municipalities stand to benefit from the distorted wage levels in the city, but the net effect will be worse than a wash for the region, as adjustments to the new, artificial conditions are not costless. Again, it is likely that the least capable workers and least resourceful firms will be harmed the most.

The negative effects of a higher wage floor are also greater when substitutes for low-skilled labor are available. Here is a video on the robot solution for fast food order-taking. In fact, today there are robots capable of preparing meals, mopping floors, and performing a variety of other menial tasks. Alternatively, more experienced workers may be asked to perform more menial tasks or work longer hours. Either way, the employer takes a hit. Ultimately, the best alternative for some firms will be to close.

The impact of the higher minimum on the wage rates of more skilled workers is likely to be muted. A correspondent of mine mentioned the consequences of wage compression. From the link:

“In some cases, compression (or inequity) increases the risk of a fight or flee phenomonon [sic]–disgruntlement culminating in union organizing campaigns or, in the case of flee, higher turnover as the result of employees quitting. … all too often, companies are forced to address the problem by adjusting their entire compensation systems–usually upward and across-the-board. .. While wage adjustments may sound good for those who do not have to worry about profits and losses, the real impact for a company typically means it must either increase productivity or lay people off.“

For those who doubt the impact of the minimum wage hike on employment decisions, consider this calculation by Mark Perry:

“The pending 67% minimum wage hike in LA (from $9 to $15 per hour by 2020), which is the same as a $6 per hour tax (or $12,480 annual tax per full-time employee and more like $13,500 per year with increased employer payroll taxes…)….“

Don Boudreaux offers another interesting perspective, asking whether a change in the way the minimum wage is enforced might influence opinion:

“... if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?“

Proponents of a higher minimum wage often cite a study from 1994 by David Card and Alan Krueger purporting to show that a higher minimum wage in New Jersey actually increased employment in the fast food industry. Tim Worstall at Forbes discussed a severe shortcoming of the Card/Krueger study (HT: Don Boudreaux): Card and Krueger failed to include more labor-intensive independent operators in their analysis, instead focusing exclusively on employment at fast-food chain franchises. The latter were likely to benefit from the failure of independent competitors.

Another common argument put forward by supporters of higher minimum wages is that economic theory predicts positive employment effects if employers have monopsony power in hiring labor, or power to influence the market wage. This is a stretch: it describes labor market conditions in very few localities. Of course, any employer in an unregulated market is free to offer noncompetitive wages, but they will suffer the consequences of taking less skilled and less experienced hires, higher labor turnover and ultimately a competitive disadvantage. Such forces lead rational employers to offer competitive wages for the skills levels they require.

Minimum wages are also defended as an anti-poverty program, but this is a weak argument. A recent post at Coyote Blog explains “Why Minimum Wage Increases are a Terrible Anti-Poverty Program“. Among other points:

“Most minimum wage earners are not poor. The vast majority of minimum wage jobs are held as second jobs or held by second earners in a household or by the kids of affluent households. …

Most people in poverty don’t make the minimum wage. In fact, the typically [sic] hourly income of the poor appears to be around $14 an hour. The problem is not the hourly rate, the problem is the availability of work. The poor are poor because they don’t get enough job hours. …

Many young workers or poor workers with a spotty work record need to build a reliable work history to get better work in the future…. Further, many folks without much experience in the job market are missing critical skills — by these I am not talking about sophisticated things like CNC machine tool programming. I am referring to prosaic skills you likely take for granted (check your privilege!) such as showing up reliably each day for work, overcoming the typical frictions of working with diverse teammates, and working to achieve management-set goals via a defined process.”

Some of the same issues are highlighted by the Show-Me Institute, a Missouri think tank, in “Minimum Wage Increases Not Effective at Fighting Poverty“.

A higher minimum wage is one of those proposals that “sound good” to the progressive mind, but are counter-productive in the extreme. The cities of St. Louis and Kansas City would do well to avoid market manipulation that is likely to backfire.

Haunted By Food Demons

03 Wednesday Jun 2015

Posted by in Biotechnology

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dr-jekyll gmo Glyphosate herbicide usage (as in Roundup) in the U.S. has increased dramatically over the last two decades, replacing the use of far more toxic herbicides on many crops. That’s one of the major points in a post at The Credible Hulk blog entitled “About those more caustic herbicides that glyphosate helped replace“. The increased use of glyphosate corresponded to heavier reliance on glyphosate-tolerant strains of genetically-engineered crops. The author provides charts and other details on the changing use of a number of different herbicides both over time and across crop varieties.

“… the purpose of this [post] is to show that when opponents of GE technology and of glyphosate claim that GR crops are bad on the grounds that they increased glyphosate use, they are leaving out critical information that would be highly inconvenient for their narrative.“

The use of insect-resistant GE crops has also been associated with a declines in total pesticide use. [The links above are all given in The Credible Hulk post].

There is a great deal of distortion prompted by certain interest groups who oppose the use of synthetic herbicides and insecticides and GMOs. Irrational fears among consumers are inflamed by this sort of propaganda. This post and this post give farmers’ perspectives on some of the misinformation with respect to glyphosate. No, farmer’s do not “drench” their crops with glyphosate prior to harvest. That claim is pure hyperbole.

It’s also important to note that organic crops are not free of treatments. So-called organic pesticides are often just as toxic as synthetic pesticides, and they are often used in heavier quantities. Furthermore, organic foods carry undeniable health risks to consumers. A balanced view must acknowledge the benefits of crop treatments to consumers (whether the treatments are organic or nonorganic), that residues on produce in the U.S. are minimal, that safety still dictates that consumers wash their produce, and that consumers deserve a free choice between crops grown conventionally or organically.