Economics Charts

Source:  https://politicalcalculations.blogspot.com/2018/03/january-2018-median-household-income.html#.Wp2kEGrwaUk






Source:  https://politicalcalculations.blogspot.com/2018/02/spring-2018-snapshot-of-expected-future.html#.Wp2kNWrwaUk

The Future of Forests...is People

 David Wear, USFS, predicts large declines in forest area in the US as more and more land is developed for housing.  Over the next 50 years the US population is forecast to double again to 500 million, mostly along the coasts. 
 

Most of the RPA interval projections by the USFS are driven by economic analyses.  Increased wealth greatly increases the impact of any increase in human population, because wealthier people build bigger houses, shop more, and need more roads.  More people will need more food, leading to higher food prices that threaten to undo the conservation reserve program, putting reforested land back into food production.  But higher prices for timber or biomass would actually increase forested area!  With a higher value on trees, timbered lands might be worth too much to develop....

I conclude that the US needs a healthy forest products (including, somehow, forest biomass) industry to push back against the teeming urban hordes.

The Schmoo and Marxism

How much is a human life worth?

From a 2008 article in the Washington Post: Several federal agencies have come up with figures for the dollar value of a human life to analyze the costs and benefits of new programs they believe will save lives. A sampling:

According to the Principles of Economics by Gregory Mankiw, economics calculate the

value of a human life by looking "at the risks that people are voluntarily willing to

take and how much they must be paid for taking them".

For example, the decision to work as a contractor in Iraq involved placing a monetary value on

years of extended life. Assuming an annual risk of death of 0.004 and a salary

premium of $30,000 per year over comparable jobs in the United States, contractors in

Iraq are essentially compensated at a rate of $250,000 per statistical year of life. A recent survey of estimates based on occupational risk that found a range from $500,000 to $21 million per statistical life year depending on how dangerous the work is. If someone will accept a 1-in-10,000 chance of death for $500, then the value of life

must be 10,000 times $500, or $5 million.

An example of this kind of analysis was used by the federal Consumer Product Safety

Commission this year:A proposal to make mattresses less flammable was expected to cost the industry $343 million to implement. But, a spokeswoman said, the move was also expected to save 270 people. The commission calculated that each life was worth $5 million, which meant a

benefit of about $1.3 billion.

This total value can also be annualized. The World Health Organization has proposed $108,609 as the value of a disability-adjusted life year, while a recent study by Lee et al using Medicare willingness-to-pay, estimated it as $129,000. Lee notes that this figure compares to a range of $50,000 to $100,000 used in other countries, such as Australia and the UK, which run national health care systems in guiding their coverage decisions.

see: EPA's mortality risk valuation

The fact of the matter is that monetary valuations of human life are a necessary step in triage. However, as Risk and Decision-Making researchers know, individual's valuations of their own and others lives is rarely consistent or logical. For example, many people complain bitterly about automobile or factory pollution, while themselves being one of the largest, willful, and unnecessary sources of pollution:

Economic Incentives and Water Quality in Ohio

Brent Sohngen, a professor in Ohio State University’s Department of Agricultural, Environmental and Development Economics, presented “Economic Incentives and Water Quality in Ohio”, an interesting talk about paying farmers for the reductions in runoff pollution they deliver. This economics-inspired approach differs from that typical of Soil and Water Conservation grants that pays for specific installations like riparian buffer strips, containment ponds for sewage, and conservation research program fallow fields.

Dr. Sohngen experimentally signed a contract that would pay farmers for pollution reductions in a small watershed in West Ohio. Unfortunately pollution increased when one of the farmers in the watershed decided to double his hog production. Still, Dr. Sohngen thinks the technique has promise, given that the farmers were responsible for more pollution than a nearby town's wastewater treatment plant. Given what we are willing to pay to upgrade the plant, shouldn't we be willing to pay a similar amount to the farmers?

I like the idea, but the economic logic seems to falter because it is based only on what society is willing to pay, not the cost to the farmer. I would have liked to ask about how much money, given the farmer's decision to invest in additional hogs, it would actually take for the farmer to pollute less. What is the opportunity cost of reduced pollution?

Medical Decision-Making

When a doctor diagnoses a patient, who makes the decision about treatment? Perhaps the patient defers to the knowledge and authority of the doctor: "you're the doctor, you decide." Although the structure of power dynamics between the doctor and patient can bias decision-making, the final decision usually comes down to money, which is decided by the insurance company. So how does a large insurance company decide what procedure to pay for?

Others have pointed out that this is a system of misaligned incentives can lead to situations where, for example, insurance companies would be much more worried about over-prescribing rather than under-prescribing treatment. So how do insurance companies do this in practice? By conducting a scientific review of all published literature on a given treatment, and then evaluating it. For example, Aetna's Clinical Policy Bulletins lay down the law of what is, and isn't accepted medical diagnosis and treatment.

Inequality and Wealth

The unlinking of Top 1% income from all those below them is simultaneous of another trend which is hard to measure, and often overlooked: increasingly, health and human hapiness have stopped tracking GDP and wealth. Correlation, or causation? Would greater equality lead to higher standard of living? Why? In the 1960's President Kennedy stated that a "rising tide would lift all boats," which was generally true, but something changed in the early 1980's.

http://www.huffingtonpost.com/2009/08/14/income-inequality-is-at-a_n_259516.html

The Environment and Natural Resources

read more...

A number of attempts have been made to conceptualize humanity's use of the planet: are we using too much? Calculations based on how much land is needed to produce the food, fuel, housing, transportation, and consumer products for the average American are used to show that it would take five planets to sustainably produce what Americans consume every year. These measurements, codified as the Ecological Footprint (seen above for the entire Earth), are based on the renewable productivity of standardized land uses such as agriculture, forest, and grassland.

Ecological Footprint versus Ecological Health
However, the size of the Ecological Footprint does not take into account most forms of pollution (heavy metals, estrogen mimics, etc) and in general does a poor job of accounting for the differing health of ecosystems. Indeed, according to the Ecological Footprint, non-renewable high-intensity resource use may "use" less land than renewable low-intensity resource use. The problem with this landscape landuse metric is that its focus on "biocapacity" can be at odds with biodiversity and ecosystem health, which the Ecological Footprint does not measure.

Much of this analysis is taken directly from Lenzen, M., C. Borgstrom Hansson and S. Bond (2007) On the bioproductivity and land disturbance metrics of the Ecological Footprint. Ecological Economics 61, 6-10.

"America is the Saudi Arabia of negawatts"

Amory Lovins goes on to say that "more productive use of energy is not, strictly speaking, a physical "source" of energy, but is only a way to displace physical sources. This distinction is rhetorical, since the displacement or substitution is real and makes supply fully fungible with efficiency."

Why aren’t more economists backing win-win climate solutions?

David Roberts at Grist.com points out that climate change legislation would reduce the federal deficit while boosting production. Yet mainstream economists, and hence politicians, are stuck in the old paradigm wherein the economy and the environment are inherently opposed: you can't have one without sacrificing the other. Isn't it time we realized how absurd that is?

EF Schumacher on "Progress"

"He called his talk 'The Insufficiency of Liberalism' and it was an exposition of what he termed the “three stages of development”. The first great leap, he said, was made when man moved from stage one of primitive religion to stage two of scientific realism. This was the stage modern man tended to be at. A few move to the third stage in which one can find in the lapses and deficiencies in science and realism, and that there is something beyond fact and science. He called this stage three. The problem, he explained, was that stage one and stage three appear to be exactly the same to people stuck in stage two. Consequently, those in stage three are seen as having had some sort of a relapse into childish nonsense. Only those in stage three, can understand the differences between stage one and stage three."

Econ. Questions

Is gov't the only way to control externalities, or will the market correct its own inefficiencies? One solution would be MORE private ownership, so that the owner of the wild geese would have a vested interest in making sure pollution from the local coal plant didn't mutate their ugly ducklings, or whatever.

Do copyrights and patents prove that the free market system is irrevocably flawed? How does biology deal with the costs of mimicry? There is ample evidence that innovation is not greater in countries with better intellectual property rights. Does this show that these incentives aren't significant, and hence necessary? "The intellectual property issues, when it comes to copying drugs, involve an irreconciliable clash between rule and act utilitarianism."[Marginal Revolution]

What does GDP or even utility/happiness/welfare have to do with what we really want to maximize?

Are defense and health both public goods that shouldn't be relegated to the private sector. CF. The voluntary city.

Good Econ Reads:
Marginal Revolution Blog
Reason Magazine
Freakonomics Blog
Overcoming Bias Blog

I am a Libertarian

"Competition is merely the absence of oppression."
-- Frederic Bastiat

Freakanomics and the PBS series "Comanding Heights" (a reference to Lenin's conception that socialism, in order to control the economy, must control the commanding heights of the economy -- mostly energy production and concomitant natural resource utilization) about globalization 1900-2005, mentioned Hayek and the other libertarian post-keynesian thinkers. Hayek's book "the road to serfdom" , if you pick up the edition with the cartoons, is a great read. Also now am a big fan of Milton Friedman's work, and just finished reading David Henderson's "The Joy of Freedom" which is actually really good despite the hokey title. It mentions, among other things, that economics shouldn't be taught "theory first" with all that ceteris paribus junk but instead should just keep it real, with real world examples. Henderson has a great list of the top ten principles of economics, the first is that incentives matter. For a spoof see http://www.youtube.com/watch?v=VVp8UGjECt4

Although there are problems with the explanatory power of a purely rational approach to the world, there are many things that are rationally/economically obvious (raising the minimum wage necessarily raises unemployment, tariffs hurt both countries), and I no longer think Stieglitz is the be-all and end-all (his textbook with the lighthouse on the cover -- referring to the idea that some services are best left to gov't -- is actually a non sequitur since it was shown that lighthouses were privately owned in England in the 1700 and 1800s). I definitely wouldn't vote for a candidate who thought the gov't could do a better job on anything (except maybe defense?) than private enterprise.

How do I reconcile all this dismal science with social justice and environmentalism? Paul Hawkin and Amory Lovins have the answer in Natural Capitalism, which due to space limitations I cannot quote in its entirety.