04/23/2018

News

What Economists Don’t Know About Manufacturing

Manufacturing, and especially the initial production of new technologies, must be seen as part of the innovation system. It is an autonomously creative stage in which a new product must evolve through prototyping, product definition, and production design from an idea into both a marketable and produce-able good. This often requires a re-examination of the […]

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America’s Emissions Are Still Declining Under Trump

ven now, after Scott Pruitt’s EPA move to unravel President Obama’s marquee domestic green initiative, the Clean Power Plan, American energy-related emissions are projected to drop in 2017, according to the Energy Information Administration (EIA). So what’s at work here? If the Trump Administration is so skeptical of climate policy, why aren’t the projections matching the doomsday rhetoric? In large part, what’s happened to U.S. emissions since their recent peak in 2007 has occurred despite—not because—of federal policy.

The Clean Power Plan was never put into place, as it was still working its way through legal challenges before Pruitt announced his intention to dismantle it. Therefore, we can’t give President Obama’s green aspirations credit for this recent drop in emissions.

Instead, the drop occurred due to market forces, specifically the displacement of coal-fired power generation by cheap, plentiful natural gas provided by the shale boom. Fracking’s flourishing has made our dirtiest form of electricity production less economical, and because natural gas plants emits half as much carbon as their coal counterparts, this shift has also made our energy mix more climate friendly.

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Germany Isn’t Anywhere Close to Its 2020 Climate Target

Germany has fashioned itself a new brand for the 21st century as the global green leader, but it’s nowhere close to meeting the ambitious greenhouse gas (GHG) reduction targets it set for itself. The German government has targeted a 40 percent reduction of GHG emissions by 2020, as compared to 1990 levels, but with less than three years to go the country remains far from achieving that goal. Berlin already admitted that the 40 percent goal likely wasn’t possible, and instead lowered its sights to a 35 percent reduction, but even that seems unlikely now. A new study from the green think tank Agora Energiewende says Germany is likely to achieve only a 30-31 percent reduction.

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The Kaiser Has No Clothes

There’s a limit on how much renewables will be able to do, going forward. Wind and solar are intermittent by nature, and can’t be relied upon to replace more consistent energy sources like nuclear power or coal en masse. Germany’s reactors would have made a nice foundation on which to build this renewables revolution, but Merkel’s mind seems made up. But however hard she tries to position herself as the virtuous green, the fact remains that German emissions rose last year, while America’s fell three percent (thanks to cheap, abundant shale gas displacing coal). Words matter, but so do numbers, and the data tells us that lately—whatever Trump is trumpeting—the United States is doing more to combat climate change than Germany.

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Scientists Warn Against Fuzzy EU Carbon Math

Europe has a long history of playing fast and loose with its emission numbers, especially when it comes to carbon captured by forests. The EU considers burning biomass (read: wood chips) to be carbon neutral, under the logic that if felled forests are replanted, there’s “no harm, no foul” in the long run. That’s a problematic assumption, though, for a long list of reasons. For one, the mere acts of cutting down trees, transporting them, and then processing them into wood pellets all produce emissions. For another, oftentimes the trees that are cut down aren’t replanted, and those purchasing this “green” biomass often don’t do their due diligence to ensure they’re sourcing their wood from responsible foresters.

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California’s Soft Secession

As we noted when California inaugurated this policy, American federalism is based on the agreement that different states can pursue different policies (within Constitutional bounds) while retaining equal status within the union. California’s decision to escalate the culture war with “sanctions” against states with different political orientations represents a direct challenge to America’s federal structure.

This new order could have a major symbolic impact—for example, by making it difficult or impossible for University of California sports teams to compete against the University of Texas. And could lead to retaliatory measures by the targeted red states: They could, for example, up the ante not only by enacting reciprocal travel bans but also by refusing to cooperate with California’s government in criminal investigations, declining to share tax data, or prohibiting companies from selling products to California’s state government.

How long before a coalition of liberal states begins to collectively and systematically impose sanctions on conservative ones, or vice versa? To state the obvious: This has nothing to do with the legitimate democratic debate over the merits of the policies California is trying to sanction in the first place. Maybe some of these policies are reasonable compromises between LGBT rights and religious liberty; maybe others are unacceptable forms of discrimination. These are debates that need to be resolved by the courts, by federal civil rights agencies, and by the voters in those states. California’s brazen offensive dangerously short-circuits this process.

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President Obama Silent as Illinois Sinks

Decades of blue model governance have left Illinois with powerful public sector unions, a legislature subservient to them, and an intractable public pension problem. Politico recently labeled Illinois America’s first “failed state,” as feuding between the Democratic legislature and the Republican governor over how to handle the state’s cascading fiscal crisis brings governance to a standstill.

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EVs Struggle in Green Darling Denmark

Price obviously matters—it always does—and Denmark’s experience should serve as a warning against reading too much into the progress of green industries (like solar power or, in this case, electric vehicles) that are being propped up by market distorting subsidies or tax breaks.

For the electric vehicle industry specifically, this isn’t a major setback, because many of the automakers in this space are having success in bringing costs down to levels that are attractive for consumers, even without generous tax breaks. It is a heat check of sorts, though, and it suggests that the promised takeover of EVs is further away than its most ardent advocates (and environmentalists) might have you believe.

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Pensions Are a Problem in the Heart of Silicon Valley

Many local governments are getting squeezed, as Calpers, the state pension fund, demands higher contributions to cover exploding costs. But the fact that even Mountain View is struggling to come up with the money highlights how grim the situation is for the state as a whole. Not all California towns are home to huge wealth-creating enterprises and affluent tax bases; in fact, many inland areas have been hemorrhaging high-paying jobs for years.

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Cal State Can’t Explain Why It Needs So Many Bureaucrats

The California State Auditor has delivered a damning assessment of the management practices at the single largest university system in the United States. . . In other words, administrators have been hiring more administrators for make-work positions and giving each other raises without sufficient accountability in a self-perpetuating cycle of bureaucratic decay that is sadly endemic to academia at large.

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Gentry Liberalism in San Francisco

Local minimum wage hikes cause restaurants to leave or shut down and deter new ones from entering, according to a new Harvard Business School study of the San Francisco Bay Area restaurant industry that contradicts the orthodox liberal view that steeply raising the cost of unskilled labor will not affect jobs or hiring.

More interesting, though, are the study’s findings about which restaurants are forced to leave by the higher wage floors. The authors compared rates of departure of restaurants across different Yelp ratings, and found that the policy hit low and mid-quality restaurants much harder than top-tier restaurants. “Our point estimates suggest that a $1 increase in the minimum wage leads to an approximate 14 percent increase in the likelihood of exit for the median 3.5-star restaurant but the impact falls to zero for five-star restaurants.” While a restaurant’s Yelp rating doesn’t correlate directly with its price range, this differential effect suggests that it’s easier for rich people to ignore the deleterious effects of minimum wage hikes. Virtually all of the most expensive restaurants in San Francisco have four or more stars; the city’s business and professional elite are unlikely to see many of their favorite high-end destinations pushed out of the city. Poor or middle-income workers are less likely to have the luxury of only frequenting top-rated establishments, not to mention that they are more likely to work at the restaurants that the hikes put out of business.

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Entitlements Offer America’s Poor a Raw Deal

Social Security and Medicare, the two most established and popular parts of the American welfare state, are increasingly stacked in favor of the already well-off, according to NBER paper from some of America’s leading economists. That’s because the rich have experienced large life expectancy gains over the last few decades, meaning they are eligible for the programs for a longer and longer period of time.

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Foreign Students Say U.S. High School Classes Are Absurdly Easy

When the Brookings Institution’s Brown Center on Education Policy surveyed foreign exchange students studying in the U.S. in 2001, it found that they thought that American education was a cake walk compared to secondary education in their home countries. And when it conducted the survey again in 2016, it found that exchange students thought that U.S. education was even less challenging than before.

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GOP Tax Cut Shows Why Administrative State Needs Pruning

“There are many ways governments can support the construction of affordable housing. One is to pare back some of the byzantine regulations that control housing development at the state and local level—NIMBY land use and zoning restrictions, unrealistic regulations regarding construction and labor procurement methods—that drive the cost of new housing through the roof. And when that doesn’t work, city and state governments can subsidize rents. But to create an elaborate investment tax code workaround to problems that blue model governance has created through overregulation, cost inflation, and bureaucratic micromanagement only builds new layers of cost and complexity over the old ones. And of course there is the problem of moral hazard created when it becomes impossible to build housing for the average person with an average income in a given area without getting ‘help’ from insiders who can help you navigate the bureaucratic morass.

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California’s Cap-and-Trade Goes Unpaid

Regional cap-and-trade schemes are always going to struggle for viability, but California’s might be the worst of the lot. It’s been gasping for air since its inception, and there’s no sign that the state is capable of turning this green policy disaster around.

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