An ongoing review of politics and culture

iPhones vs Krugerrands

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Chris Hayes' Secret Source on Flying

In 2004, Maureen Dowd outsourced her column to her brother, a staunch Republican. It was an awesome column. Kevin Dowd is an angry man. But he’s also a colorful writer.

I had a similar feeling as I read this Chris Hayes post, which he outsourced to a friend who works in the airline business. The result is a wonderfully lucid, plausible explanation of how the airline industry has evolved.

Less flying is going to make some huge differences in air traffic control, and that slack is going to make delays drop pretty dramatically across the US system. The FAA is working on some pretty important advances in air traffic management that it will be implementing over the next several years—also good news. The whole experience is about to change. For the better? Well… that depends. It’s almost guaranteed to be more pleasant, and it is guaranteed to be more expensive. The best thing the Federal government can do to help the situation? Ease off on the crazy deficit spending and get the budget in order so that the dollar starts to climb some against foreign currencies.

Get this man a blog!

Vote of No Confidence

Well, I’m glad to see the market is finally responding intelligently to the truly horrible news that the government is proposing to prop up Fannie Mae and Freddie Mac by (potentially) buying their equity. Fannie opened up sharply today, but is now off; Freddie is similar.

The proposal is awful, awful, awful. The whole point of calling something “too big to fail” is that it creates confidence out of thin air. Because you believe nobody would allow the GSEs to fail, you agree to lend to them without concern about their financial health. Nine times out of ten, that’s enough to actually get past real problems; a great deal of finance, particularly in this era of fiat currencies, amounts to a sophisticated confidence game.

But the tenth time, when the fundamentals really matter, and confidence isn’t enough to get you through, you have a real problem. Because at the point where the government actually ponies up the money, the game ends. Lack of confidence has been irreversably revealed to the entire market. Once the government even suggests that it would be willing to do what it had never explicitly promised in the past, the market will demand that promise be made good – or else refuse to lend to the GSEs. So the attempt to prevent a panic guarantees the panic – and the bailout. Game over.

There is lots of blame to go around for the situation at Fannie and Freddie. Like the ratings agencies whose failures are so close to the center of the housing mess, Fannie and Freddie are peculiar hybrids between public utility and private for-profit company, and so can be – and are, legitimately – criticized from both the right and the left. But since a hybrid system is what we have – and will have, for about as far out as I’d care to project – these are properly only the starting points for criticism, not the end points.

But whatever answers we come up with either for how we got here or what the long-term solution is, as a short-term matter the actions our government is taking now are very dangerous. There are precious few bullets left in the rifle, and the bear is still coming at us.

Doing Any Hiring?

This is exceptionally smart.

Is There No Economy?

Zachary Karabell, one of the most interesting thinkers out there on the changing shape of the global economy and global culture, has an op-ed in the Wall Street Journal on why the notion of the single, coherent nation-state economy is outmoded and best discarded.

The world is composed of hundreds of economies that interact with one another in unpredictable and unexpected ways. We cling to the notion of one economy because it creates an illusion of shared experiences. As comforting as that illusion is, it will not restore a simplicity that no longer exists, and clinging to it will not lead to viable solutions for pressing problems.

So let’s welcome this new world and discard familiar guideposts, inadequate data and outmoded frameworks. That may be unsettling, but it is a better foundation for wise analysis and sound solutions than clinging to a myth.

This is all very abstract, but Karabell is working on a new book on how the economies of China and America have merged to form a single, interlocking system. My guess is that it will blow your mind. I briefly want to mention two things:

First, Karabell’s analysis reminds me of the Citigroup notion of Plutonomies, ably summarized by Robert Frank.

In a series of research notes over the past year, Kapur and his team explained that Plutonomies have three basic characteristics.

1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants…the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.”

2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending.

3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization.

Karabell’s essay also reminds me of the old argument between Robert Reich and Laura D’Andrea Tyson when they debated the central premise of Reich’s The Work of Nations — that the nationality of firms was scarcely relevant, and that the skills of opportunities of individuals were what mattered most. Nations would thrive by dominating key agglomerations. To be sure, Reich still believed in the nation-state framework. But there is a faint family resemblance here. Tyson replied, roughly, that the nationality of firms was very relevant, as key decisions made by corporate elites were path-dependent and structured by home-country regulatory environments. My sense is that regulatory harmonization, plummeting manufacturing costs, the rise of process networks, etc., has moved the world in a somewhat Reichian direction over the intervening years. I’ll also note that there is a family resemblance between Reich’s now-ancient concept and Philip Bobbitt’s “market-state.”

I am not quite as anti-nation-state-econonomics as a methodological premise. But I hope Karabell pursues this idea further. My sense is that his idea lends itself to more unconventional political frameworks — e.g., rather than pay close attention to the health of the U.S. economy, keep careful tabs on Chimerica or NAFTAland, or the global Plutonomy. And I frankly haven’t thought enough about this, though I have advocated for Pooristan.

Creative Capitalism

The most heartening intellectual development of our time is the triumph of market economics. The Ungerian in me dreads the tyranny of “no alternative” — but the triumph of market economics needn’t imply that we can’t build better, more inclusive models of economic life. And that is the agenda of Creative Capitalism, a quirky new project launched by Michael Kinsley, one of my heroes and the progenitor, for better or for worse, of opinion journalism as we know it, and Conor Clarke, a formidable intellectual in his own right, and, I’m very happy to say, my future colleague at The Atlantic.

Following on Bill Gates seemingly banal yet actually pretty important observation that the engine of capitalist creativity would need to solve the problems it generates, that we can’t rely on the largesse of enlightened billionaires or (I would emphasize) the good graces of administrative elites given the scale of these problems.

I’m reminded of Clay Shirky’s wonderful mini-essay on the cognitive surplus. We are at the end of yet another “collective bender,” a period of apathy, indifference, and indeed public stupor, and at the beginning of an era in which our massive collective intelligence is looking for outlets — some of them destructive, no doubt, but others that will create technologies and business practices and social models we can only barely imagine. How neat is that?

Consider that the British working classes created friendly societies and lending libraries that were devised, staffed, and financed by their beneficiaries — their great-grandchildren, in contrast, are assumed to be the passive recipients of instruction, and of discipline. But of course we haven’t grown dumber. Rather, less is expected of us. So of course the parts of our brain geared towards constructive collective action have atrophied.

We know this is changing. We see this in our politics, particularly in the netroots left. We see it in the rise of homeschooling cooperatives, in part-time missionary work that is putting thousands of Americans in direct contact with grinding poverty. Robert Fogel wrote some years ago of a Fourth Great Awakening, in which economic egalitarianism would be enriched and perhaps replaced by an emphasis on, for lack of a better phrase, the state of our souls. To be sure, this things are deeply interrelated.

And that’s what the search for a better capitalism is all about.

Wow, this is really gushing and odd, I realize. I’m in a reflective mood. I hope to say something more substantive, on how to think about trade and sovereignty in context, but that’ll do for now. Briefly, I’ll just add that some of my favorite thinkers have already contributed to Creative Capitalism, including the great Ed Glaeser, William Easterly, Richard Posner, and Gary Becker. The left is still sorely underrepresented, so I’m hoping Dani Rodrik and Joseph Stiglitz and others will get in the mix. I’m also hoping some of my blogger-comrades will join in too.

The project is designed, as you’ll see, to solicit lots of contributions from lots of people — programmers, stay-at-home dads, bloggers, blue comedians, etc. So do consider joining in the fun.

Club for Growth

Here’s a question: how big can the G-8 be without becoming unweildy?

China should clearly be in the G-8, given the enormous role it plays in international trade. India should probably be in as well, because while it isn’t in China’s league yet, it’s already more important than members like Canada and Italy. Arguably, so should Saudi Arabia, because of its outsized influence on the pricing of a key commodity. Other countries that might deserve inclusion because of the size of their economies and their value to international trade include Brazil, Spain and South Korea. Then there are the countries that aren’t yet in the same league, but might be before too long, and whose inclusion might provide more . . . diversity: Turkey, Mexico, South Africa.

Including all of the above countries, you’d have a G-17, more than twice the size of the current group:

Brazil
Canada
China
France
Germany
India
Italy
Japan
Mexico
Russia
Saudi Arabia
South Africa
South Korea
Spain
Turkey
UK
USA

At that size, it’s hard to picture the group functioning effectively, isn’t it? But once you say you want to let in China and India (the two gimmes from the list), don’t you have to at least consider other candidates? If you didn’t want the group to get too big, wouldn’t you need some mechanism for throwing countries out if they didn’t make the cut? And who is going to be willing to take the heat for throwing out Italy?

This is why, more often than not, instead of reforming the old institutions you wind up building new ones to supplement them. Slowly the real action moves from the old institution to the new one, but nobody gets insulted and no sinecures get eliminated.

The Return of Manufacturing?

In The Next American Nation, Michael Lind — a free trade skeptic — posited that as labor costs plummet as a share of the cost of manufacturing goods, we’d likely see a return of domestic production, much of it heavily mechanized. Well, a couple of weeks ago, Timothy Aeppel had a terrific story on how the skyrocketing cost of shipping goods, coupled with the softening dollar and rising Chinese wages and regulatory costs, have made a revival of domestic manufacturing look increasingly plausible (WSJ, 6/13, firewalled).

Edward Zaninelli, vice president of trans-Pacific westbound trade at Orient Overseas Container Lines in San Ramon, Calif., a major shipping line, says he’s heard from customers who are moving production back to the U.S., including a maker of steel pans for car engines.

“I believe a decent amount of production could come back into the States within five years, not everything,” he says. “But it won’t be because of transport costs — it’ll be because other production costs have gone up and companies have realized they can have better control over their production when it’s closer to home.”

For many manufacturers, though, oil prices that have hurtled past $130 a barrel have been the tipping point.

But there are barriers …

One problem is that much of the basic infrastructure needed to support many industries — such as suppliers who specialize in producing parts or repairing machines — has dwindled or disappeared.

Moreover,

In essence, every job added as a result of companies pulling work back home is being more than offset by others reeling from the domestic slump.

Higher fuel costs “may slow the outsourcing of goods in the future, rather than causing a massive shift back of those things that have already been outsourced,” says Daniel Meckstroth, an economist at the Manufacturers Alliance/MAPI, a public policy group in Arlington, Va.

BusinessWeek had a slightly different take on the same question.

Expecting the U.S. to recapture industries that have already gone to China may not be realistic. But the new cost equation likely will influence many decisions about where to locate production in the future. America remains the world’s biggest manufacturer, after all, because it’s still the largest market for everything from drugs and packaged foods to high-end medical equipment. The U.S. may have as good a chance as anyone of being a strong player in nascent industries, whether next-generation wind turbines, medical devices with nano-scale sensors, or electric cars. The challenge will be to persuade reluctant venture capitalists and corporations to invest again in modern U.S. production facilities.

Here’s hoping high-altitude wind power is part of America’s economic future. Ahem.

My guess is that even if we did have a manufacturing revival, we’d soon realize why manufacturing jobs weren’t always seen as an economic panacea. We need to revitalize our infrastructure, a point that’s been hammered by my New America comrade Sherle Schwenninger. And as Americans grow richer, they will consume larger share of goods that need to be sourced domestically — because of their size and durability, and the need for tight quality control, etc. — but the real economic challenge isn’t restoring manufacturing to a central place in our jobs portfolio, but rather increasing productivity in the services sector and public-sector productivity. So say I!

the two races

I am in a certain agony, for Noah has beat me to the literary punch. I was not thinking of Joyce, though, but of the greatly weird Charles Lamb and his essay called "The Two Races of Men." Herewith the beginning:

“The human species, according to the best theory I can form of is composed of two distinct races, the men who borrow, and the men who lend. To these two original diversities may be reduced all those impertinent classifications of Gothic and Celtic tribes, white men, black men, red men. All the dwellers upon earth, 'Parthians, and Medes, and Elamites,' flock hither, and do naturally fall in with one or other of these primary distinctions. The infinite superiority of the former, which I choose to designate as the great race, is discernible in their figure, port, and a certain instinctive sovereignty. The latter are born degraded. 'He shall serve his brethren.' There is something in the air of one of this cast, lean and suspicious; contrasting with the open, trusting, generous manners of the other.

“Observe who have been the greatest borrowers of all ages — Alcibiades, Falstaff, Sir Richard Steele — our late incomparable Brinsley what a family likeness in all four! What a careless, even deportment hath your borrower! what rosy gills! what a beautiful reliance on Providence doth he manifest, — taking no more thought than lilies! What contempt for money, — accounting it (yours and mine especially) no better than dross! What a liberal confounding of those pedantic distinctions of meum and tuum! or rather, what a noble simplification of language (beyond Tooke), resolving these supposed opposites into one clear, intelligible pronoun adjective! What near approaches doth he make to the primitive community, to the extent of one half of the principle at least!”

The Economics of Injustice

I see that Richard Posner has entered the lists in the debate over David Brooks’ column about debt. See my earlier contribution here and Reihan’s contribution (where he says I am making sense!) here.

Posner is a genuinely interesting fellow. His strength and his weakness is his willingness to follow his premises through to their conclusions. This is a strength, because it means he’s honest, and because you really see where his premises lead. It’s a weakness in that sometimes these premises lead to really crazy places. I recall a college seminar where we read his Economics of Justice and trying to figure out why, logically, under his schema, debtors’ prison was unjust. (Ultimately, I think the big problem with the “law and economics” crowd is that they have a very useful perspective on the law, but it’s not a theory of justice – justice and efficiency are different things, as are justice and aggregate utility, as are justice and maximizing liberty. But that’s another topic for another time.)

In any event, I found his contribution to the “Great Seduction” debate relatively unconvincing. Here’s why:

On Predatory Lending

Though I’m sympathetic to David Brooks’s column on debt, I think Noah Millman is making sense. I strongly agree with his prescriptions, particularly his stalwart advocacy of a VAT. I’d just like to add one minor point.

I do think it would be a good idea to crack down on predatory lending and so forth. But advocates of doing this should recognize that this will not suddenly make lending available at better terms; it will mean less lending to a given class of people. If we’re talking about college students, that’s probably a good thing. If we’re talking about laid-off workers, maybe not. Similarly, I have friends who are involved in establishing nonprofit credit unions to provide small loans to people who can’t get credit at a traditional bank, and shouldn’t have to rely on (legal or illegal) loansharking to get access to capital. These kinds of institutions can also do a lot in terms of financial education.

There is a long tradition of anti-usury laws in the United States. There is also a long tradition of laws criminalizing prostitution as well. Some favor legalizing and regulating prostitution as a harm-mitigation strategy. Payday loans are, to some extent, filling a niche that was once occupied by racketeers and loansharks. I think banking the unbanked is a very important goal, and I favor spending more of my (and your!) tax dollars on it. (Don’t worry, I favor spending less on other things.) I also think nonprofit credit unions should be encouraged. But the Banfieldian distinction between those with short time horizons and long time horizons is important to keep in mind — we can’t eliminate short time horizons through legislative fiat, and we should be wary of the consequences of pushing the payday loan trade back underground.

Neither a Borrower

Commenting on a David Brooks column that is three days old? Is this a blog or a broadsheet?

A Qualified Defense of Cap and Trade

In the first of Reihan’s recent posts about carbon pricing, he mentions the inimitable Jim Manzi’s writing on the subject, saying that Jim has “already made the case against cap and trade pretty effectively.” Now, unless I missed something, Jim has actually made two different points, both of which I agree with:

1) The political economy of the US will not allow a Pigovian tax on carbon.

2) Even if you could herd all the political cats into the carbon tax paddock, pricing carbon as a textbook externality is so difficult as to be futile.

Pursuing market-based solutions to carbon mitigation means choosing either a quantity instrument (cap and trade) or a price instrument (a carbon tax). Jim’s convinced me that there is no workable price instrument at our disposal, leaving us with cap-and-trade as the only remaining option. Just because it’s the other option presented doesn’t make it right, but nor does the fact that politicians like cap and trade make it the worst idea in the world. A cap and trade program with all the necessary bells and whistles (an initial auction, a liquid market, tradability, bankability, etc.) would be a simpler and more transparent way to reduce aggregate US CO₂ emissions if that’s what we decide to do.

The precedent for a tradable permit system, of course, is the successful SO₂ allowance trading program implemented in the 1990 Clean Air Act amendments. This ten year-old paper discusses the lessons to be learned from “the Grand Policy Experiment,” as it’s described, and mentions a few points that apply to any market-based carbon mitigation policy. A few aspects of the CO₂ problem argue in favor of a quantity instrument:

If uncertainty about marginal abatement costs is significant, and if marginal abatement costs are quite flat and marginal benefits of abatement fall relatively quickly, then a quantity instrument, such as tradeable permits, will be more efficient than a price instrument, such as an emission tax (Weitzman, 1974). Furthermore, when there is uncertainty about marginal benefits, and marginal benefits are positively correlated with marginal costs (which, it turns out, is a relatively common occurrence for a variety of pollution problems), then there is an additional argument in favor of the relative efficiency of quantity instruments.

If there were ever a case of “uncertainty about marginal benefits,” carbon mitigation is it. Avoiding one ton of CO₂ emissions today doesn’t deliver benefits for generations hence, and then only if it’s part of a massive global reduction.

A legislative mandate to reduce the US’s greenhouse gas emissions to some politically determined ceiling, for all its arbitrariness, is more rational than convincing ourselves that we’ve magically identified the social costs of each ton of CO₂ and “priced the externality.” Reihan is right that the US’s incremental reduction isn’t nearly enough to reduce warming by the IPCC’s preferred 50-85%, and our “setting an example” is unlikely to make a difference in the carbon intensity of developing nations’ economies.

I remain unconvinced that it’s possible to mitigate climate change with any tools at our disposal, and I don’t think we’ll bring the next generation of energy sources to market by making fossil fuels more expensive in relative terms. Such an approach is especially fragile in an inflationary and increasingly zero-sum world economy, so I tend to agree with Indur Goklany and Tom Schelling that the best way to solve the problem of climate change is by applying the brainpower that only a wealthier developing world can deliver. The political consensus, however, is for getting a head start on direct mitigation, and emissions trading might be the least-bad way to do so.

Carbon and Inequality II

Ryan Avent writes,

The rich don’t consume fewer non-durables than the poor, they just consume less as a share of their income. In practice, and unsurprisingly, the rich consume much, much more than the poor. They also consume a lot of carbon-intensive durable goods, like big houses and big cars. They fly more. They’re less likely to take public transit, and so on. According to the Carbon Tax Center, households in the richest income quintile in America spent over $3,000 on gas in 2005, while the poorest spent under $900. The rich are not greener.

That’s a good point, which is why I used the slippery “in some sense” — their consumption is less carbon-intensive. But Ryan’s point stands. In absolute terms, the rich are less green because they consume more. It’s funny: I just wrote a Current about the imperative to reduce our carbon-intensive consumption, including the size of our homes, etc. (It’ll go up on Monday.) So I definitely should have made this explicit. We agree that the domestic poor will bear a heavy burden, though Ryan is optimistic about third and fourth order effects. I hope he’s right.

Noah, incidentally, makes a good point about Baumol’s cost disease. But I don’t think it contradicts my broader point about uneven impacts — the rich are feeling squeezed due to their relatively high reliance on in-person services. That’s a discussion for another post.

But Reihan misunderstands Prasad (odd given that he’s provided counter-evidence to his position in the very quote he uses). She doesn’t say that an effective carbon tax never generates revenue, or that revenue generated should never be returned to taxpayers. She simply suggests that in order to be effective, a carbon tax must continually be increased above the revenue maximizing rate–something politicians who commit tax revenue to long-term purposes are likely to avoid doing.

When Prasad wrote the following:

if reducing emissions is the goal, then a carbon tax is a tax you want to impose but never collect.

She meant to suggest that the revenue would need to be channeled towards industry, e.g.,

Instead, if we want to reduce carbon emissions, then we should follow Denmark’s example: tax the industrial emission of carbon and return the revenue to industry through subsidies for research and investment in alternative energy sources, cleaner-burning fuel, carbon-capture technologies and other environmental innovations.

Now, this could be a matter of boiling down a complex argument to op-ed length. Perhaps some of the (declining) revenue can be dedicated to compensating taxpayers to ease the transition. She does not, in praising the Danish approach, identify this as a possibility, though it’s entirely possible that she’s done this elsewhere. But again, what will happen — in the political process — as these taxpayer sweeteners diminish over time? I’m suggesting that the Prasad approach is the most coherent one for carbon tax advocates, and that it cuts against returning the revenue to taxpayers.

Ryan goes on:

But Reihan basically says that carbon pricing is insane, extremely costly, and regressive, which tells me that he’s probably not spent much time exploring the relevant arguments.

I don’t think I’ve ever suggested that carbon pricing is “insane,” particularly since I was a forceful advocate of carbon pricing very recently. And I don’t think all regressive taxes are necessarily bad, provided they are paying for services that disproportionately benefit the less-well-off (e.g., a VAT that pays for universal healthcare or universal pensions). I just think we should be wary of them. VATs are, in my view, superior to income taxes. I do think carbon pricing is extremely costly, and that my understanding of political economy suggests that we won’t do a very good job of implementing carbon pricing.

It seems to me that conservatives have learned nothing politically from the climate change debate to date. Facts on the ground are forcing them to abandon the denialist position, and facts on the ground will ultimately force them to abandon the do-nothing position. Rather than get ahead of the curve and offer a reasonable critique of the liberal approach, they’ve opted to stick their fingers in their ears and hope for the best. That’s bad policy, and it’s bad politics.

Leaving aside the substantive issue, I think that the politics of carbon pricing are clear — as long as conservatives are denialists, they allow Democrats to make promises on which they can’t deliver: we would take action, we care about the environment, etc. By recognizing that climate change is real, and by proposing modest, low-cost strategies to deal with the downside risks, conservatives will call the bluff of Democrats who advocate a sweeping transformation of the economy, one that will cause a lot of economic dislocation.

That said, I am open to lots of different approaches to tackling this issue. I just think that a single-country approach will do little good, that the uneven impact of carbon pricing will sharply increase the likelihood of regulatory capture, and that technological solutions are a better long-term bet. Why does technology matter? We need to give the developing world a better reason to decarbonize their economies than, “But we’re taking the lead!”

I would be happy to spend vast sums on an approach designed to spur technological innovation in this space, funded out of VATs and income taxes and other broad-based taxes. It’s not even the cost that bothers me, though it’s certainly not trivial. I just think carbon pricing will be made to work for GE and the NAM. Ryan believes that political will can prevent this from happening. I don’t.

Carbon and Inequality

For the last few weeks, Congress has been debating the Lieberman-Warner Climate Security Act. I haven’t written about this, as I think Jim Manzi has already made the case against cap-and-trade pretty effectively, but I’d just like to emphasize one minor point. Environmentalists fret that the Lieberman-Warner measure doesn’t go far enough, but they it as a dry run for future environmental legislation. It’s worth thinking through the impact such legislation will have on American families.

Christian Broda and John Romalis, economists at the University of Chicago’s Graduate School of Business, have just released a fascinating working paper on consumption in America. They argue that America’s poor are the overwhelming beneficiaries of freer trade — because a higher share of their income is spent on non-durable goods as opposed to services, the proliferation of Chinese-made non-durable goods has been a tremendous boon. It has made money earned by the poor go further. More affluent Americans, in contrast, are more likely to purchase in-person services, the prices of which have been steadily increasing. And so the money earned by the rich is, counterintuitively, going less far. Once you factor in the carbon impact of shipping manufactured goods U.S., you see that the lifestyle of the rich really is in some sense greener. Massage therapy emits very little carbon into the atmosphere. So pricing carbon will have a disproportionate impact on the poor. But wait, wait about abatements for lower income Americans? I urge you to check out Monica Prasad’s excellent op-ed on carbon taxes that work vs. carbon taxes that fail.

Carbon tax discussions always seem to devolve into gleeful suggestions for ways to spend the revenue. Reduce the income tax? Give the money to low-income consumers? Use it to pay for health care? Everyone seems to forget that the amount of revenue is directly tied to the amount of pollution that is still going on.

Denmark avoids the temptation to maximize the tax revenue by giving the proceeds back to industry, earmarking much of it to subsidize environmental innovation.

So yes, we could use carbon tax revenue to soften the impact on less affluent Americans. But this will undermine the measure’s environmental impact.

What we need is a $100 billion prize or set of prizes to the person or firm or non-profit entity that can devise a cost-effective means of scrubbing the atmosphere of carbon emissions. This sounds insane, I realize. It is less insane than the far costlier, far less egalitarian regulatory alternative.

Would-be Jeff Skillings, Take Note

On of the key tricks that Enron played with its accounting was creating a variety of vehicles thruogh which it could “bet” on its own stock price continuing to rise. If they won the bet, they would be able to generate earnings from nothing more than appreciation in their own stock price. If, as of course they ultimately did, they lost the bet, it would turn out that a substantial percentage of the firm’s assets consisted of nothing more than shares of itself.

Well, Statement 159 plays a similar game allows firms to play similar games – entirely above board – with their debt. This could turn out to be a problem.

Is Zappos the Greatest Company in History?

Via TMN, I found the following:

When I came home this last time, I had an email from Zappos asking about the shoes, since they hadn’t received them. I was just back and not ready to deal with that, so I replied that my mom had died but that I’d send the shoes as soon as I could. They emailed back that they had arranged with UPS to pick up the shoes, so I wouldn’t have to take the time to do it myself. I was so touched. That’s going against corporate policy.

Yesterday, when I came home from town, a florist delivery man was just leaving. It was a beautiful arrangement in a basket with white lilies and roses and carnations. Big and lush and fragrant. I opened the card, and it was from Zappos.

Can this possibly be true? Apparently so. But I fear this kind of customer service doesn’t really scale! Man, this is a year old. I hope Zappos isn’t actually stealing flowers from the graves of other people’s grandmothers now.

I’ll just note that I’ve had very good experiences with Zappos, though they’re apparently out of Brooks Cascadias. Yes, they are ugly as hell.

Greening the Sunbelt, plus Transit and Inequality

Wired‘s cover package on environmental heresies is a mixed bag. On the minus side, it’s not remotely surprising that dense living is greener, and it hardly counts as environmental heresy. What was unexpected, though it should have been obvious, is the news that air-conditioning is a heck of a lot better than heating when it comes to carbon impact.

When it’s 0 degrees outside, you’ve got to raise the indoor thermometer to 70 degrees. In 110-degree weather, you need to change the temperature by only 40 degrees to achieve the same comfort level. Since air-conditioning is inherently more efficient than heating (that is, it takes less energy to cool a given space by 1 degree than to heat it by the same amount), the difference has big implications for greenhouse gases.

In the Northeast, a typical house heated by fuel oil emits 13,000 pounds of CO2 annually. Cooling a similar dwelling in Phoenix produces only 900 pounds of CO2 a year. Air-conditioning wins on a national scale as well. Salving the summer swelter in the US produces 110 million metric tons of CO2 annually. Heating the country releases nearly eight times more carbon over the same period.

In other news, I believe Matt Power, who wrote both quick-takes, is a friend and landlord of a couple of friends of mine. A small world! Power also argues against buying a shiny new hybrid in favor of buying a used conventional car with good gas mileage.

Briefly, I was thinking about the air conditioning insight as it relates to the relative environmental impact of living in the Frostbelt versus the Sunbelt. And there are a lot of questions, including water sustainability, that you’d need to take into account. Los Angeles is very dense, yet it is extremely auto-dependent. If the city were as transit-friendly as New York, I would move there in a heartbeat. (This is a good reason for Angelenos to maintain the status quo.) That’s a tall order, but we can certainly close the gap in various. Assuming we also rationalized the way we distribute water resources, by pricing water intelligently and eliminating or sharply curtailing irrigation subsidies to agribusiness, the case for the Southland and the Valley of the Sun would become even stronger.

I’d also love to see adoption of something like the Kheel Plan in cities across the United States. Implement high congestion charges and use the revenue to fund free access to high-quality public transportation. That is step one. I would want to encourage private entrepreneurship, by, for example, inviting small-scale entrepreneurs to create jitney services in underserved neighborhoods, rather than banning and harassing such efforts. Also, we could use negative-price bidding to allow private firms to run certain bus rapid transit lines, etc.

There’s a small irony here. This public and private mix of transportation services will further enhance the role of cities as magnets for the ambitious, and in particular the ambitious poor. That is, good public policy will have the effect of exacerbating inequality in cities while improving the lives of the ambitious poor, by giving them better access to jobs and schools, etc. So a narrow focus on inequality doesn’t always serve us well.