Economics, capitalism and social progress

HH, one of my LUC students, wrote the following comment in the discussion board for my course Social and Business Entrepreneurship. I think it’s worth reading:

I think there is one area which is going backward – ‘Democracy.’ Due to tech advancement, now we can access information easily, but it is hard to verify whether it is reliable or not. Just like we had seen the American Presidential election in 2016, fake news dominated the Internet. On top of that, the same thing happened in the UK, the Brexit referendum. As Huff also mentioned in his article [PDF link], people tend to become less critical if there is too much information. It’s just out of our capacity to process everything with accuracy within a certain amount of time. Thus, people tend to go for an easy choice, believing what they want to believe, rather than evaluate information more thoroughly. Also, echo chamber effect makes it even worse. I think this is another critical challenge we are facing now – fake news on social media and the crisis of democracy. Check out this article, if you are interested in this topic: 

Also, on the discussion about poverty alleviation and progress, I agree with what A___ said: the world is focusing more on growth than achieving equality. But often what I found uncomfortable is a somewhat disparaging view towards profit-seeking companies, especially in the LUC community. I am not sure that I am the only one who felt this way, but from my perspective, money is neutral, and there is nothing wrong with pursuing it. The reason why capitalism is more successful than communism is that it understands the power of motivation and incentives. These are the foundation of innovations that make the world a better place. I believe, if they are not involved in illegal activities, purely profit-seeking firms can contribute to society by increasing productivity, investing in R&D, creating jobs, and so on. In addition, we all benefit from the products and services they sell. Only the way people use money determines the value of the money. I hope that many LUC students in the future become “successful entrepreneurs” and earn a lot of cash “ethically” and become “philanthropists.” I think it is way better than demanding the rich to share what they have. You can be the rich, and use it for the right thing.

To this, I replied:

What worries me is that some LUC’ers (and many people) take the old world view of profit as theft (zero-sum game) when the “magic” of economics is its revelation of win-win dynamics. This was why Smith (1776) was so influential.

Some people mistake economics for capitalism, which it’s not. But, worse, they also misunderstand capitalism as “=evil” when really:

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.

This definition and discussion doesn’t get to the important role of government, in creating the conditions for capitalism and also regulating its functions (competition, transparency, etc.)

These failures mean that those LUC’ers oppose institutions that create gains from trade and pt capital assets to good use: two main sources of our prosperity.

There are problems with markets (externalities) but there are also many problems with society (poverty) and government (corruption), so let’s keep all these issues in mind when seeking targets.

My one-handed conclusion is that many people blame capitalism for political failures.

Interesting stuff

  1. Money and trade in a US prison
  2. Millennials are NOT well insulated from the next recession
  3. Read the Cliff Notes version of Sapiens (my review is a little shorter 😉
  4. Related: a very short history of capitalism
  5. Wanna make a new country? Don’t ask — fight.
  6. People like confident leaders more than cautious ones
  7. How can we make waiting a lot less boring…
  8. What is Goop selling to women?
  9. Some good news on climate? 
  10. Scenes from America’s heroin-laden streets

H/T to DV

An (ig)nobel tragedy

In my most recent newsletter, I wrote:

I was surprised and upset to hear that Marty Weitzman, a Harvard environmental-economist of 77 years, killed himself recently. Weitzman brought, in my opinion, the right perspective to the costs and benefits of acting on climate change, and it was his work that motivated me to start the Life plus 2 meters project. I initially assumed he killed himself in despair over climate chaos, it seems that he was upset to not win the Nobel. (A third possibility is that the award of the Nobel to Nordhaus, who deserves zero respect for his highly flawed model and its recommendation to leave action to future generations,* convinced Weitzman that his work would not get the attention it deserves, thus sealing the miserable fate of our civilization.)

* I want to add more on that comment, which is based on two of Nordhaus’s assumptions. First, he assumes that it’s a good idea to use “market” discount rates to discuss (decidedly non-market) costs and benefits from climate change chaos (CC). I prefer Lord Stern’s view, i.e., that low discount rates (which make future damages from CC more salient in making sacrifices today to avoid CC) are more appropriate for discussing a existential threat like CC. Second, Nordhaus assumes that GDP captures the costs of CC when GDP misses many “ecosystem services” that CC will destroy (e.g., 2/3rds of our oxygen from oceanic phytoplankton). You can read his 2018 Nobel lecture in which he sticks with these flawed assumptions. Weitzman did not.

[Addendum (22 Sep): The lecture link returned a 404. Here’s a copy.]

When comparing these two environmental economists, I would have preferred that Weitzman get the Nobel and Nordhaus get the Ignobel prize, which is “devoted to people who’s research makes people laugh and then think.” Nordhaus’s work is worth thinking about (and laughing at once that’s done), but it’s instead taken seriously, which explains (partially) why the world has taken no substantial steps to slow CC.

How about an example of the dangers from CC? Last week, Hurricane Dorian slapped the Bahamas with winds of up to 300 km/h and a storm surge (more or less instantaneous sea level rise, or SLR) of 8 meters (24 freedom units). That much sea level rise would devastate many coastal cities, and the Bahamas were unlucky. 

The Netherlands (where I live) is planning for 1.2 meters of SLR by 2100. What would happen if a 5.5m surge arrived? The whole country would flood, as the country’s famous “delta works” is really only configured to storms bringing a 3m rise. (Listen to my discussion with Ties on this.)

Why is this an emerging (and uncertain) threat? Because SLR is predictable but storms are not. The warming Arctic (see this month’s National Geographic) is making such conditions more and more likely.

My one-handed conclusion is that Nordhaus would be surprised at  the Netherlands getting flooded while Weitzman would not. These reactions explain (to me) why the Nobel went to the wrong guy and my sorrow at losing a real visionary on the dangers of CC.

R.I.P. Marty Weitzman.

Addendum (12 Oct): Tim Hartford shares my views

Interesting stuff

  1. An interesting discussion on intoxication, consent and responsibility
  2. The peculiar dynamics of sharing your location with “friends”
  3. Bolsinaro thinks the Amazon is theirs to burn. That’s true but we all suffer
  4. City planning for everyone
  5. Good BBC podcasts: Is university worth it, fake stories going viral, and climate change starts to show up in the weather
  6. Joe Rogan talks to America’s men
  7. An amazing profile of a cop’s job
  8. Afghanistan pursues normality
  9. The threat of fake science (is rising)
  10. The modal American is a male, gen-Xer without a university degree

Surviving LA’s heat without AC

Frank Butterworth emailed me an interesting story. I asked if he could make it into a blog post, so here’s Frank…

If you think one can live (in Los Angeles or other semiarid places) without air conditioning, you’ve got to be crazy. Right? Actually, you can and we did.

I. The unplanned experiment

Our AC (air-conditioning) broke and it was 104F (40C). And the next day was also going to be 104. I figured we’d have to move to a motel or fry. But something miraculous happened. We opened the widows around 8 PM and with the help of fans, we sucked cool air into the house all night and early morning. [The outside temperature dropped to 68F (20C).] And when we arose at 6 AM, it was cool inside, about 75F (24C). We quickly shut the windows, pulled the drapes and closed the shutters. Voila — it stayed cool in the house until about noon when the temperature started creeping up to a max of about 82F (28C) at 4 PM in the warmest room — my office! On the first floor it was still cool even though it reached a high outside of 104. Not bad! I knew we could make it, and productivity would not suffer. There would be no motel, no misery. This cycle of opening and closing went on for 18 days (27 Jul to 13 Aug) with the average maximum temperature at 96F (36C).1 And we did not fry. We got our work done. And we did it without air conditioning. Yee hah! An ancient Mediterranean might say “meh,” but I was elated. 

Actually, we rediscovered our forebearer’s technology, using cold desert nights to cool the house to 68F/20C. With drapes (even see-through gauzy types) and shutters to block/reflect the daytime light and a few fans, the warmest parts of our house never went above 80 (even though the average, maximum external temp was 96 – three days in triple digits, three days at 99, and just a few 80 deg days gave that average). My office, the warmest room in the house, only once reached 90, when outside temps were in triple digits. (We probably did not open the house long enough at night or close it up soon enough in the morning.) On that day, we went out for an early dinner. Ha!

True, we suffered at night, sleeping under blankets, but this is nothing new vis-a-vis ancient Mediterranean technology. So I believe the modern world can save a lot of energy without fear.2 

Of course, folks living with high humidity may still have need fans and sweat, but my guess is that the night air can be harnessed to avoid suffering. I recall my life in miserable heat waves on the East Coast sleeping in a ‘pool of sweat’… yet the nights were cooler… people would sleep on the roof or on a back porch. We just have not yet figured out how to use night air to cool a house without massive amounts of electricity (see Greek anecdote below).

II. Several more points

  1. Not one of the few people I talked with was interested in my re-discovery. In fact, they were hostile. They were not going to let some academic nerd steal their comfort. I guess there would have to be huge incentives — or a catastrophe — for them to listen.
  2. ‘Ancient’ cooling technology is amazing and needs another look. My direct experience was in Greece, 40 years ago. Athens in July and August is hot and humid. Yet, when I went to an outdoor café in the shadow of a tall, fairly modern building on Syntagma Square, I was hit by a downdraft of cool air. No fans. No AC. It was the building’s structure, someone explained. Somehow, the coolness of the previous night was trapped somewhere… and it slowly escaped during the day.
  3. Before they proudly modernized to AC, the Greeks used the siesta to cope, eating a large meal at noon and napping until the air cooled. Then Athens became alive and a ‘second day’ began. The ‘new day’ meant a second shift of work and/or play in the cool, cool, cool of the evening. It was confusing to me at first because it seemed to give more time to life — plus another set of dreams. 🙂

III. A few caveats

  1. Knowing there would be no AC for the next day, extra alertness was required to open windows when the external temperature began to drop around 8 PM. A large portable fan was used in upstairs hallway to speed the process. Because the walls and roof had reached thermal equilibrium with the outside it was important to cool down the inside walls quickly. This could be a problem for those needing sleep in a noisy neighborhood.
  2. Also, wooden internal shutters, opaque drapes, and even gauzy window treatments prevented direct sunshine from entering the house and slowed  radiant heat transfer from windows where there was no direct sunshine. R factors lose their meaning (R1 for single pane and R2 for double pane glass). I think it applies to insulation from the cold, not heat. All our windows are double pane, but they still were warm to the touch. So, even a gauzy window treatment reflected light and slowed internal air convection.
  3. California construction codes (particularly those of 30 years ago, when our house was built) were not big on insulation. And California architecture of that time was big on windows. So, I was pleased and surprised by our experience. After the first day, I knew we were going to make it. And I knew this could be a viable solution to excess energy demand.

IV. A thought on individual energy savings

Our solar panels cut our annual energy use by about 2/3rds. That is, our annual electric bill two years ago was $1,500 without panels. Our bill for the past two years with panels was $500 per year. I know that when the AC is on during the peak sun, the panels’ electricity production is not enough, and we have to use electricity from the grid. So, it is likely that much of the $500 reflected the cost of AC.

Frank Butterworth, former professor of genetics and cell biology, is now a writer and author. His claim to fame was the discovery of the first pheromone (cis-vaccinyl acetate) in the fruit fly, which resulted in three papers in Science. Frank’s Twitter is @resource643.

1 Day-after-day for 18 days, the needed AC part was not available. But this made me so happy to use this inefficiency to do something I never would have planned.

2 In 2018, Los Angeles County used 67,850 GWh. The average California house used 7,000 kWh per year. [Note from David: We used 1,440 kWh in the past 12 months.] What proportion of that goes to AC? In Texas, peak loads reached 70,000 megawatts in July compared to 44,000 mw in April, so the difference (26,000 mw, or 37%) is probably used for AC.

Interesting stuff

  1. A walk among Hong Kong’s protesters (here’s my impression from a visit 9 months ago)
  2. Lower speed limits improve city life (and safety)
  3. Climate change is affecting crop yields and reducing global food supplies
  4. Two Dutch guys might get life in prison for trafficking marijuana and MDMA. I consider this a terrible injustice given that murderers get shorter sentences (e.g., 18 years for killing a leading politician). I guess that Big Pharma/Alcohol don’t like competition.
  5. Despite all my efforts to leave Russia, it had followed me. Why? Are we suddenly living in a Russian-like world that Putin has created?
  6. How Eric Arthur Blair became George Orwell
  7. Climate catastrophe looms ever larger as the bad news (e.g., Greenland’s icesheet slipping off land and raising sea level by 7.5 meters in a short time) outpaces even the worst fears of scientists. Related: Watch this video on how the people of the Sundrabans (Bay of Bengal) are trying to cope with rising seas.
  8. There are some really interesting parallels between Brexit and warfare. Yes, the UK will adapt and survive, but no it’s not a good idea to declare a war that you will lose.
  9. The funny economics of near-zero interest rates
  10. The Dutch are innovating to feed 11 billion

H/T to FB

Advice for a graduate student

DA emails:
I’m currently a graduate student/candidate for a Masters in Urban Planning. My interest are in water equity, efficiency, and conservation. My goals are to work in developing countries on water access, sustainable management of water resources and improving the water quality for existing systems. I’m contacting you in hopes of acquiring some advice or contacts in which I can further my knowledge and experience. 
If you have any advice or could point me in the right direction on possible research projects or must reads for this field I would greatly appreciate it 
DA’s interests (water equity, efficiency, and conservation) and work goals (work in developing countries on water access, sustainable management of water resources and improving the water quality for existing systems) suggests a two broad themes (aspirational and operational) and thus the different ways of engaging these themes:*
  • Equity and access (aspirational): Laws, regulation, outreach, and subsidies
  • Management of efficiency/conservation and quality (operational): Incentives, reporting, engineering and regulatory policy

From these themes, I can give some ideas on work (experience) and readings (knowledge). 

DA can work inside a water-delivery organization on all of these themes. This experience will be hands on, but perhaps not very progressive, given the inherent caution of water firms. DA can also work for the regulator or an advocacy organization. With the regulator, leverage for change is high, but most of the work involves fights over information and interpreting laws and standards. With an advocacy organization, all topics are ready for radical improvement, but leverage for change is low.

When it comes to developing countries, DA will not be able to get a job as a local unless they have local connections, language skills, passport, etc., so the work is likely to be directed at projects (“we have money for this project but not the one you might want”) or building capacity (“this is how we do it in X, you should too”). In either case, it helps a lot to have operational experience on top of theoretical knowledge and passion (read my paper), thus, see above on work.

The best knowledge will come from practical experience, so I recommend that DA look for internships that offer it. In terms of readings, I could come up with dozens of papers and books, but I’m going to draw from the archive of recent episodes from my Jive Talking podcast, i.e., 

Be sure to look at the show notes for links to further reading.

Still want reading? Then I recommend two of my papers on evolving water management in the UK (where meters were more ideological than useful) and the Netherlands (where it took decades and massive public subsidies to build a reliable safe system). 

My one-handed opinion is that you will learn more in the trenches than in the library.

* Note that “sustainable” is superfluous when talking about a well-managed system.

Interesting stuff

  1. The sad tale of America’s religious freedom fraud and Christian “science”
  2. The history and application of gamification to Lyft drivers
  3. On the strange experience of living through the only accurate doomsday prediction” (echoes of my own perspective…)
  4. Why mass shootings in the US? Guns. Why are white men targeting “immigrants”? Trump is an openly racist President who motivates “losers” to attack on his behalf. How would a real president lead? Read Obama’s tweet
  5. Will Germany ban domestic flights? They should.
  6. The biggest money laundering center centre? Britain.
  7. The Dutch need to talk more about how their wealth was built on suffering
  8. America put Mexicans in gas chambers
  9. Editing is writing
  10. The key insight was to stop trying to build a mechanical carriage, and instead build something more like a mechanical horse.

Catholics, fascists and populists

I have two unrelated thoughts on these groups…

First, the catholics and the environment

The Catholic Church knows how to sell indulgences. I suggest — in line with the Pope’s Laudato si’ (Care for Our Home) that the Church sell climate offsets (as indulgences) and then enforce their impact by calling upon members of the flock to enforce environmental laws. God knows how many believers are in countries experiencing environmental harm. God knows when they are working to protect — or harm — the environment. Let’s get God’s believers involved, as someone needs to act on what God knows!

Second, the fascists and populists

I throw around labels like “fascist” and “populist” when talking about political failures. It just occurred to me that populists tend to promise something for nothing, giving away stuff (or pride) in ways that are ultimately unsustainable (e.g., national pride turning into war).

Fascists, OTOH [go further and] take from people. They take freedom but also wealth, and they justify their theft via state needs or ideological purity. Theft is also unsustainable, as people at some point rebel or flee.

What’s interesting (terrifying) is that these populist and fascist tendencies complement each other (theft to fuel gifts), which would seem to be more sustainable, except that they reinforce each other (gift recipients are more likely to support pogroms against “enemies of the people” whose property and freedom are being stolen). We’ve seen these patterns in religious fighting, nationalist fighting, and now we’re seeing it in many populist-authoritarian states (Turkey, Brazil, Venezuela) and leaders (Trump, AMLO, Orban, Salvini, et al.). It’s a bad time for property rights — and human rights.

My one-handed conclusion is that an interest group’s ideology can be good or bad for the rest of us.

Interesting stuff

  1. This podcast on American supermarkets has an interesting (sad) discussion of how government farm programs have distorted what’s grown, what Americans eat, and their health problems.
  2. Around 95 percent of crypto currency trades are fake, which reveals that some “shitcoins” are really shit frauds and that markets are actually working more efficiently than incorrect data show. (Read the full analysis .)
  3. George Orwell’s 1984 is ever more relevant: “The crucial issue was not that Trump might abolish democracy but that Americans had put him in a position to try. Unfreedom today is voluntary. It comes from the bottom up.”
  4. Go to Coney Island to see humanity in all its glorious variations
  5. Scammers are buying old sites with inbound links from reliable sites (think NY Times to b/c they can fill the old sites with spam.
  6. The eighteenth-century “reclamation” of Paris was brutal
  7. Norwegian territory of Svalbard allows anyone to live there, theoretically.
  8. A great podcast on reading books and learning
  9. Insights into Pakistan’s Imran Khan and Turkey’s pivot to its past
  10. The ethics and aesthetics of garbage