“The Key Role of Conservatives in Taxing Carbon”

Carbon
Julia Yellow

Economist N. Gregory Mankiw presents a compelling and succinct case for conservatives leading market based climate change through the carbon tax in a recent posting in the New York Times.

As Mankiw states in the article, “It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.”

At this juncture, conservatives and libertarians should think of government responses to climate change as a binary choice – either opt for the inevitable heavy-handed and likely ineffective machinations of government agencies that are riddled with cronyist handouts and contradictions, or put a price on a substance that is in having an environmental impact to drive market-based incentives to change behavior and let private industry innovate around the new landscape. The role conservatives can play is to ensure that moves in this direction are consistent with limiting the role of government and making sure that carbon taxes are offset with tax reductions elsewhere. Otherwise, we will be left with a double penalty of more taxes and a higher burden of regulations.

A carbon tax would be at least neutral or perhaps much less economically malicious than taxes on income, investments, consumption, or taxes on production (corporate taxes). Conservatives could propose a compromise approach to climate change in which carbon taxes are offset by reductions in the aforementioned tax types that would likely pass into law.

It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.

Indeed, a simple carbon tax is, as quoted in the article, “a solution that is consistent with free enterprise and limited government.” This rings particularly true when compared to the current arbitrary rule by diktat patchwork that is the EPA.

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How Automatable is Your Job? How Much Will the Minimum Wage Accelerate Automation?

Cashier

Courtesy of the great blog Cafe Hayek , I came across this fascinating interactive graph built upon no doubt painstaking McKinsey analysis of the range of U.S. occupations and where they sit on axes of how automatable the occupations are and their average hourly wage range.

The common canard from left-leaning advocates for an increase in the minimum wage is that it will improve conditions more than it will harm them – an assumption that more people will benefit from improved wages than will be harmed by being laid off. This graph shows that there are millions of individuals that would be greatly at risk of being automated out of a job – if not now, than in the near future as incentives for innovation in automation would increase.

For advocates of the minimum wage being increased, keep in mind the unintended consequences of what you advocate for. Aside from the fact that one unintended consequence is that those that are most in need of a job are automated out of it, one of the less often talked about realities of a government forced wage floor is that even if it has relatively benign impacts on labor (which in fact it most surely will be more than harmless) is the reality that at best, market and political forces will fuel inflation such that equilibrium and the market clearing price is met once again. This is something that Hayek documents in his writings. Thus, even in its most harmless hypothesized state, a forced raising of the minimum wage is ineffective at best in the intermediate term. In the worst (and most likely) case, it is human labor crushing at the end of the skill scale where people are most in need of a job.

Institutions and Experience (plus some Carbon Tax thoughts)

Magna Carta

I always enjoy John Cochrane’s writings, and the notes from his speech recently at the Hoover Institute are remarkable for bringing to light the importance of venerating our institutions that uphold individual liberties, ideals, and the rule of law. It is well worth the read and includes a lot of concepts that are not talked about or defended enough, especially by our presidential candidates.

As Cochrane is an economist that is considered quite libertarian, I appreciated his discourse on implementing a carbon tax:

I see hope on climate. There is a small but increasing alliance between environmentalists and free-marketers. The environmentalists think carbon is such a big problem, that they want policies that will actually do something about it. Free marketers are aghast at the waste and cronyism of energy policy. They are coming together on a deal: A simple straightforward carbon tax in place of wasting money and economic capacity on tax dodges, crony subsidies and ineffective regulations. Sure, there will be a big discussion on the rate, but any conceivable rate will be a big improvement for both environment and economy.

This may be anathema to many libertarians and conservatives, but I hope to see the discussion on the carbon tax grow. I wonder if that day will ever come. I think there are many climate change skeptics that will balk at the carbon tax simply on principle. I consider myself not so much as a climate change skeptic as much as I consider myself a skeptic that the throngs of self-appointed science doyens that have seemingly descended into a colossal mob mentality group-think aligned with cynical politicians happy to use the fear-mongering to shower subsidies on their pet projects will have any discernable impact while wasting trillions of dollars along the way. Far better that if we agree that there is some risk of manmade climate change, no matter how far into to “black swan” tail end of the probability curve it is, it would be far better to implement the carbon tax and offset other forms of taxation to make it politically palatable. Then the market will adjust to the activities in innovative and efficient ways. The cronyist ways in which we allow the government to pick and choose winners and to create arbitrary and unaccountable legislation through the EPA is the current alternative – and this undermines liberty and the rule of law far more than a simple and understandable and navigable carbon tax.

 

 

 

Should we tap the brakes on our self-driving car expectations?

 

google-self-driving-car
Courtesy of proctorcars.com

Yes, the pun in the title was intended.

One of my favorite podcasts, for many reasons, is EconTalk. Primarily, I caught on to EconTalk due to the fact that the host, Russ Roberts, authored one of my favorite books within the economics genre, The Choice which is a highly readable fable that indicates why free trade is highly beneficial. The other reason I love EconTalk is that it does not just focus on micro or macroeconomics topics that many people may not be interested in, rather the podcasts explores many different aspects of economics, social sciences, business, public policy, and innovation. A recent episode in which Roberts converses with David Mindell, Professor of Aeronautics and Astronautics and Dibner Professor of the History of Engineering and Manufacturing at MIT, on his recent book, Our Robots, Ourselves: Robotics and the Myths of Autonomy  is a case in point.

As someone that works within the Healthcare information technology field, I found the analogies and insights in this episode interesting and thought provoking. While I am not a computer science major nor do I do the physical coding on the solutions, in the past I have been in product management roles and currently I work closely with hospital organizations to implement and optimize technology designed to predict events such as an imminent Sepsis event in which alerts are triggered and sent to the clinicians caring for the patient coupled with Clinical Decision Support Systems designed to give guidance and recommendations to the clinicians on the appropriate actions to take. On the development side, it is easy to let hubris set in and believe that the system is essentially a wonderful piece of art that should continually push the boundaries of completely removing human intervention. Mindell serves up a nice reminder that the systems themselves are built by humans and often have those biases coded in.

Mindell reiterated on a number of occasions that the best systems are those that work within the human framework, automating what makes sense but still factoring in those elements that could only possibly be managed by the human in complex settings. At one point, Mindell indicated that, “the humans in these settings are not idiots…” and too often the natural thought of the product designer is that all things can be solved for and human error can be eliminated if there is just one more tweak to the system to remove the human factors. This episode of EconTalk served as a great reminder that the best systems are designed to allow those closest to the actual action to use the systems for all that they can do, but allow the inevitable human intervention that complex events will require. Healthcare is full of the “9 foot snowbanks in Boston” that Mindell referred to, so it was helpful to hear the perspective.

Lastly, as someone that has loved the idea of summoning a car with a mobile application and then reading the newspaper to commute to work, the implications of what Mindell discusses here were somewhat disheartening. That being said, the ability, as he calls it, to use automation to participate more fully in the world around you was a nice way to reorient my thinking. Instead of reading a newspaper and not observing what the automobile is doing nor observing the environment around me, why not use the technology to embrace such innovations as having the car provide reports on local events going on that align with my interests, places to go with any requisite information (tickets, availability), places to eat that fit my tastes, recommendations on music programs in the local area, provide updates and historical facts about the locations I am driving in, alert me in real-time to dangers going on in the vicinity or divert the vehicle rather than head into an accident or traffic jam, etc. In other words, perhaps the more exciting aspects of the automated car of the future will be allowing us to more fully immerse ourselves in the world around us and interact with us rather than allow us to put ourselves into a self-absorbed cocoon.

“Texas Doctors Organize Against Innovation”

school-basedtelemedicineapp_000
Courtesy of http://www.amdtelemedicine.com

Imagine that it is 2 am and your 3 year old child is crying and complaining of an ear ache. You want to be able to quickly figure out whether it is something serious or not, and one of your options at such a late hour is to open up your laptop and quickly find a qualified caregiver from anywhere in the United States to give you some basic guidance and recommendations on demand. The caregiver indicates to you that based upon the evidence, it is a basic ear infection and prescribes the proper medication and routes it to the 24 hour pharmacy closest to you. This could potentially save you a tremendously burdensome and costly trip to the Emergency Room. Expand this concept of virtual clinicians on demand beyond my simple example above, and you can see the powerful implications as it relates to timely access and costs associated with care across hundreds of situations where our current impulse is to go to the ER or call 911. Even within the hospital and outpatient clinic settings,  the best specialists in their field could be brought in virtually to consult on complex cases – thus a Critical Access Hospital in Tulia, Texas could bring in a Cardiologist from the Cleveland Clinic for a consult in the unencumbered by regulations hospital.

Alas, this type of seemingly no-brainer innovation is but one of thousands of examples of regulatory-based supply restrictions that pervades healthcare. In this particular example of what is broadly called “telemedicine”, restrictions come in various forms but can largely be bucketized into reimbursement restrictions (doctors or facilities don’t get reimbursed for virtual visits even though they could perform the exact same functions as a face to face visit), geographic restrictions (a consumer can only leverage a caregiver in a certain state), or licensing restrictions (a consumer can only see a certain type of caregiver or can only see them upon certain conditions.

A recent Cato Institute podcast interview with John Davidson of the Texas Public Policy Foundation highlights such inane regulations, in this instance in the form of dictates pushed down from an unaccountable medical governing board comprised largely of licensed physicians, who will inevitably have a conflict of interest allowing more care supply. The specifics of the case are that the medical board published a ruling earlier in 2015 (with a company that provides access to on demand telemedicine services, Teladoc firmly in their crosshairs) that indicated that to use telemedicine services a licensed professional had to first have a face to face meeting with the patient or be present in the room while the virtual visit occurred. This of course defeats the whole purpose of telehealth and renders my example above of the ear infection as impossible to actually pull off. The case has since gone to court, and hopefully the judicial review finds the patently obvious conflict of interest ruling (physicians restricting supply will increase their own reimbursement) as anti-competitive.

At a higher level, this calls into question the sprawling and pernicious market impacts that such governing and licensing boards create, especially when legislative bodies fail to create controls or boundaries on such agencies. When such boundaries do not exist, we wind up with agencies that can create arbitrary rulings that favor the connected and entrenched interests and can have a sizable impact on economic forces and ultimately hurt the consumer, particularly the poor. The agencies can essentially act with unchecked powers – a quasi executive, legislative, and judicial branch all rolled into one. In this instance, I am pointing to the services required mostly of a Primary Care Physician, but the examples abound in Healthcare, Energy, Environmental, and many thousands of subsets of our economy beyond.