Category: climate change

The Maze of Our Arguments

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November 17, 2024

By Stephen Stofka

This is a bit longer than usual but in a conversational format. I will also leave copies of the in-text links in the notes at the end. The sources do not require a subscription.

This week’s letter is about our arguments. Some policies are implemented but the disagreements on the underlying issues are not resolved. The debate often detours through a maze of assumptions and perspectives, identities and loyalties before it can reach the main issue. Resistance and resentment simmer like the underground coal-seam fire in Centralia, PA that has been burning for six decades.

At the Constitutional Convention in 1787, delegates could not resolve the issue of slavery, and the southern states threatened to walk. The financial condition of the confederacy of thirteen colonies was desperate, making the new nation vulnerable to attack and encroachment by France and Spain. In a compromise, the delegates agreed to make the importation of slaves illegal after twenty years, but booted the issue down the road. For seventy years after the Constitution was ratified, the southern states periodically threatened to secede, and various compromises averted a crisis without resolving the issue. The 1820 Missouri Compromise was a key piece of legislation that kept the nation together. In 1857, the Supreme Court issued its Dred Scott decision which overturned the Missouri Compromise and public sentiment accepted the inevitability of civil war.

Climate change is not as emotional a topic as slavery or abortion, which I wrote about here. I will imagine a discussion between two groups of people who set policy for all the people in the country. Speaking for the first group is a person named Abel who claims that certain types of human activity are having a pronounced and growing effect on the climate. To counter these damaging effects, Abel’s group proposes regulating some activities and adopting different methods that will lower the impact of human activity on the climate. Cain, a spokesperson for the second group, is averse to most regulation of economic activity and argues that Abel’s claims and theories are a hoax. Any changes in climate are probably temporary and driven by natural physical variations that people can not influence.  

Abel offered to present the evidence for his claim, but Cain dismissed the offer. Cain turned to page 156 of Nassim Taleb’s Fooled by Randomness and handed the book to Abel, who read the highlighted passage, “I can use data to disprove a proposition, never to prove one. I can use history to refute a conjecture, never to affirm it.”

Abel responded, “In An Enquiry Concerning Human Understanding, the 18th century philosopher David Hume wrote that we could not state with absolute certainty that the sun would rise tomorrow or that it would not rise. Knowledge gained from experience can only move to greater certainty or uncertainty. Each year’s climate data moves us closer to certainty that  human activity is a significant contributor to climate change.”

Cain argued, “Our group requires incontrovertible proof, not just an increased certainty. Scientists were certain the climate was cooling in the late 1970s.”

Abel responded, “That is a myth that climate change deniers have used for decades to refute climate change. Peterson et al (2008) unraveled the making of that myth. J. M. Mitchell published his cooling hypothesis in 1963. When others checked his data, they found that his conclusions were based on weather station data in the northern hemisphere only. When researchers included data from the southern hemisphere, the conclusion was the opposite. The planet was warming.”

Cain interjected, “Scientists also claimed that world oil production had reached its peak in the 1960s, a theory known as Peak Oil.”

Abel responded, “Let me finish the rest of the story. In the 1970s, popular magazines like Newsweek promoted both theories as “news peg” headlines to attract readers’ interest. Controversy sells. There was already a broad consensus in the scientific community that the warming effect of man-made greenhouse gases were dominating any cooling effect from aerosols and natural factors. Prominent scientists like Carl Sagan presented that conclusion to Congress in 1985. In 1990, when the IPCC issued it’s first assessment of the global climate changes, it had already found a measurable increase in temperatures.”  

Cain argued, “Look, technologies change and new data causes scientists to revise their opinions. The same could happen with climate change. There’s no sense in imposing regulations that disrupt economic activity as long as there is a chance that scientists could be wrong.”

Abel responded, “Your group casually dismisses sixty years of scientific data and increasingly accurate predictions. Hume pointed out that there is always a chance that any claim is wrong. We have to act on probabilities, not absolute certainty. Your group adopts the reasoning of jurors in a criminal trial who reach a conviction only if there is no reasonable doubt. Our claim is more like a civil trial where jurors reach a conclusion based on a preponderance of the evidence. Each year provides more evidence that human activity is having a significant effect on the global climate.”

Cain replied, “Well, some of your group’s proposals seem criminal to me so yes, we require evidence that is beyond a reasonable doubt. Our group is suspicious of policy proposals that affect our economic lives. We believe that the price system provides the best environment for voluntary cooperation. Prices emerge from the decisions and preferences of everyone.”

Abel nodded. “Science works like the price system, only slower. There’s a supply of research and data, and a demand for solutions and understanding. Scholars publish their research. They put their data and conclusions on the market, so to speak. The research community digests that data and methodology, points out flaws and presents alternative conclusions. Theories improve just like the products we buy.”

Cain objected, “Unlike the price system, there is no equilibrium point.”

Abel responded, “Yes, there is. Some consumers and suppliers of fossil fuels want research that concludes that there is little evidence for anthropogenic climate change. These groups fund organizations that hire researchers to publish position papers to that effect. Demand and supply meet, but the quality of the supply of research is lowered.”

Cain objected again. “These are reputable scientists presenting their conclusions. Look, even if there was some credible evidence that the use of fossil fuels was having an effect on the climate, our group favors price incentives, not regulations. Carrots, not whips.”

Abel countered, “The free market and price system doesn’t cope with negative externalities like pollution. Do you acknowledge that?”

Cain nodded. “Yes, but we think those externalities can be priced as well. The polluters can compensate others for the nuisance or trade among themselves for permits to pollute.”

Abel replied, “But that requires some government agency to set the prices or the allotment of permits.”

Cain nodded. “It’s not a perfect world. More regulations that affect economic outcomes only incentivize people and companies to find loopholes to avoid the regulations. Government agencies must not only regulate an economic activity like pollution from manufacturing, but they have to play watchdog to catch the actors trying to avoid the regulations. Regulatory agencies are not an efficient way to accomplish a goal.”

Abel asked, “What about social and economic justice issues? How can the price system cope with them? Let’s say some business owner thinks that all black people are inferior workers, so he offers black applicants half the wage he offers white workers. How does the price system handle discrimination?”

Cain shook his head. “Our group does not endorse discrimination of any type. We question whether it is the job of a government agency, particularly a federal agency, to try to correct those attitudes and behaviors. We support policies that encourage economic growth. More growth will promote employment which will create more bargaining power for workers. Employers will have to compete to hire workers. Black workers will have a greater choice of jobs and can refuse to work at a lower wage. Employers will end their discriminatory practices because it hurts their businesses.”

Able argued, “Using Taleb’s reasoning, any  instance where the price system does not end discrimination would be cause enough to invalidate your conjecture. If the price system coordinates human activity and resources so well, why are there subsidies for suppliers and price controls for consumers?”

Cain shrugged. “Politics corrupts the price system. In a perfect republic, there would be no subsidies or price controls.”

Abel said, “You speak of the price system as though it were a natural force like gravity.”

Cain nodded. “It is a natural force of human interaction. Einstein said that gravity was the curvature of spacetime. The phrase ‘matter tells spacetime how to curve, and curved spacetime tells matter how to move’ captures an important element of his theory of relativity. Without political interference, suppliers and consumers tell prices how to curve and that curvature affects the decisions and behavior of both suppliers and consumers.”

Abel replied, “The price system provides incentives for a limited number of transactions or exchanges between people. There are economic activities where one party inflicts damage on another party and may not be aware of it. Pollution can affect people far from the source of the pollution as happened with acid rain. Decades ago, the amount of sulfur emissions from smokestacks near New York City were affecting farmers and wildlife in upstate New York. Climate change contributes to a global problem, making it more difficult to regulate with any price system. Human industrial activity contributes to the carbon dioxide blanket surrounding the planet. That blanket inhibits the release of solar energy from the earth’s lower atmosphere, causing ocean and air temperatures to rise. Heat seeks an equilibrium so that warming affects the convection of energy around the planet.”

Cain scoffed. “Your group is saying that a family driving a car powered with gasoline is affecting some people living in remote Kamchatka. Come on, there are limits to responsibility.”

Abel replied, “The family driving the car is affecting their own climate as well. The power plant in Kamchatka is affecting U.S. families. Climate change surpasses national borders. It’s the butterfly effect, an idea that mathematician and meteorologist Ed Lorenz proposed. How the beating of a butterfly wing could contribute to an initial state that eventually produced a tornado.”     

Cain objected, “Butterfly effect or not, we can’t be regulating every little action that people do because it might contribute to some problem. In the Fable of the Bees, Bernard Mandeville imagined a society that collapsed after it prohibited all vices. We just have to accept that living bears some risks and unpleasant things. We can’t craft a perfect society. The price system promotes a natural system of checks and balances. Is it perfect? No, but it is better than a bunch of bureaucrats micromanaging our economic activities.”

Abel sighed. “Your group’s solution is to do nothing. If the world goes to hell, so be it?”

Cain replied, “We struggle to solve our own problems. Coordinating human behavior is difficult. The price system is a coordinating mechanism. Sure, it has flaws, but it is more democratic than any autocratic system of regulation. Even if human activity were causing the planet to warm up, how would we get other countries to comply? We can’t force everyone to think like we do.”

Abel asked, “There doesn’t seem to be any area of compromise on this, is there?”

Cain smiled. “A solution will emerge. Don’t worry. For two centuries at least, technological prowess has raised living standards and our life expectancy.”

Abel objected, “The cumulative effect of our technological prowess is causing the problem. How can it solve a problem that it is contributing to?”

Cain turned to leave. “You have no faith in human ingenuity and motivation. That is the real problem.”

Abel replied, “You put too much faith in the price system. That is an even bigger problem. Let’s discuss that next time.”

The debate may begin on climate change but often shifts towards each group’s assumptions and perspectives on an issue. Each group pays more attention to others in their group than arguments from the other side. The signers to the Declaration of Independence argued over the list of British offenses or usurpations included in the Declaration. They had only minor changes to the noble sentiments expressed in the opening paragraphs that we cherish today. The arguments against rebellion? Loyalist sentiments, as they were called, were stamped out. In the northern colonies, some of the Loyalists were driven out and their property confiscated. Force is the final arbiter of failed attempts to compromise.

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Photo by Susan Q Yin on Unsplash

A 16-minute excerpt of Carl Sagan’s presentation before a Republican led Senate committee in 1985.

Anti-Loyalist sentiment

Fable of the Bees

The butterfly effect

acid rain

curvature of spacetime

Peak Oil

natural physical variations that contribute to climate change.

The Dred Scott decision and the inevitability of civil war. Roger Taney, the Chief Justice and author of the court’s majority opinion, was initially nominated by President Andrew Jackson to be Secretary of the Treasury. Taney was the first cabinet nominee to be rejected by the Senate. Jackson then nominated Taney for the position of associate justice of the Supreme Court and met rejection again. Later, Jackson nominated Taney for Chief Justice, and the Senate confirmed him after much debate.

An underground coal-seam fire in Centralia, Pennsylvania burning since at least 1962.

Peterson, T. C., Connolley, W. M., & Fleck, J. (2008). The myth of the 1970s Global Cooling Scientific Consensus. Bulletin of the American Meteorological Society, 89(9), 1325–1338. https://doi.org/10.1175/2008bams2370.1

The Water That Connects Us

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August 28, 2022

by Stephen Stofka

Several events this week share a common theme. President Biden announced a partial student loan forgiveness program.  Fed chair Jerome Powell announced the central bank’s firm commitment to tame inflation. The justice department is pursuing tens of thousands of fraudulent claims related to the pandemic federal relief programs. California Governor Gavin Newsome announced that the state will completely phase out gas fueled cars by 2035. What do these four events have in common? Government officials taking action to shield or relieve individuals from some oppressive force – a debt burden, rising prices, a pandemic, and a contributing cause to climate change. Government is a raft, an anchor of safety that we must share if we are to keep our heads above the water that connects us.

The physical world does not care whether human beings acknowledge or deny climate change. In 2013 the IPCC released their fifth assessment of the global climate. They were careful to note that they could not project individual small weather events like thunderstorms but that there would be more extreme weather events. Tree ring data indicates that this two decade drought in the west last occurred 1200 years ago. Agriculture uses 80% of the total amount of water humans use and have been severely impacted by water rationing. The federal government and states have spent billions fighting fires throughout the west. In recent days several southern states have experienced “1000 year” floods. They have declared emergencies to trigger federal assistance for cleanup and rebuilding.

The sun pours a flow of energy on the earth. Greenhouse gases like carbon dixoide retard the escape of the heat from that energy. California’s initiative is a key declaration of an aspirational agenda to lessen the release of greenhouse gases.  Building an infrastructure for thousands of electric vehicles is a Herculean task. So was the journey from Independence Missouri on the Oregon Trail in the 19th century. More of us are realizing that things have gotten to a point that we have to make some changes whether we like it or not. California has declared its intention to start the journey. Let’s hope more states will follow.

Inflation is oppressive. In a Jackson Hole summit speech this Friday Fed Chairman Jerome Powell stressed the Fed’s  commitment to taming inflation. “Inflation feeds on itself,” he said. As people come to expect higher inflation they may buy more now, making choices that actually accelerate inflation. When inflation is low, businesses and people no longer need to factor in rising prices as they make future plans. Former Fed Chairman Allan Greenspan called it “rational inattention.” The Fed has a twin policy mandate from Congress – full employment and stable prices. Because unemployment is so low the Fed feels that they can focus their policy tools on curbing inflation. Powell warned that rising interest rates would have a negative impact on both economic growth and employment. The stock market fell more than 3% in response to the Fed’s determination to keep raising rates until inflation has returned closer to their target.

David Farenthold (2022) reports that the Justice Department is pursuing tens of thousands of fraudulent claims under the CARES act. Three relief programs totaled $5 trillion, $3.1 trillion in the spring of 2020 and $1.9 trillion under the new Biden administration in the spring of 2021. Because there are so many cases, those who stole $10,000 will probably escape prosecution as investigators tackle claims with larger amounts. The Labor Department has 39,000 cases of fraudulent unemployment claims pending. The Small Business Administration has over two million fraudulent claims to investigate and verify. So far, the Justice Department has charged 1500 and secured 500 convictions. During the pandemic, Congress reached out. Many took advantage.

President Biden announced a student loan forgiveness program of $10,000 for each student with outstanding student debt and an income below $125K. The debt relief does not apply to those pursuing advanced medical and law degrees. A surge of college enrollment before and after the Great Recession drove student loan debt much higher. For-profit colleges overpromised well-paying careers to attract lower income students who qualified for federal grants and loans. Those low-income students who qualified for Pell grants will be eligible for up to $20,000 of student loan forgiveness. This will help minority students and women who typically earn less even after earning a BA degree. Most of those who graduate from 4-year schools come from the top 50% of incomes, and are endowed with more financial and educational resources prior to entering college. Whether a president has the power to forgive student loan debt is a matter for the courts. Mr. Biden’s executive action will surely be challenged.

Former President Ronald Reagan once quipped “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.” Despite his rhetoric, Reagan headed a big spending government that helped certain groups of people. Communities near military bases appreciated his military buildup in the fight against the Soviet Union. Investment and savings banks appreciated the 1984 and 1986 bailouts from his administration. High interest rates during the early 1980s drove the economy into a deep recession and curbed inflation but crippled debt-burdened farmers. Many family farms were sold to large agricultural holding companies. Military contractors and finance companies got relief. Farmers did not.

The founders of our country thought that the business of government was to protect people from oppressive burdens. Then as now we argue about whose burdens, who pays and how they should be relieved. We are all interconnected, swimming in the same pool. Government is a big raft, a temporary rest from a lifetime of staying afloat. At times we appreciate the hand up when someone says, “I’m from the government and I’m here to help.”

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Photo by Jong Marshes on Unsplash

Fahrenthold, D. A. (2022, August 16). Prosecutors struggle to catch up to a tidal wave of pandemic fraud. The New York Times. Retrieved August 25, 2022, from https://www.nytimes.com/2022/08/16/business/economy/covid-pandemic-fraud.html

United Nations. (n.d.). United Nations Charter. United Nations. Retrieved August 26, 2022, from https://www.un.org/en/about-us/un-charter/full-text

Bridge the Gap?

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Photo by Ragnar Vorel on Unsplash

September 6, 2020

by Steve Stofka

What issues are your priorities this election? For more than thirty years Pew Research has surveyed people about their priorities. For the first time in 2019 a majority of 765 respondents answered that there is a “great deal” of difference in where each party stands, up from 25% in 1987 (Pew Research, 2020). I’ve included the full list at the end.

In January 2019, soon after the midterm elections Pew surveyed 1500 adults (Jones, 2020). I don’t know why the abortion/free choice debate is not on the issue list since that single issue may decide some voters. I’m particularly interested in the large gaps in those priorities among those who lean Democrat or Republican. I’ll start with gaps of 25%. For instance, terrorism is a concern for 80% of Republicans but only 55% of Democrats. Other Republican priorities are Immigration, the Military and Crime.

As you can see, these are fear issues. Should a person in a town of 2000 be more concerned about terrorism than a resident of NYC? Of course not, but it is what it is. People vote out of fear and hope, but fear probably wins the wrestling match, especially among Republican voters who are not hopey, changey voters, as former VP candidate Sarah Palin noted (Gonyea, 2010).

The issue of crime illustrates the conflicting complexities of these issues. It is a 60% priority for Republicans, who are in suburban and rural areas where there is less crime, and a 40% priority for Democrats, who are in dense urban areas where there is a higher incidence of crime. Because crime is much lower than in past decades, this issue has slipped as a priority for Democrats (FBI, n.d.).  

Two of the highest Democrat priorites – Cimate Change and the Environment – have a huge gap of 50% with Republican voters. Democrat politicians have not been able to make these two fear issues personal for Republicans. If they could, they would draw more voters to their side on this issue. 25% gaps exist on issues of the Poor and Needy, Health Care, Education and Race Relations. Rural Republican voters are more likely to be poor and needy, but this is not a fear issue for them (USDA, n.d.).

What strategy would a politician or political consultant advise? Run toward the base? If so, one would emphasize these issues where there are large gaps between the two primary factions in this country. The President has largely adopted this strategy. Republican voters are more inclined to fall in line and the President is relying on this party loyalty even if they don’t like him personally.

Some issues where there is a smaller gap between factions are the economy, the budget deficit, jobs, global trade, drug addiction, transportation, Social Security and Medicare.

A politician reaching out to voters on the fence in this election would focus on these issues. Joe Biden hits the jobs theme, the budget deficit, and protecting Social Security and Medicare to appeal to voters who have had their fill of the President’s divisiveness.

In the coming two months, candidates may adjust their strategies. In the 2016 election, Hillary Clinton may not have addressed these shared concerns as well and it cost her the election.  Governing comes after winning an election. In politics, winning is packaging the concerns and identities of voters into an appealing, if not attractive, box that will get them to come out and vote.

What are your priorities this election season? Are you a multi-issue voter, a single issue voter, a party voter regardless of the issues? Here’s the Pew survey list of 18 issues: terrorism, immigration, military, crime, climate change, environment, poor and needy, race relations, health care, education, economy, Social Security, Medicare, jobs, drug addiction, transportation, global trade, and the budget deficit.

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Notes:

FBI. (n.d.). Crime rates in the United States, 2008 – 2018. Retrieved September 05, 2020, from https://crime-data-explorer.fr.cloud.gov/explorer/national/united-states/crime

Gonyea, D. (2010, February 07). ‘How’s That Hopey, Changey Stuff?’ Palin Asks. Retrieved September 05, 2020, from https://www.npr.org/templates/story/story.php?storyId=123462728

Jones, B. (2020, August 26). Republicans and Democrats have grown further apart on what the nation’s top priorities should be. Retrieved September 05, 2020, from https://www.pewresearch.org/fact-tank/2019/02/05/republicans-and-democrats-have-grown-further-apart-on-what-the-nations-top-priorities-should-be/

Pew Research Center. (2020, August 21). Public’s 2019 Priorities: Economy, Health Care, Education and Security All Near Top of List. Retrieved September 05, 2020, from https://www.pewresearch.org/politics/2019/01/24/publics-2019-priorities-economy-health-care-education-and-security-all-near-top-of-list/

U.S.D.A. (n.d.). Rural Poverty & Well-Being. Retrieved September 05, 2020, from https://www.ers.usda.gov/topics/rural-economy-population/rural-poverty-well-being/

A Junk Drawer of Changes

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December 8, 2019

A tip of the hat in respect to those servicemen who lost their lives at Pearl Harbor on December 7th, 1941 – almost 80 years ago.

This week I was cleaning out two kitchen drawers that had turned into junk drawers over the years. I became aware of how much things have changed in the past twenty years. There was a digital pedometer that we don’t use anymore. A cell phone app does that now. There were 9- volt batteries in the drawer that were long past their expiration date. The new lithium smoke and carbon monoxide detectors don’t need them. The manufacturer says to replace the entire unit after ten years. There were bayonet type Garden Accent light bulbs in the drawer. We use LED fixtures now. There were phone cords and phone couplers for landline phones. We don’t have those anymore. There were batteries for a modest digital camera. We use our cell phones to take photos now. There were expired C-batteries for a battery-operated adding machine that we don’t use anymore. Technology is changing more rapidly than I clean out my junk drawer. Maybe I should do that more often.

Talking about change….

I was in Amish country in Iowa a week ago. Although different communities have different rules, they ordinarily don’t use fossil fuels. We were in one store with a big iron wood burning stove. At a grocery warehouse, the clerk used a battery powered adding machine instead of a cash register. We saw a few men cleaning up the fields and tossing the remains of last season’s planting into a large container sized like a dump truck. It was pulled by a team of four horses. For tasks requiring gasoline, natural gas and electricity, the Amish rely on outsiders whom they call “English.” For farm work requiring a combine, they hire outsiders.

Most of us do not want to live the way of the Amish. We have become accustomed to the benefits of the very efficient energy provided by fossil fuels. Our society and economy thrive on energy. Stricter regulations have spurred technological advancements that enable our cars, furnaces and power plants to burn fuels much cleaner now. Climate scientists point out that we are putting far too much carbon dioxide in the atmosphere. Some scoff at the idea that carbon dioxide can be a problem. We breathe it out. Plants breathe it in. As part of the dynamic energy cycle, carbon dioxide itself is not a problem.

The threat to our way of life is the extra amount of carbon dioxide that our industrialized society is exhaling into our atmosphere. We are rapidly tapping a reservoir of carbon that was stored in the earth more than 300 million years ago. The key word in that sentence is “rapidly.” We are putting more carbon dioxide into the atmosphere than the plants can absorb. In some developing countries, people are cutting down the trees that absorb carbon dioxide as part of their life cycle.

From ice cores extracted from Greenland and the Antarctic climate scientists have been able to deduce a familiar cycle of events when the carbon dioxide concentration increases. The planet warms, the oceans rise, and precipitation increases. Permafrost at extreme latitudes melts and releases the carbon it has stored. That creates a feedback loop that intensifies the effect.

We need to slow down our consumption of fossil fuels, but we don’t want to give up the savings from the energy they provide. The internal combustion engine lowered food production costs, increased yields and lowered the cost of food for all Americans. Farmers dry their corn and other staple crops with fossil fuels. In another time, they might have plowed a damp surplus crop back into the ground.

We can’t attribute the lower cost of food entirely to fossil fuels, but a comparison of prices surprised me. A hundred years ago butter cost .58 per lb. in NYC (BLS, 2006). That’s $7.54 in current dollars. Eggs were .57 per dozen, so about $7.40. Current price for eggs was $1.28 last month (BLS, 2019). That’s a sixth of the price a century ago. Milk, a government subsidized product, was .28 per 1/2 gallon – approximately $3.64 in today’s money. The current price for milk is $3.12 for twice as much, a gallon. Milk today is about 40% of the cost it was a century ago.

Sixty years ago, the development of nuclear energy plants promised cleaner and less expensive energy. After the Three Mile Island accident in 1979, the building of new nuclear plants was severely curtailed [Wikipedia, n.d.]. Each year more coal miners die in accidents than all the people in history who have died from a nuclear accident. When it comes to nuclear, people disregard comparative statistics.

We don’t like making hard choices. We don’t like inconvenience. We absorb change and become accustomed to it. We put our old ways of doing things in the junk drawer of history and forget about it. We don’t want to live like the Amish to adapt to a planet with rising levels of carbon dioxide. What choices will future generations make?

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Bureau of Labor Statistics (BLS). (2006, May). 100 Years of U.S. Consumer Spending. [Web page, PDF]. Retrieved from https://www.bls.gov/opub/100-years-of-u-s-consumer-spending.pdf

Bureau of Labor Statistics (BLS). (2019, November). Average Retail Food and Energy Prices, U.S. City Average and Northeast Region. [Web page, PDF]. Retrieved from https://www.bls.gov/regions/mid-atlantic/data/averageretailfoodandenergyprices_usandnortheast_table.htm

Photo by katherine cunningham on Unsplash

Wikipedia. (n.d.). Three Mile Island accident. [Web page]. Retrieved from https://en.wikipedia.org/wiki/Three_Mile_Island_accident#Effect_on_nuclear_power_industry

Reaching Consensus

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September 22, 2019

by Steve Stofka

In the early 1980s, scientists at NASA raised the alarm that much of the protective ozone layer over Antarctica was missing. Newspapers and TV carried images of the “ozone hole” (Note #1). In 1987, countries around the world enacted the Montreal Protocol and banned the use of aerosols and chlorofluorocarbons (CFCs). There were some arguments and a few AM radio talk show hosts called the ozone hole a scientific hoax. However, most of the world reached consensus. There will always be crackpots who ride backwards on their horse and claim that everyone is lying about what lies ahead.

Compare those days of yesteryear with today. We have a wide array of media and information outlets. People who can’t make change are self-proclaimed experts on climate change. The Decider-in-Chief can’t reach consensus with himself for more than a day. A slight breeze changes his opinion. Intentionally or not, he has become the Anarchist-in-Chief.

The younger generation is quite upset because they will have to live with the consequences of climate change. The fat cats who make their money proclaiming climate change is a hoax will be dead. Next week there’s a climate summit at U.N. headquarters in NYC. A lot of young people demonstrated in cities around the world this past Friday to let the world know that they are concerned. That’s consensus.

What happened to us in the past thirty years? It’s tougher for us to reach consensus about guns, immigration, climate change, women’s rights, and health care to name a few. Let’s turn to a group of people whose job it is to craft a consensus. In a recent Town Hall Supreme Court Justice Neil Gorsuch pointed out that the nine justices reach unanimous consensus on 40% of the 70 cases that they decide each year. Only the most contentious cases make it to the Supreme Court. 40% unanimity means they agree on many principles. 25-33% of their cases result in a 5-4 decision. Those are the ones that get all the attention. The nine justices who currently sit on the Court were appointed by five different Presidents over the past 25 years. Despite the changing composition of the Court over the past seventy years, those percentages of unanimous decisions and split decisions have remained the same.

Let’s turn to another issue concerning consensus – money. Specifically, digital money like Bitcoin. Some very smart people believe in the future of Bitcoin and the distributed ledger concept that underlies digital money. In this podcast, a fellow with the moniker of Plan B discusses some of the econometrics and mathematics behind Bitcoin (Note #3). However, I think that pricing Bitcoin like a commodity is a mistake.

I take my cue from Adam Smith, the father of economics, who lived during a time and in a country with commodity-based money like gold and silver. Unlike today, paper money was redeemable in precious metal. However, Smith did not regard gold or silver as money. To Smith, the distinguishing feature of money is that it could be used for nothing else but trade between people. Money’s value depends exclusively on consensus, either by voluntary agreement or by the force of government. Using this reasoning, Bitcoin and other digital currencies are money. They have no other use. We can’t make jewelry with Bitcoin, or fill teeth, or plate dishes as we can with gold and silver. The additional uses for gold and silver give it an anchoring value. Bitcoin has an anchoring value of zero.

When people lose confidence in money, they lose consensus over its value. Previous episodes of a loss of confidence in a country’s money include Zimbabwe in the last decade, Yugoslavia in the 1990s, and the sight of people pushing wheelbarrows of money in Germany during the late 1920s.

Like gold, Bitcoin must be mined, a process that takes a lot of electricity and supercomputers but does not give it any value. Ownership in a stock gives the owner a claim on the assets of a company and some legal recourse. Ownership of a digital currency bestows no such rights.

In an age when we cannot reach consensus on ideas like protecting our children at school or the rights a woman has to her own body, we seek consensus with others on more material things like Bitcoin. We seek out information outlets which can provide us with facts shaped to our perspective. When facts don’t fit our model of the way things should be, we bend the facts the way water bends light.

John Bogle, the founder of Vanguard, died recently. He was an advocate of investing in the consensus of value about stocks and bonds. Now we call it index investing. That’s all an index is – a consensus of millions of buyers and sellers about the value of a financial instrument. There are several million owners of Bitcoin – a small consensus. There are several thousand million owners of SP500 stocks. That is a very large consensus, and like a large ship, turns slowly in its course. A small ship, on the other hand, can zip and zig and zag. That’s all well if you need to zig and zag. Many casual investors don’t like too much of that, though. They prefer a steadier ship.

I do hope we can move toward a consensus about the bigger issues, but I honestly don’t know how we get there. In 2008, former President Obama called out “Si, se puede!” but quickly lost his super-consensus in Congress. “No, you can’t!” called out the new majority of House Republicans in 2010. We’ve gotten more divisive since then. Journalist Bill Bishop’s 2008 book “The Big Sort” explained what we were doing to ourselves (Note #4). Maybe he has an answer.

In the next year we are going to spend billions of dollars gloving up, getting on our end of the electoral rope and pulling hard. Our first President, George Washington, was reluctant to serve a second term. Hadn’t he given enough already? In our times, each President looks to a second term as a validation of his leadership during his first term. There’s that word again – consensus.

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Notes:

  1. Images, video of the ozone hole in 1979 and 2018 from NASA.
  2. We the People podcast from the National Constitution Center
  3. Discussion of bitcoin on this podcast
  4. The Big Sort by Bill Bishop

Country Roads and the Election

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May 12, 2019

by Steve Stofka

I spent the past week traveling with my sister to a family reunion near Dallas, Texas. In our travels, we passed through rural counties in southeast Colorado, western Oklahoma, and northwest and central Texas. In contrast to the signs of a brisk economy in the larger cities, some rural communities show signs of stress. Some roads leading off the main route need repair; some houses could use a fresh coat of paint; some stores have delayed maintenance. In some small towns most of the stores remain boarded up ten years after the financial crisis.

Candidates for the 2020 Presidential election must speak to the two Americas. The Americans who produce the food we eat and the power that lights our businesses and homes are not doing as well as those in the urban corridors. Young people in rural America leave for the larger cities to find a job or pursue an education. Older people with medical needs must move to larger cities with hospital facilities available in an emergency.

Let’s turn to a proposal on the list of issues for the 2020 election – an increase in the Federal minimum wage. A person making a minimum wage of $15 an hour in Los Angeles earns a bit more than half of L.A.’s median household income (MHI). She may work 2-1/2 weeks to pay the rent on a one-bedroom apartment (Note #1). The MHI in rural America is about 20% less than the national average. In Limon, Colorado (population less than 1500), the MHI is about half of the national average (Note #2). $15 an hour in Limon is the MHI.

In 2009 and 2010, the Democrats controlled the Presidency, the House and had a filibuster proof majority in the Senate. They could have enacted a federal minimum wage that was indexed to the living costs in each county or state. Why didn’t they fix the problem then? Because Democrats use the minimum wage as an issue to help win elections. If Congress passes a minimum wage of $15 an hour this year, they will have something new to run on in five years – a raise in the minimum wage to $17 an hour. Voters must begin asking their elected representatives for practical and flexible solutions, not political banners like a federal mandated one-size-fits-all $15 minimum wage.

For decades after World War 2, Democratic Party politicians who controlled the House refused to allow legislation that would index tax rates to inflation. This resulted in “bracket creep” where cost of living wage increases put working people in higher tax brackets automatically (Note #3). The problem became acute during the high inflation decade of the 1970s and the issue helped Ronald Reagan take the White House on a promise to fix the problem.

A week ago, I heard a Democratic Senator running for President say that they knew all along that Obamacare was just a start. The program was poorly drafted and poorly implemented and now we learn that Democrats knew all along that it was bad legislation? Will Medicare For All also be built on poor foundations and require a constant stream of legislative and agency fixes? This provides a lot of work for the folks in Washington who draft a lot of agency rules that require a lot of administrative cost to implement. Democrats are fond of federal solutions but show little expertise in managing the inevitable bloated bureaucracy that such solutions entail.

Some Democratic Party candidates are promising to fix the harsh sentencing guidelines that they themselves passed in the 1990s, which fixed sentencing guidelines enacted 25 years earlier by Democratic politicians in the 1960s and 1970s. This party’s platform consists of fixing its earlier mistakes.

According to a Washington Post analysis of election issues (Note #4), some candidates are concerned about corporate power. A Democratic president would have to work with the Senate’s Democratic Leader Chuck Schumer whose main support comes from large financial corporations based in his home state, New York. While a President Elizabeth Warren might propose regulatory curbs on corporate power, Mr. Schumer would be gathering campaign donations from the large banks who needed protection from those same regulations.

Large scale industrial power production has a significant effect on the climate. The few blue states that supported a Democratic candidate for President in the 2016 election also consume most of the final product of that power production. Have any candidates proposed solutions that lower the demand for power? Temperature control systems in commercial buildings could be set to a few degrees warmer in the summer and a few degrees cooler in the winter. That would have a significant impact on carbon production. Some candidates propose solutions that regulate the production and supply of power – not the demand for power. Most of that production occurs in states that supported a Republican candidate in the 2016 election. Proposals to install wind and wave generating stations in Democratic leaning coastal states in the northeast and northwest have been met with local resistance. Voters in the blue states want green solutions to be implemented in the red states, but not inconvenience residents of the blue states. Voters in the red states see through that hypocrisy.

A viable Democratic candidate must convince independent voters who are wary of political solutions from either party.  Donald Trump won the Presidency without visiting rural folks on their home turf. He landed his plane near a staged rally and the folks came from miles around to hear him. Compare that approach with former Republican candidate Rick Santorum who visited many small towns in Iowa in the months before the 2012 Iowa primary. In small restaurants and rural post offices, Santorum listened to the concerns of voters. Trump’s approach was successful. Santorum was not. Go figure.

Trump convinced rural folks that he was going to go to Washington and drain the swamp. This in turn would help the economy in small town America so that those folks could get themselves a new roof, or a new pickup truck, fix the fence or get a few potholes patched. From what I saw, those folks are still waiting. Some rural folks may run out of patience with Trump by next year. The success of any Democratic candidate depends on that.

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Notes:

  1. One week’s take home pay of $550 x 2.5 weeks = $1375. A 1 BR in L.A. averages $1350 L.A. Curbed
  2. Areavibes.Com assessment of Limon, Colorado.
  3. Tax indexing
  4. Washington Post article on various election issues

Election Reflections

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August 28, 2016

Let’s pay a visit to an earnest voter…

The Labor Day weekend was a week away and the election campaigns would swing into full gear following the holiday. He had a hard time deciding what to do with his vote in November.  His mom used to make it easy, voting the party ticket no matter what. He heard someone say that they would write in Reagan’s name this election. He told himself that he was more conscientious than that so he reviewed some of the issues.

Climate Change

He thought that climate change was at least partially caused by human activity, so he decided he should probably vote Democratic this election. Republicans were climate deniers, weren’t they?  Hell, some Republicans denied evolution.  Michele Bachmann had announced that she wasn’t running for re-election for her House seat. He thought that she should be put out to pasture where she could do the least harm.  He had read a climate scientist writing that it didn’t matter much anymore, that human activity had already flipped the switch.  Sure, we might be able to make a few small improvements, some amelioration of the damage, but it wasn’t worth arguing with others who preferred to think that climate change was as real as Santa Claus.  What was that song by Chris Rea?  The Road To Hell

White House Short-timers

Obama had a few months left in his second term.  Was he hoping that Iran didn’t do something crazy in the meantime?  Former White House Press Secretary Robert Gibbs said (Interview with David Axelrod) that the worst day in an election campaign is the best day working in the White House. Everyday some part of everything that happens in the world came into the White House so the stream of problems was constant.

September was coming up.  Did Obama say a little prayer that there would be no financial crisis like the one that beset former Prez Bush in September 2008?  Bush’s body language in those last few months of his second term screamed out that he wanted to be gone from the flood of problems coming across his desk.  Bush had turned out to be a big government Republican with dramatic big government solutions to the financial crisis.  He had flooded Iraq with lots of cash in 2003.  Then he had wanted $700 billion from Congress.  His Treasury Secretary, Hank Paulson, had famously handed the Congress a scrap of paper, the most concise emergency bailout plan ever devised.  Hank could have written it on a piece of toilet paper in the men’s room.  $700B!

Rock-em-sock-em big government robot fights for justice

Democrats had been proposing big government solutions to society’s problems for as long as he could remember.  Solutions that cost a lot of money and produced meager or mixed results.  Was it bad execution of a good solution or was it the wrong solution?   The Dems were good at blaming someone or something else when their programs didn’t work very well.  Human greed, Republicans, selfishness, and poverty were the usual suspects.

Republicans blamed most problems on government regulators, Democrats, high taxes, and a loss of Christian values.  Republicans believed that a progressive income tax, the taking of money from one person and giving it to another, was a violation of a person’s property rights.  He agreed with that so maybe he should vote Republican.  But then most Republicans wanted to take away a woman’s right to choose what happened inside of her own body.  That was also a violation of a woman’s property rights, a God given right to privacy. So which property rights should he hope to protect with his vote?  Neither party cared much for the Constitution, that was for sure.

Social mores

At heart he was a classic liberal, or what is now called a moderate Libertarian. Gay marriage, fine.  If transgender people wanted to use the sex of bathroom that they identified with, fine.  His granddaughter had said she didn’t care if some transgender boy wanted to use the bathroom. The stalls had doors.  Dems seemed more libertarian on social issues, but very autocratic on economic issues.  Why couldn’t the Dems or Republicans be libertarian on both social and economic issues?  Because then one of them would be the Libertarian Party, he thought ruefully.  The anti-government anarchists had taken over the Libertarian Party several decades earlier.  Maybe it was time for the moderates to take it back?

Taxes

He didn’t think that politicians in Washington should be using the tax code to correct what they perceived as inequities in society.  It was the Republicans in 2003 who had stopped the practice of penalizing married couples through the tax code.  A Democratic House and Senate had put that one into place in 1971 (1998 article) but it was Nixon, a Republican, who signed the legislation.  Democrats could justify any tax.

The Hammer of God

He didn’t think Bible thumping politicians should be telling us how to live our lives. He was with the Dems on this one.  No, God wasn’t dead.  He was kept alive by politicians who used Him as a rhetorical weapon against the other party. Running for his first term in Congress, Abraham Lincoln, a Whig, had endured accusations that he was not a religious man (Sandburg’s Lincoln bio).  The Whigs had morphed into the Republican Party during the 1850s and now it was the Republicans who used religion as a cudgel against Democrats.  (Obama warning in 2012 race)  Apparently, only Republicans knew God’s will and how to implement it here on earth.  How could he vote for a party that was so conceited and arrogant?

Obamacare

But he also thought that the Federal government had no constitutional right to be telling people that they had to buy health insurance.  Each party wanted to take away people’s rights and freedoms.  As a small employer for several decades, he had often wished that health insurance wasn’t tied to employment. Bigger companies could offer more favorable benefits to good employee prospects, and it was tough to compete with that. Despite his preference for private solutions to societal problems, he wished that there was a program like Medicare for all or no tax write offs for health care benefits.  One or the other.  A public option had been a part of Obama’s 2008 platform (Politifact) but he had not been a particularly strong leader on this one and had encountered resistance from the members of his own party.  The result was Obamacare, a rough draft legislative hodge-podge that was more typical of a preliminary committee product, not a final piece of law.  Democrats just sucked at crafting economic legislation yet, in an ironic twist, they tended to see most of society’s problems as economic ones.  Obama had got his health care legislation passed only to see it used against the Democratic Party in the important census election of 2010, when the Dems lost a large lead and control of the House. Bill Clinton had tried to pass a health care bill in 1993 and lost Democratic control of the Congress to the Republicans in the 1994 election.  The Dems had apparently not learned their lesson.

Security

He couldn’t decide who was going to best keep the country safe.  Republicans seemed to think that Mexicans threatened each American family somehow.  Not all Mexicans, he understood, just illegal Mexicans.  For years, hundreds of thousands of students and visitors had come to the U.S., then overstayed their visas and remained in the U.S. illegally.  According to Republicans, all those other illegals weren’t a problem. Just Mexicans.   The Donald would build a wall.  In 2006, a Republican Congress had approved funds for Homeland Security to build more fences along the southern border.  Neither Democrat or Republican Congresses had been able to move the fence building further along toward actual construction.  Having once solved the problem of building a skating rink in Central Park, the Donald thought that he – and only he – could get this fence thing going.  He wished the Donald good luck in herding 535 fat cats in Congress toward any one project.  As the top Fat Cat, maybe the Donald could make it work.

Crazy vs Experience

Nah, he thought, the Donald was too crazy and inexperienced. Most Presidents were either one or the other, but not both, except for Bill Clinton.  Clinton had been crazy enough to have sex with an intern in the Oval Office and inexperienced enough to propose a universal health care plan.  He had won the Presidency with the lowest popular vote in the country’s history yet Clinton had thought he had some clear mandate. Even strong Democratic control of both the House and Senate could not help him and within two years, Clinton certainly contributed to the loss of  both the House and Senate to the Republicans.

Split the vote

Several decades ago a co-worker had shared his personal voting system.  “Split your ticket in the hope that the government stays split,” the guy had said.  That way the politicians could do the least harm.  Maybe that’s what he would do this election.  His congressional vote didn’t matter.  Few Congressional districts were contested in the general election and his district had voted Democratic for more than forty years.  Republicans would likely keep the House anyway.  Democrats might just take the Senate so he should vote Democratic to make it more likely.  That would help split the Congress.  That still left his vote for President.

Supreme Court

Over and over again he had heard that this Presidential election was a vote for the direction of the Supreme Court for the next decade or more.  His secret hope was that the Court would remain at eight members. If there was no clear majority on the Court then there should be no precedence set in Constitutional law.

Libertarian?

Maybe he should vote for the Libertarian Candidate, Gary Johnson?  Johnson seemed neither inexperienced or crazy other than the fact that anyone who runs as a third party candidate in this country must be crazy.  If the Dems took the Senate, they could simply block any nominee to the court and keep the Court at 8 members.  He could tell himself that a Libertarian vote was a combined nod to both the Democrat and Republican parties.  It would not be first time that he had split his vote but it had been quite some time since it did it in the hopes of a split government.

Baseball

Having resolved all those election issues, he turned his attention to the World Series schedule.  If the series went to seven games, the last game would be played on November 4th, at the height of pre-election coverage and just a few days before the election. (Schedule) If the Cubs were in the World Series for the first time since 1945, the attention of many voters might easily be diverted to the historic match up.  Let’s say the Cubs won the series for the first time since 1908 and let’s imagine that the series went to seven games, with the final game played on Friday, the 4th. KC Royals’ fans had celebrated their 2015 series extra inning win over the Mets just two days after the final game.  He could imagine that millions of Chicago residents and former residents would be there to celebrate the event on Sunday perhaps and the festivities rolling into Monday.  Although Illinois was usually a solid vote for the Democratic Presidential contender, he imagined the possibility that thousands of Illinois voters, distracted by the post-Series events, didn’t vote in Tuesday’s election.  Like Florida in 2000, the results turned on the votes of a few in Illinois and Donald Trump won the Presidency because the Cubs won the series.  Nah, he thought, sounds too much like a bad movie script.

Next week: a troubling long term trend that will hurt many investors