Economics and Alaska

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Democratic Iraq

Can we really mold Iraq into a democracy once we conquer it? Thomas Friedman addresses this question today in a New York Times column: "Iraq Without Saddam". He thinks that if it can be done it will take a long time:

"It is instructive in this regard to quickly review Iraq's history before Saddam. Romper Room it was not. It was a saga of intrigue, murder and endless coups involving the different ethnic and political factions that were thrown together inside Iraq's borders by the British......

"The point here is that we are talking about nation-building from scratch. Iraq has a lot of natural resources and a decently educated population, but it has none of the civil society or rule of law roots that enabled us to quickly build democracies out of the ruins of Germany and Japan after World War II. Iraq's last leader committed to the rule of law may have been Hammurabi.......... "

posted by Ben Muse at 3:32 PM

 
Healthy Forests legislation

I posted notes on President Bush's recent "Healthy Forests" initiative to address forest fire danger here and here.

The Wilderness Society, which doesn't like the initiative, is reporting that:

When the Senate reconvenes next week, we expect an amendment to the Interior Appropriations bill, with likely sponsors to include Sens. Pete Domenici (R-NM) and Larry Craig (R-ID). The legislation will probably track the President's plan fairly closely......

posted by Ben Muse at 10:30 PM

 
Leadership in Arab Armies

This one, "Why Arabs Lose Wars by Norvell B. De Atkine, in on online magazine called American Diplomacy, is of topical interest and has a lot to offer on organizational culture and leadership.

Arab armies reflect the cultures and politics of the Arab states they serve. Many of these cultural practices are counterproductive when found in armies. For example:

"In every society information is a means of making a living or wielding power, but Arabs husband information and hold it especially tightly. U.S. trainers have often been surprised over the years by the fact that information provided to key personnel does not get much further than them. Having learned to perform some complicated procedure, an Arab technician knows that he is invaluable so long as he is the only one in a unit to have that knowledge; once he dispenses it to others he no longer is the only font of knowledge and his power dissipates. This explains the commonplace hoarding of manuals, books, training pamphlets, and other training or logistics literature.

"On one occasion, an American mobile training team working with armor in Egypt at long last received the operators’ manuals that had laboriously been translated into Arabic. The American trainers took the newly minted manuals straight to the tank park and distributed them to the tank crews. Right behind them, the company commander, a graduate of the armor school at Fort Knox and specialized courses at the Aberdeen Proving Grounds ordnance school, promptly collected the manuals from those crews. Questioned why he did this, the commander said that there was no point in giving them to the drivers because enlisted men could not read. In point of fact, he did not want enlisted men to have an independent source of knowledge. Being the only person who could explain the fire control instrumentation or bore sight artillery weapons brought prestige and attention."

Why is this article interesting - it's of professional interest to MPA students in the armed services, it says something to all citizens about what a war with Iraq may be like - the picture it paints of the caste system incorporated into the armies says something about how realistic it may be to assume that some sort of "Marshall plan" for Iraq after the war with bring about a stable democracy - it's a reminder that institutions (including armies and other government agencies) have their own cultures, - it says something about the sources of those cultures - it has a lot of thoughts to provoke about leadership (again ideas relevant to government agencies other than armies).

I learned about this article from the Arts & Letters Daily.

posted by Ben Muse at 11:15 PM

 
Healthy Forests II

Paul Krugman, economics columnist for the New York Times, doesn't like President Bush's "Healthy Forests" initiative. I outlined the provisions yesterday in this blog post. See his column in the August 27 Times: "Bush on Fire".

Krugman (a) is worried that timber companies will get the valuable timber, but not follow through on their commitments to take away the brush (and that the Forest Service won't hold them to it), (b) believes that brush clearing and tree cutting are separate policy decisions that should be evaluated separately, and (c) notes that logging activities are normally heavily subsidized, so that "the measured costs of timber sales capture only a fraction of the true budgetary costs of logging in national forests."

So, Krugman thinks we should step back and look at tradeoff - brushing for trees - as two separate transactions and evaluate each separately on its own terms. Why are we compensating the companies for brushing with trees rather than with cash? How much is the brushing worth? How is the decision going to be made about the timber rights that would be appropriate to any given amount of brushing work?

Over at Slate Douglas Gantenbein is more optimistic about the forest plan in "Firestopper. President Bush's forest plan is half right". Gantenbein traces the intellectual history of the plan to Prof. Wally Covington at the Northern Arizona University. The key to Covington's plan:

"Covington's solution is this: Turn back the clock to about 1880 (chosen as the rough point when grazing changed fire regimes) by estimating how many trees per acre existed then (easy to do by counting tree stumps) then removing all but two or three trees for each pre-1880 stump. Figuring that one or two of those trees will fall victim to bugs or wind, in a decade or three you'll have a forest that looks like it did 120 years ago, when fire frequently burned but did no damage because the widely spaced trees gave the flames little to chew on except grass and pine needles."

Problems with the plan - there's no scientific evidence it will work. Moreover, there are different types of forests...

"...Covington focuses on ponderosa pine forests, which don't regenerate well after destructive wildfire of the type burning this summer. They clearly would benefit from some kind of fireproofing. For them, Covington's proposal might prove a good one (and still cheaper than throwing billions at fires that can't be extinguished)...."

"But millions of acres of Western forests also have in them lodgepole pine, Englemann spruce, Douglas fir, subalpine fir, and other tree species. Many of these trees—lodgepole pine, for instance—are genetically programmed to turn into a pile of ashes every 100 years or so...."

An earlier (June 13) Gantenbein column in Slate talked about the costs of fighting fires: "Smokey the Businessman. Only you can make millions preventing forest fires. Much of the work of fighting fires has been privatized - fire fighting is enormously expensive - (privatization has not led to economies) - and often of little use:

"Even more troubling is that throwing those sorts of resources at big fires accomplishes little except the creation of a big bill. Few, if any, large fires are extinguished. In nearly all cases if a blaze exceeds a few hundred acres and finds the wind at its back, firefighters can only try to protect a few houses or perhaps chivy the fire away from particular areas. And even that's problematic..."

posted by Ben Muse at 10:34 PM

 
Development vs. sustainability in Johannesburg

Bjorn Lomborg, controversial author of The Skeptical Environmentalist, had a Johannesburg summit op/ed column in Monday's New York Times: "The Environmentalists Are Wrong" .

"...for the same amount Kyoto [the Kyoto protocols meant to address global warming, Ben] would have cost just the United States every year, the United Nations estimates that we could provide every person in the world with access to basic health, education, family planning and water and sanitation services. Isn't this a better way of serving the world?....

And the key paragraph:

"The focus should be on development, not sustainability. Development is not simply valuable in itself, but in the long run it will lead the third world to become more concerned about the environment. Only when people are rich enough to feed themselves do they begin to think about the effect of their actions on the world around them and on future generations. With its focus on sustainability, the developed world ends up prioritizing the future at the expense of the present. This is backward. In contrast, a focus on development helps people today while creating the foundation for an even better tomorrow."

I learned about this from Junius. Brad DeLong has a response to Lomborg here: Skepticism Toward the Skeptical Environmentalist . DeLong's summary:

"He [Lomborg, Ben] may well still be right that inaction on control of greenhouse gas emissions over the next twenty years is the best policy--but that claim needs a footnote warning that we need now to build the institutions necessary to take swift action if it turns out that things are worse than expected. He may well be right that the resources that Kyoto would suck up would do more for human welfare if spent creating a more human world by boosting public health and economic infrastructure--but that claim needs to be accompanied by a plan to make sure that these resources are devoted to their best alternative use in the global south. "Would" cuts no ice here. "Will" does.

"And, most disappointing of all, is Lomborg's failure to even mention the importance of technological development. If it is the best policy to wait for a technological fix to the problem of global warming, then we need first to fix our technology so that it will be able to do what we ask of it when we need it.

"It's not my field of expertise, but as a card-carrying economist I can't help but think that Lomborg is probably right when he condemns Kyoto as a worthless waste of the world's wealth--as something that will be ineffective at fighting global warming and so expensive as to foreclose options to do other things that would be more useful. Lomborg's flaw, however, is that he doesn't spell out what the "other things" we should be doing are. And that's what he needs to do if he wants to advance the ball."

posted by Ben Muse at 8:12 PM

 
The WEO

The World Environmental Organization doesn't exist yet, although many at the current Johannesburg World Summit on Sustainable Development look forward to it.

Professor Oran Young of Dartmouth outlined four possible roles in a 1999 panel on "Do We Need a World Environmental Organization?" at Harvard Law School proceedings here:

"1. Administration First, a world environmental organization might be needed to administer a comprehensive regime for the environment. Professor Young alluded in this regard to GATT [General Agreement on Tariffs and Trade, Ben] (which offers a comprehensive regime for trade), UNCTAD, and other international treaties that contemplate comprehensive regimes that need an institution to act as administrator. He noted that there are environmental issues that can be dealt with effectively only at the international level – i.e., e.g., transboundary air pollution, hazardous waste, climate change. A world environmental organization could administrate a comprehensive regime to deal with all of these problems....

"2. Overarching Service Provider Second, a world environmental organization might provide common services for a cluster of environmental regimes. Professor Young noted that international environmental regimes require secretariat services, scientific advice, funding, dispute settlement procedures, and implementation review. He suggested that there might be a need for a super-organization because the current structures may not be adequate.

"Professor Young added, however, that he was skeptical about this potential justification for a world environmental organization. He noted that there is already in existence considerable organizational capital existing today, and questioned whether the world is ready for an overarching environmental organization to service existing regimes. He suggested that, in order to justify a new world environmental organization, it must be established that the existing organizations are failing, inadequate, or incomplete in some significant way.

"3. Regime Reformation Third, a world environmental organization might provide a mechanism for formation or reformation of international environmental legal regimes. He anticipated that reformation would deal with process issues, such as the creation of international environmental law. He commented, however, that there is a general sense that existing organizations like UNEP [United Nations Environmental Program, Ben] are fairly well structured to deal with these types of functions. In short, he concluded, there is no clear organizational deficit here that would justify the creation of a world environmental organization.

"4. Handling Institutional Interplay Fourth, a world environmental organization might deal with interactions between the environment and other regimes, such as trade arrangements. He offered as an alternative the WTO's [World Trade Organization, Ben] Committee on Trade and the Environment ("CTE"). Professor Young commented that he was skeptical that a world environmental organization could function as envisioned since there are so many distinct environmental regimes. Professor Young suggested that, even if a new Committee on Environment and Trade were created to counterbalance the WTO's CTE, it is doubtful it would have a credible or strong voice. He also questioned whether institutional interplay is not already under the mandate of the United Nations Commission on Sustainable Development ("CSD"), which has both overview and assessment functions though it lacks speed and the capacity to render binding recommendations.

"5. Identifying and Addressing Gaps and Overlaps Fifth, a world environmental organization might identify gaps and holes in existing coverage of international environmental problems, as well as tensions between existing organizations that might lead to inefficiencies. He noted again, however, that the CSD already exists under the auspices of the United Nations, and questioned whether we could do better by creating a freestanding world environmental organization."

Although a topic of interest at the summit, The Daily Summit reported on August 26 that the summit was unlikely to end up pushing it: "There is no chance of the WEO being discussed, let along agreed, here at the summit.....It is possible that a leader (best bet: Jacques Chirac) may mention it in his speech, but WEO-supporters must content themselves for lobbying for change within existing global institutions."

The U.S. is opposed as James Glassman reports: U.S. Says No To WEO. Glassman noted that many think of a potential WEO as a counterweight to the World Trade Organization (WTO), an international organization pushing a world trading regime:

"Many of the delegates at the summit favor establishing a WEO to set global rules for environmental protection and to balance the powerful World Trade Organization, and, according to an earlier report in Earth Times, "the European Union is vigorously pushing for such an organization."

"A study released earlier this year by a United Nations think tank, the UN University Institute for Advanced Studies in Tokyo, concluded, "A well constituted WEO could act as a check or counterweight to overreaching by the WTO." And Earth Times reported earlier that Klaus Toepfer of Germany, who heads the UN Environment Programme, and Nitin Desai of India, Secretary General of the WSSD, are the leading candidates to head a WEO "if such an agency is created.""

Resources for the Future has a Summit background paper on the ways environmental concerns are integrated into the WTO process here: two page backgrounder and here nine page brief.

posted by Ben Muse at 6:46 AM

 
Has the Bush Administration identified a "Policy window"?

"Healthy Forests"

President Bush announced his "Healthy Forests" initiative in Oregon last week. The details are still very unclear - making allowance for the environmentalist stance, one of the best short descriptions of the program is this from the Wilderness Society: "Analysis: Bush Administration's. 'Healthy Forests Initiative'". The program has three parts:

"1. Administrative guidance and procedures designed to cut red tape and "improve regulatory processes" for fuels treatments and restoration projects. The briefing paper does not provide enough detail to evaluate the impacts of these administrative actions on environmental protection and public involvement.

"2. Legislation to curtail or eliminate administrative appeals and lawsuits challenging fuels treatments and restoration projects. This appears to be the most radical and controversial part of the Initiative. The briefing paper suggests that the Bush Administration wishes to exempt some or all fuel reduction and restoration projects nationwide from judicial review, as Congress recently did in order to implement a revised settlement agreement for portions of the Black Hills National Forest. The impacts of such an exemption would likely be similar to the 1995 Salvage Rider (a.k.a. Logging Without Laws), which effectively barred appeals and lawsuits of salvage timber sales and generated tremendous controversy. Vice President Gore later said that signing the Salvage Rider was the worst decision made by the Clinton Administration during its first term.

"The Initiative also proposes legislation to authorize use of long-term "stewardship contracts" for fuels treatments and restoration projects. This is also a controversial proposal because it allows logging companies and the Forest Service to trade "goods for services" - i.e. to cut federal timber in return for reducing fuel loads. A similar provision was considered but dropped from the Farm Bill earlier this summer, due in part to environmental concerns that it would create a perverse incentive for loggers and Forest Service managers to cut bigger and more valuable trees.

3. Legislation to increase timber sales in the Pacific Northwest by "removing needless administrative obstacles" in the Northwest Forest Plan and by expediting implementation of projects determined to be consistent with the Plan. It is important to note that this part of the Initiative is not limited to fuel reduction and restoration projects. Instead, the primary impact would be to increase logging of old-growth forests in the relatively moist western Cascades, where fuel reduction generally is not a management objective. Environmentalists have been working with Senator Wyden and others to develop legislation that would protect the remaining old-growth forests and encourage ecologically beneficial thinning projects in the Northwest. However, the Healthy Forests Initiative suggests that the Bush Administration is only interested in cutting more of the old growth. Environmentalists almost certainly will strongly oppose this part of the Initiative."

A "policy window"?

Is the Bush administration taking advantage of the forest fire crisis to reorient forest policy? One of the political science books I'm considering adopting in "Natural Resource Policy" next spring is The Environmental Case. Translating Values into Policy by Judith Layzer (Congressional Quarterly Press, 2002). One of the poly sci concepts she works with is the "window of opportunity." It's hard to get government policy changes, the savvy advocate tries to identify "windows of opportunity":

"A substantial departure from the status quo is likely only when hospitable political conditions come together with a compelling problem definition and an available solution. such a convergence rarely just happens, however; usually a policy entrepreneur must link a solution to a problem when a window of opportunity opens."

Is that's what's going on here? Hard to tell without more details.

NEPA

The New York Times reported that, "...Mr. Bush is likely to ask Congress to waive provisions of the National Environmental Policy Act...to streamline approval of what proponents call a necessary forest thinning." (NYT, August 22, Douglas Jehl, "Bush, Citing fires, will Seek to Ease Laws on Logging").

This is the second article I've seen recently reporting on Bush Administration interested in restricting the scope of NEPA. On August 10 I linked to a story about administration efforts to limit the applicability of NEPA in U.S. offshore waters between 3 and 200 miles: NEPA - not at sea? .


posted by Ben Muse at 5:18 PM

 
Consensual leadership

Nice article in today's (8-27) Wall Street Journal on leadership. The theme is that:

"...those who have proved their ability to inspire rarely say they were guided by formal instruction. Instead they point to life experiences that were pivotal in helping them recognize a capacity to make things happen and to get others behind them."

Also interesting - the experience of Jack Kahl, who learned a consensual style of leadership from his mother's operation of the household during a period of Intense family stress:

"Years later, when he founded Manco, based in Avon, Oho, Mr. Kahl adapted his mother's consensual style rather than what he had learned as a business major at John Carroll University, Cleveland. 'They taught us command-and-control management, and it was all wrong,' he says. 'A great leader knows that people must be included in the company's decision-making process and that you have to share information with developing leaders rather than hoard it."

Kahl's role model was Sam Walton, who he describes in the article has having a "coaching" style of leadership:

"Mr. Kahl recalls: 'He shared detailed information with all his employees, even part-timers, about how much Wal-Mart paid for their products and what they sold them for, so everyone felt part of the game."

This article is by Carol Hymowitz and it's on page B1. This type of leader seems to me to be in a position to acquire and exploit new sources of information, one of the things Jon Karpoff (see my posting on August 14) said made the difference between life and death, success and failure, in 19th century arctic exploration.


posted by Ben Muse at 12:26 PM

 
What's going on in Utah?

Michael Grunwald and Juliet Eilperin at the Washington Post reported on August 19 that:

"The Bush administration recently agreed to a massive land swap with Utah even though the federal government's own experts had warned that the deal amounted to a $100 million giveaway by U.S. taxpayers, agency documents show.

"The deal would exchange 135,000 acres of federal land for 108,000 acres of state parcels, many of them surrounded by federal areas. Utah would get commercially attractive land that would pump tax revenue into its school system. The federal government would get scenic red-rock bluffs for a possible national monument as well as prime habitat for the threatened desert tortoise.

"But at least six officials at the federal Bureau of Land Management, including its chief real estate appraisers for Utah and the nation, have complained internally that the swap offers a windfall to the state. They said several parcels of mineral-rich federal land had been counted as having little or no mineral value, and they issued blistering critiques of "one-sided and inaccurate" information in an official "White Paper" justifying the deal........

"This is like Enron all over again," said Kent Wilkinson, a senior BLM appraiser in Utah who gave a host of documents and e-mail messages to The Washington Post. "They're cooking the books, and it's all to the detriment of the public.........

"On Friday, Wilkinson and lawyers with the group Public Employees for Environmental Responsibility filed a formal whistle-blower complaint, which could hold up the latest trade. Still, the Utah Legislature ratified the deal last month, and Reps. Chris Cannon (R) and Jim Matheson (D) of Utah have co-sponsored a bill that would give congressional approval as well. The bill is pending before the House Resources Committee............"

And so on............

Check out the complete story here: "U.S. Ignored Appraisers in Land Deal with Utah" .

posted by Ben Muse at 9:40 PM

 
Natural Resource Policy Wednesday Nights Next Spring

The Natural Resource Policy course, PADM 635, is going to be on Wednesday nights next spring:

Spring 2003

PADM 618 Administrative Law Tuesdays 7-9:45 pm
PADM 688 Program Evaluation Thursdays 7-9:45 pm
PADM 690 Capstone Wednesdays 7-9:45 pm
PADM 635 Natural Resource Policy Wednesdays 7-9:45 pm
PADM 696 Managing IT in the Public Sector Web-based


posted by Ben Muse at 6:47 PM

 
My life as a blogger

What I found

A "blog" is a weblog - an internet journal or diary - made possible by a new type of software that makes it easy to update a webpage often.

I learned about blogging early this past June when I followed a link from Brad DeLong's economics web page to his blog, and from links on his blog to other blogs. I found that DeLong's blog was one of many inter-related blogs which were talking back and forth - arguing, sharing information, turning over and considering different ideas.

Why I blog

After a week or so of reading blogs, it occurred to me that many of them were no more than electronic versions of notebooks I kept to gather material and ideas for my classes. Since I was already doing some of the work, I might as well do a little more and put some of the material on line right away.

I thought this would be good for several reasons. It would force me to develop the ideas a little more. It provided a convenient way to link directly to interesting material - not possible in a paper notebook. Prospective students could get a better understanding of upcoming classes. During classes the blog would be a convenient bulletin board - something I now use email for. After classes it might be a way of providing added value to students - interested students could update as I updated the classes.

At first I wanted to use DeLong's software, Moveable Type, on the UAS server. UAS computer services began to evaluate the issues connected with using Moveable Type on their server, and in the interim I found and began to use Blogger. My son Peter was able to set Blogger up quickly - under an hour - on my own internet provider's server.

What I've learned

The best blogs I've seen are journals with relatively short items on topics that interest the author. Sometimes an item is a link to an interesting web page, with only a line or two of commentary, sometimes its a short essay on a topic that interests the blogmeister, sometimes an a critique of an item from another blog. The best blogs are personal - more so than newspaper op/ed columns. The best blogs are witty and engaging. Really long items belong in another medium.

Blogs on a given topic or interrelated set of topics constantly refer back and forth to each other. The discussion stays at a higher level than you often see in discussion lists. DeLong's piece Boosting the Signal-to-Noise Ratio on the Internet talks about how this works.

Blogging is more work than simply writing things down in a paper notebook.

What I need most, and haven't been able to figure out how to do, is make a topical index. The archives are indexed chronologically. It'd be nice to be able to pull together items on a particular topic. I've seen topical indicies in other blogs so I know it can be done.

What works for me

A quick look at five of the blogs I've enjoyed most. Brad Delong and Jane Galt (a pen name) have two of the best, more traditional blogs - nice combination of the personal, original material, wit, notices of great items from other blogs. Both have an economics focus.

Instapundit has a different focus - lots of links to other interesting items each day, with brief commentary.

Here a couple blogs with a little different format: Great Questions in Economics provides a link to an economics item in the news, adds brief commentary and follows up with a discussion question about the item. (This will be a great resource when I teach Economics for Public Managers next summer. At The Daily Summit David Steven is experimenting with the blog format to do real time journalistic commentary on the ongoing Johannesburg Sustainable Development Summit.



posted by Ben Muse at 8:38 AM

 
Johannesburg Summit on Sustainable Development

The World Summit on Sustainable Development opens tomorrow in Johannesburg, South Africa, and runs through September 4.

What's it all about?

Michael Toman of Resources for the Future explains:

"The World Summit on Sustainable Development, also known as Rio + 10, will be held from August 26 through September 4 in Johannesburg, South Africa. At this meeting, governments, international institutions, and members of the private sector and civil society will meet to review the 10 years since the United Nations Conference on Environment and Development (UNCED), held in Rio de Janeiro in 1992. That meeting in turn brought to the political foreground the concept of sustainable development, defined by the 1987 World Commission on Environment and Development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs...

"Participants in the World Summit on Sustainable Development will seek to take stock of what has been accomplished since Rio 1992, what lessons have been learned about the effectiveness of different approaches, and what might be done to strengthen progress toward sustainable development. They will address both specific natural resource and environmental issues (forests, oceans, climate, energy, and water), and crosscutting issues such as the revolutions in technology and the financial markets, as well as globalization."

More information

Resources for the Future has a nice web page with background briefs on a wide range of issues: The RFF Issue Brief Series on Sustainable Development .

If you want almost real time reporting and commentary on the progress of the summit, try David Stevens' blog, The Daily Summit. Stevens is experimenting with the blog format for reporting on an event in progress, as he explained to blogger Rebecca Blood here .

Another source during the summit: Tech Central Station (TCS). One of the TCS's authors (Nick Schulz) describes the difference between TCS coverage and the likely "The Daily Summit" (just mentioned) coverage:

"Make sure to also check out the Daily Summit, a blog of all the events going on in and around the WSSD, updated several times a day. The editor of the site may not see eye to eye with everything we at TCS believe, but he's familiar with the work of Gregg Easterbrook, TCS, and other environmental optimists, so he'll be sure to give pro-growth optimists a fair shake. It's an extraordinarily smart, lively, and valuable website."

I learned about the Stevens, Blood and TCS blogs from Instapundit .



posted by Ben Muse at 1:17 PM

 
The Price of Oil and War with Iraq

Daniel Yergin, a respected energy expert, projects the impacts of a war with Iraq on the price of oil in today's New York Times: "Oil Prices Won't Depend on Iraq, but on Its Neighbors". Bottom line, the impact of a war on oil prices could be "more limited than many anticipate."

Prices during the war

Prices now are in the area of $30, including "a 'fear premium' of roughly $5 to $6 - which translates into an added 10 to 15 cents a gallon at the pump for American drivers." A cutoff of Iraqi exports on the outbreak of war might drive prices to the $35 or $40 level.

But Iraqi exports are only about a million barrels a month now and "Other OPEC producers have about six million barrels a day of unused production capacity that could be quickly called on..." Half of this is in Saudi Arabia, "with most of the rest in Kuwait and the United Arab Emirates." There is some in Algeria, Libya and Nigeria. "Saudi Arabia and Kuwait have indicated they would use that extra capacity to make up any shortfall."

It's an obvious Iraqi strategy to attack the oil fields in Kuwait and Saudi Arabia, but Yergin suggests this is unlikely to be successful for three reasons: (1) the Saudi fields are well defended, and (2) maybe more important "There's a great deal of duplication in the facilities, which provides a backup if anything is hit, and damaged facilities could be repaired quickly. In addition, Saudi Arabia has backup export facilities across the country...", moreover (3) western nations have strategic petroleum reserves of 1.2 billion barrels - half in the U.S..

Prices after a war

Iraq has the second largest proven oil reserves in the world (112 billion barrels). Only Saudi Arabia has larger reserves. Will Iraqi oil flood world markets and drive down prices following a war?

Yergin says less on this, except to guesstimate that it would take three to five years of investment and reconstructive work before Iraq could be at its previous high production levels.

posted by Ben Muse at 8:15 AM

 
The corporate governance scandal and public administration

Good short essays on the corporate governance scandal

Paul Krugman has a nice piece in Friday's New York Times on the problems with the way corporations are governed: "The Outrage Constraint": "...the official theory of the corporation, in which the C.E.O. serves at the pleasure of a board that represents shareholder interests, is thoroughly misleading...."

Brink Lindsey also discusses corporate governance in two recent postings on his blog. Start with "Thoughts on Corporate Scandals" on August 15, and follow-up with "Market Forces and Corporate Governance" from August 16. Lindsey is more optimistic that Krugman.

Brink Lindsey explains it all - or a lot of it

The key problem is that the principals (shareholders) have trouble controlling their agents (management) because the agents have better information about the business than the principals. With the poor control, the agents can take the firm's resources and use them for their own purposes, subject only to what Krugman refers to as an "outrage constraint." Lindsey points to market forces that constrain the ability of management to do whatever it wants. He identifies the capital market and the market for corporate control as the main forces.

With respect to the capital market:

"After the dot-com bubble and all the recent accounting scandals, it's easy to take a dim view of capital markets. And indeed, they're far from perfect. They're prone to herd behavior, and the quality of the financial information they operate on is, as we now know all too well, often less than stellar. But consider the alternative sources of corporate funding: retained earnings and bank lending. As to the former, retained earnings are free money for managers with no strings attached; they impose no accountability whatsoever. Banks can exert discipline on managers, but around the world the norm for bank-dominated financial systems is clubby, insider capitalism where established dinosaurs get a free ride and innovators go begging. I'll take our system, warts and all, over Europe's or Japan's any day. When companies have to raise funds in capital markets, they are pressured -- more than in any other funding arrangement -- to justify what they're doing with the money in a relatively transparent and competitive setting."

And with respect to the market for corporate control:

"The market for corporate control offers even sharper incentives for managers to keep on their toes: If they don't, they're out in a hostile takeover. Specifically, when poor management depresses a company's stock price, an opportunity arises for outsiders to take over the company, restructure it, and reap the share price gains. The corporate raiders of the 1980s were vilified, of course, but the conventional wisdom often allies with the status quo over the sharp-elbowed insurgent. And the fact is that afflicting the status quo is the name of the game in good corporate governance."

Implications for public administrators

What are the implications of all this for public administrators? First, the principal-agent problem is important in our world too, in spades. The problem crops up between voters and their agents, legislators and executives; between legislators and executives and their subordinate administrators; between public stakeholders on different issues and public administrators responsible for those issues. In the public sector, principals face the same problems understanding what their agents are up to. Second, we, as public administrators, are not generally subject to the same disciplinary market forces as the private sector. We are subject to discipline by voters, by the civic minded, and by the scrutiny of interested parties, but it's not clear to me that these disciplinary forces are more rigorous, or even as rigorous, as market forces might be.



posted by Ben Muse at 10:50 PM

 

City warfare

War with Iraq will be a serious business, so I'm getting less reluctant to pass along information on related topics.

Today's Wall Street Journal has an eye-opening story - "As Threats Evolve, Marines Learn Skill of Combat in Cities" by Greg Jaffe. Jaffe points to evidence that Saddam Hussein is likely to make his stand in downtown Baghdad to lure the U.S. into urban fighting, where much of our technological advantage will be lost. He then tells - in vivid detail - the story of a U.S. Marine urban combat wargame at an abandoned Air Force Base in California. The article brings home the problems of urban war, including those of the command and control of troops. In the exercise, even company and platoon leaders have trouble keeping in touch with their men. Jaffe also points to the types of lessons that are being learnt from these exercises. This article is well worth your time if you can get a copy of the paper.

Two questions about a possible war: First, my understanding is that we have limited regional support for this. Do we have the ability to support the logistical requirements of a large army in Iraq over an extended period of time without using bases in Saudi Arabia, Iran, Turkey, or Jordan? Can we sustain the land and air forces out of Kuwait? Second, I've heard a number of discussions that imply we are going to go in, get rid of Hussein, and establish democratic institutions. The latter seems implausible to me - I suspect the culture and traditions to support democratic government just aren't there. Am I missing something?

One more good source on the situation - this one dealing with rumors. I've heard, and I'm sure you've heard, a lot of stories purporting to leak U.S. plans for war against Iraq. Donald Sensing provides some guidance on interpreting and evaluating these stories/rumors in "No, we don't do disinformation".


posted by Ben Muse at 12:21 PM

 

The UAS Campus

Hey, pictures! Here's the UAS campus (where I teach as an adjunct) - at the bottom of the picture, looking across Auke Lake and towards the Mendenhall Glacier. (Photo linked from the UAS website).

posted by Ben Muse at 6:37 PM

 

Impact of rules on small business

I'm exploring an archive of Albert Crenshaw's small business columns at the Washington Post tonight.

Here's an interesting one on the impact of rules on small business: "Rules, Rules. And Big Business Thought It Had It Bad".

A couple of paragraphs:

"Now the Small Business Administration's Office of Advocacy has tried to quantify these issues. A recent study, released at a conference marking the Office of Advocacy's 25th anniversary last month, concludes that firms employing fewer than 20 workers face an annual regulatory bill of $6,975 per employee. This burden is 60 percent higher than that faced by firms with more than 500 employees.

"Government agency officials occasionally admit that they have encountered instances of large firms urging very, very tight regulation in some situation, knowing that they can manage the compliance costs while their smaller competitors cannot."

A couple of interesting points here - (a) the high apparent cost of regulation, and the higher average cost for small business, and (b) the use of regulation as a competitive tool by one business against another.
posted by Ben Muse at 10:10 PM

 

Problems with Reg Flex Implementation?

This Washington Post column by Albert Crenshaw (from January 28, this year) reports on a GAO report that the Reg flex Act (requiring an analysis of the impacts of regulation on small businesses) may not be implemented by agencies as enthusiastically as it should be: "GAO Finds Little Help To Understand Rules".

Key paragraphs:

"The 1996 Small Business Regulatory Enforcement Fairness Act required agencies to do things such as simplify language, provide more accessible information on reporting and compliance requirements, and, in a key section, to publish compliance guides for important new rules.

"However, the last requirement hinges on whether a new rule has a "significant economic impact on a substantial number of small entities," leaving it to the agency to decide what is a "significant" impact and a "substantial number."

"So, guess what: It's amazing how insignificant many agencies find their rules to be, and how few entities they affect.

"The General Accounting Office, in a report prepared for Sen. Christopher S. Bond (R-Mo.), ranking minority member of the Senate Small Business and Entrepreneurship Committee, surveyed six federal agencies, including the Commerce Department, the Environmental Protection Agency, the Federal Communications Commission, and the Securities and Exchange Commission. It found that the guide requirement "does not appear to have had much impact."

"Using the "broad discretion" allowed by the law, "an agency could legally exclude all of its rules from the coverage by the statute," the GAO said in its report. Or it could simply pick an old publication and designate that as the required guide, or publish a guide with no input from small business "years after the covered rule takes effect," the report said."


posted by Ben Muse at 9:54 PM

 

Why is there spam

Jane Galt explains spam, and in the process provides a painless (and even pleasant), explanation of externalities, transactions costs, Coase's theorem, moral hazard, and pollution.

I linked to a column on the economics of spam by David Friedman on August 14.

Another Coase piece: Virginia Postrel applies Coase to building and design codes in Portland, OR in this New York Times column: "When It comes to enforcing Taste, It's Best to Tread Lightly".

I learned about the Galt and Postrel links from Lynne Kiesling's blog.


posted by Ben Muse at 9:26 PM

 

Mitch Daniels' days are numbered?

Mitch Daniels, of course, is the Director of the Federal Office of Management and Budget (OMB). This article by Stan Collender, from Government Executive magazine focuses on Daniels' budget (rather than regulatory) responsibilities: Government Executive Magazine (8/21/02): "A thankless job"

Daniels is described as relatively tactless and undiplomatic, particularly towards Congress, and his tenure is described as having been "generally difficult and sometimes turbulent." Collender speculates that he'll leave OMB "soon."

posted by Ben Muse at 9:03 PM

 

McKinsey Reports on the NYC Fire and Police Department Responses to 9-11

The McKinsey consulting firm has released reports today (8-19) on the responses of the NYC Fire and Police Departments to the 9-11 attack. Here is a Washington Post story on the reports: washingtonpost.com: N.Y. Rescuers Disorganized In 9/11 Attack .

The reports themselves can be found here: Improving NYPD Emergency Preparedness and Response and here: Increasing FDNY's Preparedness " .

Quoting the Post story: - there was no lack of courage in either department -

NYPD comes off better - it didn't set up a "clear command structure" at the scene - "too many of the department's top brass placed themselves at risk of death by needlessly running to the site" - in the following days "department leaders lacked the analytic capacity to sift through dozens of rumors of further attacks" - NYPD communications were much better than those of the NYFD and probably contributed to its lower casualty rate - this was the fruit of a traditionally proactive department attitude to new technologies (communication technology in this case).

McKinsey acknowledges the courage, and esprit de corps in the NYFD - but fire chiefs "are not 'effective managers,' don't understand their roles and responsibilities, and need to learn how to better command and plan" - NYFD has a long tradition of resistance to new technology - "Deployment and the enforcement of line discipline remain problems. As firefighters learned of the disaster on Sept. 11, stations began peppering dispatchers with requests to race to the scene. Four engine houses arrived at the World Trade Center without ever receiving clearance from a dispatcher."

The New York Times story on the reports emphasizes a lack of interagency cooperation between NYPD and NYFD, based in a history of rivalry between the two agencies. Both the Post and stories point to very different cultures in the two agencies.
posted by Ben Muse at 7:57 PM

 

Reg Flex Act news

Remember that the Regulatory Flexibility Act (Reg Flex Act or RFA) requires Federal agencies to evaluate the impacts of proposed regulations on regulated small entities (including businesses, non-profits and governments).

The Bush Administration issued a new Executive Order last Wednesday (Aug 14) with instructions to Federal agencies on Reg Flex compliance. You can find a copy of the executive order and other information at the OMB Watch web site: "Bush Signs E.O. on Regulatory Impacts on Small Business" .

The order calls for agencies to issue written procedures and policies, notify the Small Business Administration (SBA) Office of Advocacy of proposed rules that may have a significant impact on a substantial number of small businesses, and include a response to any SBA comments on the proposed rule in the preamble to the final rule when it is published in the Federal Register. I expect most of this is already done in most agencies. It's hard to see what the point of this executive order was.

posted by Ben Muse at 6:33 PM

 

Council of Environmental Quality NEPA Task Force

NEPA, of course, is the National Environmental Policy Act. The Council of Environmental Quality (CEQ - the agency in charge of NEPA guidelines) established a task force this spring to look at the ways NEPA is actually implemented, and suggest ways to improve the NEPA process. The task force is to report this November. The published CEQ materials on this project suggest that it may lead to (a) best practices guides, and (b) possible changes in the CDQ NEPA regulations.. It doesn't look like they are considering recommendations for revisions in the act itself.

NEPA, which requires reports on significant environmental impacts from Federal actions, is an enormously important environmental law. New regulations are Federal actions and require NEPA analysis - either a categorical exclusion (stating there are no significant impacts), an Environmental Assessment (EA) to determine if impacts are significant, or an Environmental Impact Statement (EIS) if impacts are significant. So the product of this task force may have reg writing implications.

The Task Force is composed of career federal employees from DOE, NOAA, the Army Corp of Engineers, USFS, BLM, DOT, USGS, and EPA. It's asking for public input and "best practice" ideas on six NEPA preparation topics: (1) more effective use of technology, information management, and information security, (2) Federal cooperation with other governments, (3) a look at the more effective use of programmatic analyses, (4) adaptive management, monitoring, and evaluation plans, (5) categorical exclusions, and (6) additional areas for consideration.

The Task Force is accepting comments until this Friday (August 23), and is supposed to complete its report sometime in November 2002. The comments will be Internet accessible after the comment closing date. There are details on the Task Force, including a link to the July 9 2002 Federal Register notice and request for comments, at the Task Force's web site: NEPA Task Force announcement from the Federal Register. There's also an Internet based form for making comments on the NEPA process to the Task Force.

Jim Barnett of the Newhouse News Services notes (in this overview article on the task force): Bush Administration Reviews Landmark Environmental Law that some environmentalists have concerns about the process. One object of the working group is to look for ways to use categorical exemptions and programmatic analyses to make the NEPA process more efficient.

Categorical exclusions (CE, or catex) exempt a federal action from EA or EIS analysis when an action can be certified not to have significant environmental effects. These exemptions can be a valuable time-saving tool when environmental impacts are not signficant, but environmentalists are going to be sensitive to changes in the rules which exempt more projects more easily from the NEPA analytical requirements.

Programmatic analyses are NEPA analyses conducted for an overall program. Specific actions subsequently undertaken as a part of that program still require a NEPA analysis, but time and effort can be saved by tiering off of the original programmatic analysis (drawing by reference on issues already analysed in the programmatic). Environmentalists may worry that issues may get lost in the cracks between the programmatic and the project analyses; new procedures that make it easier for agencies to use programmatics may exacerbate any problems.


posted by Ben Muse at 1:58 PM

 

Comparing income growth across countries

Thursday's New York Times had a good column by Virginia Postrel on international comparisons of income distribution: "The Rich Get Rich and Poor Get Poorer. Or Do They?.

Many statistical reviews compare average incomes in different countries and produce results suggesting increasing divergence in income levels between rich and poor countries. Postrel points to research by Xavier Sala-i-Martin, an economist at Columbia, who looked at changes in income distribution by focusing on individual people rather than country averages. Selected paragraph:

""Treating countries like China and Grenada as two data points with equal weight does not seem reasonable because there are about 12,000 Chinese citizens for each person living in Grenada," writes Professor Sala-i-Martin in "The World Distribution of Income (Estimated from Individual Country Distributions)." That is one of two related working papers for the National Bureau of Economic Research. (The papers are available on Professor Sala-i-Martin's Web site at www.columbia.edu/~xs23/home
.html.)"

And in fact, incomes in China (and India), very large countries, have been rising rapidly. An individual based rather than country based analysis is much more optimistic. The column doesn't go into a lot of comparative details.

The Economist had a column on Xavier Sala-i-Martin's arguments in mid-July: "Convergence Period". They summarize Martin's results as follows:

"Mr Sala-i-Martin agrees that inequality has probably increased, on average, within countries. The picture is not clear-cut, however. Inequality has gone up in some countries and down in others. (Rapid globalisation does not push all one way: emerging-market globalisers such as South Korea and Indonesia have seen inequality fall.) On the whole, though, the author reckons that within-country inequality has most likely gone up during recent decades.

"What about inequality across countries? On this, the UN neglects an important point. If you measure incomes in terms of purchasing power rather than at market exchange rates, incomes are a lot more equal. (The reason is that the cost of living is lower in poor countries.) When the UN says that the incomes of the richest 20% were 30 times bigger than the incomes of the poorest 20% in 1960, and 74 times bigger in 1997, it is using market exchange rates. In purchasing-power terms, the corresponding ratios were 11 and 15. Despite the fall after 1980 (when the ratio was 16) the trend for the period as a whole is nonetheless up."

Sala-i-Martin's has more details at his website which I highly recommend for its entertainment value alone.

Here are two approaches to measuring income inequality. Which is more valid? Are they each valid, but for different purposes? Why does the UN use the first, and report only on it?


posted by Ben Muse at 1:45 PM

 

John Graham of OIRA

The Public Citizen Graham Watch & Bush Administration Threats website has a lot of materials on John Graham and his administration of the OMB Office of Information and Regulatory Affairs (OIRA) from a liberal point of view.

A link at the Public Citizen site takes you to a Congressional Quarterly profile on John Graham from this past February by Rebecca Adams: The New Ruler of Rulemaking.

Graham is an economist in his late 40s, a graduate of Wake Forest, Duke and Carnegie Mellon. He spent most of his career at Harvard where he was the director of the Center for Risk Analysis at the Harvard School of Public Health from 1989 to 1991. He had been a controversial, but I think respected, advocate of greater use of cost-benefit and risk analyses in public policy decision making with respect to public health issues. He was selected by Mitch Daniels (I posted on Daniels on July 24) for OIRA. His appointment was controversial, (Public Citizen opposed him and many of the materials at the site above date to the nomination period). The Senate approved him 61-37 - this was the second closest vote for all of Bush's appointments. He's been in office since last July.

The Congressional Quarterly article on Graham was published last February and has some information on his career and a review of his tenure at OIRA up to that time (about seven months). The article discusses a number of tools Graham has been using, sometimes novel tools or available tools used in more aggressive ways.

Among the tools used more aggressively is OIRA review of regulations and supporting analyses. OIRA has shown an an increased willingness to return analyses to agencies with accompanying return letters if OIRA has objections to the analytical work. This article is about five months old now, and may be somewhat dated in this respect - OIRA hasn't generated any return letters since about the time the article was published. The article notes that OIRA's aggressive use of return letters was prompting agencies to be more proactive with OIRA on regulations: "Worried agencies, hoping to avoid his 'return letters,' are getting in touch with Graham, seeking his guidance on prospective rules. That pattern of early involvement, once established, could well linger beyond one administration....What we've been working on," Graham said in an interview at his office, "is to create an incentive for agencies to come to us when they know they have something that in the final analysis is going to be something we're going to be looking at carefully...."And I think that agencies that wait until the last minute and then come to us-well, in a sense, they're rolling the dice." (page 521).

posted by Ben Muse at 12:00 PM

 
Eldred v. Ashcroft

I posted some information on this Supreme Court case on July 15 . The U.S. “Sonny Bono Copyright Term Extension Act of 1998” was passed and signed in 1998. This law extended the length of copyright protection from “the life of the author plus 50 years” to “the life of the author plus 70 years.” It also extended copyright protection retroactively to existing works. Eldred v Ashcroft challenges various provisions of the act.

The July 15 posting summarized an economic analysis submitted to the court by 17 distinguished economists. This post takes the opportunity to draw your attention to various other items: (1) the case home page maintained by Eric Eldred - the Eldred in the title, (2) an August 13 blog posting by Brad DeLong on this case, with a link to another resources page, (3) an August 17 blog posting by Brad DeLong, with material by one Lawrence Lessing, a professor at the Stanford Law School, on some of the implications of the case (and an interesting discussion of how our current restrictive copyright law might have affected the evolution of Mickey Mouse).
posted by Ben Muse at 11:22 AM

 

More paperwork...

"Washington, D.C. (SatireWire.com) — Already frustrated by seemingly endless delays, U.S. officials today conceded a confusing knot of new Iraqi regulations that require "non-resident aggressors" to obtain hundreds of federal and provincial pre-invasion permits and licenses will further postpone any attack on Saddam Hussein....."

For more details click here: SatireWire | U.S. ATTACK DELAYED BY MORE IRAQI RED TAPE.

This was brought to my attention at The Buck Stops here.

posted by Ben Muse at 4:15 PM

 

It can't happen here?

Japan has been in the economic doldrums since the late 1980s. Paul Krugman has an op-ed in today's New York Times discussing current events in the U.S. and how they compare to the events that whipsawed Japan: Mind the Gap.

Krugman:

"...Back when I first got professionally obsessed with Japan's problems, around four years ago, I made myself a mental checklist of reasons that Japan's decade of stagnation could not happen to the United States. It went like this:

"1. The Fed has plenty of room to cut interest rates, which should be enough to deal with any eventuality.

"2. The U.S. long-term budget position is very strong, so there's plenty of room for fiscal stimulus in the unlikely event interest rate cuts aren't enough.

"3. We don't have to worry about an Asian-style loss of confidence in our business sector, because we have excellent corporate governance.

"4. We may have a stock bubble, but we don't have a real estate bubble.

"I've now had to strike the first three items off my list, and I'm getting worried about the fourth...."



posted by Ben Muse at 12:32 PM

 

John Graham and OMB's Office of Information and Regulatory Affairs

The Wall Street Journal has a short squib about John Graham, who heads OMB's Office of Information and Regulatory Affairs (OIRA - the OMB office responsible for review of federal regulations): "Amid rising public anger at corporate executives, Democratic Sen. Durbin of Illinois prods the General Accounting Office to examine the influence of "outside parties" over decisions by administration regulatory czar John Graham. The GAO asks federal regulators to describe how Graham has decided which proposed rules merited "high priority" review."

The short story in the "Washington Wire" column by John Harwood (page A4) suggests the GAO probe was triggered by OIRA's rejection of the tire pressure monitoring rule a few months ago (we discussed it in class - go here for a copy of the return letter). The story also suggests that Graham will figure in a debate this fall over a proposed rule with a rating system to "assess vehicles' propensity to roll over."

posted by Ben Muse at 12:12 PM

 

How much is enough?

From the "Premium Blend" weblog via Brad DeLong's weblog:

Semi-Daily Journal: Sated?.


posted by Ben Muse at 7:06 AM

 

Iraq again

The Wall Street Journal has a column today by former National Security Advisor Brent Scowcroft on the possibility of a war with Iraq. This is worth while. Just one reason to like it - he works from the assumption that Saddam is rationally pursuing a set of goals and asks what this implies for the actions we should take. I get tired of hearing how we're dealing with a crazy man; he may be bad, but he is systematically and rationally pursuing his goals. I was disappointed to be reading a print edition that I couldn't link to - but at lunch I saw that Brad DeLong has a link to the complete text. Not economics, but DeLong has one of the premier economics weblogs and he thinks it's worth while, so...Brent Scowcroft, "Don't Attack Saddam" from the Wall Street Journal, August 15.

posted by Ben Muse at 12:27 PM

 

How to stop email spam

Economist David Friedman offers a suggestion at: Tech Central Station: "Mail Me the Money!"

I learned about this one from the AmateurEconomist blog.
posted by Ben Muse at 7:39 PM

 

Relative Efficiency of Public and Private Arctic Exploration

Jonathan Karpoff compared public and private 19th Century Arctic exploration efforts, and found that the private sector did better: "...despite greater funding, public expeditions achieved fewer major Arctic prizes, suffered greater losses, and performed more poorly than private expeditions." (pg 63). (See the post on July 31.) Why was this the case?

Three reasons: "...compared to private expeditions, many public expeditions (i) had unmotivated and unprepared leaders, (ii) had poor leadership structures, and (iii) were slow to adapt to new information." (p 63). Ultimately he finds these grounded in incentive problems.

Leader preparation and motivation His review of the 92 private and public cases he collected indicated that the leaders of private expeditions were generally better motivated and prepared. With respect to motivation, private explorers generally wanted to be there. "Even relatively unprepared private leaders had strong desires for Arctic exploration.....Many leaders of government expeditions, in contrast, had little direct knowledge of, or interest in, Arctic exploration." (p 63) The leader of a British navy expedition in the 1870s "...went north not because of any particular interest in the job, but rather because he had been appointed and he sought promotion..." (p 63-64)

Leadership structure Leadership structure - specifically the division of responsibilities between the persons who started a project and those who carried it out - appears to have been important. Initiation and execution functions appear to have been combined much more often in private than public expeditions. "...the persons initiating and organizing public expeditions actually led them only 25.7 percent of the time. For private expeditions, in contrast, the percentage is 77.2 percent." (p 64) The impact on incentives: "Because they did not actually go on the trips, the organizers of public expeditions faced few of the negative consequences of poor planning or erroneous theories." (p 64). Karpoff places this next point under use of information, but maybe it belongs under leadership structure as well. He notes that, "Private expedition leaders appear to have adopted nonhierarchical organizations more frequently than public expedition leaders. Rae, Kennedy, Nansen, and Amundsen, for example, all solicited and used information from their crew, delegated some decision authority to their men, and participated in menial tasks. This is in contrast to the strict hierarchical structures maintained on many government expeditions..."(p 69).

Adaptation and learning Private expeditions, possibly because of the experience and motivation of the leadership and the non-hierarchical leadership structure, were quicker to make use of new information and new techniques than public expeditions. Private expeditions were quicker to make use of native clothing, snow houses, dog sleds, good dog sled design, small party size, scurvy reducing diets, and valuable geographic information. To take one issue, snow houses: "A skilled traveler, Rae claimed, could construct a snow house large enough for five men within one hour. The snow house could be used again on the return journey and was warmer than the canvas tents most explorers carried...All the expeditions in my sample that used snow houses extensively were privately organized and funded. The others relied on canvas tents and cloth sleeping bags, which would freeze stiff with condensed water vapor." (p 66)

Karpoff links these various problems to the issue of incentives. "...many of the public expeditions' problems lay with the poorly aligned incentives of key decision makers. Expedition leaders were appointed by senior officials who were motivated by political objectives in addition to expedition success and did not suffer severe consequences for expedition failures. Many leaders themselves were motivated by the promise of promotion, which accompanied but did not require success as explorers....Poor incentives could affect not only an expedition's leadership but also its provisions and the selection of its crew. As a result, even skilled leaders were rendered ineffective by governmental control of important decisions...Conflicting incentives impeded the flow of information to expedition leaders. The official accounts of many British naval expeditions, for example, downplayed the incidence and risk of scurvy, partly as a means to safeguard public support for the expeditions." (p 69)

Check the July 31 note, linked above, for the full reference for this article. (This and other journal articles, not available through JSTOR, are easily available to UAS students through the Egan Library's excellent interlibrary loan service. I received this article about 48 hours after I ordered it; someone had evidently scanned it from the journal, and I received it at home on my computer as an electronic PDF file. If you want to use this service, click here.)

I have some questions. Did the results of polar exploration have some of the characteristics of public goods (non-rival consumption and excludability)? If they were a public good, would the private sector have failed to provide the polar exploration? Why, or why not? Was this a market failure that could have been rectified by government intervention? What does this article say about the relative efficiency of public and private production? Can the results of this analysis be applied to a comparison of the efficiency of production by a large public bureaucracy and a large private bureaucracy (say Con Ed and New York City)? Why or why not? How could public administration be structured to combine initiative and execution? How could it be structured to obtain the benefits of a nonhierarchical organization? What are the implications for personal leadership in a public organization?




posted by Ben Muse at 8:39 AM

 

War with Iraq

I will normally try to focus this blog on my chosen topics (microeconomic policy analysis, natural resource policy, and regulation). But this blog essay by Donald Sensing on Iraq is about such an important issue, is so well done, (and does deal with public policy, and with manpower and logistics, the economic underpinnings of war), that it deserves a mention here: Fighting a winter campaign in Iraq

posted by Ben Muse at 12:50 PM

 

NEPA resource

I've got the National Environmental Protection Act (NEPA) on the brain this week.

The Department of Energy's (DOE) quarterly "Lessons Learned" newsletter is a great resource. It has about 20 pages of news items on ongoing NEPA events, training sessions, reflections on experience, book reviews, and so on in each issue. Much of it from a DOE perspective, but lots of useful stuff generalizable to other agencies. You can access the archive of issues at the NEPAnet web site: Lessons Learned.

One interesting item from the June 2002 issue suggests the scale of NEPA analysis at DOE, and the relative scale of an EA compared to that of an EIS. For the 12 months ending on March 31, 2002, the median completion time for 25 EAs was 8 months; during the same period the median completion time for 6 EISs was 22 months. For the same 12 month period, the median cost for 19 EAs was $80,000; during the same period, the median cost for three EISs was $1.5 million. (page 15) There is not much supplementary text, but I assume that the numbers of EAs and EISs differ for the time and cost information because both types of information were not available for all reports.


posted by Ben Muse at 9:16 AM

 

One world and war

Globalization of trade may have helped prevent the war between India and Pakistan says Tom Friedman in Sunday's New York Times:".....This story starts with the fact that, thanks to the Internet and satellites, India has been able to connect its millions of educated, English-speaking, low-wage, tech-savvy young people to the world's largest corporations. They live in India, but they design and run the software and systems that now support the world's biggest companies, earning India an unprecedented $60 billion in foreign reserves — which doubled in just the last three years. But this has made the world more dependent on India, and India on the world, than ever before....."

Click here for the full article: India, Pakistan and G.E.

Friedman suggests that war might have been prevented, for now, because the information based industries, which had found a home in India, would have been lost - along with their foreign exchange- by a war with Pakistan. Would other, less mobile, industries have created lower opportunity costs for the war option?


posted by Ben Muse at 7:12 PM

 

The vocabulary lesson

I’m reading A First Glance at St. Thomas Aquinas. A Handbook for Peeping Thomists by Father Ralph McInerny (University of Notre Dame Press, 1990). An introductory book – I thought it would be an easy starting point. A good book, it’s not all that easy.

But one thing I think I understand – the distinction St. Thomas makes (following Aristotle) between what he calls the univocal, equivocal, and analogical uses of words. A word is used univocally if it means the same thing in each of two uses. A word is used equivocally, if it means different things in different uses. A word is used analogically if it means different things in different uses, but the meanings are related through some underlying common referent. When we say either, “The big dog barks,” or “The small dog barks,” we’re using the word “bark” univocally; it means the same thing each time. When we say either “The big dog barks,” or “The tree’s bark is thick,” we are using the word equivocally; it sounds the same in each instance, but has two unrelated meanings. When we say either, “The big dog barks,” or “The sergeant barks out an order,” we are using the word analogically; it means different things, but the meanings have an underlying relationship – the sergeant’s order is short and abrupt, like a dog’s bark, the sergeant doesn’t literally bark like a dog.

This registered with me, because it struck me that this lies behind a lot of the miscommunication between economists and ordinary people. People mistake analogical uses of words with univocal uses. I don’t think equivocal uses are really a problem. But when economists say “value” as economists they mean something different than when regular people say “value.” The meanings have an underlying referent, but they are different. An economist talks about the value of reducing the risk a species will be lost, meaning only the willingness of people to sacrifice for it, and people misunderstand and say "the economist knows the price of everything and the value of nothing," meaning only value in some sort of ethical sense.

This problem crops up with a lot of words besides value. For example, think about the possible definitions and connotations of the word “marginal”: (a) we might say that a business is marginal, meaning that it is just barely (or possibly not) profitable or breaking even; (b) we might say that a person’s behavior is marginal, meaning that it may just barely be acceptable; (c) it might mean unimportant or almost irrelevant to a process – “a person’s contribution was marginal at best”; (d) it might mean on the fringes of, or not fully integrated into – “they lived on the margins of society”; (e) there is the economist’s use to refer to a small or incremental change; (f) there is a connotation in the general use of the word to – something marginal is not good, its kind of a negative word (although not in its economic use). . All the uses seem to be related analogically – related to some underlying concept of "the edge.” But all of them are different, the word is not used univocally. A student brings all of this baggage of other meanings to the class on marginal analysis and I assume will be trying to integrate my definition and use of the word to this pre-existing understanding. God knows what the results must be.

I think I need to address this head-on in my claseses. Instead of simply providing the economic definition of the word in the technical sense I use it - as I have done in the past, I need to try and get the students to discuss the various meanings the word might have in different contexts. Then as I work out the economic definition, I need to use the results of this discussion to highlight the distinctiveness of the economic definition.

posted by Ben Muse at 2:11 PM

 

NEPA: not at sea?

The Bush Administration is arguing in court that the National Environmental Policy Act (NEPA) doesn't apply to Federal actions in U.S. waters between three and 200 miles from shore. If the Administration is successful, this could have important implications for people writing regulations dealing with those waters (fishery regulations for example).

John McQuaid had a story on this in the New Orleans Times-Picayune yesterday: "WASHINGTON -- In what could result in a major change in U.S. policy toward the oceans, the Bush administration is arguing that a key environmental law should no longer be applied to activities that take place outside the 3-mile limit of U.S. territorial waters.........." Go to Bush Team Seeks Change in Key Environmental Law for the full story.

Katherine Seelye follows up with a report in today's New York Times: "WASHINGTON, Aug. 9 — The Bush administration is arguing that a major environmental law does not apply to the vast majority of oceans under United States control, a move that environmentalists say could allow military maneuvers, oil and gas pipelines, commercial fishing, ocean dumping and scores of other activities to escape public environmental review...." Connect to the article: U.S. Seeks to Limit Conservation Law.

posted by Ben Muse at 11:09 AM

 

Data Quality Act

This is important (for reg-writing students): the Data Quality Act is going to kick in on October 1. This law was passed quietly, apparently without much debate, a year or so ago as a rider on an appropriations bill. It will impose new requirements on NEPA, Reg Flex, E.O. 12866, and other analysis associated with the development of new rules. Some see it as a way to give interested parties another tool to slow down or derail rulemaking they don't want.

If you want some easily digestible background try this story from the New York Times. The Office of Management and Budget published guidelines for the act in February and you can find them here. Agencies are supposed to have their own guidelines in place by October 1. You can link to a set of agency guidelines at the Center for Regulatory Effectiveness. The Center is a strong advocate for the Data Quality Act and you can find other materials at their site. For a more skeptical take on the Act, you can check out the OMB Watch site here.

posted by Ben Muse at 7:00 PM

 

How much has the "Enron" scandal cost?

"Washington (July 25, 2002) — A new report from the Brookings Institution estimates that the Enron and WorldCom scandals will cost the U.S. economy approximately $37 to $42 billion off Gross Domestic Product (GDP) in the first year—assuming the market does not recover from its July 19 level or drop substantially below it. Even with the July 24 rebound, the market remains close to that level." (Brookings press release)

The authors of the report think this is equivalent to the hit the economy would take from a $10 increase in the price of a barrel of oil. Link here:Brookings Study Details Economic Cost of Recent Corporate Crises

I learned about this study from Brad DeLong's web site. DeLong thinks the authors may have missed some of the costs!
posted by Ben Muse at 6:42 AM

 

Perverse incentives II

This may be a good item to use at the start of the "Economics for Public Managers" class (intro to economics to meet the prerequisite - offered summer, 2003) in order to motivate a discussion of incentives.

A first-rate book on law and economics - any student in the MPA program will find it readable - is David Friedman's Law's Order. What Economics Has to Do with Law and Why it Matters. Friedman's first chapter starts:

"You live in a state where the most severe criminal punishment is life imprisonment. Someone proposes that since armed robbery is a very serious crime, armed robbers should get a life sentence. A constitutional lawyer asks whether that is consistent with the prohibition on cruel and unusual punishment. A legal philosopher asks whether it is just.

"An economist points out that if the punishments for armed robbery and for armed robbery plus murder are the same, the additional punishment for the murder is zero - and asks whether you really want to make it in the interest of robbers to murder their victims."

I was reminded of this by these paragraphs from a story by Tom Harrigan in today's Washington Post, (Teen Girls Tried to Kill Abductor). Ratliff was the kidnapper, Sparks is Carl Sparks, Kern County Sheriff:

"Ratliff, who was wanted on an October 2001 rape charge and would have faced life in prison if convicted of that crime, had nothing to lose and would have killed the girls if officers had not arrived, Sparks said earlier Thursday.

""He was a two-striker. He was going to prison for the rest of his life. He had nothing to lose. He needed to get rid of those girls," Sparks said.

"Ratliff was shot after pointing a gun at one of two deputies who were first to reach the scene, authorities said. The deputies fired 17 shots in all.

""Those two girls are safe and I honestly believe they were probably 10 minutes away from being killed and buried out there somewhere in that ravine," the sheriff said.

"Ratliff was wanted for allegedly raping a 19-year-old relative in October. Under California's three-strikes law, he was facing life in prison if convicted"


posted by Ben Muse at 1:29 PM

 

Perverse incentives

This has to do with EPA's approach to the Regulatory Flexibility Act (RFA), and how that approach changed when the RFA was changed in 1996 (this is the SBREFA referred to in the quote below). Remember that the RFA requires agencies to look at the impacts of new regulations on small business. If an agency has to publish a notice of proposed rulemaking, it has to either (a) certify that the rule will not have a significant economic impact on a substantial number of small entities, or (b) it has to prepare an analysis of the impacts the regulation will have (this analysis is called an IRFA).

A recent General Accounting Office (GAO) report tells how a new requirement, imposed on the Environmental Protection Administration (EPA) by a change in law in 1996, changed the incentives for EPA to certify (the GAO argues that a provision meant to provide more protections for small business actually led to fewer studies of the impact of regulations on small businesses):

"...Its [EPA's , Ben] four major program offices certified about 78 percent of the substantive proposed rules that they published in the 2 ½ years before SBREFA took effect in 1996, but certified 96 percent of the proposed rules published in the 2 ½ years after the act’s implementation. In fact,two of the program offices —the Office of Prevention, Pesticides and Toxic Substances and the Office of Solid Waste —certified all 47 of their proposed rules in this post-SBREFA period as not having a significant impact. The Office of Air and Radiation certified 97 percent of its proposed rules during this period, and the Office of Water certified 88 percent. EPA officials told us that the increased rate of certification after SBREFA ’s implementation was caused by a change in the agency ’s RFA guidance on what constituted a significant impact. Prior to SBREFA, EPA ’s policy was to prepare a regulatory flexibility analysis [an IRFA, Ben] for any rule that the agency expected to have any impact on any small entities. The officials said that this guidance was changed because the SBREFA requirement to convene an advocacy review panel for any proposed rule that was not certified made the continuation of the agency ’s more inclusive RFA policy too costly and impractical. In other words, EPA indicated that SBREFA —the statute that Congress enacted to strengthen the RFA — caused the agency to use the discretion permitted in the RFA and conduct fewer regulatory flexibility analyses."

From the statement of Victor Rezendes, Managing Director, Strategic Issues Team, General Accounting Office (GAO) to the House Committee on Small Business, March 2002. Available from the GAO web site as GAO report GAO-02-491T: "Regulatory Flexibility Act. Clarification of Key Terms Still Needed."
posted by Ben Muse at 8:09 PM

 

Non-verbal communication

Noted economist Hal Varian has a column on auctions in today's New York Times: "Tales of Manipulation and Design" .

In one sense it's about the optimal design of auctions - and of interest to public administrators who may have to auction off surplus, or write regulations to dispose of the electromagnetic spectrum, individual fisherman's quotas, or transferable pollution rights. It can also be read as a lesson in non-verbal communication, for example:

"In the mid-1990's, two telephone companies were in a bidding war in a spectrum auction for Lot 378 in Rochester, Minn., generally bidding in round numbers. One company suddenly bid $313,378 and $62,378 on two other lots in Iowa that the second company thought it had won. The message there was also clear: stop bidding on Lot 378 or we will drive up the prices of other lots you really want."

Well worth your time!

posted by Ben Muse at 7:50 PM

 

Voting paradoxes

In "Economics of Public Policy" we talk about the paradox of voting, intransitive preferences for groups of voters, and voting cycles. On March 2 this year, Tim Egan had an article in the New York Times titled They Give, but They Also Take: Voters Muddle States' Finances. The article highlights some voting paradoxes, whether illustrating intransitive group preferences or not, I don't know. Good article - the first two paragraphs:

"PHOENIX, March 1 — The voters of Arizona have spoken. They want lower taxes. They also want higher taxes — but only if they go to the state's beleaguered public schools, consistently ranked among the worst in the nation.

"The people of Colorado have spoken as well. They passed a constitutional amendment that limits how much state government can spend or take in, even in flush times. But then a few years later they passed another amendment, calling for guaranteed annual increases in education spending. Pay for it however possible, the voters seemed to be saying, but do not raise our taxes........."



posted by Ben Muse at 4:42 PM