Saving the Global Environment: Climate Change and the Carbon Limit

As of late the global environmental debates have been receiving much attention. Leonardo Dicaprio, a leading environmentalist and well-known actor, even spoke at the UN just 2 months ago about dealing with climate change. Moreover, 2014 is going to be a record year for CO2 emissions. However, this isn't entirely an American problem. In fact, it is more a problem with growing economies and developing countries. In America, greenhouse gas levels have gone back down to 1990s levels and coal emissions dropped to 1980s levels. However, there have still been a 2.5% emissions increase. This is because of the countries that do not have to sign climate treaties like China, India, and Mexico. Because of their rapid levels of manufacturing and production, they are heavily contributing to pollution that is going to cause climate change above the 2 degree (C) safeguard. Based on current levels of carbon emissions, globally, we will reach the carbon limit in 30 years. This will create unprecedented heating, causing sea levels to rise and increased intensity of natural disasters among many other issues. Consider numerous species going extinct due to changing conditions. The negative externalities are endless.

Solutions may not be so easy in this space, but there are a few places we can start. The first is to admit that there is a problem in the first place. Dicaprio addressed world leaders in his speech to the UN and said, "I pretend for a living, but you do not." With this admission, should come education. People in developing countries may be trying to achieve economic growth, but the long-run outcome can be detrimental to the economy if there is are environmental crises. Additionally, people in well-established nations like the United States are not really taught about environmental conservancy--the conservative mentality may be something people pick up over time. I think, however, that it is important to teach these pressing topics starting at the grade school levels in science classes. There are some policy initiatives that have been in place that I do think are effective. One is carbon price commitments--putting a price tag on carbon emissions. However, I do not think that this should work solely, but in conjunction with carbon caps--or a limit to the overall amount of carbon a nation can produce. This would create a market for carbon emission trading but keep it regulated so as to not allow any one country to overproduce simply because it can. Next, leaders need to work with countries like China, India, and Mexico to abide by climate treaties. Additionally, on what some might consider to be extreme, subsidies for oil, coal, and gas should be eliminated. This hasn't been instated but I believe it is something that is necessary--the government should not support climate deteriorating activities. Finally, companies should start putting an actual value on the externalities they exhibit. Puma is a great example of a company that has actually done this. It has valued its externalities based on greenhouse gas emissions and water runoff from the companies operations. If companies start valuing nature itself and the effect they have on it, then things could actually begin to change.

-Neal Patel

Sources:

http://www.science20.com/news_articles/30_years_left_to_reach_the_limit_co2_emissions_will_reach_new_record_high_in_2014-145321

http://www.theguardian.com/environment/video/2014/sep/23/leonardo-dicaprio-un-climate-change-summit-speech-video

http://www.ted.com/talks/pavan_sukhdev_what_s_the_price_of_nature?language=en#t-737103

Oil Prices and The United States - James Woodruff

Oil prices are below $80 for the first time (outside of this month) in years. What does this mean for the U.S.? The vast majority of Oil and Gas production in the United States involves the new technology of fracking. However, fracking is more expensive than more traditional methods. Many industry specialist believe a price of $75 or lower will result in a draw back in exploration in production. What does this mean for the U.S.? Reduced production requires us to increase energy imports, increasing our reliance on other countries. However, a reduction in production results in a reduction in supply (holding alternative production constant) resulting in an increase in price - essentially removing the less secure production efforts. The real question is: is this necessarily a problem? It is the natural evolution of a market to remove the weaker players.

What policies can counter act falling prices? There is already a negative production externalities revolving around Oil and Gas production (pollution to name one). We could implement a "carbon" tax that traces your emissions and taxes you accordingly. Such a tax could be implemented once the O&G price falls below a certain level, say $75, which would remove a lot of the pressure on production companies when the price inevitably falls. 

Changing Legislation on Psychoactive Drug Research – Ali Haq

It has been an incredibly long time since a new psychiatric medication (something that would treat the likes of depression or schizophrenia) has been discovered. Many believe that this is primarily due to the bans that the U.S. government has placed on research related to analyzing the potential beneficial effects of psychoactive drugs (one of the most common being lysergic acid diethylamide, colloquially known as "LSD"). Many point to any advances in current medicine as being at a standstill because of this. For instance, statistics show that medication to treat depression is still only as effective as the drugs that were produced for use in the 1950s. It is truly staggering to know how much our innovation has slowed down in this regard. Over 14 million Americans suffer from depression, and public policy is failing this populace if it cannot utilize the resources that are at hand.

The problem, of course, lies in the cultural connotations that many of these drugs have. Ecstasy, LSD, marijuana, psilocybin (mushrooms), etc. have all been chastised as dangerous and essentially drugs that are prone to being abused. However, all of these drugs have a history of being used as ways to medically treat issues such as depression, dating back several years. In fact, in the 1960s, many scientists were analyzing and rigorously conducting trials to obtain the benefits of these drugs for medicinal use. Unfortunately, this was all put to an end by policy and legislation imposed in the nation as well as internationally. At the head of this was "The Controlled Substances Act of 1970", which essentially stated that these sorts of drugs did not belong in medicinal care. This has led to the standstill we see to this day, because of what was mostly just a cultural notion that was extrapolated into legislation.

It should be our goal to end this type of legislation, as the benefits of various drugs can only truly be harnessed if scientists are able to conduct tests and lab investigations on them. It is truly ironic when doctors can recommend marijuana as a medical treatment, but scientific researchers cannot legally study the actual effects in a lab.

Sources:
http://nymag.com/scienceofus/2014/08/governments-disastrous-drug-research-ban.html
http://www.reuters.com/article/2012/05/31/us-drugs-science-research-idUSBRE84U0DX20120531
http://www.scientificamerican.com/article/end-the-ban-on-psychoactive-drug-research/

Another Minimum Wage Post { Emma Catlett }

I had a conversation today with Ms. Anne, a lovely and well-known Vanderbilt Dining worker who is one of the leading voices in the OUR Vanderbilt movement, which is currently fighting for an increase in the minimum wage for Vanderbilt workers. She had just returned from the weekly union negotiation meeting with the University and was obviously tired and unsettled. She talked about her struggle comprehending with the polar opposite views of many of the decision makers in the room. To her, being "pro labor" was absolutely the most logical, ethical stance. I decided to do a little research about the Living Wage movement after speaking with her.

There are many valid concerns with raising the minimum wage to meet a "livable standard." A widely published professor at MIT developed a Living Wage calculator that breaks down the minimum monthly expenses of various household sizes for survival and suggests a wage rate that will satisfy those needs after taxes. In Metro Nashville, which has a flat minimum wage rate of $7.25, the living wage rate is calculated to be $22.07. If living wage advocates want to decrease this huge gap, they have a long way to go.

Opponents of raising the minimum wage have three major concerns: employment effects, price effects, and distorted distribution of benefits. Numerous studies (see Center for Economic and Policy Research report) have debunked the notion that increasing the minimum wage will simply cause employment to decrease as firms substitute labor for capital or simply hire less labor. One preventative factor could be higher prices offsetting increased labor costs, which may in fact hurt those the policy was intended to help. Lastly, David Neumark (see the Wall Street Journal link) explores the counterintuitive distributive effects of a rise in the minimum wage. He suggests that a good portion of those earning below the proposed minimum wage rate are actually not poor. Data from the Census Bureau shows us that only 17% of minimum wage earners in the early 2000s were in poor families. This means that a rise in the minimum wage might disproportionately benefit families who are not income poor.

It's proponents argue a higher minimum wage will help stimulate the economy by increasing disposable income. However, an Economic Policy Institute report finds that a minimum wage increase to $9.00 would only increase total spending by $10 to $20 billion. Proponents also assert that raising the minimum wage will improve labor productivity by decreasing labor turnover.

Christina Romer in her article for the New York Times writes that increasing the minimum wage is merely one policy option aimed at improving the lives of the poor, and it is not the best option. It is likely to benefit many poor families, but it does not accurately target poor families to create an efficient use of dollars.

-http://livingwage.mit.edu/
-http://www.nytimes.com/2013/03/03/business/the-minimum-wage-employment-and-income-distribution.html?pagewanted=all
-http://online.wsj.com/articles/who-really-gets-the-minimum-wage-1404683348
-http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

Financial Pressures on Students Beginning to Decrease

Studies have been released this week that show that after several years of steep increases in the cost of attending college and student debt, the real costs of college and student borrowing have plateaued. The increases in costs for students between the years 2005 and 2013 became both major economic and public policy concerns for the United States. Though this news of leveled pricing cannot be assumed a permanent change, the lower costs provide hope that obtaining a higher education will not be such a daunting financial burden for students. 

The research conducted on college costs looked primarily at public colleges and universities in the United States. The nearly doubling of four-year state school tuition between 2001 and 2013 was due in part to government cuts to state education aid and tuition rose to $9,000 for in-state students. Due to political pressure to stop price increases, many schools like the University of California and the University of Texas have initiated price freezes and state governments have made efforts to restore some of the support they withdrew during the recession in 2008. The government grants and price freezes result in an average published price increase of only 1 percent after inflation, drastically down from prior years. On the other hand, actual tuition prices paid by students, after financial aid and grants, went down during the 2013-2014 decreased from previous years by 4 percent after inflation and room and board increase by one 1 percent. The average tuition price changes do not apply to private nonprofit colleges since prices increase yearly, but taking into account inflation, the average net prices remain relatively steady. Student debt has overall dropped both in public and private colleges.

Andrea Garcia 

Oil and Gas Matthew Wilkes

It can be argued that a large part of America’s recovery came through the American Energy Resurgence (largely due to fracking). Over the last couple of weeks, the effects of American Energy companies’ incredibly impressive energy production has led to some unintended consequences: oversupply of the market. Currently, the price of oil has dropped significantly over the last couple of months, with the West Texas Intermediate (WTI) hovering around $78 and the Brent Crude Oil at $83. This creates losers and winners: energy companies will obviously be hurt as their product’s value has diminished, but consumers will benefit due to lower gas prices (more money in their pockets to spend on others items). Additionally, lower energy costs means that more businesses can conduct themselves more cheaply (especially agriculture). Interestingly enough, a 10% change in oil prices is associated with a .2% change in global GDP.  In America, the results are going to be more confusing because it is the world’s largest importer, producer, and consumer of oil all the same time.

            Thus the question becomes, does Congress intervene to push up oil prices (either by restricting production/sale in America or restricting importation of oil, further propping up an already heavily subsidized industry) in an effort to prop up energy companies or does Congress allow the free market to work itself out? For the sake of argument, lets conduct a simple cost-benefit analysis test. With the assumption that without policy intervention, the price of oil would fall to $70 (according to analysts at Goldman), this would result in a large cut back in US energy production as the expensive fracking techniques to extract and produce oil would no longer be economically worth it. This would imply that they would be the loser and your everyday consumer would be the winner. If policy intervened, and buoyed the price of oil around $80, it would allow the costly fracking techniques to continue, but would reduce the benefit of cheaper oil for the everyday American. The question becomes would individual firms conduct more business with cheaper energy to offset the loss of production of energy firms? I would recommend against Congress intervening, as it is likely to cause unforeseen distortions. It would likely cause a price war with foreign producers as we are artificially setting our prices.

http://www.nytimes.com/2014/11/05/business/daily-stock-market-activity.html?_r=0

http://online.wsj.com/articles/cheaper-energy-could-be-a-mixed-blessing-1414887778

http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics

Brian Wolgast - Accessibility of Casinos

            Recently, the owners of the Mohegan Sun casino in Connecticut have begun considering adding additional facilities in order to make gaming more geographically convenient for customers. This is being done in order to keep customers whom might be more attracted to new casinos being developed in nearby Massachusetts. The building of more casinos has become a hot topic among Connecticut politicians resulting in two sides: those who believe in the economic benefits of the casino, and those who do not want to further promote gambling problems and addictions.

            It has been found that increased accessibility of casinos can significantly increase the possibility of one growing a gambling addiction. Cheryl Chandler, interim executive director of the Connecticut Council on Problem Gambing, notes that “within 50 miles of a casino, the rates of pathological and problem gambling can double.” She goes onto note that adding new gaming facilities would almost certainly trigger a need for more education, counseling, and other support services to combat problem gambling. The good news to this issue is that the Mohegan tribe has been a valuable partner for groups concerned with problem gambling by supporting education and counseling services.

            On the other side, current law requires the state to assess the economic and social impacts of gambling in the state every 10 years. The last study undertaken in 2008 recognized the casino’s major contributions to the state’s economy in terms of employment as well as revenues to the state budget from taxes. The question now arises whether the government should intervene and attempt to block the Mohegan tribe’s efforts. As the new casinos develop in Massachusetts, will the loss in employment and revenues outweigh the potential social costs of problem gambling?

Source: http://www.courant.com/politics/capitol-watch/hc-ctm-problem-gambling-foes-say-ct-needs-new-study-on-addiction-20141113-story.html

Spencer Smith - Brazil Rules Out Stimulus

After the recent close re-election of President Dilma Rousseff, both Rousseff and the Brazillian government are rejecting the idea of an economic stiumulus, depsite the current struggles in both industry and finances. Instead of attempting to stimulate the Brazillian economy, Rousseff has stated that she plans to focus on rebuilding damaged ties with investors that have been burned in past selective stimulus plans. These plans, which attempted to revive the economy by reducing taxes and increasing subsidies, have fueled inflation and led to the increase in the current budget deficict. Rousseff's new plan for mending Brazil's economy is consisted of cracking down on inflation and cutting down on expenditures to improve the country's primary budget balance in order to avoid ending in a deficit, as well as lowering its key fiscal savings target for next year.

The main problem is that global ratings agencies have threatened to downgrade Brazil's credit rating if the government doesn't correct the current rate of inflation. The current high rate of inflation has many worried about the future financial health of Brazil, which has led to the frayed relationship between Brazil and both domestic and foreign investors. There's an old joke that says "they call Brazil the 'country of the future', because it always will be," but President Rousseff is doing everything in her power to avoid a such a fate for Brazil. Unforunately, fiscal experts doubt the government will be able to achieve these goals without serious increased taxes on gasoline and other industrial products.

Sources:

http://www.chicagotribune.com/sns-wp-blm-news-bc-brazil-econ27-20141027-story.html#page=2
http://www.reuters.com/article/2014/11/07/us-brazil-economy-measures-idUSKBN0IR21Y20141107

Should college athlete's be paid? -Adam Goodwyn

          Over the past several years, there has been much debate over whether or not college athletes should be paid. Proponents to reform believe that college athletes deserve to be paid due to the revenue that athletes' sports bring into their schools and the time that the athletes are forced to devote outside of the classroom. On average, college athletes dedicate 43 hours to their sport, which is more than an average work week. Add on classes and studying hours, and these athletes are working 70-80 hours a week at a minimum. Additionally, athletes' game schedules force them to miss classes and other educational resources provided throughout the school day. To put the numbers into perspective, in 2013, major conference college football coaches were paid, on average, $2.03 million, while college athletes earned nothing (Seattletimes.com). Nick Johnson, former point guard for the University of Arizona, earned an estimated $2.23 million for the university over his career. His 4-year $41,000 scholarship dwarfs in comparison (Tuscon.com). Good news came for proponents in August, as ex-UCLA basketball star Ed’ O Cannon won his federal legal battle. The ruling demanded that residual compensation be given for athletes’ popularity in videogames and broadcasts. It will be interesting to see if this ruling brings on a snowball effect for future reform.

            On the other side, opponents have two arguments. First, many argue that the education these athletes receive is not quantifiable and that they are students before they are athletes. Moreover, they argue that if athletes start being paid, it will only further increase their distractions and their education would suffer. Second, many argue that a pay structure for college athletes would be extremely hard to implement and would have many unintended consequences. There are many questions that would need to be answered before a system could be implemented. For example, would player's pay be based on talent? If so, how would talent be judged and ranked? If not, would salaries be a flat rate across the board? Secondly, would men and women be paid the same? If so what are the Title XI implications?

            In the future, this issue will only attract more attention, as college sports keep growing in popularity and revenue. Questions will keep arising in regards to what is the best policy for these athletes, ensuring that they receive the best possible education, while also making sure they are properly compensated for their hard work and talents. 

Zach Dubrof - South African Economic Policies

In this blog I would like to focus on recent economic policies instituted in South Africa. Following the end of apartheid in South Africa, many had high hopes for a successful economic and cultural transformation. Instead, twenty years after reforms were implemented, the country’s economic progress has disappointing. Income inequality is among the highest in the world, education is one of the worst in the world, unemployment is around 25% and real GDP growth is stagnate at around 1%. This has been the result of severely contradictory economic policies. The first contradiction is South America’s institution of multiple economic policy doctrines at the same time. The majority of these policies are interventionist, not market friendly, and supportive of a developmental state, while others, such as the National Development Plan, are market friendly and emphasize and efficient delivery state.

The other key policy contradiction is that many of these doctrines are built on assumptions that are not necessarily true. For example, some of the industrial and trade policies instituted in South Africa make proposals about development without accounting for the country’s severe deficiency in electricity supply. On a similar note, part of the country’s industrial policy looks to stop commodities trading in favor localized resources. However, this proposal completely ignores how energy intensiveness of harvesting local resources. For a country with a serious energy shortage, this is a troublesome oversight. For South Africa to get back on track, its policymakers must create policies based on more realistic assessments of its situation. Current policies were almost based on a dreamlike conception of what South Africa could have been following apartheid. This must change for South Africa to regain its position as Africa’s number one economy.