2009 - %3, September

Music Econundrum: Sacrifice Stadium Shows?

| Mon Sep. 28, 2009 5:00 AM EDT

Q: I heard stadium concerts are carbon nightmares. So do I have to skip U2 next time they’re in town?

A: In July, former Talking Heads frontman David Byrne slammed U2 for its massive 360˚ tour. “Those stadium shows may possibly be the most extravagant and expensive (production-wise) ever: $40 million to build the stage and, having done the math, we estimate 200 semi trucks crisscrossing Europe for the duration,” he wrote on his blog. Ouch—especially for a band that bills itself as socially responsible. An environmental consultant calculated that that the tour’s carbon emissions were equivalent to flying all 90,000 attendees at one of their London concerts to Dublin.

A tour like U2’s creates about 15 pounds of CO2 per audience member per concert, not including the carbon created by getting to the show. But few people attend more than a few truly extravagant live shows every year—most of the music we hear is recorded.

A recent study found that downloading music online creates between 40 and 80 percent fewer greenhouse gas emissions than buying a CD at a store, depending on how you get to the store and whether you burn and package your disc after you download it. In general: Assuming you drive to the music store, buying three physical CDs has 1.5 times the carbon footprint of attending a U2 show. For the same amount of carbon, you could download about 10 albums.

Tip: Don't burn downloaded albums onto CD. If you do, you're only creating 40 percent fewer greenhouse gas emissions than you would by buying a CD at the store. Sans physical CD, that figure jumps to 80 percent.

The bottom line: See your favorite band rock a stadium every few years—but download their albums online instead of buying a CD.
 

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Quote of the Day

| Sun Sep. 27, 2009 11:52 AM EDT

This is from Binyamin Appelbaum's front-page story in today's Washington Post about the Fed's unwillingness to regulate subprime lending by affiliates of commercial banks:

"There was a long period when things were going very well and regulation was viewed as something that got in the way," said Alice Rivlin, the Fed's vice chairman from 1996 to 1999 and now a fellow at the Brookings Institution.

The Fed also minimized repeated warnings about mortgage lending abuses in part because it was an institution dominated by big-picture economists focused on the health of the broader economy rather than the problems faced by individual borrowers.

[Former Fed chairman Alan] Greenspan said in an interview that he did not think the Fed was suited to policing lending abuses because of its focus on broader issues, but he added, "I'm not sure anyone could have done it better." He said the administration's plan to create a consumer protection agency was "probably the right decision."

Greenspan is exactly right.  This is more than just the usual issue of regulatory capture (though it's that too).  The Fed is a bad choice to regulate this stuff because their first priority is always going to be macroeconomic stability.  That's exactly as it should be, but it means that regulating consumer products will simply never be anything more than an afterthought for them.

The same is true for virtually every other existing regulator too: they already have settled missions and settled cultures that value specific tasks.  Consumer lending regulation isn't one of them, so it will never be able to compete effectively for attention.  The only place it has a chance of succeeding is at a new agency in which everyone from top to bottom considers it their primary mission in life.  That's what a strong CFPA brings to the table.

Will it eventually be captured by the industry it's supposed to regulate?  Sure.  And then we'll have to try to fix things again.  But no solution is eternal, so that's hardly a good reason not to act.  We should set up a CFPA that's as strong as we can make it; that has its incentives aligned as precisely as we can align them; and that has an institutional base of power that allows it to actually get things done.  It won't be perfect, but it will be a lot better than anything we have now.

The Meltdown List

| Sat Sep. 26, 2009 7:01 PM EDT

Off the top of my head, here's a list of the various things people have blamed for last year's economic meltdown:

1. Housing bubble
2. Mortgage securitization mania
3. Massive growth of complex credit derivatives
4. Mortgage fraud, growth of NINJA/liar/HELOC/option ARM/etc.
5. Asian savings glut
6. Long-term current account imbalances
7. Ratings agency flimflam
8. 2007-08 oil shock
9. Overuse of leverage on Wall Street
10. Easy money policy from Fed
11. Reliance on bad risk models (VaR, CAPM, etc.) that led to consistent undervaluation of risk
12. Too much debt (both household and financial sector)
13. Government efforts to increase homeownership
14. Repeal of Glass-Steagall

I don't have any particular agenda here.  I'm just collecting reasons, and obviously there's quite a bit of overlap on this list already.  But I'm still looking for more!  If I'm missing anything that a significant number of people think had a significant effect, please leave it in comments.

UPDATE: Added from comments:

15. Pay practices that provided incentives for risky behavior
16. Greenspan/Bernanke put (i.e., the widespread belief that the Fed would bail out any big bank that failed)
17. Inadequate regulation of shadow banking sector
18. Poor bank capitalization regulations that allowed too much off-balance-sheet risk

Is Copenhagen Dead? Podesta Replies

| Sat Sep. 26, 2009 6:47 PM EDT

John Podesta posted a response to my article on a statement he co-wrote that I characterized as a signal the Obama administration has concluded that producing a comprehensive global warming treaty at the upcoming Copenhagen summit will not be possible and that alternative measures must be pursued. Here is Podesta's reply in full:

While Mother Jones’ David Corn is an excellent reporter, he is a lousy tealeaf reader. Mr. Corn misread a recent article by Dr. Rajendra Pachauri, the chair of the Intergovernmental Panel on Climate Change and Nobel Peace Prize winner, and myself in advance of the G20 summit, incorrectly concluding our purpose was to downplay expectations on behalf of the Administration. Mr. Corn’s interpretation of our piece is inaccurate. Dr. Pachauri, one of the world’s foremost advocates for strong global action on climate change, and I both recognize that significant challenges remain in advance of the U.N. summit in December. But we are confident that the international community is poised to make substantial progress on climate change in Copenhagen, and that the U.S. is now in a position to exercise renewed leadership in pursuit of a best-case climate scenario.

The purpose of our September 23 piece was to emphasize the importance of climate change in advance of the G20 meetings and encourage the world’s top emitters to seize an important opportunity to take concrete steps to move forward in advance of December’s summit. It is not news that the divide between the unwieldy groups of developed and developing countries have stalled climate talks in the past and that they are drifting again. It is, however, noteworthy that major emitters have recently utilized new channels — the Administration’s Major Economies Forum, for example, as well as the U.S.-China Strategic and Economic Dialogue — to lay the groundwork for a new climate agreement in Copenhagen. We think this is an important development and should be pursued whenever opportunities, like this week’s summit, arise. Our piece urged leaders at the G20 to pursue concrete actions prior to Copenhagen on issues such as financing arrangements, technology cooperation, and deforestation prevention to increase the chances of success in December.

Even in the midst of global economic crisis, climate change has remained at the top of the agenda both in the United States and in key countries around the world. There is broad consensus that the effects of climate change are not only real, but will be devastating to developed and developing countries alike if the international community fails to agree on a global emissions reduction strategy soon. The road ahead is not without obstacles, which our piece pointed out. But the fate of Copenhagen is far from sealed — and it is my strong belief that the Obama Administration is committed to doing all it can to lead the world into a low-carbon, clean energy future.

It still seems to me that by declaring that the pre-Copenhagen talks are at an "impasse" and that the prospects of reaching a treaty is "grim"—possibly realistic assessments—Podesta and Pachauri, two champions of countering climate change, are assuming that the climate summit will fall short of what's been the perceived public goal (a comprehensive global accord that leads to a serious reduction in emissions) and are now pushing for alternative mulitlateral actions and decisions that would mark real progress in redressing climate change (though perhaps not as much progress as a full-fledged and tough treaty). This might be a reasonable approach—maybe the only option—given the well-known conflicts in the pre-Copenahgen negotiations and the US Senate's inability to produce climate change legislation prior to the gathering. But if the Obama administration—which Podesta helped set up—has reached a similar conclusion, that would indeed be noteworthy and represent something of a shift (even if a necessary one) in its efforts to address global warming.

Adapting to Climate Change

| Sat Sep. 26, 2009 4:39 PM EDT

Are conservatives stuck over climate change because they're devoted to free market principles and there just aren't any free market solutions to reducing CO2Matt Yglesias thinks this is too kind an interpretation:

How about reductions in subsidies for fossil fuel production and consumption? The free market credentials seem impeccable. Or how about a “green tax shift” in which carbon is taxed or carbon emission permits are auctioned and the revenue is used to finance deficit-neutral reductions in other taxes?

....But that’s not what we have. Not because market-oriented approaches are inadequate to the challenge but because too many of the key institutions that espouse market-oriented approaches are run by people who are too corrupt, incompetent, immoral, stupid, or cowardly to get their side to take the problem seriously.

Generally speaking, I agree.  There are a few conservatives out there who have argued in favor of free-marketish solutions like Pigouvian taxes and the like, but they're pretty thin on the ground.  The vast bulk of the conservative movement has simply decided to declare climate change a hoax and refuse to even consider doing anything about it.

Still, there really is a philosophical problem here too.  Eliminating subsidies for fossil fuels is a good idea, but it's also a drop in the bucket.  (And Democrats tend to be pretty big offenders on the subsidy front too.)  Revenue-neutral taxes could go a lot further, but they're not enough either.  Conservatives know that if they actually fess up to the full scope of the global warming problem, they're eventually going to have to accept some pretty serious government intervention to halt it.  Things like fuel economy standards, green research and development programs, moratoriums on coal-fired plants, tax incentives for conservation, new building efficiency standards, and much, much more.  There's nothing wrong with any of this stuff, but there's no question that it's a considerable amount of interference in the market.

Still, conservatives could adapt if they were smart.  After all modern conservatives have never really been very dedicated to free markets.  They're dedicated instead to being business friendly, which is quite a different thing.  And while not every business sector can benefit from new climate change regulations1, an awful lot of them can2.  So why not accept the science of climate change and then simply press for the most business friendly solutions possible?  It would mean rewarding a different set of business partners than they're used to, but so what?  Might as well start currying favor (and campaign contributions) from the businesses of the future instead of the businesses of the past.  Right?

1Coal-fired electricity, beef production, and SUVs, for example.  Those are almost certainly losers no matter what approach you take to limiting climate change.

2Nuclear/wind/solar electricity, biofuel production, weatherproofing, electric cars, etc. etc.

Of Frogs and Demagogues

| Sat Sep. 26, 2009 2:38 PM EDT

Let's revisit the boiling frog controversy, shall we?  Basically, it's an urban legend: it says that if you toss a frog in a pot of boiling water, it will jump out (or try to).  But if you put it in a pot of cold water and turn up the heat slowly, it will sit idly by as it boils to death.  Turns out it's not true, though: the second frog will indeed try to jump out when the water temperature gets too high.

So why the persistence of the legend?  If it's such a useful metaphor, why don't we have any good substitutes?  Well, James Fallows, who started all this, says we do.  For example, people with cats slowly get accustomed to the smell of a litterbox in their home:

So, to answer Kevin Drum's question: we don't cling to the frog story, even knowing it's false, because there is no possible other illustration from the realm of shared human experience that would illustrate progressive desensitization. The litterbox problem is one that is actually true — and I bet a million times more people have experienced it than have actually seen a boiled frog. There's some other psycho/linguistic reason why the boiled frog story has caught on. But for the moment, this is my candidate for a new image: the reeking kitty-litter box. If someone has a better candidate, great.

Two similar suggestions are here.  But there's a problem: none of them are a substitute for the boiling frog.  The difference is simple.  In the case of the litterbox, we're slowly acclimating to something unpleasant.  There are a million examples of humans doing this.  But the frog is doing something else entirely: it's dying.  Nobody ever died from an overripe litterbox.

That's the power of the frog metaphor.  Not merely that we can get used to unpleasant things, but that we'll literally allow ourselves to be killed as long as the pain is turned up slowly enough.  And that's not all: not only will we die, but we'll hardly even notice that it's happening.

Now, I'd argue that the reason there are no good substitutes for the frog metaphor is because this never happens1.  No normal animal, human or otherwise, will fail to react to death-inducing pain.  Period.

So that explains that.  But we're still left with a question: why then is the boiling frog metaphor so popular and enduring?  If, despite being technically wrong, it were a genuinely useful illustration of a rare but not unheard-of human condition, that would be one thing.  But it's not.  So what gives?

That's a little more difficult, but I think I'd chalk it up to the common human desire to incite dire fear about things we dislike.  (This is probably a very rational desire, too, since it's hard to get people to rouse themselves from their sofas unless you get them pretty riled up.)  So it's not enough to say, for example, that healthcare reform will lead to higher taxes and a somewhat bigger role for government in our lives, just as it's not enough to say that post-9/11 security measures will put everyone under a little more scrutiny than we're used to.  In both cases, we want to make a much more dramatic point: maybe not literally death, but the end of freedom as we know it.  The frog is a pretty useful and homey way of illustrating it.  The boiling frog is the demagogue's best friend.

1Climate change (and related slow-motion catastrophes) may seem like examples of this, but they aren't.  Even if climate change does end up killing a lot of people, it won't be because we never noticed the pain it was causing.  Just the opposite: it's because the pain is too subtle to notice.  If it ever gets to the point where we're all genuinely suffering and we know the source, we'll notice it and try to do something about.  It might be too late by then, but we'll try.

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Chart of the Day

| Sat Sep. 26, 2009 12:43 PM EDT

Via Zubin Jelveh, this chart comes from Princeton economics professor Hyun Song Shin.  The data is taken from the Fed's Flow of Funds report, which shows you — unsurprisingly — how much money is flowing through various sectors of the economy.

Basically, from 1954 through 1980, the household sector grew 10x.  The corporate sector grew 10x. Commercial banks grew 10x.  And the securities sector grew 10x.  All very balanced.

The came the great deregulation. Between 1980 and 2008, the household, corporate, and commercial bank sectors once again grew by about 10x.  But securities dealers?  They exploded.  The securities sector grew by nearly 100x.

And then imploded, taking the rest of us with them.  Roughly speaking, though, the securities sector still needs to shrink by a factor of about five before they get back to the size they should be.  Here's Shin:

Overall, it would be reasonable to speculate that the securities sector that emerges from the current crisis in sustainable form will be smaller, with shorter intermediation chains, perhaps less profitable in aggregate, and with less maturity transformation. The backdrop to this development will be the regulatory checks and balances that are aimed at moderating the fluctuations in leverage and balance sheet size that were instrumental in making the current financial crisis the most severe since the Great Depression.

I'm not feeling especially optimistic right now about the the creation of new "checks and balances that are aimed at moderating the fluctuations in leverage and balance sheet size," but here's hoping he's right.

Today's the Day We Overdraw Our Accounts

| Fri Sep. 25, 2009 8:12 PM EDT

Thanks to Deborah Byrd blogging at EarthSky for the heads-up that today is Earth Overshoot Day. The day when we overdraw our ecological bank account.

This year it falls on 25 September. Starting today, we're utilizing resources at a rate faster than what the planet can regenerate in a calendar year.

Which means for the next 97 days, we're using up our capital investment. You know, the air, waters, oceans, forests, species, topsoil that keep us alive. The problem's called ecological overshoot.

We first went into overshoot in 1986, according to the Global Footprint Network. Before then we consumed resources and produced carbon dioxide at a rate consistent with what the planet could produce and reabsorb in a year. By 1996 we were using 15 percent more resources in a year than the planet could supply. Earth Overshoot Day fell in November that year.

Now we're now stripping resources 40 percent faster than the planet can produce them.

'Course a thrifty Homo sapiens would batten down the hatches, tighten the belt, and shift to extreme emergency savings mode. Unless he or she didn't really feel overdrawn? Like everything was still super affordable and super expendable and super infinite?
 

G20 Disappoints on Climate

| Fri Sep. 25, 2009 7:58 PM EDT

Hopes for a significant breakthrough on climate change at the G20 were dashed Friday with the issuance of a final communique that was even more underwhelming than the drafts that leaked earlier in the week.

The final statement from the leaders called for greater focus on climate change, but included no new specific commitments. "We underscore anew our resolve to take strong action to address the threat of dangerous climate change," said the statement.

On financing for developing countries for climate change adaptation, mitigation, and technology development, they emerged with essentially the same agreement that they made in Italy in July, calling on their finance ministers to come to the next meeting with "a range of possible options for climate change financing to be provided as a resource to be considered in the UNFCCC negotiations at Copenhagen."

The most notable agreement was perhaps an expression of shared interest in ending fossil fuel subsidies, though there were no specifics offered to that end either. Instead, the leaders merely  pledged to "rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption," keeping in mind the need to transfer some of those subsidies to programs that support those most economically vulnerable to fuel price increases.

Just How Unflappable is Barack Obama?

| Fri Sep. 25, 2009 7:08 PM EDT

The man's a rock. He doesn't twitch. He doesn't sway. The wattage of his smile doesn't waver. Is this a good thing? Is it supernatural? If only he could stare down global climate change with a smile.

Seeing is believing.

 

 

Barack Obama's amazingly consistent smile from Eric Spiegelman on Vimeo.