Showing posts from July, 2009

Carbon sequestration from forestry and agriculture

Rob Stavins writes about curbing potential climate change by sequestering carbon rather than, or in addition to, reducing emissions from fossil fuel consumption. Stavins focuses mainly on preserving and increasing forest coverage. There are two good reasons for this focus: (1) deforestation is responsible for about 20% of CO2 emissions worldwide and (2) preventing deforestation and planting new forests appear to be low-cost ways of reducing total emissions. Within the Waxman-Markey bill, CO2 emissions can be offset from agriculture and forestry activities. I'm not convinced much sequestration gains are to be had from agriculture. But farmer interests smell an opportunity, and with 80 years of rent-seeking under their collective belts, they are quite good at capitalizing on them. Under the bill (at least some versions of it) USDA will run the offset program, not EPA. That's probably essential given political constraints. Some environmentalists smell a rat in the offset pr

We've hit bottom in the housing market

In case you haven't noticed the efficient markets hypothesis has been proven false. That means, at least occasionally, there are $100 bills lying all over the place to be picked up by those savvy enough to notice. If you've read Robert Shiller's books and papers, studied the data , you would recognize that RIGHT NOW is one of those times: We've hit bottom in the housing market . Yes, housing prices are predictable. The price to rent ratio isn't bad. Not bad at all. And it's much better given today's remarkably low interest rates. If you are a first-time buyer now is a ridiculously good time to buy because the government will give you $8000 on top of the already good deal that is the current housing market. It's a little harder if you're an investor because interest rates are not as advertised: few banks are lending to investors and the terms are pretty ugly. Expect a higher interest rates and 3 to 4 points origination fees, even if you're bu

What is a farm?

Sounds like an obvious, even stupid question, no? Awhile back I complained about reports in the New York Times and many other places that drank the spiked koolaid put out by the USDA that claimed the number of farms was growing. (See here and here .) The problem is, the increase in the number of farms was in all likelihood a statistical allusion stemming from a quirky (and wholly misleading) definition of a farm. You see, most farms that USDA calls farms you and I probably wouldn't call a farm. To the USDA a farm is any place that could have produced $1000 of agricultural output. Horses, Christmas trees, and maple syrup all count. Inflation, high commodity prices in 2007, plus the fact that the USDA has been searching harder and harder for those illusive small farms over the last ten years or so, added up to more micro $1000 farms. This goofy definition does strange things to both farm numbers and average farm size, to the point where average farm size is an utterly meaningles

Note to self: A good justification for assigning tough homework (also very funny)

Via Mark Thoma, we have Richard Green posting an email from one of his students: The rigors of the USC Masters in Real Estate Development Program A student of ours emails: I just wanted you to know that this assignment got me out of a traffic ticket this morning. La Cienega was shutdown to due an accident and I was trapped. So, I made a u-turn which included driving over a curbed median. A motorcycle cop pulled me over and gave me a lecture about how this isn't Texas (I have texas plates) and "cowboy driving" is not acceptable....whatever that means. So I told him that I had to get to campus for the mid- term and I had a limited amount of time to complete the homework assignment. I pulled out assignment #3 to make my story credible and he took it with him when he went back to his motorcycle. When he came back he told me that it seemed like the assignment was going to be enough punishment and he let me go.

Conservation programs drive crop production

I noted this stylized fact in an earlier post, but I think it is important enough to emphasize again: Over the last 100 years most variation in crop production comes from agricultural policy. But it's a lot different from what gets reported in the popular press. Or even the journals. It's primarily co nservation policies that pay farmers not to plant. Effects of production subsidies are (probably) quite modest and mainly have indirect effects that are hard to figure out. Here are two pictures. The first shows harvest cropland, failed cropland (with the infamous dust bowl years on 1934-1936 being the only clear discernible events), and acres in set-aside and conservation programs. Since 1986, the set-aside and conservation acres are comprised entirely of land in the Conservation Reserve Program. It's also interesting to note that while production has increase steadily with yields, there is no discernible trend in crop acreage: it's been about 300-350 million

Commodity Prices: Supply, Demand and Speculation

For awhile, commodity prices starting to climb again, which some, like me, took as a sign that the economy would soon start growing again. I heard a rumor that editor of the Journal of Environmental Economics and Management predicted oil will hit $100/bbl by the end of the year. But now commodity prices are falling off again. I think Paul Krugman's tidbit on all this is right on the money: it's been speculation about "green shoots" that now are not materializing as expected. Unlike the much larger boom in commodity prices that culminated in last summer's record peak, the recent more modest rise appears to be due to speculation. This is indicated by the rise in inventories that accompanied the boom. The market was anticipating world demand to rise as the recession bottomed out and growth resumed. So, instead of selling commodities at low prices, commodities were stored, in speculation of higher future prices. But future demand growth is proving more elusive