Greed, Green & Grains

Update:  For the record, I'm actually not against Federal crop insurance.  Like Obamacare, I generally favor it.  But the subsidies are surely much larger than they need to be for maximum efficiency.  And I think premiums could likely be better matched to risk, and that such adjustments would be good for both taxpayers and  the environment . Wow.  Frumpy agricultural economics goes Politico ! Actually, it's kind of strange to see a supposedly scandalous article in Politico in which you know almost every person mentioned.  At issue is the federal crop insurance program.  The program has been around a long time, but its scope and size--the range crops and livestock insurable under the program and the degree to which taxpayers subsidize premiums--have grown tremendously over the last 20 years.  And the latest farm bill expands the program and its subsidies to grand new heights. Nearly all the agricultural economists I know regard the crop insurance program (aka O

I've often panned the idea that commodity prices have been greatly influenced by so-called financialization---the emergence of tradable commodity price indices and growing participation by Wall Street in commodity futures trading. No, Goldman Sachs did not cause the food and oil-price spikes in recent years. I've had good company in this view.   See, for example, Killian , K nittel and Pindyck , Krugman  (also here ),  Hamilton , Irwin and coauthers , and I expect many others. I don't deny that Wall Street has gotten deeper into the commodity game, a trend that many connect to  Gorton and Rouwenhorst (and much  earlier similar findings ).  But my sense is that commodity prices derive from more-or-less fundamental factors--supply and demand--and fairly reasonable expectations about future supply and demand.  Bubbles can happen in commodities, but mainly when there is poor information about supply, demand, trade and inventories.  Consider rice, circa 2008 . But most a

Economists like to emphasize how people and businesses will adapt to climate change.  On a geological scale the world is warming very fast.  But on a human scale it is warming slowly, so we can easily adjust infrastructure and management decisions to the gradually changing climate.  For example, in agriculture farmers can gradually adjust planting times, cultivars, and locations where we grow crops, and so on. So how much does adaptation really buy us?  As it turns out, probably very little, at least in most contexts.  Since it is economists who often emphasize this point, sometimes even intimating that otherwise negative impacts could turn positive with adaptation, perhaps we should pause for a moment to consider what basic microeconomic theory says about it.  And we have a ready-made tool for the job, called the envelope theorem  (or here ), that provides essential insight. I'll try to make this intuitive, but it helps to be a little formal.  Suppose agricultural

A question for my undergraduate environmental economics students: Navigate to http://www.uhero.hawaii.edu/news/view/274 and read about the costs and benefits of installing PV, from a household's perspective and from Hawaiian Electric's. Play around with the interactive calculator. Dick Rosenblum, the CEO of Hawaiian Electric, often complains about net metering agreements because homeowners get retail prices instead of wholesale prices for the energy their panels generate. (Also see this article by energy economist Severin Borenstein.)  As the UHERO blog post points out, a side effect from current net metering agreements is that households over-install solar. As a result, they often pay a zero marginal price for electricity, which discourages conservation.  Devise a different model for net metering agreements that can address both Dick Rosenblum's complaints and restore incentives for households with solar to conserve energy.

Sorry for the radio silence.  Way too much going on. However, I am doing a little blogging for UHERO, focusing on Hawai'i's interesting electricity situation.  We have the highest electricity prices in the country, about 3.5 times those on the mainland.  That fact coupled with tax credits and a lot of sunshine has given us more solar penetration, by far, than anyplace in the country.  Most statistics you'll find tend to be a bit dated---there's more penetration here than most people know, and it's pushing the limit of our grid. Anyhow, below are links to my first two posts about the situation.  More to come soon, I hope. Is Monopoly a Barrier to Hawai'i's Ascent? Why are Hawai'i's Electricity Prices So High?

A brief follow up to my post the other day about the disasterous NY Times article by David Kocieniewski. Flex Salmon and Jayson Lusk , among others, have written similar and more detailed pieces detailing  Kocieniewski 's reporting slight of hand.  I really thought this sort of thing was beneath the NY Times.  The editors there certainly deserve some of the blame. Journalistic malfeasance aside, where is this attack coming from?  Why does Kocieniewski and NY Times go to such great lengths to attack two relatively innocuous academic economists?  Why do they seem to have a bee in their bonnet about commodity price speculation? I don't know the answers to these questions.  But I'm wondering if momentum on financial regulatory reform may be a bit less innocent that Paul Krugman seems to think. Some might note that the Mike Konczal article that Krugman references mentions the heavy influence of Gary Gensler, chairman of the Commodity Futures Trading Commission.