Gernot Wagner's Blog, page 24

Class inaction

There's nothing like unexpected free money. Class action lawsuits are a prime example. A few weeks ago I received a check of almost a hundred dollars for flights I took years ago. British Airways apparently overcharged me and many others in a scheme courts later determined to be illegal. I didn't notice the inflated prices back then; I sure noticed the $100 in my hands now. Thank you, "world's favourite airline."

Last week I received another letter. Our insurance owes its customers $455 million dollars. Sign me up, or not.

I'm eligible to receive "approximately $1.37″ from the Settlement—with a capital "S" to make it seem weightier. $1.37 minus the cost of a stamp, an envelope, a dash to the nearest mailbox, and I'm better off letting my portion of the $455 million go.

The letter assures me that unclaimed portions won't go to the lawyers in the case. (They are set to get another $90 million not taken out of the $455 million.) Instead, it will go back to the insurance, with no guarantee that it benefits anyone other than the insurance itself.

So in other words, if I don't claim my $1.37, the bad guys who lost the class action suit will get it back. If I claim it, I'm losing money and time in the process.

If everyone thinks like me, claimants collectively forgo $455 million. In practice, everyone should think like me. Well played, lawyers.

How about setting up a system where one lucky claimant, who does mail in the letter, gets the remaining portion of the $455 million that remains unclaimed? I bet his winnings won't amount to much, but at least now everyone will claim their fair share of the settlement in hopes of the big payoff.

Don't trust us mortals to do "the right thing" if it's so blatantly not in our interest.

Black and white

Being the conciliator is fun. You are popular, everyone trusts and loves you.

Yet sometimes mediating is not enough. Sometimes there are objectively better ways of doing things.

That's why we drink Chinese green tea and French wine, or why we eat Austrian Sacher Torte, Italian Parmigiano Regiano, Pad Thai, and any number of other delicacies. I wouldn't want Pad Thai cooked by an Austrian chef, and I don't care much for Thai pastries.

It may be hard to swallow, but sometimes one position does trump another. That goes for raising the national debt ceiling as much as for lowering many a pollution ceiling.

18.4 cents, and going South

The U.S. federal gas tax is 18.4 cents a gallon. Why 18.4? Because the Senate didn't have the support for 18.5 cents when it voted on it in 1993.

Sad fact: 18.4 cents is pathetically low and means driving is subsidized to the tune of several bucks a gallon. Forget pollution, just the socialized cost of accidents adds up to about $2 to 3 per gallon.

Funny fact: The gas tax is set to drop to 4.3 cents on September 30th unless Congress acts.

Costa Rican Ben & Jerry's

When you think eco-tourism, you likely think Costa Rica: national parks, rainforest lodges, low-flow toilets in your hotel room.

No wonder Costa Rica has emerged as a climate leader, declaring its intended goal of carbon-neutrality within a decade. (Never mind that it takes quite a bit of jet fuel to go on your eco-vacation, and international air travel doesn't figure into its accounting.)

The real problem is that Costa Rica is like the Ben & Jerry's of countries. You can easily carve out a niche for yourself as the premium do-gooder brand, while the big players tinker around the margins but otherwise go about business as usual.

Let's cheer Costa Rica and hope it will meet its goals, but when it comes to actually making the atmosphere notice, sadly, it'll be up to Washington and Beijing rather than San José.

Starfish statistics

The Starfish Story has become a metaphor for doing good. Throw stranded starfish into the sea one at a time, and you are making a real difference in the life of that one starfish.

Doctors, in many ways, are the ultimate starfish throwers: one patient at a time, day after day.

My wife is a doctor. She's an obstetrician and gynecologist, which can be a fairly pleasant doctoring experience: two healthy people show up; three leave. That's on a good day. On a bad day, things can go really wrong. And then there are the less pleasant aspects of the job.

When a sixteen-year-old comes in for her third abortion, there isn't much an individual doctor can do other than "give the talk." Within "safe, legal, and rare," a doctor's primary job is to focus on the safe. "Legal" is for others to decide. Doctors do address "rare," but it's difficult to tackle when encouraging words and pretty handouts are all you have. You can't force anyone to get an IUD or use a condom, let alone abstain altogether.

That's where it's crucial to take a step back. What are the best ways to prevent the largest number of unwanted pregnancies? How to make births safer? How to help the most patients?

It turns out one way to save a large number of people comes back to my line of work. There's a good reason the Environmental Protection Agency is sometimes called a public health agency.

EPA's latest "good neighbors" rule alone will prevent some 13,000 to 34,000 premature deaths. That, of course, is statistically speaking. You can't point to individual bodies, the same way as you can't point to individual patients when you tackle the "rare."

It may not be quite as satisfying as personally fighting against the tides and throwing in individual starfish, but the impact is orders of magnitude higher. It's also the reason why my wife is currently studying for her statistics midterm.

Mark Bittman for President

"Bad Food? Tax It."

It's to policy what "Eat food. Not too much. Mostly plants" is to individual behavior.

Amen to both.

"Bad Carbon? Tax or Cap it," sadly, has no effective equivalent in individual behavior. That makes the policy level all the more important.

No lines for clean electrons

When we think "new technology" we think long lines at Apple stores: tech fanatics wanting to hold the latest gadget in their hands.

Energy does not work this way. No consumer will be lining up to buy new, cleaner electrons at a premium.

Cleaner energy technology will have to be cheaper than fossil energy to make any significant inroads.

In memoriam: Steve Schneider takes on skeptics

If you think things are bad, listen to a group of climate scientists talk about geoengineering—literally hacking the planet. I had the pleasure of attending the Asimolar geoengineering conference last March and, while there, had the distinct pleasure of spending some time with Steve Schneider.

Even among a group of some of the world's most distinguished climate scientists, he tended to stand a notch above the rest.

Steve passed away a year ago. Andy Revkin remembers him as one of the most eloquent defenders of climate science.

Watch him take on a room full of 50 self-described Australian "sceptics." 45 minutes well spent—for them and for the rest of us.

Don't buy our product

The business of electric utilities is to provide reliable, affordable, and (increasingly) clean electricity—except when it is not. Con Ed recently started a campaign extolling the virtues of saving electrons. Imagine a business that runs ads telling customers not to buy its products.

ConEd hasn't suddenly found religion. It has found regulators that try to decouple revenue from sales and essentially tell the company how much electricity it can sell.

In hot summers, when demand for air conditioning goes up, ConEd is obliged to pay refunds to customers for selling too much of its products. (Hence the ads.)

When demand for electricity is unexpectedly low, ConEd will be able to collect a surcharge from its customers. You can bet the ads will stay up then, too, encouraging everyone to conserve even more.

Lest anyone screams "socialism," this convoluted regulatory construct tries to make up for the fact that electric utilities often print money like monopolies and—most significantly—carbon has no price to begin with, leading all of us to consume more electrons than would be the ideal market outcome.

Until Washington manages to find a way to limit carbon and price carbon emissions, we will see many more regulatory constructs like this that make little sense other than for the fact that our climate policy (or lack thereof) makes no sense.

$75,000 buys happiness, twice as much buys more

"Money doesn't buy happiness." Ask anyone who had been slaving away on his desk late last night. Happiness seems to stop going up at $75,000. Make more and you are no better off.

This is only a third of the story.

Double my income today and I'll tell you tomorrow that I am happier for it—another piece of conventional wisdom. I might get used to my increased riches eventually, but for now let me enjoy the extra cash.

There's another, even more profound complication lurking in the background: Ask me how I evaluate my life overall, and the threshold goes away altogether. More money suddenly does buy more happiness, even for a household raking in more than $75,000 per year.

$75,000 itself, of course, is already high. Two thirds of American households make less. Half make less than $50,000. And that's Americans. Most of the world has a ways to go to hit any kind of plateau.

Even if we moved from our obsession with money to maximizing "happiness," we'll be accumulating quite a bit more stuff for a while.