Thursday, June 30, 2011

June 2011 Cycling Totals

It's been a tale of two months. We finally got a string of good cycling weather at the start of June, and I took advantage by racking up a number of good rides and lots of miles. But then my knee started flaring up. Since June 15, I've ridden just three times for a total of 100 miles. The total for the month is 440 miles.

The knee will be surgically repaired tomorrow, and I hope to be back on the bike (at least spinning easy) within a week or so. I probably won't be racking up any serious mileage again until August.

Year to date: 2128 miles.

Thursday, June 23, 2011

Tuesday, June 21, 2011

American Electric Power Co. v. Connecticut et al.

Yesterday, the US Supreme Court ruled 8-0 that the Clean Air Act displaces the federal common law of nuisance with respect to climate change and its mitigation. (You can read the opinion here). Justice Sotomayor did not take part in the decision; she had sat on the appellate panel below, but was not a party to that court's ruling.

Most scholars expected this result. In fact, I doubt whether more than a few were surprised that it was a unanimous decision. Many environmentalists will not be pleased that  state and private plaintiffs cannot sue power plants and other large carbon emitters for nuisance. It certainly reduces the incentive large emitters have to seek a federal solution as a means of reducing common-law exposure. However, the prospect of controlling greenhouse gas emissions through nuisance law has always struck me as both  haphazard and too costly, relative to a well-designed regulatory scheme (which still isn't in place).

Perhaps more important than the Court's ruling on the merits, going forward, is the Court's strong reaffirmation of Massachusetts v. EPA. As Dan Farber explains (here), Justice Sotomayor, voting in subsequent cases, would make a clear 5-vote majority on issues of standing and the political question doctrine.

Sunday, June 19, 2011

Tour de Suisse

I typically don't enjoy watching individual time trials in bike races; there's not enough action or drama. And if Fabian Cancellara is in the race, everyone else is racing for second place. That was the case today in the Tour de Suisse. Cancellara won the day handily. However, today's TT was full of excitement and intrigue because, as the last stage in the 8-day tour, the TT had the potential to dramatically alter the final GC standings. Damiano Cunego, who has defended the leader's jersey magnificently through all the mountain stages, is mediocre time-trialist at best. The second and third place riders, Steven Kruijswijk and Frank Schleck, are also not known for their prowess in the "race of truth." Sitting behind all of them in fourth place, however, was the American Levi Leipheimer, among the best TTers in the world.

At the start of the day, many expected that Leipheimer would displace Frank Schleck from third place, and possibly even challenge for second. But Leipheimer had more ambitious plans. When he hit the line at 41:14, just 13 seconds behind Cancellara's winning time, the stage was set for a dramatic conclusion. Already, it was clear that Leipheimer would leapfrog Schleck and Kruijswijk onto the second step of the podium. It only remained to be seen whether Cunego could finish quickly enough to prevent Leipheimer from claiming the final yellow jersey. With less than a kilometer to go, it was still close to call. Cunego needed to finish at 43:12 or under to win the tour. With 500 meters to go, he was giving it all he had, but time was rapidly slipping away. When he crossed the line, the clock read 41:17, and Leipheimer had  won the Tour de Suisse.

A great end to what has been a very exciting tour, which was devoid of the usual, dull (until the last 3 kilometers) sprinters' stages. I confess I feel bad for Cunego, who rode a very tough and intelligent race. But even Cunego conceded before Friday's stage that he needed to put more time into Leipheimer before the time trial. He failed to do so, and ended up losing an 8-stage race by 4 seconds. Kudos to Levi.

Wednesday, June 15, 2011

The Rest of My Summer Reading (for This Year and Probably the Next)

I just received both volumes (all 1060 pages, not including appendices) of Derek Parfit's new book, On What Matters (Oxford 2011). My recollection, from reading Parfit's last book, Reasons and Persons (Oxford 1984), is that, although Parfit writes clearly, the sheer depth and complexity of his analysis makes for hard reading. I anticipate that the payoff to be high (otherwise, I wouldn't start reading the first page of the first volume). I cannot predict, however, how long it will take me to get to that payoff.

Four Papers I Read Today

Scott Masten, "Public Utility Ownership in 19th-Century America: The 'Aberrant' Case of Water" (Jan 2009). A very interesting historical/empirical study of why utilities for water supply, in contrast to other public utilities, became predominantly publicly owned before the end of the 19th century. Masten finds it was not a consequence of any special public financing issues or scale economies; rather public ownership of water utilities was largely a consequence of two factors: (1) the comparative simplicity of waterworks operation and management, which immunized them public water supply companies to some extent from inefficiencies usually associated with government ownership; and (2) friction between cities and private water companies relating to (a) extension of service to sparcely populated areas and (b) prolonged supply disruptions stemming from installation and repair of waterworks. Among the more interesting implications Masten draws from his historical analysis is that current efforts by World Bank and other organizations to induce developing countries to private waterworks as a mechanism for reducing water shortages may be misguided:
If, despite an institutional environment conducive to private ownership, American water and sanitation systems are overwhelmingly publicly owned and operated, it is reasonable to expect privatization to yield long-term gains in developing countries where the environment for private enterprise may be much less hospitable?
Masten's article provides a very useful reminder that the structure of property ownership is not simply a matter of ideology; nor is private ownership necessarily more economically efficient and productive than public ownership. Among other things, transaction costs matter!

Katherine Casey, Rachel Glennerster, and Edward Miguel, "Reshaping Institutions: Evidence on External Aid and Local Collective Action," NBER Workshop Paper 17012 (May 2011). The authors examine the short- and long-term consequences of a specific international aid program for Sierra Leone and find that, in the short-run, the aid program did achieve its aim of improving provision of local public goods, but failed to achieve the longer-run aim of improving local institutions for collective action. The implications of these disparate findings are interesting. On the one hand, the authors note, "[t]he results contradict the current popular notion in foreign aid circles that CDD ["community directed development"] is an effective method to initiate social change or fundamentally alter local decision-making processes." On the other hand, the "results also challenge the aid pessimist's view that external assistance cannot improve the lives of the poor in countries with weak institutions." Hopefully, other scholars will build on this work by applying the same analytical model to examine aid projects in different developing countries.

Marjan Peeters and Micolien van der Grijp, "Emerging national climate legislation in EU Member States: in search of proper legislative approaches," Maastrict Working Papers, Faculty of Law, 2011-6 (May 2011). A nice comparison of the French and English approaches to national climate legislation (supplemental to the European Union's Emissions Trading Scheme). The English approach is completely centralized and top-down, as is the norm within the UK's system of government. The French program, by contrast, is largely decentralized, with regions given a substantial amount of freedom to determine how national goals will be met. However different they may be, however, the national climate laws of France and the UK share one crucial feature in common: the lack of any enforcement apparatus for ensuring that the legislated goals are met. To my mind, that renders the goals of each country's climate law purely aspirational.

Last, but by no means least, Jeremy Edwards and Sheilagh Ogilvie, "What Lessons for Economic Development Can We Draw from the Champaign Fairs?," CESifo Working Paper No. 3438 (April 2011). This paper turns on its head just about everything we thought we knew about the Champaign fairs, and their significance for economic theories of the institutional basis for long-distance, impersonal exchange. The authors argue, provocatively but pretty convincingly, that the high level of contract enforcement, which made the fairs so successful, did not arise from private-order or corporative mechanisms, but instead was provided by public institutions. The paper seriously restructures our understanding of how and why legal-economic institutions arise.

A Bit of Cycling Eye Candy

Watching the Tour de Suisse (when I should be riding, but for a balky left knee), I noticed Team NetApp riding a very pretty bike made by a small, family-owned Austrian company of which I had not previously heard. It's the Simplon Pavo, and it's as nice looking as anything in the peloton, especially in the NetApp team colors.

Tuesday, June 14, 2011

Summer Labors

My summers are always devoted to research, writing, and cycling (not necessarily in that order). This summer, my work plans are unusually banal, which may be just as well considering that I'm in the process of moving jobs and possibly homes. Aside from the working paper I posted the other day (here), which I wrote for a conference last month, my summer writing consists mainly in preparing new editions of existing works.

Peter Grossman and I are currently working on a teachers manual to accompany the new edition of our Principles of Law and Economics, which will be published next month by Wolters Kluwer Aspen. I don't use teachers manuals myself, but Peter and I realize the importance of writing one for marketing purposes. So, we're working hard to make ours useful. It is not, however, the most edifying of projects. I also just finished up the copyright clearances for works we excerpt in the textbook. That was also a less than fascinating chore.

Once Peter and I finish up with  teachers manual and the page proofs (hopefully next week) my attention will turn to the new edition of Natural Resources Law, which I'm co-authoring with Jan Laitos, Sandi Zellmer, and Mary Wood. I've already completed first drafts of updates and revisions of two chapters. I just have the chapter on mining and mineral leasing law to go. My main goal for that chapter (aside from the usual updating of new cases, regulations, etc.), is to cut some fat from the last edition, and add in a new section on the Deepwater Horizon oil spill and its aftermath. That new section will be the one fun part of yet another uninspiring project.

If I'm lucky, I'll finish most of the work on new editions of existing books by mid-July, which would leave me a month before classes begin to get some work done on my long-suffering climate policy monograph. I don't have high hopes however, especially if we wind up moving lock, stock, and barrel to Bloomington. I have to be out of my office in Indy by the end of this month, and I'm about halfway moved out already; I've been moving boxes to Bloomington in drips and drabs each time I go down there. 

Sunday, June 12, 2011

The Weekend in Cycling

After rains in  Southern Indiana washed out a planned trip to Brown County for hill climbing on Saturday, Dr. Wilkes, Dr. Raynor and I decided to stick with the local hills around Traders Point (such as they are). We did each of the climbs - Preserve Hill, Wilson Rd., Fishback Hill, and the Fishback Rd. climb toward Raceway Rd. - four or five times. Because the two good doctors are in training for a ride in the Colorado Rockies next month, road them all in the big chain ring, at low cadence, with butts firmly planted in saddles. Fishback Hill, which kicks up at over 16%,  was a special challenge for this approach. After about thirty miles and 1426 feet of climbing, our legs were mush (at least mine were).

My legs still felt like mush when I awoke this morning. Consequently, I expected to get shelled off the back of today's ride, but for some reason or other that did not happen. On one of the best days of weather for riding so far this year - perfect temps, a moderate breeze (around 10 mph), and low humidity - we had a good size group of about 15 cyclists, including a couple of new guys who fit in well with the group. We averaged over 20 mph for the business part of the ride (46 miles, not including 6.6 miles of warm up and cool down). The fastest section, as usual, was the 4-5 mile section of Elizaville Rd from Elizaville down into Lebanon.

All in all, my rides this weekend were much better than last weekend.

Wednesday, June 8, 2011

Harold Demsetz Comes Down from the Fence

Harold Demsetz, an economist I have always greatly admired, has written a somewhat  baffling article (here)  in which he attacks Coase's correction of Pigou's treatment of externalities in social-welfare economics. Demsetz's disagreement with Coase is summed up in a single sentence, which suggests that Demsetz himself has finally descended from his perch between the Chicago School of neoclassical economics and the New Institutional Economics, landing firmly on the Chicago side:
"Coase has treated the legal system and its courts as if they are parts of the economic system, when they are not."
 In a footnote expanding on the point, Demsetz adds, "The neoclassical model ... assumes that all resources are privately owned and that ownership is fully respected; there is no place in its deductions for the courtroom drama imagined by Coase." That, of course, is precisely Coase's problem with the neoclassical model, and why he rejected it in favor of a "new institutional" approach. Interestingly, just one or two pages later Demsetz himself rejects the assumption of complete allocation of property rights, when he argues, in a way perfectly consistent with Coasean analysis, that "[t]here is an efficient degree of ownership that generally is smaller than '100 percent.'"

As usual, Demsetz's article is full of insightful points and witticisms, but his attack on Coase misses the mark. Coase has never focused myopically on market failure as a category; indeed, in a brief 1964 article, Coase pointedly argued that the category of government failure should be every bit as important in economic models. Moreover, Demsetz's assertion that the legal system is not part of the economic system is mind-boggling, especially coming from someone who has spent much of his career writing about property rights and other legal institutions as they affect economic activity.

From Global to Polycentric Climate Governance

My new working paper of that title, written for a conference at the European University Institute, can be downloaded here. Here is the abstract:
Global governance institutions for climate change, such as those established by the United Nations Framework Convention on Climate Change and the Kyoto Protocol, have so far failed to make a significant impact on greenhouse gas emissions. Following the lead of Elinor Ostrom, this paper offers an alternative theoretical framework for reconstructing global climate policy in accordance with the polycentric approach to governance pioneered in the early 1960s by Vincent Ostrom, Charles Tiebout, and Robert Warren. Instead of a thoroughly top-down global regime, in which lower levels of government simply carry out the mandates of international negotiators, the polycentric approach provides for greater experimentation, learning, and cross-influence among different levels and units of government, which are both independent and interdependent. After exploring several of the design flaws of the existing set of global institutions and organizations for greenhouse gas mitigation, the paper explores how those global institutions and organizations might be improved by learning from various innovative policies instituted by local, state, and regional governments. The paper argues that any successful governance system for stabilizing the global climate must function as part of a larger, polycentric set of nested institutions and organizations at various governmental levels.

Monday, June 6, 2011

Peter Diamond Learns a Lesson on Capitol Hill

Nobel laureate Peter Diamond is withdrawing as President Obama's nominee to the Board of Governors of the Federal Reserve, having grown frustrated by the predictable Republican opposition with which virtually every Obama nominee must confront. In today's New York Times (here), Diamond bemoans that a Nobel Prize "wasn't enough" to secure confirmation. But merit and qualifications have never been enough to secure appointment to a high-ranking political position.

Professor Diamond is a phenomenal economist, whom every other economist (regardless of political affiliation) admires. But he seems not to understand that there are only two strictly necessary qualifications to serve as a political official, neither of which has anything to do with merit or credentials: (1) one must be confirmable; and (2) one must be actually confirmed.

No doubt, Senator Richard Shelby (R. Al.) who questioned Professor Diamond's credentials for the position and staunchly opposed his confirmation (because, after all, he was appointed by President Obama), would have voted in his favor had Professor Diamond been nominated by former-President Bush. He even might have supported Professor Diamond despite President Obama's nomination, had Professor Diamond been a high school drop out who happened to be a Republican hack from Alabama, who opposed abortion rights and supported a return to the gold standard.

Professor Diamond has finally learned the hard way the first rule of politics: In politics, all that matters is politics.

Graphic Evidence of Increasing Inequality and Social Stratification in the US

The Stanford Center for the Study of Poverty and Inequality (here) has published a set of 20 graphs (with explanations) demonstrating rising inequality in the American economy. Here's one example showing that the an increasing share of the social wealth is held by the top 10%, while the share held by the bottom 60% is declining.

Even more troubling than increasing  income and wealth disparities is the social stratification that seems to be accompanying it. A recent study sponsored by the Pew Charitable Trusts, in association with scholars from the Heritage Foundation, American Enterprise Institute, Brookings Institution and the Urban Institute, associates rising income inequality with increasing class stratification and reduced socio-economic mobillity. According to that study, social mobility in the US - home of the "American Dream" - is now lower than in several other countries, including France, which was dominated by an aristocracy for hundreds of years.

I am particularly interested to understand how changes in legal institutions may be influencing the decline in social mobility in the US. It seems likely that the demise of the estate tax (see, e.g., here) and the rise of dynastic trusts (see, e.g., here) have played some role. However, such changes in legal institutions may be symptoms as well as causes of increasing social stratification, as the wealthy pressure state legislatures and Congress to enact legislation protecting their wealth against intra- and inter-generational transfers.

Theories of public choice and collective action certainly explain why the top 10% has successfully pursued legal institutions that protect their wealth. They also explain why it could become increasing difficult for the bottom 60% (or even the bottom 90%) to successfully oppose those efforts as income disparities continue to rise.

Sunday, June 5, 2011

The Kind of Ride I Like Best

A nice, relaxed, conversational ride with friends. Thanks to Bob, Murph, and Josh for an extremely pleasant 40 miles.

It was nothing like yesterday's Wilkes/Raynor group ride-cum-race in which I was slaughtered, repeatedly. In fact, the second half of yesterday's was mostly a solo ride for me (although Brian sometimes hung out off the back with me) as the others were way up the road going at each other hammer and tongs. I saw the guys briefly every five or six miles, whenever they waited for me at intersections. But after each regrouping, I would quickly get shelled off the back again. They're just too strong for me anymore.

Friday, June 3, 2011

Mitt Romney:The GOP's Pro-Science Candidate

As many news outlets are reporting (see, e.g., here), GOP presidential candidate Mitt Romney has publicly broken from Republican Party orthodoxy by proclaiming that climate science demonstrates the need to reduce anthropogenic greenhouse gas emissions. His willingness to follow the scientific data, as opposed to political expediency, is both refreshing and laudable. I cannot help wondering, however, why he would buck his party on climate change, while kowtowing to it on health care, disavowing policies that are embodied in a law he championed and signed as Governor of Massachusetts. As a matter of political strategy, I find his comparative positions on climate policy and health care reform puzzling. What's his calculus?

Is Every Avoided Lawsuit a "Win for Coase"?

Over at Environmental Economics blog (here), Tim Haab tells a nice story about neighbors who almost came to litigation over trees on one property that blocked views from another. Fortunately, cooler heads prevailed, and the parties settled out of court.

Less fortunately, Professor Haab suggests that this case might  somehow constitute "a win for Coase." It's not entirely clear what he means by this allusion to Coase. But here are a couple possibilities: (1) the case provides evidence that the so-called "Coase theorem" sometimes functions in the real world - something Coase himself maintains is impossible; or (2) the case is an example of "Coasean bargaining," an ill-defined concept sometimes used to suggest that the "Coase theorem" can function in the real world and other times used to suggest that parties can overcome positive transaction costs, in at least some circumstances, to attain a socially efficient allocation of entitlements to resources.

The problem with the first understanding of "Coasean bargaining" is, of course, that it reflects a misguided belief that a world of zero transaction costs ever can actually exist. The problem with the second understanding is its implication that all contracts and other agreements in the real world must constitute "Coasean bargains," in which case "Coasean bargains" equal bargaining simpliciter. Just what does the qualifier "Coasean" add to the label "bargain"? Is any and every Pareto-improving (or potential Pareto-improving) exchange a "win for Coase"? It's far from obvious to me that Coase deserves, or would want, credit for observing that contracting parties sometimes overcome transaction costs to achieve mutually beneficial exchange.

One more point: a successful settlement is no more (or less) evidence that Coase was right than a failed settlement that results in litigation. In the first case, parties overcome positive transaction costs to bargain for an allocation of entitlements. In the second case, they fail to overcome positive transaction costs to bargain for an allocation of entitlements. Arguably, the second case better illustrates Coase's most important claim that the  market mechanism is costly to use.

Wednesday, June 1, 2011

My New Kindle

I finally broke down and bought a Kindle DX (the big one). As part of my change of jobs, I'm trying to go more  paperless. The purpose of my Kindle is mainly for storing and reading the many pdf files I download each week. That should save a lot of paper, greatly reduce the clutter in my various offices, and hopefully, inspire me to actually read all the stuff I used to print out. I'll probably wind up putting some books on the Kindle as well, e.g., for trips. However, I will not cease all physical book buying. I still enjoy the feel and smell of real books. Holding the Kindle does not give the same satisfaction. Although, as compared with a heavy, 1000-page tome, I'd rather hold the Kindle.

One issue I have with the Kindle is that it is not the easiest device on which to organize papers into collections. I've tried and failed to do so using the Kindle folder that displays on my computer, after I've plugged the device into a USB port. Apparently, the only way to do it is manually, on the Kindle itself, which is a less than slick process, especially when you're trying to organize a dozen or more files at a go. I'd appreciate hearing from anyone who's found a short-cut around this problem.

What I'm Reading These Days

Pauline Maier, Ratification: The People Debate the Constitution, 1787-1788 (Simon & Schuster 2010). I thought I already knew a good deal about the constitution's ratification. I was wrong. This book is a revelation.

David Lodge, Thinks... (Viking 2001). One of my summer projects (not planned, but simply occurring) is to reread many (if not all) of David Lodge's novels. They are all great: intelligent, witty, and humane. Of those I've reread so far this summer, my favorite is Nice Work. But Thinks... is giving it a good run for its money.

May Cycling Totals

A knee problem kept me off the bike for nearly a week, and the stormy weather put me on the trainer on other days. I only managed 448 miles for the month.

Year to date: a meager 1687 miles.