Last week, I posted my thoughts on the potential of an education revolution in North America. I came to the conclusion that a drastic change to North America’s education system will not occur because it would require the complete subsidization of post-secondary education. Today I will look at one region where the revolution could occur.
Where it could occur is in countries that are currently building their education systems and infrastructures. There are several benefits for countries to look into the latest approaches to education in lieu of more traditional methods:
There is less need for teachers and educators, both of whom are grossly undersupplied in developing countries.
Students would learn from a young age how to use technology, fostering future economic growth.
Initial reviews show that new delivery methods of education (Khan academy etc.) foster greater knowledge retention and critical thinking skills.
Blended education systems are much more accessible and flexible for teachers and students.
Is it realistic?
I think it would only be realistic for a very rich nation that is still building its education system. I'm thinking a small, newly-rich country, something like Qatar or another small, oil-producing nation. If successful, the education would help the country sustain its economic growth into a future where it will no longer be able to rely on its non-renewable resources.
From Flickr Creative Commons, some rights reserved
Keeping with the recent theme of climate change, today I will look at the potential of geoengineering to regulate climate change. If we cannot lower greenhouse gas emissions enough to mitigate climate change, we turn to Plan B— geoengineering. The idea of geoengineering stems from the 1991 eruption of Mount Pinatubo in the Philippines, which created a haze of sulphur particles that reflected sunlight away from earth and cooled the atmosphere by nearly a degree Fahrenheit. Today, I will show you the three most prominent geoengineering plans and how they could potentially save our climate.
1. Copy Mount Pinatubo
This plan is to emulate a volcanic eruption by injecting the atmosphere with sulphur, which reflects sunlight away from earth. Presently, there is no clear way to get the aerosols into the stratosphere. Potential solutions range from shooting sulphur-laden cannonballs into the atmosphere to having balloons carry the sulphur into the atmosphere. One significant problem with aerosol engineering is that the increased sulphur in the atmosphere would trigger acid rain.
2. Iron Seeding Oceans
The plan here is to pump iron into the sea to stimulate the growth of phytoplankton. Phytoplankton love iron, and are also very effective at pulling carbon out of the atmosphere during photosynthesis. The theory is that phytoplankton will pull substantial amounts of carbon from the atmosphere and then when they die after a couple of months, the carbon will fall harmlessly to the bottom of the ocean. The risk is in the uncertain affects on the ocean’s ecosystems from the increased iron and carbon.
3. Whiten the Clouds
Here the plan is to whiten the tops of clouds so that they reflect more solar radiation. To do this, 1500 remotely driven, wind-powered boats would be used to spray seawater into the sky. The uncertainty here is how long the clouds would remain whitened.
Conclusions
Incredibly, these are three of the least imaginative plans. Other ideas include: shooting mirrors into space, building fake trees, and creating tubes to pump carbon into the depths of the ocean. Personally, I think whitening the clouds has the most potential as it requires far fewer resources and seems much simpler. I think that it’s important to remember that these are last-ditch efforts as all geoengineering plans have the potential to create their own environmental problems.
Yesterday I profiled the merits of a cap-and-trade system for climate change mitigation. Today I will evaluate the cap-and trade-system against the alternative of a carbon tax.
Carbon Tax Overview
A carbon tax is an environmental tax levied on the the production, distribution, or use of fossil fuels based on the carbon content of the fuel. Economists call it a Pigovian tax as it is used to make emitters pay the full social cost of their pollution. The tax is used to make emitters pay for the negative externality of their pollution. It works through the government choosing the price per ton of carbon and then converting this price into a tax to be placed on oil, natural gas, and electricity. The tax is generally placed on the transaction, for instance on the sale of gasoline. It makes dirty fuels more expensive and therefore encourages consumers to either use less of these fuels, or to switch their consumption to cleaner alternatives.
Pros
Transparent and easily understandable, which is important for garnering public support.
Stabilizes energy prices.
Easily implemented and can be done on municipal, provincial/state, national, or global levels.
Substantial revenues from the tax.
Little monitoring needed from government.
Cons
A regressive tax as low-income residents are affected disproportionately more than other income groups.
The total level of emissions cannot be restricted to a certain level, making it difficult to limit global emissions.
The demand for fuel is highly inelastic (doesn't respond much to price changes) and therefore the tax would have to be very high to reduce demand significantly.
Politically risky to implement a tax.
The Answer
I believe that a carbon tax is the better policy for climate change mitigation because it can be quickly implemented, does not require a global framework, and generates clear revenues for the government.
A carbon tax is much simpler to implement than a cap-and-trade system. Because of its simplicity, it can be implemented much quicker than a cap-and-trade system. For example, British Columbia enacted and implemented a carbon tax in five months. By comparison, the only comparable carbon cap-and-trade system in North America (Northeastern U.S.), took five years of negotiation and rule-making.
Similarly, the carbon tax's simplicity aides it's feasibility as the tax can be effective on any level. A carbon tax is not inhibited by the need for a global or even national plan, it can be easily implemented on a regional level as in British Columbia. In 1997 the world's leaders convened in Kyoto to discuss developing a plan for Climate Change, and they decided to implement a global cap-and-trade system. Fourteen years later, the plan— overcome by erratic participation— has yet to amount to any decreases in emissions.
The carbon tax also brings in a clear revenue stream. A cap-and-trade system that auctions permits could yield similar revenues; however, firms would likely bargain away these profits by demanding a free allocation of permits.
I should note that a cap-and-trade system is an immense improvement over the do-nothingstatus quo, even if it’s second best to a carbon tax. If governments insist on cap-and-trade system (as the Obama administration has done), we should embrace the movement from the status quo even if it represents a second best choice.
I've been hearing a great deal of climate change discussion in the news lately, but the discourse has generally overlooked the policy implementation debate. Meaningful action to mitigate climate change has been held back by the lack of consensus regarding whether a cap-and-trade or carbon tax system should be implemented. Finding a harmonious answer to this problem is imperative to the success of a global response to climate change. Today’s post, analyzing cap-and-trade systems, is the first of two posts that will cover the debate (the second post will examine carbon tax systems).
Cap-and-Trade Overview
A cap-and trade system works through the oversight of a central governing body as they are responsible for setting the cap— the limit on the amount of emissions that can be polluted. After setting the cap, the authority distributes permits to emitting firms. The total amount of emissions allowed through the permits will equal the level of emissions set by the cap and firms must acquire permits in order to emit. The authority has the choice of auctioning off the permits, distributing them evenly to all emitting firms, or distributing them to each firm proportionately based on their past emissions. The trade part then comes into play as firms are free to trade permits to one another in the emissions market. Firms are rewarded for lowering their emissions by the revenue they receive from selling permits, and thus, in theory, firms will lower their emissions.
Pros
Efficient: Firms that can reduce emissions at low prices will do so, and then sell their permits to firms that face higher costs in reducing emissions.
Allows for setting the maximum level of emissions. This facilitates staying on a predetermined emissions track and thereby not crossing potentially catastrophic emission thresholds.
The risks of market volatility are lessened as the desired quantity of emissions cannot be exceeded.
Firms have incentive to monitor each other, because cheating firms lower the value of all permits.
The substantial profits the governing body receives from auctioning the permits.
It would facilitate global co-operative action.
Cons
The market may lead to highly volatile prices for consumers.
The market requires the participation of many firms/nations to be succcesful.
Significant resources are required to monitor the market and track firms/nations to ensure they don't cheat.
Considerable time and planning would be required to implement the system.
Many environmentalists oppose the idea of issuing 'rights to pollute'.
My next post will analyze the carbon tax alternative and evaluate which option is better suited for efforts to mitigate climate change.
Yesterday in class, we were discussing the recent boom in online courseware. Many universities have begun providing courses online. For example MIT has 2000 courses available on their website, they can be found here http://ocw.mit.edu/index.htm. Furthermore, there is a growing movement to make university content freely available, much like in a library. The question becomes, would fully subsidizing post-secondary education be an efficient use of resources?
My response is no.
Exhibit A: The World Bank's data on the rate of return to education clearly shows that tertiary education (post-secondary) is the least profitable form of education. Furthermore, their data demonstrates that the social rate of return decrease as you move to higher levels of schooling. It is also interesting to note that the private rate of return on tertiary education is a very high 19%, nearly double the social return of 10%.
Exhibit B: Data from the government of Canada compares the return on business capital to that of university education and concludes that investing in business capital is the more beneficial choice as it yields a 15% rate of return.
Exhibit C: Fully subsidizing tertiary education would come at a prodigious (in my mind impossible) cost. Likewise, by factoring in decreasing returns to scale, the social rate of return to tertiary education estimated here (10%) would certainly decrease substantially. Furthermore, the increased availability of tertiary education would lead to over-education. What I mean here is that many people will be forced to take jobs that do not use the skills they acquired in their schooling. This is because the market for highly skilled/highly educated individuals cannot increase indefinitely. For the labour market to be efficient the number of college graduates must roughly match the number of employers seeking the skills of college graduates. The same holds true for higher levels: master's, PhD, etc.
While open courseware is great, going a step further by making post-secondary education free would be foolish because of the inefficiencies it would create in the labour market, and the tremendous cost it would mean for tax-payers.
Which economies would be able to fully support tertiary education?
What if you were told that of the eight people closest to you, you only had enough food to feed one. One would survive, the other seven would not. How do you go about deciding who to feed? Imagine how difficult it would to be decide which of your children you would save. It is an impossible dilemma, and one that Dr. James Lovelock believes will become inevitable by 2100.
Lovelock’s Predictions
By 2020 extreme weather will be the norm, resulting in global devastation.
By 2040 Europe will have a Saharan climate, while much of the UK will be underwater.
By 2100 Europe and Australia’s climates will be 8° Celsius hotter than the present.
By 2100 food shortages and mass starvation will wipe out seven eighths of the world’s population, with an estimated 1 billion people surviving.
The Gaia Hypothesis
James Lovelock is an independent environmental scientist, best known as the originator of the Gaia hypothesis. His Gaia hypothesis proposes that all organisms and their surroundings on Earth are closely integrated to form the living, self-regulating system known as Gaia. Gaia’s goal is to provide an optimal environment for life, and she (Gaia) regulates herself to achieve this goal. Through the observation of paleoclimate data, Lovelock has concluded that increased greenhouse gas levels have forced Gaia into an unstable state. He determines that humanity has pushed Gaia to regulate herself into a state of much hotter temperatures, making much of earth uninhabitable for humans. Lovelock foresees Gaia arriving at this hotter steady state by 2100, and warns that drastic climate changes will result in massive food shortages, resulting in the deaths of seven eighths of the world’s population.
Why I Believe Lovelock
Before you dismiss Lovelock’s observations as merely a potential cover for the National Enquirer, consider the following:
He’s One of the Preeminent Scientists of Our Time
Fellow of the Royal Society.
Formally a leading researcher at NASA, Oxford, Harvard and Yale.
Became an independent researcher in 1964, to allow himself more freedom and creativity in his research.
His Past Predictions have Proven Correct
He was the first to detect the widespread existence of CFCs in the atmosphere.
While working for NASA in the 1960s, he correctly predicted that NASA’s attempts to find life on Mars would be unsuccessful, as his observations had proven Mars’ atmosphere to be uninhabitable.
In 1965, Shell Oil asked him what the world would look like in 2000, and he predicted that we would be facing grave environmental problems.
His theory of Earth being a living self-regulating system was initially ridiculed. It is now the consensus.
The UN’s Intergovernmental Panel on Climate Change (IPCC) is slowly accepting his climate change observations.
Thoughts
What I take away from Lovelock’s observations is that our future is uncertain. Then again haven’t we always known this? Hasn’t tomorrow always been a mystery?
Lovelock merely refocuses our attention on life’s uncertainty— it’s brevity. So what do we do in the face of life’s uncertainty?
Embrace it! Enjoy the moment, enjoy today, because as Lovelock demonstrates, and we have always known, the future is uncertain.
Further Watching:
1. James Lovelock interview with George Stroumboulopoulos (If you had told me 10 years ago that he'd go from MuchMusic punk rocker to Canada's Letterman, I would have called you nuts!)
This US debt defaulting drama is everywhere, there's no escaping it— it wakes me up on the radio, covers my newspaper, and is the discussion amongst my classmates as I enter class. It is time for me to put forth my thoughts especially in regards to how it affects sustainable economics.
Politics or Economics?
What strikes me most is how the disagreement is much more political than economical. I say this because the correct economic choice is obvious; the debt limit must be increased (or removed altogether) and the debt cut gradually. It is the ABCs of economics: in a recession/ recovering from a recession you maintain or increase government expenditure so to facilitate growth; in an expansion/ when the economy is doing well you can lower government expenditure so to keep inflation stable. The Republicans demand of cutting trillions from federal spending is bad policy as it would set the economy back amid decreased demand and increased unemployment.
It must be frustrating for Americans to watch this ongoing political posturing as both sides are more concerned with looking tough for the upcoming election than they are about doing what’s best for the country. Neither side wants to concede to the other’s demands. Worst of all neither side will even entertain the idea of getting rid of the arbitrary debt limit (the US is the only advanced economy with one) as doing so is said to be ‘political suicide’.
This problem of political self-interest has long undermined effective economic policy. The issue is that the nation’s goals and those of the politicians who make decisions on behalf of the nation are not aligned. The central aim of a politician is to be re-elected, not to do what’s best for the nation.
Until this problem is fixed, the best option (in this case dismissing the debt limit) will all too often be overlooked in favor of what looks best politically.
Questions - How sustainable is it to finance the present economy through borrowing?
- At what point does continued borrowing become unsustainable and overly burdensome?
The good news is that for better or for worse, the ordeal will finally be over August 2nd. I can hardly wait.
