Can’t catch a break

A story this morning in the NYT about coal powered plants brought to the forefront a question I’ve asked myself and of others – if the law of conservation of matter says that matter is neither created nor destroyed, but only changes form, where do all the pollutants go once we’ve created them.

Father Rodney Torbic, the priest at the St. George Serbian Orthodox Church, lives across the road from Hatfield’s Ferry and sees people suffering. Source: NYT

Evidently, nowhere. When you clean the air of pollution, you just end up dumping them either in the water, or in landfill.

In Economics, we call this “external cost”. While a company may do things to reduce this cost to consumers and society as whole, it is not completely eliminated.

According to the story, the Clean Water Act passed by the EPA doesn’t control all the contaminants dumped into the water. The contaminant solids that are removed by the scrubber are dumped into a landfill. Even the most advanced synthetic liner has been shown to leak in field tests, which means at some point, many of the solids are also going to find their way into the water.

The only viable solution to this is to move away from coal-powered plants – from digging up the coal (or variants) from the ground and burning them. Incidentally, that would also reduce the other huge pollution problem – mining, especially Mountain Top Removal.

Considering all the dangers involved in nuclear fission and in transporting/storage of spent nuclear waste, we’re left with only a few alternatives.

I don’t have an answer to the question of which of these alternatives has a real long-term prospect. I only know what we’re doing right now is just not sustainable.

Is greed still good?

If you close one door, another one opens. A recent article in the NYTimes on credit card companies and credit unions going to desperate lows to make money, was appalling and gut-wrenching.

Several of these banks were bailed-out by the federal government’s TARP program. For many of them, it was greed and an unapologetic willingness to rip-off the customer at any cost that brought them to that stage. You’d think they learned something from that. You’d be wrong.

Not only are they charging exhorbitant fees (3250% in one case), they do other things that any reasonable individual would consider unethical – re-arranging transactions so the highest charge is paid first, leaving the customer with no balance, and therefore triggering an overdraft fee.

From an “economic thinking” perspective, regulating this would be bad. Supply-side economists would say that by regulating this industry, consumers who have a need for this overdraft with ridiculous fees would not be able to get them. But are the customers really asking for this? Or are they simply opted-in by default?

Which brings me to a bigger point – why are default opt-ins even allowed? In you look at any industry – travel, credit cards, phone companies, advertising – an optional opt-out is always a ploy used to sucker somebody into giving up something that they may not be willing to do so if asked. It’s just as bad as those other scourges of commerce – mail-in rebates and “new & improved” products that hold less but cost the same. If you really want to give me a discount, just give it.

When this topic came up for discussion recently in class, it was interesting to watch how most students reacted. The general feeling was that it was the consumer’s responsibility to watch out. Companies had absolutely no responsibility to be transparent about unit costs.

Made me wonder – if the MBA students from Gecko’s generation brought us to this recession, where will this generation take us?

Economic thinking

As a student of economics, I’m running into a wall. It’s hard to keep a sociological perspective when you have to put on the economic-thinking hat.

Conventional economic thinking says government controls on almost anything is bad. Rent control, minimum wages, taxes…the theory is that the market eventually figures out the optimal solution and government intervention leads to a distortion of supply and demand.

If the markets could really do that magic, what happened that caused this recession and financial crisis? Paul Krugman has a theory. The ketchup economists screwed up.

That would be good if we could just get rid of them and move to what the “saltwater economists” think is the right set of policies. But unfortunately, that’s what’s being taught in schools today. Efficient market hypothesis, CAPM, Fama, deregulation…

Maybe it really is time for a 2nd Keynesian resurgence.