Thursday, August 09, 2007

Al Gore Faces New Debate Challenge

Best-selling author Dennis Avery is the next prominent figure to challenge the facts Al Gore is promoting in his global warming crusade. Mr. Avery is co-author of Unstoppable Global Warming Every 1,500 Years. Both Al Gore and Dennis Avery have New York Times best-selling books on global warming, but with opposite conclusions.

The list of Al Gore detractors continues to grow as his extreme rhetoric and conclusions get dissected by scientists, economists, and researchers. Avery joins Lord Christopher Monckton (former Prime Minister Margaret Thatcher advisor), Bjorn Lomborg (Danish economist), author Michael Crichton, Prof. S. Fred Singer (former director of the U.S. National Weather Service), Tim Ball, Ph.D. (historical climatologist), Prof. Ian Clark (University of Ottawa), and Prof. Richard Lindzen (MIT) among others.

Gore claims recent climate change is the result of human activities, and society must give up most of its energy supply to prevent global catastrophe. Conversely, Avery amassed physical evidence of past warming/cooling cycles and experimental evidence demonstrating variations in solar activity affect Earth's constantly varying temperatures. "My book says our warming is natural, unstoppable-and not very dangerous anyway," stated Avery. "These books represent the two leading explanations for the Earth's recent temperature changes-and they conflict. If global warming truly is the most important public policy issue of our day, then it is high time the public got to hear the arguments from both sides matched up against each other," continued Avery.

Gore has refused all debate challengers to date. Joseph Bast, president of The Heartland Institute, noted, "Maybe it's because climate alarmists tend to lose when they debate climate realists. Or because most scientists do not support climate alarmism." The Heartland Institute has run more than $500,000 of ads in the Wall Street Journal, New York Times, and Washington Times promoting a debate.


Environmental group aims to save the sky

Another childish Greenie stunt

An environmental advocacy group has put the sky up for "adoption" to press the U.S. Environmental Protection Agency for tougher smog standards. "Adopt the Sky" is an online petition asking the EPA to approve stricter ozone pollution standards. The site then assigns signers a patch of polluted sky to symbolically adopt as their own. As of Friday, 336 miles of Arizona sky had been adopted. Ozone, a colorless, odorless gas, is at dangerous levels in metropolitan Phoenix. The sponsor, the Washington, D.C.-based non-profit Earthjustice, hopes to have 50,000 signatures by Oct. 9.

In June, the EPA's administrator proposed to lower the federal ozone standard from 0.084 part per million to as low as 0.70 ppm. His proposal fell short of deeper cuts recommended by EPA's scientific advisory panel. "Higher ozone standards are going to mean fewer premature deaths, it's going to mean cleaner air, it's going to mean a better standard of life for all Americans," said Jared Saylor, spokesman for Earthjustice. The EPA is expected to announce the final rule by March 12.


Corn facts, not corn flakes!

There's a whole aspect of life in America about which fewer and fewer Americans know anything. It's farming. Some two percent of the population feed the rest of us who have no idea how what they produce gets to our plate. Responsible for everything we eat, agriculture is also an essential element of our nation's economy. E. Ralph Hostetter, the publisher of American Farm Publications, is one of the most cogent, sensible voices on issues concerning farming today. Recently he wrote about "The impact of biofuels." You might think he would be all for converting corn into ethanol, but Hostetter is not. He sees the insanity of using corn - a crop used in the manufacture of 3,500 commonly used products during their production or processing - in this fashion.

The American public is told by our government the rate of inflation in 2006 was only 2.2 percent. However, when price increases in food and energy were factored in, the reality was that actual inflation was 4.8 percent, or an increase of 118 percent what the nation was told.

The volatility of food and energy prices is such that the government's Consumer Price Index conveniently ignores them. That doesn't make the problem go away, but it does mislead the public.

Today, 60 percent of the American corn crop is fed to U.S. livestock. Therefore, as the price of corn is forced up by the demands of ethanol production and many natural causes such as weather, so is the price of meat, poultry, eggs, milk and more than 3,500 products American use every day.

Among the products affected by the rise in the cost of corn are cake mixes, pizza, beer, whiskey, candies, cookies, corn flakes, cosmetics, instant coffee, carbonated beverages, fertilizers, vitamins, tires, toothpaste, paper products, pharmaceuticals such as aspirin and more than 85 different types of antibiotics. And that's just a short list. Across the board, the price of a bushel of corn was up six percent in 2006 because of federal government mandates for the production and use of ethanol. Notes Hostetter:

Corn production for the nearly 7 billion gallons of ethanol production at the present time requires about 16 million acres or 20 percent of the total 80-plus million acres presently in corn production.

In the effort to cash in on the federal ethanol mandates, production facilities cannot be built fast enough. In Iowa, when 55 ethanol plants become fully operational, they will use virtually the entire corn crop of that State! Proposals in Congress to increase biofuel production "will require nearly 100 million acres of corn, approximately a 25 percent increase above the present 80-plus million acres," said Hostetter, which means that other crops such as soybeans and cotton will not be planted.

At present, the U.S. "supplies 70 percent of world corn exports of some 55 million tons of corn. It is now estimated that ethanol production in 2006 consumed about 50 million tons." Goodbye world corn exports and the money generated for the U.S. economy. Instead that corn will be added to gasoline in the form of ethanol.

It's not like the world is running out of oil for gasoline. There is no rational or scientific reason to reduce the use of gasoline except for the charge that automobile and truck use generates "greenhouse gases;" but 95 percent of all greenhouse gases is water vapor! Environmentalists and the U.S. Congress want to destroy the U.S. economy by diverting corn from feeding the livestock and other food products that we consume and the thousands of other uses for which it is required.

In 1992, Al Gore's book Earth in the Balance was published. It is his screed about the way everyone is participating in the destruction of the Earth. He wrote, ". . . it ought to be possible to establish a coordinated global program to accomplish the strategic goal of completely eliminating the internal combustion engine over, say a twenty-five-year period." Look under the hood of your car. That's an internal combustion engine. Driving up the cost of corn is pure genius if you want to inflict financial pain on everyone and destroy the nation's economy.


Energy taxes and the pretense of knowledge

"The current net tax per gallon [of diesel fuel] is 13 percent of the price, while the environmental cost per gallon is 50 percent of price. The tax on this fuel could be raised substantially to promote its efficient use."

Typically economists oppose excise taxes on the grounds that they distort market prices and lead to a misallocation of resources. But to most economists, energy, particularly energy that is derived from fossil fuels (coal, oil, and natural gas), is seen as an exception. In fact, as evidenced in the statement above, to the extent that the generation of energy imposes unwanted negative effects on society, such as pollution, it is argued that taxes on the production of that energy are called for to enhance the efficient operations of the market. In the face of a new "energy crisis" and increasing levels of propaganda about environmental problems, real and imagined, it is possible, with an assist from "economic science," that "soak the energy wasters" could replace "soak the rich" as the number one rallying cry for new tax initiatives.

Support for energy taxes by many economists centers on the economic concept of externalities. Because some energy production generates pollution, the full cost of generating that energy is not being borne by its producers and consumers: there are "external effects." As a result the price of the energy source is said to be "too low" and the amount of it produced is said to be "too high"; the market "fails" to generate the "correct" output at the "correct" price. The standard solution is to tax the energy source to induce the producer to charge the "correct" price and produce the "correct" level of output. Such a tax would, according to the theory, improve economic performance of the economy overall. As one staunch supporter of energy and other externality taxes has argued: "The primary function of such taxes is to make the economy function more efficiently. Through their use we have the opportunity to employ the tax system, not only to raise revenues but also to enhance the operations of the economy."

There are serious flaws in this entire approach to both environmental and tax policy. Ultimately we must ask what is meant by market failure and implicitly, market success. If certain forms of energy are being sold at the wrong prices and are being produced in the wrong amounts, what would be the correct price and output? Obviously this would have to be known before a tax that would "enhance the operations of the economy" could be formulated and imposed. When all the fancy terminology, graphs, and equations are stripped away, the definition of market success that energy tax policymakers are supposed to mimic is so stylized and so contrived as to have no relevance for real?world policymaking.

Knowledge Problems and the Correct Price and Output

The "correct" price and output from this perspective is the one that would be generated under conditions of what is called "perfect competition." This is a world where all market participants have perfect knowledge of all current and future information that relates to their market activities. Within product lines there are no differences between what competitors offer for sale. Markets can be entered and exited costlessly. Finally, there are so many buyers and sellers in any market that no one can have any effect on their selling or buying price. Furthermore, this world is static. Any unanticipated changes in people's preferences, attitudes, technology, or the relative scarcity of resources are assumed away. The correct price and output is the one that will occur when all markets are operating under these conditions. So when an economist proclaims that "too much" gasoline is being consumed and implicitly, that the price of gasoline is too low, he means: relative to the amount that would be consumed and the price that would be paid in a world that looks like the perfectly competitive model. Clearly, by this totally unrealistic and unobtainable standard all markets fail all of the time.

Once this is recognized the absurdity of the market?failure case for energy taxes becomes easily recognized. The information requirements that are necessary to impose the "efficiency enhancing" tax are so great as to render the policy impossible to implement. If the desired outcome is the one that will be obtained when all market participants have perfect information of all preferences, scarcities, and technologies, then any policymaker would have to have similarly perfect knowledge. In reality, then, the amount of the tax and the amount of the output reduction that it brings about would necessarily be arbitrary or politically motivated and unrelated to true efficiency considerations.

The market?failure argument for energy taxes, and energy policy in general, is based on what Nobel laureate F. A. Hayek described as a "pretense of knowledge."3 To implement a tax policy that would improve on market results, the government would have to pretend that it had information it could not possibly possess. For example, gasoline taxes are often argued for on market?failure grounds. Because, it is assumed the cost of air pollution is not being borne by oil companies and automobile drivers and producers, it is argued that too much gasoline is consumed and the price of gasoline is too low.

What is typically left unstated is that it is too low relative to the amount of gasoline that would be produced and consumed in the idealized world of perfect competition. Simply to know whether this is the case, the government must know how much would be consumed in a world of perfect competition. The government has to have complete knowledge of all the purposes for which individuals in society are using gasoline and the relative importance that they place on those purposes. Furthermore it would have to possess accurate knowledge of the costs that the pollution generated by the gasoline usage imposes on all the individuals in the economy. Ultimately all of this information is subjectively determined and unknowable by outside observers, even economists.

The information requirement becomes even more intractable once the timeless feature of the perfectly competitive world is recognized. To impose the "correct" tax, individual preferences, scarcities-and therefore all costs and benefits-are assumed to be constant. If this were not the case the amount of the correct tax would always be changing as these variables change. But this is not the real world. As time passes, people's preferences and scarcity conditions are continuously changing. Even if we (unrealistically) assume that one could gather the relevant information to impose the correct tax for a given moment, by the time the tax was actually imposed it would be completely out of date.

The argument against the possibility of efficient taxation is essentially the same argument made by Mises and Hayek against the possibility of efficient, centralized control of economies in general.4 Gerald O'Driscoll and Mario Rizzo refer to the implementation of such taxes as "socialism writ small."5 If a central authority could obtain the appropriate information for improving on market outcomes with regard to levying pollution?and energy?related taxes, then there is no reason why the same authority could not second?guess the market in general. Because of the nature of the information requirements needed to mimic the perfectly competitive results, the central authority would need to know the pattern of these outcomes in all markets, both for a particular moment and as time passes and information changes.

Insurmountable Problems

These kinds of information problems are insurmountable. In spite of this fact, highly respected economists continue to make bold proclamations concerning the appropriate size of such taxes and their effect on the efficient allocation of resources, as evidenced by the statement at the outset of this essay.

The fact is that energy taxes-like all other excise taxes-distort market efficiency, not enhance it. They drive a wedge between prices paid by consumers and those received by producers, with consumers paying more than they would in the absence of these taxes and producers receiving less. Since energy is an input into production processes throughout the economy, this means that everyone's production costs are higher, and output and social welfare are lower.

In addition, such taxes, like all taxes, transfer resources from private to inherently less?efficient public?sector uses, further reducing output and productivity. That is rarely considered by those who claim that energy taxes enhance economic efficiency. The packaging of energy taxes as good for the economy is a political ploy meant to give tax increases a free ride on the environmentalist bandwagon. We should never be more wary than when anyone, politician or economist, tells us that a tax is "for your own good." Taxes have one overriding purpose: to transfer resources from the private to the public sector. This has never been and cannot be a formula for improving the economy.



The Lockwood paper was designed to rebut Durkin's "Great Global Warming Swindle" film but it is in fact an absolute gift to climate atheists. What the paper says was of course all well-known already but the concession from a Greenie source that fluctuations in the output of the sun have driven climate change for all but the last 20 years really is invaluable. And the one fact that the paper documents so well -- that solar output is on the downturn -- is also hilarious, given its source. Surely even a crazed Greenie mind must see that the sun's influence has not stopped and that reduced solar output will soon start COOLING the earth! Unprecedented July 2007 cold weather throughout the Southern hemisphere might even be the first sign that the cooling is happening. And the fact that warming plateaued in 1998 is also a good sign that we are moving into a cooling phase. As is so often the case, the Greenies have got the danger exactly backwards.

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