Congratulations, Environmentalists

Emirates, the biggest airline by international traffic, said more carriers will go bust this year as fuel costs and sluggish economies undermine profitability.

“We can reel off a whole load of airlines that are teetering on the brink or are really gone,” Tim Clark, the Dubai-based carrier’s president, said in an interview. “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”

Airline profits will plunge 62 percent in 2012 to $3 billion, equal to a 0.5 percent margin on sales, as oil prices rise, the International Air Transport Association said this week. Emirates’s fuel bill accounts for 45 percent of costs and may jump by an “incredibly challenging” $1.7 billion in the year ending March 31, according to Clark, who says he’s sticking with a no-hedging strategy rather than risking a losing bet.

There are some environmentalists who aren’t completely economically retarded, and thus have recognized that one way to reduce consumption of a good that releases CO2 into the air is to raise the price. Some have even suggested using gasoline excise taxes as a way of essentially reducing the consumption of gas. This is practically what will happen with air travel, as higher gas prices will reduce consumption and/or profit margin, leading to the bankruptcy of several airlines. (Of course, this means that there will be fewer people buying a get-out-of-unconstitutional-patdowns-free card.)
I’m not entirely sure what’s all at play in rising airline fuel prices, but I’m going to assume that regulation plays a huge role. It’s omnipresent throughout the entire process of turning crude oil into jet fuel, including drilling regulations, transport regulations, refinement regulations, and so forth. I can’t imagine that US inflation helps, since it is still the world’s reserve currency, and seeing as how all the other major players are inflating their currencies, as well as some of the minor players, it doesn’t look like the nominal price of jet fuel will be coming down soon.
At any rate, it looks like the environmentalists have pretty much won this battle, with everyone being worse off as a result. Gaia demands sacrifice, after all. She’ll probably demand the sacrifice of cars next.

The Market and Efficiency

Mark Thornton shares a story:

Remarkably, the cost of air conditioning plummeted over the decades. The cost of air conditioning units declined, and they became increasingly reliable, safe, and efficient in turning electricity into relief from heat and humidity.

That is until recently. Twenty years ago I had an air-conditioning system (i.e., heat pump, HVAC system) installed in a house that was almost 1,000 square feet for $1,600. I just got the preliminary estimate, not an actual bid, to replace a system on a similarly sized house for $11,000. Not surprisingly, this is the reason for this article.

Thornton goes on to describe how government intervention on behalf of the environment has led to higher prices by mandating more efficient end-user systems.  This mindset is all too common among the environmentalist crowd, and belies a shocking amount of shallowness and ignorance.

(As an aside, the efficiency of end-user products and systems tend to be targeted the most by environmentalists because it is part of their pathology.  Like the group Opus Dei, at least as described by Dan Brown, environmentalists believe that one can only show penance by feeling pain and undergoing sacrifice.  As such, they target popular consumer goods in order to feel better about all the evil that man has done to the environment.)

If the environmentalists were truly concerned about protecting and saving the environment, their analysis would take into consideration not only the efficiency of the end-user product, but the efficiency of the production process of said product, the efficiency of transporting the product, the efficiency of selling the product, and the efficiency of maintaining the product, among other things.  Consumption of the product is not the only process that consumes energy and incurs environmental costs.

Production can incur massive amounts of environmental costs.  There is pollution, obviously, in addition to energy consumption, raw material consumption, and the energy costs of labor.  All these things require environmental resources.  Energy comes from coal or nuclear plants, which have their own forms of pollution and their own energy costs as well. Workers have to eat, have to drive to work, and generally wish to relax when not at work.  These desires have an impact on the environment.  Meeting stricter production costs generally requires more materials, directly or indirectly, and requires more labor besides.  Furthermore, new standards may lead to a net increase in pollution because they require more energy.

Besides that, the higher standards may mean that the product wears out more easily or quickly, requiring either repair or replacement. Both of these processes require a net increase in energy consumption, which is not good for the environment.  The former might require a repairman to drive out to someone’s house to make a repair, which does cost energy and lead to an increase in pollution.  The latter requires more units to be produced, which likewise requires more energy and leads to an increase in pollution.

As such, when environmentalists focus on the efficiency of end-user products, they often ignore the unseen environmental costs that new standards incur.  If only there was a way to gauge systemic efficiency.

Believe it or not, there is, in fact, a very easy way to judge systemic efficiency and that is by a market mechanism known as the “price.”   Prices signal to consumers the relationship between supply and demand for given product.  In this case, cold air within a closed system is the product, and prices let consumers know how much air can be provided relative to demand.

Incidentally, the market system encourages systemic efficiency because producers have an incentive to provide a given product for the highest price to consumers at the lowest cost to themselves.  This incentive is known as “profit.”

If there are two competing companies that produce identical products and one can produce their product with one-third fewer works and ten percent fewer raw materials, they can sell their product for a lower price and make a higher profit than their competitors.  Employing fewer workers helps reduce the strain on the environment by lowering the consumption of energy as would have been used for commuting.  Lower demand for certain raw materials also helps the environment in that less energy is needed because there is less material to extract, and so on.

Thus, the market serves the goals of the environmental movement quite well.  Unfortunately, most environmentalists are too dense to realize this, and thus focus their attention on obvious costs while ignoring the less visible costs.  Their superficiality, then, has led to outcomes that are worse for the environment.   Therefore, it would simply be best to refer to environmentalists as earth-hating idiots, for they are nothing more than simpletons, unable to make any observations other than the most obvious and incapable of thinking abstractly and rationally for any length of time.  Quite simply, they are enviromorons.

Where are People Most Satisfied With Efforts to Preserve the Environment?

This question arose as I was thinking about the relationship between the determinants of happiness (i.e. survey measures of subjective well-being or SWB) and human flourishing at a national level.

Recent research has been able to explain around 90% of inter-country differences in average SWB in terms of average income levels, enough money for food, healthy life expectancy, friends to count on, perceptions of freedom, corruption, charitable donations and church attendance. (See: John Helliwell et al, NBER Working Paper 14720.) It is not surprising that these factors affect well-being but it is hard to accept that items on this short list could explain as much as 90% of variation among countries in average well-being. Other factors that might also be thought likely to affect well-being include education, environmental quality, democratic institutions, and participation in cultural and sporting activities.

In the case of education, some studies have shown that while higher levels of education tend to be associated with higher levels of SWB, the effects of education tend to drop out when other factors such as health status and income are included in models. Education improves health and income-earning potential and thus indirectly contributes to SWB. Furthermore, the importance of education to individual well-being does not depend solely on its impact on satisfaction with life or happiness. Education could arguably still be good for people even if it did not make them feel good.

It is possible that similar considerations may apply with regard to environmental quality. For example, water and air pollution are detrimental to health and longevity. Furthermore, arguments advanced in favour of preserving the natural environment do not rest solely on the contribution it makes to the emotional well-being of humans.

However, there does not seem to have been as much research done on the contribution of environmental quality to SWB. This may be because of the difficulty of interpreting available survey data relating to perceptions of the natural environment.

The World Values Surveys include questions concerning the priorities that people give to environmental protection. These surveys show that the proportion of the population who consider that higher priority should be given to environmental protection than to economic growth tends to be somewhat higher in high-income countries with relatively high average SWB. These results might reflect what Ronald Inglehart has described as a shift toward postmaterialist values in advanced industrial societies rather than dissatisfaction with efforts to preserve the environment.

The Gallup World Poll asks respondents specifically whether they are satisfied or dissatisfied with efforts to preserve the environment in their country. Some characteristics of countries in which high and low proportions of the population are satisfied with efforts to preserve the environment can be compared in the chart below. The other variables shown in the chart are: per capita GDP expressed as a percentage of that in the country with highest per capita GDP (United Arab Emirates); average quality of life (data from the Gallup World Poll expressed in percentage terms); government effectiveness -perceptions of the quality of public services; and regulatory quality – permitting and promoting private sector development. (The latter two indexes are sub-indexes of the World Bank’s suite of governance indicators, converted to percentage terms such that the country with lowest rating has a score of 0% and the country with the highest rating has a score of 100%.)

The chart hows that satisfaction with efforts to preserve the environment tends to be somewhat greater in countries with higher average incomes. The factor that stands out most, however, as a characteristic of countries in which there is greatest satisfaction with efforts to preserve the environment is government effectiveness.

Countries which rate highly in terms of both satisfaction with environmental efforts and government effectiveness include Singapore, Austria, Switzerland and New Zealand. At the other end of the scale, countries which combine low ratings in terms of both of these factors include Mongolia, Ukraine and Pakistan.

What Makes a Planet Happy?

I find it hard to take seriously the concept of a happy planet. Is Earth happier than Mars? How would we know? It seems to me that only sentient beings can be happy, but that might just reflect the limited perspective of a sentient being. For all I know a rock might have a completely different perspective.

The happy planet index constructed by the New Economics Foundation (nef) doesn’t actually attempt to compare the happiness of different planets. What it attempts to do is to assess how happy our planet is with what is happening in different countries. I hope that makes you smile because if you take the happy planet index too seriously I think you are at risk of becoming unhappy – and that might make the planet unhappy!

The countries that are given the highest ratings in nef’s index are Costa Rica, Dominican Republic, Jamaica, Guatemala and Vietnam. These places don’t seem to me to offer the ideal of a good life for the people who live in them, even though many of these people say they are satisfied with their lives.

The authors claim that the results show that a good life is possible without “costing the earth”. Andrew Norton has pointed out that the results do not support this conclusion. Average happiness levels are relatively low in several countries that are ranked among the top 50 in the happy planet index.

As defined by the nef the happy planet index is a productivity measure. The numerator (or output measure) is happy life years, measured by multiplying average life satisfaction levels by average life expectancy. The denominator (or input measure) is a linear function of the average “ecological footprint”, which is a measure of the total amount of land required to provide all resource requirements plus the amount of vegetated land required to absorb CO2 emissions.

The basic idea seems to be that “the planet” becomes happier when people in a particular country become happier without using more “land” or when people maintain their current happiness level while using less “land”.

How do we know that this is what makes the planet happier? How do we know that the planet cares whether or not humans are happy?

My point is that the happiness of the planet only exists in the mind of the human who thought up the idea of the happy planet index. There is nothing wrong with trying to imagine what it would be like to be a planet that has feelings, but this is a game that anyone can play. Some people could imagine, for example, that the happiness of the planet will rise if more CO2 is produced. After all, CO2 is food for plants and planets like plants. Don’t they?

It would be possible for everyone on earth to have their own happy planet index that takes account of the things that they imagine that the planet might value. It would probably be preferable, however, to come down to earth and acknowledge that there is potential for everyone on the planet to vary in the extent to which they value various things that are important to them.

If nef’s happy planet index serves a useful purpose I think it is to remind us that surveys that measure our subjective well-being do not necessarily take into account all the things that are important to us. When we report how satisfied we are with life we take account of the things that are most salient to us at the time. We don’t necessarily take into account our own future well-being and the well-being of future generations of family members, let alone the well-being of other relatives and friends, the well-being of other humans, the well-being of animal pets, the well-being of other living things, or other matters that might be important to us.