Congressional Committee Sizes

In today’s New York Times, Tom Friedman writes:

Our Congress today is a forum for legalized bribery. One consumer group using information from Opensecrets.org calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.

What an interesting proposition: The size of a Congressional committee will be directly related to the availability of campaign contributions and lobbyists. Growing (shrinking) committees are related to increased (decreased) campaign contributions and lobbyists.

This same logic suggests that: The total number of committees and committee memberships will likewise be directly related to the availability of outside funding. As total spending on contributions and lobbyists goes up (down) the number of committees and committee memberships with increase (decrease).

To follow the money, simply follow the ebb and flow of Congressional committees over time. Taken together the propositions above suggest that Congress functions like a market, and not a ballot box.

Prop 23 and Out of State Interests

Thomas Friedman’s latest column on “The Terminator vs. Big Oil” adds another dimension to the rampant campaign finance conflicts of interest inherent in our political system.

In particular, Friedman shines a spotlight on California Prop 23, which “proposes to suspend implementation of A.B. 32 until California achieves four consecutive quarters of unemployment below 5.5 percent. It is currently above 12 percent.” A.B. 32, or California’s Global Warming Solutions Act of 2006, was designed to put California on a path to reducing greenhouse gases in its air to 1990 levels by 2020, and at the time it was enacted had the support “of Republicans, Democrats, businesses and environmentalists.”

But now, according to Governor Schwarzenegger, speaking at an energy forum last week in Sacramento:

“It is very clear that the oil companies from outside the state that are trying to take out A.B. 32, and trying to take out our environmental laws, have no interest in suspending it, but just to get rid of it… They want to kill A.B. 32. Otherwise they wouldn’t put this provision in there about the 5.5 percent unemployment rate. It’s very rare that California in the last 40 years had an unemployment rate of below 5.5 percent for four consecutive quarters. They’re not interested in our environment; they are only interested in greed and filling their pockets with more money… And they are very deceptive when they say they want to go and create more jobs in California… Since when has [an] oil company ever been interested in jobs? Let’s be honest. If they really are interested in jobs, they would want to protect A.B. 32, because actually it’s green technology that is creating the most jobs right now in California, 10 times more than any other sector.”

In particular, Texas oil companies Valero and Tesoro “have led the charge against the landmark climate law, along with Koch Industries, the giant oil conglomerate owned by right-wing megafunders Charles and David Koch. Koch recently donated $1 million to the effort and has been supporting front groups involved in the campaign.”

For me, this raises some interesting questions. At the federal level, foreign interests are technically prohibited from making political contributions (although there is reason to suspect they are being circumvented and not adequately enforced). Why don’t states adopt similar regulations with regard to out of state interests — corporate or otherwise? After all, why should the citizens of a state be held hostage to outside interests of any kind? It seems that residents of a state should have more say over their own governance than a couple of businesses who happen to have facilities located there. Of course, the same goes for other activists.

Earth Day Versus Earth Race

In “Off to the Races,” New York Times columnist Thomas Friedman contrasts “two basic strategies for dealing with climate change.”

The Earth Day strategy is epitomized by a series of eponymous events as well as other summits, such as Copenhagen. “The Earth Day strategy said that the biggest threat to mankind is climate change, and we as a global community have to hold hands and attack this problem with a collective global mechanism for codifying and verifying everyone’s carbon-dioxide emissions and reductions…”

However, Friedman questions the viability of the Earth Day strategy. “[A]nyone who watched the chaotic way [the Copenhagen] conference was ‘organized,’ and the bickering by delegates with which it finished, has to ask whether this 17-year U.N. process to build a global framework to roll back global warming is broken.” Thus, while agreeing that the Earth Day process has not been “a waste,” Friedman dubs himself “an Earth Race guy.”

The Earth Race strategy considers “averting catastrophic climate change [to be] a huge scale issue. The only engine big enough to impact Mother Nature is Father Greed: the Market. Only a market, shaped by regulations and incentives to stimulate massive innovation in clean, emission-free power sources can make a dent in global warming.”

This Earth Day versus Earth Race logic leads Friedman to conclude that priority one is “getting the U.S. Senate to pass an energy bill, with a long-term price on carbon that will really stimulate America to become the world leader in clean-tech.”

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If you believe that CO2 is an externality (and most people now do), then removing uncertainty through regulation seems to be important step. Until CO2 emissions (and its “equivalents”) have a price, there is little incentive for internalizing such costs. But I fail to see how such a policy is the exclusive domain of an Earth Race strategy. It seems that regulating carbon is also a logical conclusion of an Earth Day strategy.

Moreover, despite potentially agreeing with his conclusion, I am not sure about Friedman’s logic. For one, the either/or dichotomy implicit in Friedman’s article ignores the potential interdependencies between an Earth Day strategy and an Earth Race strategy. If anything, I suspect the Earth Race strategy is best understood as an emergent response to the growing prominence (political and otherwise) of the Earth Day strategy. Having said that, I would not go so far as to suggest that an Earth Race was either an inevitable response or even the only possible response to the Earth Day strategy. Further, it is difficult to imagine the Earth Race strategy having any traction were it not for the forty years of effort put into the Earth Day strategy. In fact, it is not entirely clear that the Earth Race strategy has sufficient traction to sustain itself.

Additionally, it is ironic that Friedman’s proposed solution — “the Market” — is only viable when “shaped by regulations and incentives.” I am not troubled by these conditions. If anything, I see them as acknowledgment(whether intended or not) that markets are social constructions. As a result, markets are not inherently capable of solving social problems. “Greed is good” (or bad) only if and when human institutions make it so. “Successful” markets require every bit as much explanation as market failures. However, if Friedman’s conditions are also intended to signal the possibility of intentionally designing a “perfect” (i.e., rational) carbon market, then we should be concerned. As social constructions markets are not inherently rational.

Finally, my biggest concern involves Friedman’s comparison between the Earth Race strategy and the Space Race, in which “two countries competed” to “be the first to put a man on the moon.” While a potentially interesting analogy, apart from sharing the word “race” it is unclear to me what the two scenarios have in common. In particular, it is not clear how (if at all) market dynamics played a role in the space race — either in the United States or (especially) in the Soviet Union.  Instead, if there is a parallel between the space race and climate change, it seems to me the lesson is that creating public goods may require massive government investments in technologies, and protection from market dynamics.

In short, I find Friedman’s latest article thought provoking. His contrast between Earth Day and Earth Race strategies provides a compact way of thinking about alternative approaches to a complex problem. And yet, while inclined to support his conclusion that we need a carbon market, if anything, such a policy seems entirely inconsistent with the lessons of the space race. It would not be inaccurate to describe the space race as dependent on a singular enemy, driven by an appeal to nationalistic fervor, and indebted to massive governmental investments in the industrial-military complex.

In other words, if Friedman is right, if what we need is an Earth Race strategy, and if the Earth Race is like the Space Race, then it seems the last thing we need is a carbon market. Instead, what we need is an enemy, more nationalism and massive spending. However, in the case of climate change, the problem is that we have seen the enemy. The enemy is us. “Them” in this case is “Us.” Pushed in this direction, an Earth Race strategy suggests annihilation is victory. If that is the case, there can be no winner in the Earth Race. Thus, I am inclined to think that solving climate change is probably not at all like putting a man on the moon. And considering the moon walk remains an enigma, perhaps that’s not such a bad thing.

But then, to what shall we liken climate change?

Certainty and Solar Power

In today’s New York Times, Thomas L. Friedman’s “Have a Nice Day” column highlights quite nicely the connection between uncertainty and the adoption of renewable technologies — in this case the adoption of solar energy technologies.

In particular, he argues that the solar panel industry is thriving in countries whose governments that have enacted policies aimed at overcoming the triple uncertainty threat:

  1. Regulatory uncertainty — “[A]ny business or homeowner can generate solar energy.”
  2. Connectivity uncertainty — “[I]f they decide to do so, the power utility has to connect them to the grid.”
  3. Price uncertainty — “[T]he utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business.”

Friedman reached these conclusions, in part, after touring the Applied Materials solar panel “war room” in Silicon Valley, from which it maintains “real-time global interaction with all 14 solar panel factories it’s built around the world in the last two years.”  According to Mike Splinter, CEO of Applied Materials, “We are seeing the industrialization of the solar business. In the last 12 months, it has brought us $1.3 billion in revenues. It is hard to build a billion-dollar business.”

And yet because U.S. policies have not adequately addressed regulatory, connectivity and price uncertainties, all 14 factories of these solar panel factories have been built outside the U.S.  As a result “[R]ight now, our federal and state subsidies for installing solar systems are largely paying for the cost of importing solar panels made in China, by Chinese workers, using hi-tech manufacturing equipment invented in America.”

Interestingly, Friedman points out that the debate over U.S. energy policies need not depend on competing beliefs about global warming.  “[S]o, you don’t believe global warming is real. I do, but let’s assume it’s not. Here is what is indisputable: The world is on track to add another 2.5 billion people by 2050, and many will be aspiring to live American-like, high-energy lifestyles. In such a world, renewable energy — where the variable cost of your fuel, sun or wind, is zero — will be in huge demand.”

His point is worth exploring.  To understand the magnitude involved in supplying electricity to 2.5 billion more people AND supplying them with more electricity per person, consider that in 2007 the world consumed 18,187 terawatt hours (TWh; 1 terawatt hour = 1 trillion watt hours) of electricity.  That represented consumption of approximately 2,752 kWh for each of the world’s 6.6 billion people.  However, consumption is far from evenly distributed.  For example, OECD countries consumed an average of 8,477 kWh per capita, while China only consumed 2,346 kWh.  Meanwhile in the U.S., average electricity consumption was 13,616 kWh per capita.

All of this means that electricity demand by 2030 is expected to increase nearly 50%.  Perhaps not surprisingly, some have described energy as “the biggest challenge of the twenty-first century.”  But those challenges also may make energy — already an estimated $6 trillion dollar industry worth about 1/10th of the world’s economic output — the “largest economic opportunity in the twenty-first century.”