Start Financial Reform with Cap and Trade

One of the main criticisms of using a cap and trade system to fight global warming is that allowing markets in carbon permits and (especially!) in carbon offsets, opens the door to financial manipulations such as we just saw with the real estate derivatives markets. We probably won't get a full blown bubble in carbon offsets, but we will get a lot of wasted money and energy channelled into useless derivatives when we need that money and energy for building a renewable energy economy.

So let's start financial reform with the cap and trade bill. Keep the auctions and aftermarkets as simple and regulated as possible. And in a best case scenario there are no carbon offsets.

Obama and Clinton

Robert Reich has a good post today, after the State of the Union, comparing Obama's administration to Clinton's. I am reluctantly starting to agree that there is a comparison to be made. Obama seems deadset determined to recapitulate the Clinton administration.

Start your administration expecting an easy victory on health care. Of course it will be easy because it's necessary, the people want it, and it just makes so much sense. Then, when you get your behind whupped on your first major initiative, immediately retreat to the right. And in moving to the right you promote the legislative defeat you've just suffered into an actual surrender, handing the conservatives a triumph which their actual power does not justify.

What a depressing day.

Being Part of the Team

At the urging of Al Gore's Repower America people, I just wrote a letter to my local newspaper against Senator Lisa Murkowski's amendment to weaken the Clean Air Act. I have to say that I was impressed with Repower's newspaper writing tool.

One of the things that impressed me was their approach to the letter's content.

Nexus One and Market Share

I just read a newspaper article saying that the Nexus One sales have been disappointing so far, with only 20,000 sold in the first week. This figure is compared to the 1.6 million iPhone 3GSes sold in June.

I'll admit to a bias against Apple, but even allowing for that I don't think the comparison is fair. Apple's new phone was going to an established market with a loyal customer base. Google is trying to sell into a market that Apple dominates and has largely saturated already. From that perspective, sales of 20K are very respectable, especially when you compare the coverage that the iPhone enjoys from AT&T versus what the Nexus One has from TMobile.

Depending on how serious Google is about Nexus One, they can overcome their late start. That is demonstrated in the history of just about Microsoft product. Still, even if Google has launched Nexus One purely as a strategic threat to force concessions from Apple, the sales figures show that they have a ways to go before this threat is credible. They've launched Nexus One, but now they need to do something more to demonstrate that they're serious.

Changing of the Guard

In regards to newspapers versus the Internet, this just about says it all. A few years back my local newspaper abandoned their downtown office building, which they had built for themselves and had occupied for decades, in favor of cheaper rents and reduced space outside of the city. The building has sat vacant ever since. But today my local ISP announced that they are taking the building over.

Why We Need More Democrats in the Senate

Alan Blinder provides a succinct statement describing our current dilemma:

Let's remember what happened to health-care reform (a success story!) as it meandered toward 60 votes in the Senate. The world's greatest deliberative body turned into a bizarre bazaar in which senators took turns holding the bill hostage to their pet cause (or favorite state). With zero Republican support, every one of the 60 members of the Democratic caucus held an effective veto—and several used it.

Paradoxically, the thoroughly inept job that the Democrats did in passing health care reform argues for our need to elect more Democrats. With more (and more left) Democrats, misbehavior by Democratic Senators would go down, not up.

The original article appears in the Wall Street Journal. Thanks to Economists View for the pointer.

Losing my Faith in Democracy

Even if you set aside, for the moment, the whole question of Bush 43, the fact that both Sarah Palin and Rod Blagojevich could become governors of entire states makes me question my faith in representative democracy.

The horror. The horror.

Nexus One Needs a Bigger Playing Field

There's a little article on Wired expressing sorrow that the Google Nexus One is not the revolutionary device it could conceivably have been. The problem isn't with the phone itself, which is great, but the fact that you can't use it anywhere but T-Mobile.

It basically sounds right to me, but there isn't a lot that Google can do about it: the problem is with the telecoms, of course. Author Ryan Singel does end up pointing the way to the real solution, which is for the FCC to impose the Carterphone decision on the cell networks. The Carterphone decision helped mightily to spur the deployment of the modem, and hence of the Internet itself. A similar decision regarding the cell phone networks could only work to the greater good of society, while the cellphone networks would just have to find other ways to increase their profits (and I'm sure that there are other, more productive ways) than by exploiting their market power.

Elinor Ostrom and Collusion

I was just reading a short summary of Elinor Ostrom's work on management of common resources. According to the description, she examines how communities of autonomous actors manage to avoid the tragedy of the commons without erecting a resource management organization that can establish formal rules of usage and punish violators with the backing of the State.

It occurs to me that her work might have some application to the issue of corporate collusion. A common market, served by a group of oligopolists, can be seen as a common resource. Certainly price collusion to "manage" this resource for the extraction of larger profits would be something that needs to happen without direct State support, to say the least. I wonder if Ostrom's work gives us any additional information about the feasibility of price collusion.

I have to say that I am a little amused by what seems to me to be a contradiction in the responses of some free market leaning economists to Ostrom and her work. In general, such economists are dubious about the ability of corporations to effectively collude on price fixing for any serious length of time. The pressures and temptations of individual self-interest will always lead such conspiracies to collapse. And yet when the same problem is framed, as Ostrom frames it, as the ability of people to manage their affairs without state intervention, then we find that there are indeed mechanisms that will provide for the long term success of group collaboration over the temptation to cheat.

Update: Bruce Yandle, publishing in the libertarian journal The Independent Review, manages to argue that firms which collude to control common resource extraction will simultaneously be effective in their efforts to conserve the controlled resource, and be ineffective in their efforts to charge monopoly prices for the controlled resource. Actually, I use the word "argue" loosely in regards to monopoly prices; Yandle pretty much just states that efforts to raise prices will be ineffective. I believe that for many libertarian economists, the futility of collusive price-fixing is regarded as being too well-known to bear repeated explanation.