Monday, December 17, 2007

IPCC Falsifies Sea Level Data

The IPCC falsified data showing a sea level rise from 1992-2002 according to Dr. Nils-Axel Morner, former head of the Paleogeophysics and Geodynamics department at Stockholm University in Sweden. In an interview by George Murphy, Morner cites various examples of falsification of evidence claiming sea level rises...

This shouldn't be a surprise to anyone, the IPCC and similar groups of pseudo-scientists have a long history of falsification and intellectual dishonesty. Piltdown man and stem cell cloning to name a few.

This does raise the larger question of how our esteemed elected officials plan to reconcile their previous statements. After reading an IPCC report Senator Barbara Boxer boldly proclaimed:

This powerful report confirms the very real dangers that global warming poses for us all. The effects of global warming will be felt throughout the world. 1

This wouldn't the first time the vapid witch of the west has put her foot in her mouth.

Beyond that, it should concern you that policy makers are making policy based on falsified research. Or even for that matter, policy makers are making policy based on science itself. Assume for a moment that the IPCC wasn't wrong, the sea level is rising dramatically. It doesn't tell us anything about policy. Climatologists don't ask the question of does it matter? Does it matter sea levels are rising? The question is left up to other disciplines of thought. Simply saying that the sea levels will rise or fall does not mean government will better everyone or anyone by intervention.

Morner goes on to say in the article:

Then, in 2003, the same data set, which in their [IPCC's] publications, in their website, was a straight line - suddenly it changed, and showed a very strong line of uplift, 2.3 mm per year, the same as from the tide gauge. And that didn't look so nice. It looked as though they had recorded something; but they hadn't recorded anything. It was the original one which they had suddenly twisted up, because they entered a 'correction factor,' which they took from the tide gauge.

This is why I consider myself a far superior scientist to the kind at IPCC. The methods they use are not scientific. They are not empirical methods. The correction factor they used is because of falling sea levels in areas of Hong Kong. In other words, a falling sea level in Hong Kong doesn't fit in very well with the computer modeling of global sea levels rising. Instead of checking to see if the data in the field is correct, it is automatically discarded. Wholly unscientific.

Saturday, December 15, 2007

Privatized Deforestation and Profits

Let’s start from the very beginning. One of the commonly accepted statements that were explicitly made throughout the semester was that privatization of forests would eliminate inefficiency of forest logging. In this post I examine the incentives of forest loggers and question the validity of the accepted class’s theorem.

Assumptions. I hereby assume the model of a non-corporate private sector entity (a non-public firm that is either a sole proprietorship or a partnership) that generates positive profits in the forest logging industry that is not a monopoly market structure. Under a logical presumption that the current owner of the business is not going to live forever, the owner will most likely try to sell the business to a younger individual at some point. I also presume that the current owner will try to maximize the price for which he will sell the property in the course of price negotiations with the buyer.

I emphasize that this is a private company because the mechanism for property appraisal differs between the privately held companies and publicly held companies. Here is how it works.

First, a company is selling goods at some price(s) making total revenue. If we were to subtract the cost of revenue (which is the cost of goods sold, do not confuse with total cost!) from total revenue, we would get the firm’s gross profit. After subtracting operating expenses (which are a sum of fixed and variable costs) from gross profit, we then derive earnings before interest and taxes (EBIT). Now, if it were a privately owned company, its sale value would be determined by multiplying EBIT by a number between 8 and 10 years. That way, it would estimate the forgone future income for the following period between 8 and 10 years.

If the current owner is interested in maximizing the price he can receive from the sell of the property, he will most likely be interested in maximizing EBIT during the last year before the sale occurs. Doing so means maximizing total revenue. Given that a logging industry is not a monopoly implies a single firm’s somewhat limited control over price of homogenous goods (after all, it is wood we are talking about). It also means that the firm will try to maximize its total revenue by increasing the quantity supplied, which means it will cut down even more forest. (I realize you might think that a single year’s increase in logging each time the business gets resold may not mean much but I strongly urge you to consider the power of aggregates given the number of logging business out there as well as the frequency of ownership changes). As you can see, evaluating the value of a privately held logging company based on EBIT may not be the best environmental choice. Instead, a party interested in purchasing the forest for the purposes of logging may suggest a few different approaches for calculating a mutually agreed upon price. Such approach will result in a slower rate of deforestation, lower price that the business would be sold for, and it would even contribute a miniscule part to inflation reduction.

Another way to calculate the value of the business is to calculate the present value of an annuity of the business under consideration (with an embedded assumption of equal payments in the future). Such calculation would presume that the amount of total revenue that the business would most likely generate would remain fixed over a number of years. Quite naturally, it implies that real (inflation-adjusted) annual incomes from that business diminish annually. Even though theoretically possible, it is empirically highly unlikely. Instead, I would advise using the sum of present values of an asset discounted with appropriate interest rate. Such approach eliminates the incentives to drastically increase the logging’ output throughout the year preceding the buyout and as a result leaves more trees for you, me, and the tree huggers. As you can see, it is not the privatization of forests that will be efficient but the mechanism of evaluating logging businesses that will influence efficiency.

Friday, December 14, 2007

Rainforest not depeleting as fact as we thought. This brings to light new ways to fight it.

In the early 1980's, people feared that without intervention, the rain forest in Brazil would have been completely gone by the turn of the century. Well, the turn of the century came and went, as here it still is. This should, very well the nature of an "emergent future." Factors, including period of debt that Brazil's militant government experienced slow the growth. It is very possible that the "over-logging" of the forest was, itself th cause for this debt and subsequent reduction.

I think a lot of the fears about the rain forest inflate the statics. They act on the assumption the rate current rate will continue until the loggers drive themselves into the ground, as though they are blindly going to go forth with the same amount of logging always dispute cost or benefit.

There is a lot of talk to "act now" in fixing this problem. There are people telling the Brazilian government what to do with their own property, which is inconsistent with liberty. If some people highly value the rain forest and think it is going to go away, despite it's slowing in depletion, they need to pool their resources and buy parts of it. If they value it more than the brazilians value it's using, then they will get the forest. If it would truly cause an externality on other countries for it to be gone, then nations could buy portions of the forest, to keep it around for research.

Tuesday, December 11, 2007

Green Evolution

Profit maximization, an ultimate goal of every business, possesses its inalienable theoretical simplicity: an elegant amalgamation of total revenue’s maximization and total cost minimization. What else is there to it? In the absence of externalities, equating marginal revenue to marginal cost determines the optimal quantity of output and achieves the above stated goal- yielding maximum profit. Until relatively recently, the traditional combination of cost minimization and revenue maximization used to be the traditional and, on a large enough scale, the only way of conducting business, but it is not anymore.

At the end of the twentieth century an environmentally friendly business model started gaining popularity. The trend continued and received substantial support carrying the new business model well into the new millennium. What exactly am I talking about? I believe it would be a fair statement to point out the following. The business community observed a shift from traditional profit maximization model to conducting business while taking environment into consideration. After that we made the next step, introducing the entire segment that made environment its focal point and generated profit solely via helping the environment. Today, it seems there are companies that approach business in an even different manner. Instead of supplying a good or a service to satisfy the existing demand or create a supply that would in turn create its own demand, few companies are putting emphasis on environment at the expense of profit maximization. If anything, such conduct seems to be counter intuitive to neo-classical economics. Surprising as it is, such is a new business trend.

Allow me to illustrate. For simplicity purposes, let us consider the paradigm shift within the food industry. For generations, we have all enjoyed the good old pesticides-filled and antibiotics affected foods. Then came “Whole Foods Market,” “Wild Oats,” and “Vitamin Cottage,” making promises to change business and rescue the consumers’ bodies of pesticides, hormones, and poisons. After achieving such goal quite abruptly, it was those companies that pledged to bring yet another change to conducting business. Now the goal of those commercial enterprises was to alter their business models and tailor them to the existing preferences of the general population, which in the 21st century are unquestionably environmentally centered.

Take a closer look at Whole Foods Market. If you see what I see, then among other things you will take note that the company is fueling its trucks with biodiesel at four out of nine company’s distribution centers; it is the only FORTUNE 500 Company to offset 100 percent of its electricity use with renewable energy credits. Also, it is developing green construction methods, building some stores to LEED certification standards, and selecting green building materials. Finally, in addition to recycling glass, plastic, and aluminum the company offers a bag refund in an attempt to promote reusing packaging materials as well as compostable food packaging for prepared foods. For more information on Whole Foods, please visit

To top this list, may I mention that Whole Foods recently received Green Power Partner of the Year Award from U.S. Environmental Protection Agency for second consecutive year. Why? Well, according to their website “In 2007, Whole Foods Market is being recognized for increasing its green power purchasing to include more than 509 million kilowatt-hours of wind-based renewable energy credits. This is enough renewable energy to offset 100 percent of the electricity used in all of its stores, facilities, bake houses, distribution centers, regional offices and global headquarters in the U.S. and Canada. Whole Foods Market is the only FORTUNE 500 Company to offset 100 percent of its electricity use with renewable energy credits.” Well, that doesn’t really fit together with the traditional framework of cost minimization, does it? After all, what kind of cost-minimizing business would double its expenditures on electricity?

Let me guess what you are thinking. If you are a diligent student of Economics, right about now you might be thinking that it is a part of the business model of a natural, organic grocery chain. Appealing to people’s environmental preferences and supplying organically grown foods, that is just good business and creates an even better reputation for the company, right? What’s more, you might be thinking that Whole Foods got lucky to be in a position where it can supplement its traditional revenue sources with a good environmentally friendly reputation. Seriously, how many traditional (non-electricity generating) businesses would buy green credits and most importantly why?

Surprisingly, to name just a few, Kohl’s Department Stores, New York University, Pepsi Americas Inc, The Pepsi Bottling Group, Pepsi Bottling Ventures LLC, Starbucks, Johnson & Johnson, Mohawk Fine Papers, PepsiCo, Staples, Sloan Valve Company, City of Bellingham (WA), Wells and Fargo, and of course Whole Foods- all of them have purchased enormous quantities of renewable energy. Together, these companies account for a purchase of more than 3.55 billion kilowatt-hours of renewable (mostly wind powered) energy (see details at I seriously urge you to consider the amount of energy 3.81 billion kilowatt-hours provide. Other participants include Bank of America, Hewlett-Packard, Dell, and Google (who actively seek and implement environmentally friendly practices into their business models. For details, go here

As you can see, it not just organically fed tree huggers proclaiming slogans about the virtues of saving the whales. Numerous industries’ large capitalization leaders assume the responsibility for their environmental practices. The above listed names constitute only the top of the pyramid, representing the tip of the sword in the battle for the quality of environment for us all. Their voluntary participation and invaluable contribution demonstrate the unflinching willingness and considerable ability to provide unparalleled leadership among businesses. Make no mistake in your mind: this is a beginning of a trend that will only become stronger. This is no longer a world of governmental coercion to make businesses abide by some arbitrarily set pollution legislature or standard. This is an unprecedented evolution of corporate thought. This is a Green Evolution.

Sunday, December 09, 2007

The Hidden Costs of Recycling

Earlier today, I came across an article written by an economist named Daniel Benjamin. Earlier this semester, we discussed recycling in class, and questioned whether it really helps the environment or not. The article is entitled the “Eight Great Myths of Recycling.” In this article Benjamin defines these eight myths as follows:

· Our Garbage Will Bury Us
· Our Garbage Will Poison Us
· Packaging Is Our Problem
· We Must Achieve Trash Independence
· We Squander Irreplaceable Resources When We Don’t Recycle
· Recycling Always Protects The Environment
· Recycling Saves Resources
· Without Forced Recycling Mandates, There Wouldn’t Be Recycling

I originally come from Bergenfield, New Jersey. In Bergenfield, recycling is mandatory. Everybody there seems to believe the sixth misconception about recycling, which is that recycling always protects the environment. The problem with recycling is that in order to turn the recyclables in to useable goods, resources must be consumed, hence creating pollution. In addition to pollution created from processing recyclables, other negative effects of recycling are shown in the following example:

This effect is particularly apparent in the case of curbside recycling, which is mandated or strongly encouraged by governments in many communities around the country. Curbside recycling requires that more trucks be used to collect the same amount of waste materials, trucks that pick up perhaps four to eight pounds of recyclables, rather than forty or more pounds of rubbish. Los Angeles has estimated that because it has curbside recycling, its fleet of trucks is twice as large as it otherwise would be—800 versus 400 trucks. (Benjamin)

This example is proof of many unseen negative effects of recycling. For example, the city of Los Angeles now has to pay twice as many garbage men because of the increased size of its fleet. In addition to this it has to spend a larger portion of its tax revenue on fuel and maintenance for these garbage trucks. This either causes increased taxes or budget cuts from other areas of the local economy. There is no doubt in my mind that these same effects are present in virtually every city and town with mandatory recycling. Although recycling sounds good on paper, the unseen costs it carries may actually make it worse than simply throwing things in the trash.

Green Protectionism

For many people there has become a growing concern about global warming and what we can do to help limit its effects. A new bill (that is fairly well supported by both democrats and republicans in congress) would be a big step toward unified efforts among states domestically. The primary concern regarding the bill is that it would be very wide reaching, and could possibly have some strong positive effects for protectionists.

While Al Gore has been strutting his stuff on stage, behind the scenes America’s quieter greens have been successfully lobbying powerful interests. Many companies have come round to the view that they would do better with a single federal system than a patchwork of state-level rules. Farmers have bought the idea that they can make money out of biofuels. Christians have been persuaded that they need to be better stewards of the earth…But two powerful groups have remained determinedly skeptical: energy-intensive manufacturers and organized labor, who fear the effects of higher energy costs in America and their impact on jobs.

Those people who are in the manufacturing sector have legitimate concerns that need to be addressed before the bill is passed. Some have suggested that imports from the manufacturing sector, and possibly others, would need to be certified as to their carbon content and then be charged a tax according to their content. Some are apprehensive about implementing a tax because it will hurt trade overall. Places like China and India will then have a significant barrier to bypass in order to compete on the international market in trading. Another legitimate concern is that once a tax like that is placed on goods there is almost no going back. It would then enable protectionists to fight their personal battles with government support.

“The people who worry the most about the costs of trying to constrain carbon emissions are the very ones demanding protectionist measures. But if those measures are passed, America risks something far costlier than a switch to cleaner energy: a global trade war.” The concerns surrounding the legislation and the bill are very real. Depending on if and how the bill goes into effect, and what the ramifications associated with it are, trade in the United States and world wide could be impacted significantly. Is a bill like this one even necessary? Many people would agree that it is not. The market functions well as it is right now, and to throw one more thing into the mix may begin to muddy the waters with trading partners worldwide.