Articles by Jason D Scorse

What behavioral economics has to offer

Many critics of economists contend that because people aren't rational, economics has little predictive power. This is wrong for two reasons. First, people act relatively rational in many (if not most) circumstances; second, the deviations from rationality are predictable. As one of my professors at Berkeley used to say, it's not enough to say that people don't always act like perfect utility maximizers; the question is whether they do on average, and when they don't, what directions they take. It turns out that irrationality is not at all random, as claimed by some.

What does this mean for environmentalists?

A lot. Dealing with climate change and other major environmental issues will require major changes in behavior, and this is where behavioral economics comes in. There is an interesting piece in today's NYT on ways to get people to change their energy use; pay special attention to the "Further Reading" section near the top. And Monday on NPR, there was an hour-length program on behavioral economics entitled "Predictably Irrational," which offered a nice introduction to the field of behavioral economics.

Educate yourself and enjoy.

A few thoughts for environmentalists

As the week's news can attest, the current financial system is in pretty bad shape; we're not at complete meltdown, but it's pretty scary. Here are a few thoughts for the environmental community (aside from the general concern we should all share as citizens):

Projected CO2 emissions dwarf previous expectations

This recent paper on the likely path of China's CO2 emissions is striking in that the projections are much greater than once thought. They are so large that they dwarf any reductions by all other nations who have signed the Kyoto Protocol. On top of this is the fact that China doesn't have all that much non-fossil fuel energy potential and in fact is highly dependent on coal.

The questions that need to be asked are these:

1. Is it possible for China to actually decrease absolute emissions? If so, how, and how much will it cost? Who will pay for it?
2. If China can't reduce absolute emissions, how much more do all the rest of us need to decrease our emissions to offset China's increase? Is this feasible? Within what time frame? And again, how, and how much will it cost?

If we can't answer these questions, we really are in big trouble.

Increased attractiveness of alternative energy is some consolation

Oil just passed the $106 mark, putting it well above the inflation-adjusted record set just a few days ago. In an earlier post, I predicted that the price of oil would go down. So far I have obviously been wrong, although I suspect that the price will decline by the end of the year since this seems awfully like a part of the greater speculative commodity bubble we are witnessing.

But putting that aside for a moment, there is one great benefit of the high price of oil that environmentalists should be celebrating: it is making alternative energy much more attractive, so much so that the high price may usher in a major wave of renewable energy projects that will, in turn, lead to greater scale economies and perhaps the mainstreaming of alternative energy. This would be a great thing.

Now for the bad part. First off, if politicians hadn't been so cowardly and short-sighted and had actually followed economists' advice for a carbon tax long ago, the high prices of energy could be funneled into tax rebates for us all or research and development for all sorts of green technologies. Instead, the money is going to the oil companies and the terrorists. Not good.

Second, the high prices of energy are leading to inflation, which is greatly complicating the Federal Reserve's ability to deal with the recession we're in (yes, it's a recession), and the effects are highly regressive, hurting the poor much more than the rich.

Overall, the high price of energy is doing some pretty bad things -- but if it can help tilt the playing field to alternative energy, this silver lining may end up being an amazing turning point in history.