keturn wrote
on May 3rd, 2010 at 09:00 pm
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gluten-free dairy-free grilled cheese

Armchair economist thought of the day:

We're Good People if we shift our spending habits to use less resources (Lower Your Carbon Footprint), right? And we're Very Good People if we do this even when it means spending a little more money to do so, by buying the more expensive item that used less fuel to get here, or buying the more expensive electricity from the eco-friendly power plant.

But doesn't that just lower the demand on the fuel and the dirty electricity? Doesn't that lower its price? The Industrial user, without my hippie compunctions, has no incentive to use the expensive power; they're rewarded for using the cheap and dirty stuff.

So please explain how the whole "green shopper" movement or whatever it is we're calling it is not just a plot by The Man to get us to pay more for stuff, encouraging us to use our money in less efficient ways, leaving more cheap resources for the Man's own personal gain.

(I think this was prompted by hearing that the UK banned incandescent light bulbs, or something like that. Incandescent light bulbs aren't a problem, vacuum and glass is not a scarce resource. And if you're not spending those watts on your lights, someone else is just going to buy them and spend them on something else.)

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From:glowing_fish
Date:2010-05-04 04:16 am (UTC)
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I think that the idea behind things like clean power and the like is that when people choose to use it, it makes the power company invest more in it. And then, past a certain amount of investing, it starts to be more prevalent, cheaper, etc. Just like with any lifestyle change, if things don't reach a tipping point, it can't really transform society.

And, honestly, I don't think that a lot of the environmental choices that people make are quite strong enough to trigger large changes at this point. A lot of environmental products are just a way for people to display wealth/standing.
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From:corydodt [launchpad.net]
Date:2010-05-04 04:52 am (UTC)
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By that logic isn't the greenest thing to do to shop only at WalMart, where we can most effectively make use of the economic efficiencies offered by the existence of a foreign country with a massive labor force and no "green" compunctions whatsoever?

It's true that that cost is the best way we have of measuring resource usage, but cost alone still sucks as a way of measuring. There is a time delay while we retool, and during that delay, longterm cheap things cost more in the short term.

I think what the green movement is implicitly betting on is the economic failure of China (and countries like it), the loss of China as a viable production platform which would force us to use our own resources. Which, if we've been buying the "good" local stuff and supporting the robustness of our own platform, will hopefully be up to the challenge of meeting production demands.
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From:freyley
Date:2010-05-05 06:44 pm (UTC)
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Or, to not seem sarcastic about it, to shop at walmart and use the savings to fund political action committees that effect the change you seek. This is similar to the idea of not volunteering at nonprofits when actually you could be working harder (in a skilled, and therefore highly paid way) and donating the money, as money as far more valuable to them than your unskilled labor.
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From:(Anonymous)
Date:2010-05-04 12:14 pm (UTC)

There's two different things here

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1. Using more power efficient devices is usually a good idea, as is encouraging it by e.g. banning less efficient devices. First, because it is quite often more cost effective in the long run due to lower operating costs (unless you're really on the bleeding edge of efficiency technology), and second because mass purchases drive costs down over long run by encouraging competition and technological innovation. Thus cost of CFLs is going down over time, and likely the same will happen with LEDs.

2. Switching to greener power... the idea here is that you need a period of effective subsidies and known demand in order to invest in R&D. If you know e.g. wind power has a set amount of demand over the next ten years, even if it's not yet cost effective, you're more likely to invest in wind power research, which hopefully drives down cost over time.

It sounds like you're thinking in static supply & demand terms. But you should also be thinking about long term technological change, and what drives it. Many technologies we rely on were initially created by subsidies, typically military-related government subsidies, e.g. the Internet.

My CAPTCHA below was actually "whets invented", neat.

--Itamar
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From:stereotype441
Date:2010-05-04 05:05 pm (UTC)
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But doesn't that just lower the demand on the fuel and the dirty electricity? Doesn't that lower its price? The Industrial user, without my hippie compunctions, has no incentive to use the expensive power; they're rewarded for using the cheap and dirty stuff.

It depends on the slope of the supply curve, otherwise known as the "elasticity" of the supply. If the supply is inelastic, meaning the quantity of goods available is relatively constant regardless of price, then you're right--if a coalition of hippies shift their spending habits to use less fuel, then the price will just move to the point where another group can afford to buy the fuel they didn't buy.

But if the supply is elastic, meaning the quantity of goods available changes a lot in response to small price variations, then if we use less fuel, the price won't change much and that fuel won't be available for others to use.

Another factor is demand elasticity--how much are people/corporations going to change the amount of fuel they consume in response to price variations? if demand is elastic, then a small change in price leads to a big change in consumption, which means if we hippies drive the price down by decreasing our own consumption, others will take advantage of the lower prices and consume more. But if demand is inelastic, then it means that it takes a big price difference to motivate people to change their consumption habits, so if we drive the price down a little bit, it won't affect others' consumption much.

According to stuff I've found on the internet, for the oil industry demand is fairly inelastic (since there are few readily available substitutes), and supply is fairly elastic (since higher prices make drilling profitable in areas where it otherwise wouldn't be). So I think we hippies do make a difference by consuming less fuel--our actions don't affect the price much, and even if they did, a lower price wouldn't really encourage others to consume much more fuel anyway.
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From:glyf
Date:2010-05-04 05:58 pm (UTC)
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This is similar to what some of the other commenters are saying, but:

Specifically in the area of renewable energy resources, the increased cost has a lot to do with initial investment. If you want to generate coal power, you just need to dump some coal into an existing power plant; but if you want to generate wind power, you need to build a whole wind farm first.

So, when you pay a little extra for wind power (as one might do in Massachusetts), what you're really paying that premium for is building more wind farms, which (one hopes) has the long-term effect of decreasing the cost of that power.

On a more general economic note, "price elasticity of supply" is a highly simplistic, linear abstraction over a very complex chaotic system. For example: let's assume that there are giant stockpiles of widgets built from a terrible carbon-heavy process. No apparent elasticity of supply: there's just a giant warehouse full of these things and the vendor is going to sell them until they run out. Across the street there's a warehouse full of "green widgets" - let's call them "gidgets" - which also has a fixed quantity.

At first, if you start buying gidgets instead of widgets, the widgets will get cheaper and they will benefit the widget consumer. But keep in mind that being a widget supplier gets proportionally more painful as being a widget consumer gets more comfortable. When those warehouses run out of stuff, they both go out of business, and at that point, new suppliers are going to have to evaluate whether it's more profitable to get into the business of gidget production or widget production. In this modern, globalized world, supply chains are really long and inventories are huge, so this change plays out over years or even decades.

The evidence is thin at this point, but right now at least the collective fiction of Wikipedia suggests that organic farming may be more profitable for farmers specifically because of those price premiums.

So yeah, I think it makes a difference.
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From:freyley
Date:2010-05-05 06:48 pm (UTC)
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I generally agree with you. There is, however, a difficulty with wind power specifically: wind power isn't reliable enough to be offered by itself -- it has to be matched by coal or gas (usually gas) power plants that can pick up demand in case the wind isn't blowing. So purchasing wind energy doesn't, yet, reduce demand for hydrocarbon power _plants_, which is a weird side effect. This will change as wind plants crop up in sufficient locations that some percentage of the overall wind power availability will be reliable.
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From:glyf
Date:2010-05-05 09:05 pm (UTC)
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Another way to address this problem is to build large-scale batteries to store the extra power, rather than to try to have continuous generation by widely dispersed coverage.

The simplest design I've heard of for such a thing is a large hydroelectric generator that pumps water uphill while the wind is blowing and runs it downhill through a turbine when it's not.

There are significant engineering and deployment challenges to get such a thing rolled out everywhere, of course. In the meanwhile, hydrocarbon power generation bridges the gaps, but if we were at a point where all it were doing were bridging the gaps we'd still be in a significantly better place than we are today.
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