Airs – Ian Lance Taylor

Proposition 23

Last summer’s bizarre California ballot initiative was proposition 16, a PG&E funded measure which was fortunately voted down. This season’s appears to be proposition 23. Proposition 23 is admittedly much less crazy than proposition 16: it calls for the California Global Warming Solutions Act of 2006 to be suspended until California’s unemployment rate drops to 5.5% or below for four consecutive quarters. The Global Warming Solutions Act requires that greenhouse gas emission levels in the state be cut to 1990 levels by 2020.

What’s bizarre about proposition 23 is that the monetary supporters are primarily oil companies based out of state. Their argument is that the Global Warming Solutions Act will cost jobs. That argument makes little sense. Working to reduce greenhouse gas emissions creates jobs, as people must work to develop and implement new technologies. The argument is that this will lead to increased costs for businesses, and that they will pass the costs on to consumers. That is most likely correct, but what it means is that money is shifted around. It doesn’t mean that money or jobs is lost, although certainly some specific people will gain and some will lose.

So the question is how the money would shift. And the answer is that the money would shift away from technologies which generate greenhouse gases and toward technologies which do not. The former are found in places which generate fossil fuels, such as Texas. The latter are found in places which do green technology research and development, such as Silicon Valley. So the overall effect of the law is most likely to cause more of the money that California residents spend on energy to stay in California rather than to move to places like Texas. Or, for that matter, Saudi Arabia. It is clear why so many out of state oil companies are supporting proposition 23.

Now, I happen to think that there is a straightforward case to be made for why we don’t want to increase greenhouse gases in the atmosphere, and the counter-arguments to that do not make sense to me. But I am of course aware that it is, for reasons that continue to escape me, a controversial topic. What is, however, not controversial is that there is a limited amount of oil on this planet, and that the most pointless possible thing we can do with that limited oil is burn it. Moreover, the U.S. is a net oil importer, and the money we send overseas to purchase oil is being sent directly to countries which do not share our values and often work against our interests. I believe that any rational calculation would lead us to decrease our use of oil, which in turn means decreasing our generation of greenhouse gases.

So I see exactly one argument in favor of proposition 23: it supports the profits of oil companies. And I see many reasons against it. I sincerely hope the proposition is defeated.

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10 responses to “Proposition 23”

  1. fche Avatar
    fche

    “Working to reduce greenhouse gas emissions creates jobs, as people must work to develop and implement new technologies.”

    I think the trick here is to avoid the “broken window fallacy”. Specifically, whatever jobs may be created as a consequence of the current law – or whatever wealth-shifting scheme it promotes, there is always the opportunity cost of whatever location for the jobs / money that an efficient market would have found instead. It is a mighty rare legislation that makes the market *more* efficient.

    In any case, is the monetary support angle really that important? It seems to me that complaining about who pays for advertisements sort of assumes that the actual voters are incapable of making up an independent mind. I know ads work to some extent, but surely no one who respects the notion of democracy would imagine that mere information (advertisements) *control* voting.

  2. Dan Avatar
    Dan

    fche,

    It appears that you’re making an is/ought error. One’s “respect for the notion” of democracy should have no influence on one’s estimation of advertising’s influence over the process. Personally, I can’t think of another factor that seems remotely as important for deciding elections overall, but I don’t have much data on the topic.

  3. fche Avatar
    fche

    “Personally, I can’t think of another factor that seems remotely as important for deciding elections overall,”

    I wonder why you think so. Has a mere advertisement you saw personally changed your mind on a nontrivial election topic?

  4. Ian Lance Taylor Avatar
    Ian Lance Taylor

    fche: Thanks for the comment. Yes, there is an opportunity cost. But one can also think of it as trying to capture an externality. Burning fossil fuels has costs which are not reflected in the market.

    The monetary angle is important less because of how it influences voting—though it certainly does influence voting—then because it helps get through the text of the law to see the effect. As Deep Throat said in All the President’s Men, “follow the money.” When the dominant contributors to a proposition are all oil companies, you see that the major effect of the proposition is to help the oil companies. Then you can make a more informed decision about your vote. These propositions are complex, which is why we normally elect representatives to spend their time figuring out the right thing to do. When we have to figure them out, we need all the information we can get. The list of supporters is a key piece of information.

    Finally I just have to comment that while it’s an easy meme to say that legislation rarely makes the market more efficient, it is even more true to say that efficient markets would not exist at all without legislation.

  5. fche Avatar
    fche

    “The list of supporters is a key piece of information.”

    Sure. And that actually gives me hope that advertisements are not as powerful as some think, precisely because of the reverse-psychology angle. “Why would these guys want to spend their money to convince me to do something? It can’t be that good for me.” OTOH maybe it’s a symbiotic message: “it’s good for the advertisers, but it’s also good for the audience”, should the decision in question not be a zero-sum one.

    Agreed re. the easy meme. OTOH, as to what fraction of a typical nation’s laws/regulations are market-efficiency-improving as opposed to the other kind — I’d probably get depressed by that calculation.

  6. Dan Avatar
    Dan

    “Has a mere advertisement you saw personally changed your mind on a nontrivial election topic?”

    No, I can’t think of any instance where I’ve been consciously aware of an advertisement’s influence on my vote, but I wouldn’t expect such an awareness either way (i.e., I wouldn’t be surprised to learn that I had been swayed in the past). At this point in my life, I’m probably not a very representative data point, since I expose myself to few political advertisements and am very selective about which elections I participate in.

    I have a few reasons for suspecting that advertising plays a large role. The primary one is a default assumption that organizations who spend vast sums of money probably have a better idea of what their spending accomplishes than I do. I see consistent, heavy spending on campaign advertising, which I interpret as moderate evidence that campaign spending is effective.

    My impression of the average voter’s decision process is another reason. Ideology and emotion dominate politics. A topic becoming “politicized” is synonymous with the abandonment of rational discussion. Most voters consistently vote for republicans or democrats, while many simultaneously complain about how little influence they have over the policies they care about. People appear to focus on the most heavily-advertised parties and issues.

    Another reason is the median voter theorem. The combination of shifting platforms and narrow margins of victory makes the process look very vulnerable to focused psychological manipulation. “Fence” voters become disproportionately important to the outcome. Many such voters I’ve spoken with appear concerned with personality and “integrity”, qualities which are easily distorted by advertising.

    Your reverse-psychology reaction to advertisement seems atypical. I suspect confirmation bias far outweighs more thoughtful analyses.

    A handful of hard evidence to the contrary could certainly dissolve much of my speculation. I don’t think arguments based on extrapolations of your decision process carry much weight, since you appear to have an atypically high IQ.

  7. etbe Avatar
    etbe

    fche: The broken window fallacy is a claim that something which is unconditionally harmful can through obscure economic measures cause overall good.

    Reducing CO2 emissions however isn’t unconditionally harmful. It’s good if all the climate scientists happen to be correct (and the geologists incorrect) in matters relating to climate science. It’s good in terms of all the other chemicals that are released into the air at the same time as CO2 (nitrogen and sulfur oxides, mercury, and lots more), some of which cause cancer in humans and some of which cause problems such as acid rain. It’s good in terms of freeing a country from a cartel supplier who you REALLY don’t want to do business with. It’s also good if the Earth happens to contain a finite amount of oil which will run out.

    Reducing CO2 emissions is only bad for oil companies.

    Regarding the benefit of advertisement, all the political analysis of every US election has a major focus on how much money each candidate has for advertising. When candidates start winning elections without bothering to advertise simply by having policies that voters desire then we can talk about money not being that important.

    In the last Australian federal election we got one Greens candidate in the lower house. The Greens have very little money for advertising. So I guess you could say that there is evidence that a party can get 1/150 seats by having policies that people want without advertising them. The ~15% primary vote that the Greens got wouldn’t be enough for a ballot box proposition (if they had such things in Australia).

    Ian: There is a huge amount of legislation that is specifically designed to make the markets more efficient. The laws about financial disclosure make stock markets more efficient as potential investors can make informed choices. Pretty much every law related to investing has at it’s root the aim of making more efficient markets, note that protecting against fraud is essential to efficient markets otherwise you get a market for lemons.

    In terms of competition there is a great need to regulate markets to allow free and fair competition. If oil companies were incapable of squashing technological developments for alternative fuels then some of the regulatory incentives would not be required. Of the toxic gas that comes from the exhaust pipe of my car, more will be inhaled by me and my friends and relatives than random people – therefore I have some good incentives to pay a little extra for an efficient car.

    Finally markets don’t always reach the result you would desire soon enough. For example we know that oil will eventually run out, but we aren’t sure when. It is going to take more than 4 years so corporate executives will get their payout before it impacts them. If you are running a country that you want to exist in 100 years then you need to plan for such things. That means imposing legislation that gives a certain profit motive to renewable fuel sources.

  8. etbe Avatar
    etbe

    Dan: The Median Voter Theorem doesn’t seem to apply well to the US, it might apply better to Australia.

    In Australia voting is compulsory, while you don’t have to do anything other than put a blank sheet of paper in the ballot box the vast majority of the population cast valid votes once they are in the voting booth. So people do make a decision on who seems closest to their views.

    In the US voting is optional and the winner is often the candidate or party who gets the most people to make the effort to vote. Often being the slightly better of two candidates who are rather boring isn’t enough to get voters to turn up on the day. But being an extreme candidate will get people to turn up…

    GWB Was possibly the most divisive politician in US history (prior to him which team was red and which was blue alternated with each election). Being divisive and extreme didn’t seem to hurt him.

  9. fche Avatar
    fche

    According to http://latimesblogs.latimes.com/greenspace/2010/11/proposition-23-defeat-global-warming-climate-change-initiative.html the anti-prop-23 groups actually spent several times the evil big oil money. So doesn’t that mean that little people ought have supported the underdog position (pro-prop-23)? (And what about https://secure.wikimedia.org/wikipedia/en/wiki/Fundraising_for_the_2008_United_States_presidential_election ?)

  10. Ian Lance Taylor Avatar
    Ian Lance Taylor

    Thanks for the note. When I wrote this entry Ballotpedia was not yet listing the significant contributions to the No on 23 campaign. It’s interesting that it got so much support.

    I was never arguing that people should support the underdog. I was arguing that by looking at the list of supporters you could see the likely effect of the legislation. That argument holds regardless of which side spends more money. The big money opposed to proposition 23 came from Thomas Steyer, John Doerr, Vinod Khosla, and a list of environment charities. The charities are non-profits, and their interest here is obvious. The individuals are all financiers. Steyer has joined Warren Buffett in saying he will give half his fortune to charity; presumably this is part of that work. Doerr and Khosla, on the other hand, invest in energy firms. Since they are based in California, they have a clear financial incentive in seeing proposition 23 defeated. So there is something to learn from the list of opponents as well.

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