Monday, June 02, 2008

Should California's ARB Trust Computable General Equilibrium Models for Judging AB 32's Likely Economic Effects?

Magic is in the air. The California Air Resources Board (ARB) faces a hard economic and political problem. It is mandated to implement climate change mitigation regulation. AB32 mandates a 80% cut below 1990 Greenhouse gas emissions levels by 2050! A reasonable question is what will be the costs and benefits of this regulation for the California economy and for consumers and firms?

To answer these important questions (or at least to take the heat off of politicians who endorse AB32), computable general equilibrium models (CGE) are being used to predict scenarios and likely impacts of regulation.

"ARB is starting to develop the Scoping Plan mandated by the Global Warming Solutions Act of 2006 (AB 32). Economic analysis is being developed and used to support the development of the Scoping Plan. The following contains information on three economic models, including links to more information on the models, their applications, and previous peer reviews."

California's AB32 and CGE Economic Models

While I appreciate the importance of forming predictions of the future, I also believe in confidence intervals! To be honest, these CGE models are crap. These black box models must take a strong stand on dozens of behavioral responses where in each of these cases we don't really know what the elasticity is. Feed in 20 bad estimates and you won't get back a great tasting meal.

Let me give you one example, suppose that a cap and trade system for carbon dioxide raises the price of water in Los Angeles by 2 cents per gallon --- how will this price increase change consumption of firms, households, and people who flush the toliet in Los Angeles? These CGE proponents don't know the answer but they make assumptions to generate a number and politicians then believe that the wise economists know the answer. (Why would a carbon tax raise the price of water? Pushing water around California is highly energy intensive and much of this electricity will come from natural gas fired power plants and they create greenhouse gases).

The CGE crew's model isn't science, it is magic and it makes economists look bad.

Here is my counter-proposal. The Air Resources Board should conduct a series of field experiments to actually estimates the structural demand and supply elasticities that it needs to judge how consumers and firms will adapt to the new post-AB32 pricing. Once these estimates exist, then these estimates could be plugged into the CGE models.

Even then I wouldn't be happy. If you sit down and read the technical documention to these CGE models, you will see that they are static models. In English, the models make no assumptions about technological change. I would bet my remaining hair on the top of my head that if energy prices go up in California that renewable energy technological advance will take place and this will lower the cost of complying with AB32 but this type of "endogenous technological advance" is ignored by the CGE crew.

Unfortunately, the politicians appear to be in such a rush they have gotten ahead of the basic research. I hope they are not shopping around for CGE models that generate results that they like.

I realize that my tone is sharp here but AB32 is multi-billion dollar regulation. Academic economists, rather than consulting firms, should be asked to do the heavy lifting here to figure out the likely impacts of the program. Now, if our best guesses don't actually affect any real policy decisions then you can delegate these model estimates to consulting firms. But, I've always hoped that economists are useful people whose ex-ante predictions do affect policy maker behavior by improving their information rather than simply "rubber stamping" what the politicians wanted to do.


Anonymous said...

that would be some price increase, retail costs are about $.002/gallon in LA ($800/Acre foot). I think that a2$ increase would work out to about a $350,000 increase in the average families water bill. That would probably get a behavioral response.

Jim McFarland said...

Only academics should do policy analysis and economic modeling? This line of thinking is why Michael Crichton has material for his books (just joking). I do hold a different view for several reason. First, depending on the consultancy, you can have plenty of PhDs. Second, academics are often employed by these same firms. Third, academics do not get published by doing studies for CA.

With respect to CGE modeling, your critiques are well taken. However, the garbage in, garbage out criticism applies to all models regardless of type. You suggest that the elasticities are highly uncertain. Agreed. Develop a model. Determine which elasticities have the greatest effect on the outcomes you care about via sensitivity testing and monte carlo simulation and then go get more information. Without building the model first, you could spend a lot of time collecting data on irrelevant elasticities.

With respect to endogenous technical change, within the last five years, a significant amount of research has been done to incorporate ETC within CGE models, especially related to climate change.

Your criticism of CGE modeling, in my opinion is over the top.

cheap wow gold said...

If you are cheap wow gold trying any unknown cheats to earn gold, you would cheapest wow gold face some problem and your account will be black out. So don't try to wow gold cheap find cheats instead try to wow7gold follow the guideline of world of warcraft. These tips could euwowgoldwork as gold cheat and can help a lot to earn gold and money. World of Warcraft is the most exiting online game and while Playing the game most of the players struggle ogpal to earn a lot of gold.

Most of the players World Of Warcraft Goldtry search cheat code for this game to earn gold. This article will help xowow you a lot to earn more and more gold.The best way to earn gold in this online game is by going through the guidelines wow gold for saleand other information about wowgold4europethe game that are available on the internet .

Anonymous said...

^^ nice blog!! ^@^

徵信, 徵信網, 徵信社, 徵信社, 徵信社, 徵信社, 感情挽回, 婚姻挽回, 挽回婚姻, 挽回感情, 徵信, 徵信社, 徵信, 徵信, 捉姦, 徵信公司, 通姦, 通姦罪, 抓姦, 抓猴, 捉猴, 捉姦, 監聽, 調查跟蹤, 反跟蹤, 外遇問題, 徵信, 捉姦, 女人徵信, 女子徵信, 外遇問題, 女子徵信, 徵信社, 外遇, 徵信公司, 徵信網, 外遇蒐證, 抓姦, 抓猴, 捉猴, 調查跟蹤, 反跟蹤, 感情挽回, 挽回感情, 婚姻挽回, 挽回婚姻, 外遇沖開, 抓姦, 女子徵信, 外遇蒐證, 外遇, 通姦, 通姦罪, 贍養費, 徵信, 徵信社, 抓姦, 徵信, 徵信公司, 徵信社, 徵信, 徵信公司, 徵信社, 徵信公司, 女人徵信, 外遇

徵信, 徵信網, 徵信社, 徵信網, 外遇, 徵信, 徵信社, 抓姦, 徵信, 女人徵信, 徵信社, 女人徵信社, 外遇, 抓姦, 徵信公司, 徵信社, 徵信社, 徵信社, 徵信社, 徵信社, 女人徵信社, 徵信社, 徵信, 徵信社, 徵信, 女子徵信社, 女子徵信社, 女子徵信社, 女子徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信,

徵信, 徵信社,徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 外遇, 抓姦, 離婚, 外遇,離婚,

徵信社,外遇, 離婚, 外遇, 抓姦, 徵信, 外遇, 徵信,外遇, 抓姦, 征信, 徵信, 徵信社, 徵信, 徵信社, 徵信,徵信社, 徵信社, 徵信, 外遇, 抓姦, 徵信, 徵信社, 徵信, 徵信社, 徵信, 徵信社, 徵信社, 徵信社, 徵信社,徵信,徵信,

cheap wow gold said...

WoW shares many wow gold of its features with previously launched games. Essentially, you battle with wow gold cheap monsters and traverse the countryside, by yourself or as a buy cheap wow gold team, find challenging tasks, and go on to higher aoc gold levels as you gain skill and experience. In the course of your journey, you will be gaining new powers that are increased as your skill rating goes up. All the same, in terms of its features and quality, that is a ture stroy for this.WoW is far ahead of all other games of the genre the Wow Gold game undoubtedly is in a league of its own and cheapest wow gold playing it is another experience altogether.

Even though WoW is a Cheap Wow Gold rather complicated game, the controls and interface are done in warhammer gold such a way that you don't feel the complexity. A good feature of the game is that it buy gold wow does not put off people with lengthy manuals. The instructions WOW GOLD cannot be simpler and the pop up tips can help you start playing the game World Of Warcraft Gold immediately. If on the other hand, you need a detailed manual, the instructions are there for you to access. Buy wow gold in this site,good for you, BUY WOW GOLD.

Game player said...

I can get Tales Of Pirates gold cheaply,
Yesterday i buy Tales Of Pirates Goldfor my brother.
i hope him like it. i gave Tales Of Pirates money to him as birthday present.
i like the cheap Tales Of Pirates gold very much.
I can get Tibia Gold cheaply.
Yesterday i bought Tibia Platinum for my brother.
i hope him like it. i will give Tibia coins to him
as birthday present. i like the Tibia money very much.
I usually buy tibia gp and keep it in my store.


You know ,I have some 9Dragons gold, and my friend also has some
9 Dragons gold,do you kouw they have the same meaning,Both of them can be called
9Dragons money,I just want to
buy 9 Dragons gold, because there are many
cheap 9Dragons gold.
You know ,I have some Anarchy credits, and my friend also has some
Anarchy Online credits, do you kouw they have the same meaning,Both of them can be called
Anarchy gold,I just want to
buy AO credits, because there are many cheap
Anarchy online gold.

Anonymous said...

Once I played stoneage2, I did not know how to get strong, someone told me that you must have stoneage2 Gold. He gave me some stoneage 2 Gold, he said that I could buy stoneage2 money, but I did not have money, then I played it all my spare time. From then on, I got some buy stoneage2 Gold, if I did not continue to play it, I can sell stoneage 2 money to anyone who want.

Once I played flyff, I did not know how to get strong, someone told me that you must have flyff penya. He gave me some flyff money, he said that I could buy flyff penya, but I did not have money, then I played it all my spare time. From then on, I got some flyff gold, if I did not continue to play it, I can sell cheap penya to anyone who want.

Anonymous said...

Do you know the fiesta Gold, in the game you need the
fiesta money. it can help you increase your level. My friends always asked me how to
buy fiesta Gold, and I do not know he spend how much money to buy the
fiesta online gold, when I see him in order to play the game and search which the place can buy the
fiesta online money. I am happy with him.
Do you know the tcos Gold, in the game you need the
chronicles of spellborn gold. it can help you increase your level. My friends always asked me how to buy the chronicles of spellborn Gold, and I do not know he spend how much money to buy the
tcos money, when I see him in order to play the game and search which the place can buy the
chronicles of spellborn money. I am happy with him.

xiaoqiu said...

Scions Of Fate gold is sometimes need to pay for in this Scions of Fate game. For example in this game, we have to buy sof gold to exchange premium in order to protect our character. The only part of this game will require you to pay SOF gold but they are optional for you to choose in the premium store. One very common item bought with cheap SOF gold at the store would be a pet. The is offering you with Scions Of Fate money and all kinds of cheap game gold.
buy lindens is the step process and is the required step for our players have to do. I think that it is right and required, because nothing is free and in particular the cheap linden in Second Life game. You do not have to spend second life linden, you can be as solitary as you want to be too. Once you get through the orientation you will be well on your way to exploring the ways of making linden dollars. So instead I am going to give you some secondlife money and the tip of the iceberg.

Anonymous said...

As a new player , you may need some game guides or information to enhance yourself.
FFXI Gil is one of the hardest theme for every class at the beginning . You must have a good way to manage your FFXI gold.If yor are a lucky guy ,you can earn so many Final Fantasy XI gold by yourself . But if you are a not , I just find a nice way to buy FFXI Gil. If you need , you can buy cheap Final Fantasy XI Gold at our website . Go to the related page and check the detailed information . Once you have any question , you can connect our customer service at any time .

Making aoc gold is the old question : Honestly there is no fast way to make lots of conan gold . Sadly enough a lot of the people that all of a sudden come to with millions of age of conan gold almost overnight probably duped . Although there are a lot of ways to make lots of cheap aoc gold here I will tell you all of the ways that I know and what I do to buy aoc money.

Anonymous said...

I know that most players use aion kina to get a shiny cool weapon like other players in game. You need enhance stones with aion online kina. The process of enhancing is simple if you have aion gold. You can buy aion kina after clicking enhance, if you have more cheap aion kina.
latale online gold in the game. We know, the latale gold can exchange the real money of the reality. The world you are enjoying in latale money can entertainment. This economic structure lead buy latale online gold has one kinds of real value. You can use cheap latale gold to purchase various items of course.

Jkurt67 said...

I just wanted to let you know tha I want to Get Laid Tonight and I will do it by joining Adult Dating Sites.

teragoldonlinefsbest said...

I value what you guys are usually up too. This kind of clever work and reporting! Keep up the great posts guys I've added you to my blogroll, Cheers.

tera online said...

Good blog.


Runescape gold

Tera Gold

gameplayer said...

generate leads in addition to prepare. It will eventually in the same way normally function as the actual setting up submit to receive indigenous group subject material, as well as spot to look should you be interested in studying clans and in addition would prefer to require a amount of inquiries.RS Gold
Buy RS Gold
Cheap RS Gold
Sell RS Gold

cinderaller said...

This is where it pays to research. Once you have purchased the item for the price you feel is right, the last step is to go out and sell the item for a higher price. The objective of this technique is everything to gain anything substantial Cheap Runescape Gold Tera Gold Buy Tera Gold WOW Gold
. Look at it like eBay, you want to buy an item and then resell it more than you paid for it. This is a great way to increase your own World of Warcraft gold.

discountcoupon said...

There are a lot of people like you that the blog, their message is very interesting! You also have a really unique insights about some things!!