19 Jul 2013

Murphy Testimony to the EPW Senate Committee

Climate Change, Shameless Self-Promotion 41 Comments

Here’s my full written testimony, and below is my 5-minute summary. Needless to say, Senators Boxer, Whitehouse, and Sanders didn’t care for my thoughts on the social cost of carbon.

41 Responses to “Murphy Testimony to the EPW Senate Committee”

  1. David R. Henderson says:

    Well done, Bob. Nice pivot in the later Q&A (unshown above).

    One tip: When you lead off, say the following: “I request that my written testimony be entered into the record as if read.” That way, if you depart at all from your written testimony, which you didn’t appear to have done, both written and oral get in. The presiding Senator will always (Ted Kennedy did when I asked) say yes.

    • Bob Murphy says:

      Thanks David, interesting. But I also had “written testimony” that was longer; you are saying I would effectively be putting in 3 things?

    • Dan Lind says:

      The full hearing is at
      http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.LiveStream&Hearing_id=cfe32378-96a4-81ed-9d0e-2618e6ddff46

      Bob Murphy shows up again at about 2:13:00 where he does the “pivot,” which, as Henderson says, he did nicely.

      Well done, Bob.

      An entertaining tidbit occurs shortly before the 2:13:00 mark. An insurance expert is asked what legislation he, as a representative of the professional risk assessment industry, would recommend. The insurance expert recommends legislation to incent communities to do the right thing. The comment isn’t challenged at all. This is an insurance guy claiming that “reality” needs to be changed in order to create incentive to correctly evaluate risk. Sheesh.

      The mad Alice in Wonderland world we’ve become is no longer stunning when you watch this sort of thing. We’ve morphed into an implacable “command and control” state.

      • Cosmo Kramer says:

        Wow Sen. Boxer was disgusting to listen to.

      • guest says:

        Is there a non-”.gov” link to the full hearing?

  2. Ken B says:

    Excellent Bob, very clear and persuasive.

    • Chris P says:

      That’s classic

    • Cosmo Kramer says:

      You could literally stop reading that garbage after the first sentence(I was dumb enough to keep reading)

      “Robert P. Murphy, an economist with the Koch-funded Institute for Energy Research, essentially told a Senate committee yesterday that carbon emissions are harmless.”

      The words “discount rate” are nowhere to be found in the Huff Po article.

      The words “discount rate” appear 28 times in his written testimony.

      Context be damned, we have wind farms to build……….

      • Ken B says:

        Aside from not mentioning the main topic of his disquisition, the discount rate, this claim is false on its face: Bob never came close to saying emissions are harmless.

        • Silas Barta says:

          But he thinks that pricing carbon is a fool’s errand, because there’s no relevant scarcity. I know, I know, carbon emissions may flood Bengalis out of their homes for good, but I mean, come on, it’s not like Bengalis are scarce, right?

          • Tel says:

            You can’t say “Bengali” round here!!!!!!

    • Dan (DD5) says:

      Some of the comments to that below are simply hilarious.

    • Dan says:

      That’s hilarious.

    • Major_Freedom says:

      I am almost not wanting to say this, but this article is the type of article that I would have enjoyed that guy “Beefcake” making a comment.

      “HuffPo is the intellectual equivalent of a…”

    • Major_Freedom says:

      I once worked at a company that was formerly owned by a friend of a colleague who had rumored ties to a foundation that gave money to another company whose CEO was the neighbor of a lawyer of one of the Gambino crime family’s father in law.

      According to HuffPo, that means I “whack” people.

    • Tel says:

      Well done Bob, the Koch brothers finally cut you a cheque… welcome to the official bad boy club. There’s nothing more dangerous that people who believe they might be free, even pacifists can be dangerous when they start asking questions.

      I watched the video and I think you nailed it good. Made your point in a nice short speech you didn’t put pressure on anyone’s attention span.

  3. Major_Freedom says:

    Of course they didn’t care. They hate industrialization, plain and simple. They don’t want to hear that they migth be wrong in their emotions.

  4. Daniel Kuehn says:

    Evaluating the argument based on the funding source is stupid. Bob’s arguments were great. I’m positively disposed to carbon taxes and I think I agreed with every word that came out of his mouth at the IER conference, in his written testimony, and in his spoken testimony.

    That having been said – come on guys – it’s entirely relevant for people to want to know Bob’s funding sources!!!

    If Bob is being funded by people directly affected by a carbon tax that matters. I’m convinced Bob is an objective economic scientist, but that doesn’t change the fact that this is how crony capitalism and regulatory capture happen – industry pays analysts to go in and talk Congress into favorable legislation (or at least out of unfavorable legislation). That give and take is part of democracy but it’s entirely reasonable to want tall of those incentives and conflicts of interest out in the open.

    • Tel says:

      it’s entirely relevant for people to want to know Bob’s funding sources!!!

      Absolutely it is relevant, and just as relevant to know everyone else’s funding sources.

      http://joannenova.com.au/tag/climate-money/

      On the whole, a lot more funding goes to global warming alarmists than to global warming skeptics (by perhaps a factor of 50 or so).

      • Daniel Kuehn says:

        Good! Glad you agree.

        So here’s a question: why the lop-sided funding?

        Normal Mancur Olsen logic would suggest the most energetic funding would be against the anthropogenic climate change research because the costs of doing something would be heavily concentrated in the energy but even the generalized costs would be concentrated in the sense that they would be more immediately apparent (the costs of not doing anything are less apparent for this generation – more apparent for future generations).

        Got any ideas on what might be causing the differential?

        I’m guessing it’s related to the quality of the science on either side.

        • Tel says:

          Got any ideas on what might be causing the differential?

          In simple terms, yet another scare campaign to shake a bit more tax money out of the low information working stiff. Here’s a diagram with approximate money flows, totals, and most of the major players:

          http://jonova.s3.amazonaws.com/artwork/mudslinger-map/climate-scare-machine-800.gif

          In more technical terms, it is the best excuse the central planners have ever had to bolster up their own power and demonstrate that only big government can solve problems that don’t really exist. Even better when they have managed to convince themselves of their own self-importance.

          The really strange thing is that if you look at history, socialism has an appalling record of environmental destruction, but that doesn’t stop modern socialists painting themselves green, bleating “externalities, externalities” as if that meant something and then anointing themselves as our saviours.

          By the way, how’s Al Gore’s beach-front property doing? Not exactly wanting for a crust is he, the “inconvenient truth” man?

      • Daniel Kuehn says:

        re: “and just as relevant to know everyone else’s funding sources.”

        Yes! While the comment here is about Bob for obvious reasons in my link when I discuss it in more detail I’m obviously not saying that only Bob and people who think like him should disclose funding!

        • Cosmo Kramer says:

          I think funding should be a footnote, not the headline.

          • Daniel Kuehn says:

            I agree. I didn’t make it that headline – it’s practically all that people are talking about (proponents and opponents of Bob).

            Mine is the only post I know of (an earlier one – linked in the post I linked to above) that has gone into details about the ideas expressed in his testimony.

            So you’re preaching to the choir on that one.

            But if people insist on getting worked up about the HuffPost article or Barbara Boxer I’m happy to put my two cents into that discussion too. The vagaries of the Washington think tank world is an interest of mine anyway.

          • Daniel Kuehn says:

            If you think something else should be the headline, what?

            What do you think of Bob’s ideas for example?

            I thought it was funny he put so much emphasis on the OMB guidance to use national costs. If you had asked me before I read his testimony what Bob’s position on that would be I would have thought he’d take the opportunity before Congress to rebuke that guidance – but he did nearly the exact opposite. That surprised me.

            What do you think of that?

          • Daniel Kuehn says:

            Another question I had – on the discount rates – was whether those are broad OMB guidance for CBAs in general or whether they specifically validated them as the “right” discount rates for a climate change reg. Because that seems like a big difference to me. My limited knowledge of the discount rate literature is that most proponents of smaller discount rates don’t argue that the 3 to 7 percent rates are never appropriate, just that they are less appropriate for very long time periods.

            So whether that was general or specific OMB guidance makes a big difference IMO.

            Not sure if you have any thoughts on that either, but that was another substantive issue I was scratching my head over.

            • Bob Murphy says:

              In the economics of climate change academic literature, there are disputes over
              the proper discount rate, with some economists arguing that very low rates should be
              used in order to place future generations on a nearly equal footing with the present
              generation in policy analysis. Circular A-4 and the White House’s primer on Circular A-
              4,
              5
              explicitly cited the work of Martin Weitzman, one of the leading scholars in the field
              on this issue, who argues for a low discount rate in climate change analysis.

              Nonetheless, after this discussion the 2011 primer still concluded:
              “If the regulatory action will have important intergenerational benefits or costs, the agency
              might consider a sensitivity analysis using a lower but positive discount rate, ranging
              from 1 to 3 percent, in addition to calculating net benefits using discount rates of 3
              percent and 7 percent
              .” [“Regulatory Impact Analysis: A Primer,” p. 12, bold added.]

              • Daniel Kuehn says:

                And Weitzman is who I am familiar with.

                But my point is, the primer seems to be general OMB guidance for CBAs. It’s not guidance for CBAs on climate change.

                My understanding is that a lot of people people agree that yes, for issues that (1.) do not invoke the precautionary principle with the same urgency and (2.) do not look as far ahead as climate change studies do, the 3 to 7 percent discount factor makes sense. That’s how we discount things within our lifetime that are “ordinary things”. But this non-ordinary thing that goes well beyond our lifetimes should be treated differently.

                So I guess what I’m implicitly asking is, if OMB were to draft special guidance specifically for looking at climate change do you think they’d use this same recommendation? I’m thinking maybe they wouldn’t.

              • Bob Murphy says:

                But my point is, the primer seems to be general OMB guidance for CBAs. It’s not guidance for CBAs on climate change.

                Daniel, if you want to say OMB is wrong, and that it’s odd for me to point to OMB as an authority, OK fine. But please stop ignoring the plain meaning of their words. They specifically bring up climate change, specifically cite Weitzman and the reason one might use very low discount rates in the context of climate change, and say that’s why you can quote your figures with a very low rate *in addition to* a 3 and 7 percent rate. But, the Working Group ignored that clear instruction, because (I conjecture) it would have been very awkward to officially report a range of SCC estimates that bordered on $0, if not negative, which is what would have happened at 7 percent.

              • Daniel Kuehn says:

                Another way of putting this is, if Weitzman were doing an evaluation of a project that only extends ten years in the future would he advocate the same super-low discount rates?

                Probably not. He’d say 3 to 7 was more appropriate, right?

              • Daniel Kuehn says:

                I guess that’s what I’m trying to understand Bob… I did a word search and they DO NOT mention climate change as far as I can tell.

              • Bob Murphy says:

                They are providing a general framework, yes. And then if one wonders whether the general rules be violated in the case of climate change because it’s an odd situation, I think this is pretty definitive:

                Special considerations arise when comparing benefits and costs across generations. Although
                most people demonstrate time preference in their own consumption behavior, it may not be
                appropriate for society to demonstrate a similar preference when deciding between the wellbeing of current and future generations. Future citizens who are affected by such choices cannot
                take part in making them, and today’s society must act with due consideration of their interests.
                Many people have argued for a principle of intergenerational neutrality, which would mean that
                those in the present generation would not treat those in later generations as worthy of less
                concern. Discounting the welfare of future generations at 7 percent or even 3 percent could
                create serious ethical problems.
                An additional reason for discounting the benefits and costs accruing to future generations at a
                lower rate is the longer the horizon for the analysis, the greater the uncertainty about the
                appropriate value of the discount rate. Private market rates provide a reliable reference for
                determining how society values time within a generation, but for extremely long time periods no
                comparable private rates exist. As several economists (including Martin Weitzman
                9
                ) have
                explained, for the very distant future, the properly averaged discount factor corresponds to the
                minimum discount rate having any substantial positive probability.
                At the same time, some economists have cautioned that using a zero discount rate could raise
                intractable analytical problems. They have argued that with zero discounting, even a small
                improvement in welfare, if permanent, would justify imposing any cost on current generations
                since the benefits would be infinite.
                If the regulatory action will have important intergenerational benefits or costs, the agency might
                consider a sensitivity analysis using a lower but positive discount rate, ranging from 1 to 3
                percent, in addition to calculating net benefits using discount rates of 3 percent and 7 percent.

                I am pretty sure in my office I have the book in which the Weitzman article is published. I would be shocked if the book didn’t mention climate change a million times as the context of the discussion.

                Daniel, do you really mean to say that maybe OMB was worried about other federal regulations that might have effects hundreds of years into the future, but it didn’t occur to them that climate change was one such issue? And so they issued guidelines to deal with, say, sending out messages to extraterrestrials even though they might come to Earth in 300 years and attack us, but they would have said something different if they had thought about climate change?

  5. guest says:

    I’m not pro-fracking, but I’m not anti-fracking, either.

    But I thought I’d share this with all the talk about funding going on.

    Matt Damon anti-fracking film Promised Land produced by Middle Eastern Oil government.
    http://www.youtube.com/watch?v=Aa1FQHywwp8

    Hey, Bob Murphy, would you say that oil is being made artificially more cost prohibitive, thereby giving fracking an artificial competitive boost? Especially since the Bakken oil extraction has been funded (at least in part) through the injections of new credit through the North Dakota state bank, as the Greenbacker, Ellen Brown, has noted?

    (Reference: NORTH DAKOTA’S ECONOMIC “MIRACLE”—IT’S NOT OIL, http://www.webofdebt.com/articles/north_dakota.php)

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