The complex case for rejecting AND using plastics and wearing cotton AND silk, leather and fur

A fascinating article on why the ban on plastics is not necessarily, if its overall impact on the environment is understood correctly, an unalloyed good thing as is being made out to be. An eye-opener just as the article on cotton vs. synthetic clothing was. The law of unintended consequences never ceases to fascinate me.

University of Sydney economist Rebecca Taylor started studying bag regulations because it seemed as though every time she moved for a new job — from Washington, D.C., to California to Australia — bag restrictions were implemented shortly after. “Yeah, these policies might be following me,” she jokes. Taylor recently published a study of bag regulations in California. It’s a classic tale of unintended consequences. …

….. People in the cities with the bans used fewer plastic bags, which led to about 40 million fewer pounds of plastic trash per year. But people …. still needed bags. …..This was particularly the case for small, 4-gallon bags, which saw a 120 percent increase in sales after bans went into effect. [Link]

AND…..

…. Trash bags are thick and use more plastic than typical shopping bags. “So about 30 percent of the plastic that was eliminated by the ban comes back in the form of thicker garbage bags,” Taylor says. On top of that, cities that banned plastic bags saw a surge in the use of paper bags, which she estimates resulted in about 80 million pounds of extra paper trash per year……

….. A bunch of studies find that paper bags are actually worse for the environment. They require cutting down and processing trees, which involves lots of water, toxic chemicals, fuel and heavy machinery. While paper is biodegradable and avoids some of the problems of plastic, ….. …. the huge increase of paper, together with the uptick in plastic trash bags, means banning plastic shopping bags increases greenhouse gas emissions. That said, these bans do reduce nonbiodegradable litter. [Link]

You can read the rest in the original itself. But, you have got more than a gist of it.

Now, let us turn to cotton vs. fur and leather. There was this great article in Quartz in February 2019. I thought I had blogged on it but I had not. The author of the article, Ephrat Livni begins the piece well:

Being “good” isn’t as easy as it might first seem. In theory, it’s as simple as minimizing the harm you cause. This is the line of thinking that often prompts people to make decisions like giving up meat, or, in the case of clothing, refusing to wear any materials made from animals—specifically leather, fur, silk, pearls, wool, and feathers.

But in reality, we live in a big, complex, connected world, and the consequences for our actions and decisions aren’t always easy to assess. Sadly, the possible ways that we can cause harm are seemingly infinite, and the chances of our doing so practically inescapable. And sometimes what seems like the simplest or most correct approach, when examined closely, is actually just another tricky thicket of moral quandaries. [Link]

Look at how ethically difficult it gets to choose to wear cotton and synthetics than silk:

In 2010, the majority of textiles produced in the world, 85%, were woven from cotton and polyester. Neither of these fabrics uses any animals—one is natural, and the other synthetic. “Both are responsible for widespread pollution of waterways, soils, and air,” Kwasny writes. “Both consume enormous amounts of resources.” ….

…. Cotton, for example, is the world’s most profitable nonfood crop, and 11% of pesticides used worldwide are sprayed on these plants. …. nearly all the water in Pakistan’s Indus River—97% of it—is devoted to growing cotton. It takes about 5,300 gallons of water to make a cotton t-shirt and a pair of jeans, …. Every time we wash a polyester item, we’re releasing plastics into the world’s waterways and ultimately leading to the death of flora and fauna.  …..

………. to spin enough silk for a kimono requires thousands of silkworms, and that sericulturalists kill these worms once they’ve spun a cocoon around themselves. But the work of farming silk involves a deep interaction with the natural world. …….. Nothing went to waste, and throughout the silk-creation process, farmers and artisans acknowledged that their lives were intertwined with those of the worms.

Similarly, when Kwasny visits a mink fur farm in Denmark, she remarks on the astounding care the creatures receive. ….. she notes that the mink farmers are much closer to nature than most people. They know their minks and check in on them from morning until night, feeding them, cleaning up their spaces, ensuring that the animals are healthy and getting along. During mating season, the humans look in on the minks every 20 minutes to make sure males and females are happy. They raise the puppies whose mothers die in childbirth and they get to know them. And the farmers themselves don’t gloss over the darker parts of their profession; they admit that each creature they raise has an individual character, that sometimes they grow attached to the animals, and that the nature of their work is bloody. [Link]

What are the lessons?

(1) At a policymaking level, one has to be patient and consider ALL evidence, all costs and benefits and exercise judgement even as one is acutely aware of how little one knows and might have missed out a lot. That would definitely make for better policy with appropriate and essential mitigation for the costs. Then, be humble about the policy choice taken and that also gives us the mindset to be open to new evidence and change course, without associating it with losing face.

(2) At the individual level, Melissa Kwasny, the author of the work, ‘Putting on the dog: the animal origins of what we wear’ has many lessons:

(a) In order to have a reciprocal relationship with the world, then, we have to be aware that it’s impossible to be ethically pure. It’s pleasant to think of oneself as a kind and gentle person, but it’s better to be brutally honest and understand that the best any of us can do is be “goodish.”

(b) Instead, it’s better to accommodate complexity and reject blanket answers that are convenient but untrue, and avoid insisting upon a foolish consistency, which as Ralph Waldo Emerson famously said, is the “hobgoblin of little minds.” Emphasis are mine.

In other words, the absolutism of the ‘do gooders’ is a bigger threat than we realise.

(c) This is the gem:

In a reciprocal relationship, you take only what you need, rather than as much as possible. …. Reciprocity begins with awareness. It is guided by respect and restraint. It always involves an expression of gratefulness.

Taking according to one’s need IS NOT the same as giving according to need. That is central planning and communism combined. This is individual, voluntary restraint.

Distilling it further:

  • Awareness (of the limitations of our knowledge and) of complexity and avoidance of absolutism – i.e., awareness that one can only be ‘goodish’ and not GOOD
  • Restraint (taking for need instead of pandering to greed) AND
  • Respect for nature borne out of recognition of interdependence

SOX and Fed conscience

Record high in the semiconductor (SOX) index (with rapidly slowing end markets for semis and collapsing industry fundamentals)! Extreme (manic) speculation is back. Does the Fed have no conscience? (that’s a rhetorical question). [Link]

That was a tweet by Fred Hickey. I learnt about Fred Hickey from the Global Investment Strategy Weekly of Albert Edwards. Fred Hickey’s tweets also pointed me to the rather shocking slide in the quarterly results of Micron Technologies. See their press release here.

As per this article by Martin Wolf, we learnt that the Federal Reserve has done the following:

We learnt this month that the US Federal Reserve had decided not to raise the countercyclical capital buffer required of banks above its current level of zero, even though the US economy is at a cyclical peak. It also removed “qualitative” grades from its stress tests for American banks, though not for foreign ones. Finally, the Financial Stability Oversight Council, led by Steven Mnuchin, US Treasury secretary, removed the last insurer from its list of “too big to fail” institutions. [Link]

It is a good piece. Worth reading.

This is the actual news-story that Martin Wolf refers to, here.

Science of poverty

My friend Rajeev Mantri had sent this article some three weeks ago. But, I stumbled upon this only today. Most (almost all) things life are accidents. We do not make them happen. Even reading articles.

It is a very important article. Very interesting and useful. Most of us have heard of ‘poverty trap’. There is a reason why it is called a trap. It is hard to get out of, despite one’s best efforts. The odds are stacked against them, in many ways. What this article brings to us is scientific evidence that poverty is, indeed, a trap.

However, let me start with a (minor) criticism:

Quite how the science of poverty could be leveraged to help the poor come out of poverty is not explained. But, that is not his goal in writing the article. His purpose is to exhort fellow humans to take poverty as a disease and not as a voluntarily or willingly assumed condition or something that is wholly attributable to sloth, indolence and lack of effort.

His practical policy prescripton is to continue with anti-poverty programmes:

We should leverage the lessons of the science of poverty rather than ignore them. Poverty alleviation programs like conditional cash transfers, for example, reward parents or caregivers with direct payment for taking actions, like ensuring school attendance or arranging for preventative care. They encourage stress alleviation and long-term planning that is far upstream of doing well on an exam—they provide exactly the kind of certainty that the poverty-stricken brain needs.

This is THE UNIVERSAL TRUTH:

It’s easy to attach a post-facto narrative of talent and hard work to my story, because that’s what we’re fed by everything from Hollywood to political stump speeches. But it’s the wrong story. My escape was made up of a series of incredibly unlikely events, none of which I had real control over.

This is a hugely important philosophical statement. I am so glad he made it. That shows a highly evolved mind. Very, very rare.

Despite reading this or even while reading this, some of us continue to believe that we did it and we make things happen. At best, our effort are necessary conditions.

This is the important message for policymakers:

First, that the stresses of being poor have a biological effect that can last a lifetime. Second, that there is evidence suggesting that these effects may be inheritable, whether it is through impact on the fetus, epigenetic effects, cell subtype effects, or something else.

This science challenges us to re-evaluate a cornerstone of American mythology, and of our social policies for the poor: the bootstrap. The story of the self-made, inspirational individual transcending his or her circumstances by sweat and hard work. A pillar of the framework of meritocracy, where rewards are supposedly justly distributed to those who deserve them most.

What kind of a bootstrap or merit-based game can we be left with if poverty cripples the contestants? Especially if it has intergenerational effects? The uglier converse of the bootstrap hypothesis—that those who fail to transcend their circumstances deserve them—makes even less sense in the face of the grim biology of poverty. When the firing gun goes off, the poor are well behind the start line. Despite my success, I certainly was.

The bigger question is: Do goverments have resources for this?  Do they have the mind to do this? Do they have the moral authority and the courage to acquire (fiscal) resources to tackle this? Are the rich ready and willing to pay up for this? Even if the answers to all these questions are YES, how would it translate into reality – efficacy on the ground – in terms of results?

But, one thing is clear: given the scientific evidence that successive generations are poor not because they choose to or that they did not make the effort but because they are made to stand well behind the starting line, the society has both an economic and a moral obligation to help them in whatever ways they can.

Thanks for sharing the article, Rajeev.

Invisible hand of morality

I enjoyed writing my MINT column for Tuesday on the rise of socialism among millennials and how capitalism – both ‘arms-length’ and ‘arms-around’ varieties – brought about this love for socialism. The MINT column was triggered by ‘The Economist’ cover (16th February 2019) and the ‘leader’ on the topic. While researching for the topic, I came across a paper by Amar Bhide titled, ‘An accident waiting to happen’ written in 2009. It is a well-written paper – both cogently and passinately argued.

In my MINT column, I argue that both arms-length capitalism and relationship capitalism (citing an example from India) had failed and the common reason for that failure is that morality has disappeared from both forms of capitalism. The common belief stemming from a faulty reading of Adam Smith’s ‘Wealth of Nations’ was that morality was not required. Self-interest was both necessary and sufficient to drive collectively beneficial outcomes. It is quite possible that Adam Smith never meant it that way. I had covered that in an earlier blog post. The visible hand of morality was the foundation or pillar of capitalism. My argument and Amar Bhide’s arguments are not mutually exclusive.

In his paper, Amar Bhide argues that the crisis of 2008 was a case of humans lacking in humility (excessive belief in mathematically determined probabilities) and failing to factor in the law of unintended consequences. He argues that tight securities market regulations (investor protection laws; insider trading rules, etc.,) created arms-length capital markets in which nobody had a stake and hence, managers looked after themselves. No single shareholder was powerful enough or interested enough to stop excesses of managements.

Similarly banking or financial deregulation, he says, enabled banks to take on risks that they otherwise would not have. He cites abolition of inter-state banking, repeal of Glass-Steagall, proprietary trading, etc. Federal Deposit Insurance encouraged banks’ excessive risk-taking: moral hazard. Ho brw come economists ignored moral hazard in this matter? With deposit insurance, depositors were not interested in monitoring risk-taking by banks.

He writes:

In the narrative offered by Rajan and several other economists, exogenous technologies played a deterministic role, inexorably forcing changes in regulation and financing arrangements. But technology might, instead, have facilitated relationship banking…. The outcome was not predetermined. In fact, in the story that I have told here, the increased share of securitized financial assets was driven mainly by the beliefs of financial economists and regulators. [Link]

His conclusion is pithy, sharp and correct:

Economics has underpinned securitization through its embrace of mathematical models to the exclusion of other perspectives, and through a complementary tendency to ignore the downside of liquidity and arms-length relationships. Regulation has brought this way of thinking into the world of practice in two paradoxically related streams: by increasing the scope and effectiveness of the New Deal securities acts and subsequent rules that fostered the growth of arms-length transactions in corporate control; and the progressive dilution of New Deal banking acts, which nurtured and protected long term relationships. This is the complicated story that may explain why developments in mortgage banking, of all things—traditionally the plodding, conservative bread-and-butter of depository banking—should have led to the implosion of the world economy.

I also chanced upon two of his op.-eds. One calls for the end of the Federal Reserve (as we know it) and the other faults the IMF for encouraging reckless lending by banks in foreign currencies to emerging sovereigns. Who, in their senses, could disagree with his (and his co-author’s) arguments?

Notwithstanding all of these, I could not resist pointing out in my column that the love of socialism is misguided and that humans were once again falling back on lazy answers. In this regard, the article I had cited in my MINT column on the case for wearing fur and leather was very thoughtful. The costs imposed on societies by misguided and/or uninformed do-gooders are substantial. I encourage you to read it.

I would also like to recommend reading a blog post I had written little less than six months ago.

Everybody talks inequality

Raghuram Rajan has a piece in ‘Project Syndicate’ in which he echoes Paul Tucker on central bankers but stops of advising them to not to go to Davos, as Paul Tucker did. In any case, if this FT story is true, there won’t be much tears shed. How times have changed?!

An extract from Raghuram Rajan’s article on central bankers:

And, of all elites, central bankers seem to have the most strikes against them. Most have doctorates and speak in a language that nobody else understands. The quintessential “citizens of nowhere,” they meet periodically behind closed doors in faraway Basel, where they discuss global financial conditions and the systemic effects of monetary policies. What they do not talk about, many believe, is Main Street, except when it factors into discussions about inflation.

No wonder there has been such a decline in public trust. It is bad enough when average citizens can scarcely understand the complicated tradeoff between inflation and unemployment. It is worse when one adds in public grievances over Wall Street bailouts and the perception that central bankers are focused on global conditions instead of domestic concerns. Yes, it is every central banker’s job to think about such things; but that job is increasingly being met with suspicion by those who aren’t in the room. [Link]

Overall, the piece tries to cover too many grounds and offers too little by way of answers. His piece, however, triggered my interest in the inequality topic and I re-hashed some of the recent pieces I had read in the last twelve months or little longer. The links are here:

https://washingtonmonthly.com/2017/11/06/how-the-rich-rig-regulations/

https://www.nytimes.com/2017/11/17/upshot/income-inequality-united-states.html

https://www.nytimes.com/interactive/2017/12/14/business/world-inequality.html

https://www.livemint.com/Opinion/sMRTHlLePT4cfXTkjM7JOM/Angus-Deaton–How-inequality-works.html

I had blogged on the topic here and I think that remains an answer!

Bolsonaro should beware the asymmetry

This story in Bloomberg on the new Brazilian President’s plans to relax the country’s strict gun-control laws reminded me of the note I had written with my friend and co-author Gulzar Natarajan on asymmetry in economics and in public policy.

His claim is that the country’s strict gun-control laws have not really ended violent crimes. May be. But, relaxing them might well raise them substantially. That is the asymmetry that he should be mindful of.

Cost of rural services

While newspaper reports talk of rural and agrarian distress in India, India’s statistical organisation produced a monthly CPI report for December 2018 in which rural healthcare and education costs jumped sharply higher. Headline inflation rate: 2.2%. Core inflation rate: 5.7%. Rural healthcare inflation: 9.0% and rural education inflation: 8.4%. That defies explanation. SBI Chief Economist wrote:

The most puzzling aspect of the inflation data is the increase in rural health and education inflation at the time when rural demand is collapsing. A deep analysis of this completely contrarian behavior is warranted, however, as of now it seems that it could be a combination of methodological changes in data collection and implementation of Aayushman Bharat  Scheme which might have led to an upgradation of health services at least in rural areas. However, even then the jump in healthcare costs is happening mostly because of jump in medicine costs from non-institutional sources, that begs explanation.  Another baffling aspect is the jump in education inflation in rural areas. Clearly, the CSO should clarify the doubts of such a significant increase in service costs in rural areas since October 2018. Is it a data error? We don’t know yet. 

With such data collection and lack of proper statistical and seasonal adjustments, it may not be possible to make sound public policy. Bad data can and do beget bad policy.