May 26, 2009

Strive for perfection in everything you do. Take the best that exists and make it better. When it does not exist, design it.
~Sir Henry Royce

This blog is about sustainability. We can define sustainability as the right balance of a triple bottom line: Economic profit, social profit, and environmental profit. I have been focusing in the environmental profit because it is the one that is more urgent to address; the other two can be closely related (social and economic development can go hand by hand) but usually the environment receives all the cost of this development.

Global Warming is, by far, the most urgent matter of all the environmental issues. It is urgent because:
Some people have not yet realised the long-term effects of a raise in average temperatures.
Some people do not even recognise that Global Warming exists.
Unlike other pollutant, CO2 remain in the atmosphere for hundred of years, while is reabsorbed at a very slow pace.

Victor, Granger Morgan et al compare the emission-reabsorbsion problem as having a bathtub with a huge faucet but a very small drain. The only way to reduce the amount of greenhouse gasses is to dramatically reduce the size of the faucet, but whatever measure we may take in reducing the greenhouse gases emissions, the result will come decades later, hence the urgency to take measures now. The United States has been incapable to even cap their emissions, let alone reduce them. China has surpassed the USA as the main greenhouse gases producer, and the developing countries are just not going to stop producing the relative cheap fossil energy.

While efforts need to continue to reduce CO2 emissions, we need to try to reverse the effects. Geoengineering could provide a useful defense for the planet, an emergency shield that could be deployed if surprisingly nasty climatic shifts put vital ecosystems and billions of people at risk. Geoengineering is not a new idea, since the 1940s the USA and the Soviet Union experimented in seeding clouds to make rain and to reduce hurricanes power (with very poor results). Volcano eruptions, like the one in Philippines in the early 1990s, reflected so much sunlight that global temperatures dropped 0.5C in less than one year.

It works like this: 70 percent of the earth’s incoming sunlight is absorbed while the remainder is reflected back into space. Increasing the reflectivity of the planet (known as the albedo) by about 1% could have an effect on the climate system large enough to offset the increase in warming that is likely over the next century as a result of a doubling of the amount of CO2 in the atmosphere. This is easier than causing rain in a particular location because it is not a fine tool: it is a blunt instrument that affects the whole planet, and that is exactly what we want.

Geoengineering techniques are divided in two: Removing the CO2 (e.g. fertilizing the ocean with nutrients that would allow plankton to grow faster and absorb more carbon, or scrubbing the air with cooling towers) and increasing the earth’s albedo. The latter are more promising: one kilogram of sulphur placed in the stratosphere would offset the warming effect of several hundred thousand kilograms of CO2, or seeding bright reflective clouds by blowing seawater into the lower atmosphere. “There is a general agreement that the strategies are cheap; the total expense of the most cost-effective options would amount to perhaps as little as a few billion dollars, just one percent (or less) of the cost of dramatically cutting emissions”.

This do not offset the importance of reducing C02 emissions, since reflecting the sun light does not reduce the already dangerous C02 concentration that is ending up in the oceans, killing coral reef and creating maritime dead zones. Altering the albedo will have some consequences, like changing the rain patterns (as learnt during volcanic eruptions), but the difference is that we can stop increasing the albedo, since Geoengineering requires constancy, Global Warming effects are, in the other hand, long term, and far more dangerous.

When you have Cancer you undergo chemotherapy, but you also take painkillers. Chemotherapy is the cure, is expensive, uncertain, and long term. Painkillers are a temporarily measure, cheaper, reasonably predictable, and a short-term solution. You need both to get cured, similarly, just trying to lower our present emissions is expensive, uncertain, and many nations just do not care. It needs to be done for sure, but in the meantime, they are options to reduce the risk and effects of Global Warming.

Furthermore, it only takes one powerful, decided nation to conduct a Geoengineering experiment. The literature and the scientifics studying this discipline is scarce, and further study may reveal that Geoengineering is just too dangerous; messing with the atmosphere is surely to be a shocking idea for the most of us, but we have already engage in a dangerous Geoengineering experiment by pumping massive amounts of CO2 into the atmosphere. The best and safest solution is to stop greenhouse gases emissions, but this will take time and consensus among countries with very different political and environmental views (remember, it is China and the USA talking about deep economic changes) As with particles accelerators, nanotechnology, and genetic engineering before, it is time to set regulations and rules to explore the idea that one day, the nations of the world may need to erect a shield to protect our mother land.


Public Roads Privatised

November 24, 2008

The government solution to a problem is usually as bad as the problem.
~Milton Friedman

With the falling of the first snow flakes, I declare finished my biking season. I am too tropical to endure not the weather but the ice on the paths of my biking route to Downtown Toronto, so I need to decide whether to use my car or take public transit. In my town, public transit is controlled by a municipal agency called TTC, which despite claims that its acronym stands for Toronto Transit Commission, really stands for Take The Car.

Biking time from my place to my work is 25 minutes, driving is 30 minutes, but transit takes 50 minutes.

Now, if I am going to use the car and pay taxes over gas, car ownership, road privileges, and extraordinary expensive parking, you will assume that at least I could select the optimal route to minimise driving time, idling in traffic, and polluting cost. Think again. As I bike through Rosedale, a very affluent neighborhood, I assumed I could also drive to the streets everybody is paying with our taxes, but I find out that no, that this privileged neighborhood forbids going though OUR streets at rush hour.

I cannot turn into Rosedale from 7:00 to 9:00 in the morning, and I cannot turn out of Rosedale from 16:00 to 18:00. Giving the orography of Toronto, my only other route is through a congested street that doubles my driving time and my driving distance; The yellow route is 3 kms, the dark red is 6:

Yellow route is half than dark red route


Now, I may agree that the roads of Rosedale may not handle road traffic in rush hour, but everywhere else in Toronto (everywhere else is neighborhoods with less than certain family income levels) parking in the streets is prohibited, the streets are adapted to traffic, and people pay the price for living close to the downtown core.

In this case, everybody in my neighborhood who goes downtown (and this is pretty much everybody in my neighborhood) has to drive double, hence polluting double. Yes, alternatives exist, as carpooling, but the mere fact that a handful of privilege people can dictate when can we go thought their (our) streets stills bothers me. Besides a poor road planning, now we also need to fight a virtual privatization of the few alternatives to drive.

I love how Rosedale looks, and I pity other neighborhoods that have gone through massive change on traffic patterns, like The Annex, but I also think that either all on the same boat or not. Why some places in Toronto have seen their streets take away by traffic while others are protected? Why we force people to pollute more just to keep some others comfortable? Why people in the Danforth have to suffer what people in Rosedale do not?

Public roads belongs to the public. We cannot create traffic jams and advocate for a greener city at the same time. The solution presented to the problem of traffic in certain neighborhoods cannot be at expense of everyone else. If we are going to protect certain areas from traffic, we should:

1) Include all areas affected and not only the affluent neighborhoods
2) Improve public transit
3) Improve and create alternative roads

Bailout Denial

September 29, 2008

Every individual intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his original intention. By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it
~Adam Smith, (1776)

Most of us say, ‘I want this thing to pass, but I want you to vote for it — not me’
~Paul Ryan, Republican Congressman for Wisconsin

Today’s WSJ first page reads
Historic Bailout Vote Fails in the House by Narrow Margin; Industrials Drop 700 Points Amid Broad Stock-Market Swoon

By preventing the very visible hand of the goverment to act, the US Congress will allow the Invisible hand of the markets clear up the mess of the Barons of Wall Street, but the cleaning up is going to hurt.

A real pure capitalist should be glad: One of the most important attributes of Capitalism is letting failing companies disappear. No help is received by inefficient companies the same way that pop ‘n mom stores do not receive any help when a Walmart gets in town.

A Pure socialist should be sad: The WSJ is predicting one million houses foreclosures in the next six months. A lot of hard working people are going to pay the price of not being rich. They will pay for the greed of the CEOs of the US Financial Industry.

Interesting enough, the true is the exact opposite: The bailout sought by G. Bush is widely unpopular, no congressman wanted to vote for it so close to the elections; nobody wants to help the greedy big fish of Wall Street. The capitalist are panicking since the lost in the Dow Jones are going to be huge, as I am writing, the DJCI is down 700 points, about 8%.

The true is that in this case realpolitiks should prevail. Everybody is going to pay if the huge barons of Wall Street lose. All the manufacturing industry, badly beaten now, will get worse. A credit crunch is surely to follow, and a lot of unemployment will be salted with hose foreclosures. The US Government should help the companies that are struggling now, so its representatives, the US People, can dodge a huge economic crisis. That does not mean bailing out the culprits. The CEOs that took the risky bets should be charged and go to trial for misdemeanor. Conrad Black deserves a lot of company, but I think he will remain alone.

The paradox of democracy

May 28, 2007

Democracy is a process by which the people are free to choose the man who will get the blame. 

~Laurence J. Peter

Countries with a democracy system are somehow similar to companies in the stock exchange; The latest think on a quarterly basis, and try to give quarterly reports that raise the stock price. The former think on a election basis, and try to give results that will gain votes for the next election. A lot of the decisions taken have more to do with the short term implications that with the long term welfare.

This is why undeveloped countries with a democrat government have it so hard. The necessary measures to improve the over all economy usually hurt the poor, who in turn will vote against those measures, and, being majority, will reverse those measures.

The system works somehow like this:

1) A democratic, undeveloped country sets new reforms to improve their economy: reduce fiscal imbalance, increase expenditures in education, and raises new taxes.

2) The country, being undeveloped, has got the majority of population living in harsh conditions, and the new measures hurt them. Market-based policies meant to increase the efficiency of the aggregate economy frequently generate short-term dislocations and resentment.

3) The majority may understand the long-term benefits of the measures, but feel the short-term pain, so they vote against the government on the next elections, and elect a populist government which is going to cut taxes and increase spending.

4) All the populist measures increase deficit and inflation. The people understand how bad is the populist government and in the new election vote against it for a conservative government, which sets new reforms to improve their economy: reduce fiscal imbalance, increase expenditures in education, and raises new taxes. GO TO STEP 2

This is deadlock. Liberalizing the economy within an established democratic order are not inherently contradictory terms, but there are tensions between them that the country’s leaders will have to manage carefully. Ashutosh Varshney found that, in western society, three factors helped to avoid this situation:

1) Universal suffrage came to most Western democracies only after the Industrial Revolution, which meant that the poor got the right to vote only after those societies had become relatively rich

2) A welfare state has attended to the needs of low-income segments of the population

3) The educated and the wealthy have tended to vote more than the poor

While we can consider the democratic value a long-term asset, the need of be voted each four or six years places important constraints in the maneuver margin of present developing and under developing democracies. These factors will be very important when studying development and policy in the third world.

Protection Barriers; The Canadian Experience

May 15, 2007

You cannot protect something by building a fence around it and thinking that this will help it survive.
~Wim Wenders

People advocate for trade barriers when they feel that:

1) Local industry needs protection from abroad

2) Industry from abroad is playing dirty tricks (i.e. dumping, protecting their own industry, sending lower quality products)

3) The industry is of strategic importance (i.e. banking, communications, farming)

What are the cost of proteccionism? Let’s analise the Canadian Experience. In 1878, Sir John A. MacDonald’s conservative government introduced the National Policy. The idea was to encourage investment and economic growth within Canada, as well as build an east-west flow of goods to tie the country economically. The policy had two simple components: high tariff on manufactured goods and open market for foreign investment.

The tariff were imposed to encourage the growth of central Canada’s manufacturing industries, hoping that they would reach a scale to compete internationally. Some machinery was exempt, like those needed by the natural-resource industries. The Canadian companies will sell more to other Canadians, increasing the east-west commerce and hence helping to build the very needed TransCanada Railway.

The open-investment policy was intended to attract foreign capital, since locals had not got enough resources. The first invertors were British lending money first to other British, then to Canadians. During the 1900s however, Americans replaced British as the main capital source, and this was not in the form of debt, but equity. The reason is clear in retrospect, the Americans couldn’t sell in Canada due to the tariff, but they were able to open Canadian subsidiaries, which, being Canadian, could benefit from the protection.

The consequences are still affecting us, 130 years after. The Canadian manufacturing sector became a branch plants with no incentive to compete internationally, since they will compete against their parent companies.

A second legacy of the National Policy was the concentration of the wealth on very few hands. the National Policy make Canada a very comfortable place to compete; once established, they were protected by the tariff, and the incentive to be productive was limited. For the Canadian Companies, the profits were huge and resulted in very concentrated industries for each sector: Beer is dominated by Molson and Labatt, retail was dominated first by Eaton’s and Simpsons, then by The Bay and Sears. We only have five banks. You can count one or two large companies concentrating the national production for each sector.

Foreign ownership is not a matter of national pride, but economic sense: The typical organization have a profit of 10% of the revenue, but the lion’s share of the expenses is that 90% used on research, salaries, production, marketing campaigns… and, being branch plants, all those process take place on the main headquarters, outside Canada, so Canada is not only losing the 10% of the revenue, but an important component both of economic and strategic value. While there are exceptions, like companies doing an entire process in their Canadian branch (Pratt and Whitney, ICI explosives), this rule applies to the oil producers, the automotive manufacturers and so on.

The three final consequences of the National Policy enacted in 1878 are, that in 2007:

1) Canada has a very concentrated industry, so the free market rules, where supply and demand set the price, are not valid here, because when one or two companies dominate the market, they are price setters, no price takers. That is why is cheaper driving to Buffalo and buying your stuff there, that going to Eaton Centre or Yorkville and being fleeced up.

2) Canada’s wealth is concentrated within a handful, where 100 individuals or families have got a collective net worth of $141.6 billion

3) Canadian companies are not producing the world’s leading technology. We haven’t got any Microsoft, Hewlett Packard, or Intel. I don’t really now how much Research in Motion is licensing technology or really creating new one, so I cannot comment in this one, but the general rule is new technology being developed somewhere else and then being copy or license here.

So, protectionism has resulted harmful in the long way for Canada. We will measure some other trade barriers soon.

He’s Back

May 4, 2007

I don’t know what the problem is, but I’m sure it can be solved without resorting to violence.
~Arnold Schwarzenegger

I really don’t like the guy too much. His positions against illegal immigrants are tougher than they should be, given the dependency of his state on illegal, cheap labour. He ducked all charges of sexual misconduct, and he is really a bad actor. But I have to give it to him, he is a good environmentalist.

When he took office in 2003, Schwarzenegger announced a plan for improving the state’s air, water, landscapes, energy supplies, and climate. He created the 25 million-acre Sierra Nevada Conservancy to preserve California’s iconic mountain range. He also established thousands of acres of ocean parks, and spend millions for habitat restoration, fisheries management, and pollution reduction.


He adopted the most aggressive greenhouse-gas-reduction policies on earth, including ordering the state government to slash its energy use 20% and providing $3.2 billion to put solar roofs on homes and small businesses. By 2020 one-third of California’s electricity will come from renewable sources like wind, biomass, and the sun.

What I like the most is how he has fought off the Bush Administration’s efforts to weaken California’s global-warming initiatives and drill for oil along the coast and in the state’s national forests.

The Governator regards environmental injury as deficit spending: loading the cost of this generation’s prosperity onto the backs of our children. Schwarzenegger believes that good economic policy, over the long term, is always the same as good environmental policy. He is quite the conservative, but he is doing more good to the environment that a lot of liberals.

And I have to agree with that.

(All data taken from, caricature by Chris Rommel)

Sustainable Ride

May 3, 2007

Motivation is what gets you started. Habit is what keeps you going.
~Jim Rohn 

 I was finally convinced of the need of reducing pollutants and to make my contribution to reduce traffic, greenhouse gases emissions, and oil-dependency. The grassroots activist decided to walk the talk!

Well, not really, the truth is that I can’t afford the $130 per month I need to pay for a parking space close to my work, so I decided to ride instead of to drive. I need to drop my baby to one of those baby warehouses that we call daycares before coming to work. The daycare and my workplace are in perfect opposite directions, so everyday I drive to the daycare, and then pass in front of my apartment in my way back to work.

I had to re-schedule and wake up half an hour earlier (which is a terrible sin according to my beliefs), drive to the daycare, drive back, and then take Rusty for its first ride.


I wasn’t really looking forward for this, because I had bike all my life as leisure activity, not as a mean for transportation, but as soon as I started pedaling I felt good. I felt the chilled wind in the face, the smell of the spring gardens, and the closeness to the neighbour.

I discovered then that other bikers salute you, that soccer dads say hi when you pass next to them while they are getting the kids ready for school. You can see the joggers, the dog-walkers, and the squirrels trying to steal food. I have the privilege of biking through one of the most affluent neighbourhoods in Toronto, so the streets are calm and clean. When I hit downtown I take a side street full of construction workers and potholes, but I go faster than the line of cars standing just there, waiting for the traffic light. In the corner of Bay and St. Charles there is a group of teenagers promoting biking over riding and they greet me: “Hi you sir! Thank you for riding! You are my hero!” (Actual words, I am not making this up).

Admired by the men! Desired by the women!

Then I look at my watch, coming here today only took me five minutes more that driving. I am not tired, especially because I cannot feel my legs anymore, and over all, I saved $130 bucks of parking. I understand that not everybody can bike to work, but this is just an example on how different facts add together to a result.

The raison de être of this blog is to find out how to use economic theory to promote sustainable ideas. How can we play with capitalist rules to support social welfare, fair trade, and the environment. How to match the economic benefits and the social responsible behavior? I was forced by economic rules of supply and demand to take my bike. Given that is not winter anymore, I am not willing to be fleeced of $130 per month for parking. The environmental impact is clear: less traffic, less pollution, less demand for petrol.  My health will improve, so my waist line (I hope). If enough people do this, you will see an adjust in price of petrol and parking spaces, maybe then increasing the demand, but now that I tried riding it won’t be that easy to take me back to drive for the summer/fall; so the economic law pushes the environmental fact, and it’s all good.

I, of course, will insist from now on that I started biking for the environment’s sake, so do not tell anyone!