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On Externalizing Costs, or…The Price of My Chair

January 30, 2017

I am sitting in my house in my tenure chair, writing this post about the economics of the furniture in my house. In reality, this post could be written about anything in my house that I have paid money for but I will stick to this furniture because I really like my chair, on lots of levels.

The chair is a Stickley Morris Chair with accompanying ottoman. It is made out of oak and upholstered in leather. It is a classic. And it cost me $2207 for the chair and $432 for the ottoman. You are probably saying WOW! that is a lot of money for a chair.

file-jan-30-23-12-30The reason I own this furniture is partly because I like the design aesthetic. I like Arts and Crafts furniture. I like that it will outlive me and I will leave it to my nephew and he will enjoy it for years to come and then pass it to his children, etc. But there are deeper reasons.

The furniture is made by the L. & J.G. STICKLEY, INC., a company that has been based in Manlius, New York since 1900. As an American company, it is subjected to labor laws that protect workers, OSHA regulations that create a safe workplace and environmental regulations that keep the region where their workshop is located unpolluted. They provide their workers with a good wage, health insurance, a retirement plan, etc. All these things cost money but that cost is accounted for in the price of the product that I pay for. I am providing those protections and benefits when I buy the chair.

In this way costs are internalized. The person buying the product has now paid for a large proportion of the costs inherent in the production of the chair. Those costs are not passed on to the workers or the people who live around the workshop. They are paid by the person who receives the most utility from the product purchased.

This is different from externalizing costs. Costs become externalized when the person buying a product only pays a portion of the costs associate with production. So, if I buy a chair at a discount retailer that is made in another country, let’s say…China, it is cheaper, in spite of having to be shipped to the US across the ocean.

How can this be? Because…that chair has more of its costs externalized. The chair is made in a country with fewer environmental regulations and thus has more problems with clean air and clean water. There are fewer worker protections so their workers work under conditions that are less safe and they have fewer guarantees that they will be able to keep their jobs. They lack health insurance and retirement benefits. For all these reasons, the company making that chair can produce the chair at a much cheaper price than the Stickley chair because more of the costs of production are not included in the price of the chair. When one of their workers gets sick, the worker has to pay full price for their medical bills. Perhaps what made the person sick is the level of pollution they live with because of the lack of environmental protections. In any case, a portion of the costs of production are being paid by people who receive nominal utility (a poor wage) from the production and sale of the chair. Companies have even externalized costs to their own customers (self-service gas stations and the self checkout line at the grocery store).

I teach this basic concept in my Ecology of Food class because there are lots of externalized costs in our food production systems and I think that they should be aware of these costs when they buy a head of lettuce. I think it is also something that should be taught more widely to society in general because it affects our perception of value which, in turn, affects what we buy.

When we complain about unemployment in the United States and our jobs being shipped overseas, we have to realize that we did this to ourselves.

When we go to the store and buy things that are made in countries without the worker and other protections we have in the United States, we are getting things at a cheaper price than we would if more of the costs of production were internalized to the product we are buying.

Because we want “everyday low prices”, we are sending the message to corporations that says, “Go somewhere and make products where the costs of production can be externalized.” OK, we don’t say it in this way, but in terms of economics, this is exactly what we are saying. Because the responsibility of a corporation is to maximize profit to its shareholders.*

So, what should we do?

First, buy American. Not because it is the patriotic thing to do. Not because it puts Americans to work and keeps jobs here. Do it because it is the right thing to do because you are not getting something on the cheap and making someone else pay for some of the costs of production, often economically as well as with their health and quality of life. But you might say, “Life is more expensive to live this way.” Sure it is, but we can save up for things, live more simply, not be so committed to the disposable culture we have become. I had to wait until I got a bonus at work after earning tenure before I could buy the tenure chair. And did I mention how durable these chairs are? People pass these things down from generation to generation. How many Nebraska Furniture mart chairs would you buy in the same time period? What are the actual long term costs of making a given buying decision. But we are terrible at thinking about longer time periods when making decisions.

Second, when you talk to your representatives and senators about economic matter, ask them how their economic policies encourage companies to internalize costs rather than externalize costs. They will generally look at you like you are crazy but then that gives you an opportunity to teach them something that they probably don’t think about on a regular basis but probably should.

Third, think about this concept whenever you have to make a buying decision. It makes life more difficult. When you are on a diet, trips to the grocery store are more difficult because you have to think about every item you buy and the effect it will have on your calorie count, your body, etc. Now you can think about every non-food item you buy and ask yourself, “To what degree are the people who made this product protected in terms of their environment, their workplace, their health, their future?”

Doesn’t that sound fun? No. It is a total grind.

But once again, we can do it because it is the right thing to do.


*Not strictly true but often true.

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Lies, Damn Lies and Statistics

January 25, 2017

mark-twainI lied.

I said my next post would be on economics but, here is a short one about a conversation had on social media a few days ago.

Someone tried to convince me that alternative facts were OK. They used President Trump’s claim that violent crime (homicides) in 50 major cities was up 17%. I countered that, nationwide, violent crime has been going down since the early 1990s. I even provided a helpful graphic:

crime-stats

My social media interlocutor then countered that I was just choosing “alternative facts” to prove my point just like Trump was. So, I had to drill down and do some research.

Trump’s numbers were based on crime statistics evidently reported by the FBI. Indeed, the data seemed to to show that, from2014 to 2015, homicide rates in these cities went from 9.3 deaths per 100,000 to 10.8 deaths per 100,000 (numbers are from Politifact who checked the data).

10.8-9.3=1.5.

1.5/9.3=0.16 or 16%.

Not far from his claim of 17%.

BUT…

This claim falls short in a number of ways from a scientific perspective.

It is a one year jump.

And since the homicide rate is relatively low, it does not take much of an increase to register as a large percentage increase.

And a simple one year uptick could just be random variation around an average that is pretty low by historical standards rather than the beginnings of a long term trend that has been going down for a couple of decades.

So, this is the danger in not fully interrogating the numbers politicians spout. Trump did not lie. But when you approach the claim like a scientist the truth reveals itself.

Trump used a very short time frame of data to make a disingenuous and manipulative claim to frighten people into thinking that the streets of America are running with criminals gunning down innocents. And he is the strong, law-andorder candidate who is going to fix it. It was disingenuous…manipulative…calculating …purely for political gain… and…successful.

But, is this how we want our leaders to treat data? Hopefully, after spelling this out, the social media interlocutor is a little less in favor of “alternative facts”. But I don’t think I can delude myself into think that is true.

And, next year, when it takes a 1.5 deaths per 100,000 downtick, he can say that he brought the homicide rate down. To historic lows.

 

Why We Need the US Environmental Protection Agency.

January 25, 2017

Today, President Donald Trump issued bans on communications on public media from employees of the US Environmental Protection Agency, The Department of the Interior and the Department of Agriculture. He also froze payments to contractor who carry out EPA policy as well as a freeze on grants issues by the EPA. I plan to write similar posts about the other departments but today I want to concentrate on what the Environmental Protection Agency has meant to the United States. A few caveats. I am not a historian and I am not an environmentalist. I will also draw some conclusions that I do not have the time to totally vet the way my scientific proclivities would have me. But I think it is important to expose people, unaware of the EPA’s functions, to the important contributions the EPA has made to their overall quality of life. That said, here goes.

cayuhoga-river-fire

The Cuyahoga River fire of 1952 (photo credit: Cleveland State University Library)

The US EPA was formed in 1971, largely as a response to what was perceived as the growing environmental crisis of the 1950s and 1960s. In 1952 and again in 1969, the Cuyahoga River caught on fire, bringing the deterioration of our surface waters to the attention of the nation in a stark, visual way that tables of concentrations of pollutants never could. The publication of Rachel Carson’s book, Silent Spring, in 1962, raised the alarm further. By 1970, a movement was underway that would result in the passing of the National Environmental Policy Act of 1970. The next year, the agency was up and running with a charge

“To declare national policy which will encourage productive and enjoyable harmony between man and his environment; to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man; to enrich the understanding of the ecological systems and natural resources important to the Nation; and to establish a Council on Environmental Quality.”

It did not take long for the agency to get to work, with the passage of the Clean Air Act of 1970 that authorized the EPA “to set national air quality, auto emission and anti-pollution standards” followed quickly by the Lead-Based Paint Poisoning Prevention Act of 1971, the testing of vehicle fuel economy (end of 1971), the ban on DDT (1972) and finally the Federal Water Pollution Control Act and the Marine Protection, Research, and Sanctuaries Act, or Ocean Dumping Act, both passed in 1972. In two years, the EPA had been given the ability to regulate air and water quality as well as the power to regulate one of the primary sources of environmental lead in children, and had moved, without legislative input, to remove a pesticide that was implicated in the decline of the bald eagle and other bird predators at the top of food webs and begin the nation’s move to greater fossil fuel efficiency. These actions very quickly led to safer air, safer water, safer homes, the recovery of bird species on the brink of extinction, and the first steps toward becoming more energy independent.

Now, one might argue about the effects of the formation of the EPA on these issues but one way in which scientists assess the effects of these types of unreplicated experiments is by examining trends that were occurring before the treatment and compare those trends to trends occurring after the treatment. What was happening to air quality before and after the formation of Clean Air Act of 1970? We can look at some data from Smith et al. (2011; Atmospheric Chemistry and Physics 11:1101-1116).

so2-levels

What you will notice about this figure is that after the formation of the EPA, sulfur dioxide levels go steadily down. Another way to test whether and experimental treatment has an effect is to compare it to a control. In this case, a control would have to be another industrialized country that did not impose the experimental variable (regulations on air quality), for example…China. As you can see, China’s emissions continue to increase into the 21st Century.

Lead in gasoline began to be phased out on the basis of recommendations from the EPA in 1973. What happened to lead levels in children as a result of regulating lead in paints and gasoline? See below from Nevin (2000):

lead-and-violence

Beginning in the mid 1970s, lead in products (black line) has been declining. This curve correlates highly with blood levels in children. So, regulations reduced lead level. But Nevin (2000) goes further in claiming that lead levels are correlated (after accounting for time lags due to development of children into young adults) might be implicated in the decline in violent crime in the US (red and purple lines).

You can go and log onto the EPA website and look at their history of accomplishments but it should be clear that this is an agency that has been effective at safeguarding America’s waters, air and people for 46 years. Has this cost US industries money? Certainly. But these costs have been passed on to the people who benefit from the use of the products that created the pollution EPA regulations were designed to correct (I’ll talk more about internalizing costs and the economics of doing what is right in a later post). And in the process, the EPA has made us a much healthier nation.

My main point is that, if you want to drink clean safe water, if you care about the health of ecosystems and the organisms that inhabit those ecosystems, if you care about the safety of your children, if you care about the long-term viability of the American economy, if you never want to see a river literally on fire, then you need the EPA to continue to do its job free of partisan politics. Countless career scientists at the EPA have safeguarded Americans since 1971 and I think it would be a shame to lose that a mere 46 years after its founding.

A student asked me after the last election, “Why are more highly educated people more liberal?”

November 16, 2016

It has been a while since I have sat down and contributed to my own blog. I have been really busy teaching classes and being a department chair and trying to get some research done.

And then we had an election and the day after classes were not held because of an advising day and so, on Friday, Nov. 11, 2016, there had been a few days for some hateful things to be done on our campus. The President of our college sent a letter to all faculty, staff and students explaining that this is not how we behave on a liberal arts campus. And I had to grapple with what I do with my students in an increasingly divided and  post-factual world. This is especially problematic in that I have been stressing evidence-based decision making in my general education course, a course that focuses on the ecology, economics, policy, history and ethics of food production in the 21st century.

So I began asking the class if anyone felt that they needed to talk about things. Not very far into it, one student asked me the question in the title to this post. And I am afraid I did not give her a particularly good answer. I told her that the more education you have, the more perspectives you can bring to decision-making and the more diversity of experiences you probably (but not necessarily) have to bring to that decision-making and this often leads to decisions that tend to swing more toward the middle (which actually makes you more moderate, not liberal). I should also mention that not all well-educated people are on the liberal side of the political divide. Not a bad answer but, this morning, I read a really interesting post that made me think of my own experiences.

I graduated with my PhD in 1996 and could not find a job. So I went with my then wife to the Peruvian rainforest and lived for 3.5 months among the Shipibo and, to a lesser extent, the Yaminahua people of central and eastern Peru. She was working on her dissertation research examining the effectiveness of language education program. I remember flying around in small airplanes, called Helio Couriers (the people at JAARS told me that they were designed to crash in the jungle and have you walk away from the wreckage). At 7000 ft altitude on my way to a village near the Peruvian-Brazilian border, I remember looking out and seeing nothing but unbroken lowland rain forest from horizon to horizon, 360 degrees around the airplane. I was invited to go on a “monkey hunt” with the village leader. While on the hunt, he killed eight monkeys, a guan, and we captured a red-footed tortoise. The village leader created a harness for the tortoise out of palm leaves and then strapped the tortoise, which must have weighed 30-40 lbs, onto the back of his 6 year old daughter. And off we went, running through the forest looking for more prey, the tortoise clawing into the back of the village leader’s daughter.

As a herpetologist, I could not bring myself to carry the tortoise back to the village. But as a human, I could not let this little girl carry the tortoise back to the village. I carried the tortoise back to the village where the village leader cooked the tortoise and the monkeys and the guan and asked me over for dinner.

At the time, I had travelled to Mexico, both border towns (since I lived in Texas) and deeper into the interior of Mexico. But until the set of experiences I had in Peru, I think I carried around a certain air of arrogance that comes from being raised in America without the benefit of outside influences. I wanted to judge that village leader, first, for hunting primates and tortoises (I did not care that much about the guan at the time) but then for recruiting the little girl in the act. And, over the course of the day, I lost my ability to pass judgement on them.

Somewhere along the way that day, and it was all day, these people became human to me. In a concrete rather than abstract way. They shared their food with me. They waited for me when I fell behind. I left the village that morning with one bottle of water because I did not realize it would turn into an all day event and, when I was becoming dehydrated, they advised me on where it was safe to drink. And, in the end, they shared the bounty of the hunt with me.

I had lots of experiences that trip. I was seen as the “other” when Shipibo children surrounded me in a school where I was quietly sitting and taking field notes. They boxed me in and then one girl ran her finger lightly up my arm. And all the children laughed because I was hairy…and white…and they were not. Then another did the same. And soon all of them were lightly running their fingers over my arm hairs. And when I occasionally relate this story, it comes across as special (invoke Dana Carvey’s Church Lady voice if you wish) and enlightening and life changing, which it was. But it was also creepy and uncomfortable and otherworldly, this state of being the “other” when I had lived my whole life to that point being the opposite of the “other”.

I went on a hike one day with a Shipibo guide and we ended up walking all the way to another village. As we entered the village, a group of children came around a palm bark hut and saw me and screamed and ran in the opposite direction. I asked why the children ran away and was told that they think that I am “pela cara”…someone who has come to town to “peel their faces”. This is what they think white people do to the Shipibo (possibly because white people have done so in the past?).

But what these, and many more, experiences taught me was a little of what the “other” feels like in our own society even though, in Peru, I was seen as “other” but always in a position of prestige because of my education and the color of my skin. I will never know what it means to be a black man in America, dealing with overt and institutional racism as well as all the implicit bias present in our society. But I can realistically imagine what that is like because I have had some experiences that have given me insight into what that might feel like.

So, Grace, here is a better answer. The presidential election of 2016 revealed a division in the American voting populace along socioeconomic and educational lines which prompted you to ask me, “Why are better educated people more liberal?” My better answer is this:

More education, especially if that education involves significant study abroad experiences, provides you with a deeper and broader pool of knowledge from which to draw when making decisions so that you can, perhaps, see a little more clearly the influence of a decision on people who are not just like yourself. This does make you more liberal and I am happy to be aligned with liberally thinking people.

Replication and Effect Size

March 19, 2015

I am asked pretty often by my students the following question:

“How many replicates do I need for experiment X?”

I always ask them a series of question trying to get at what they think the effect size will be relative to underlying variation without asking them, “What do you think your effect size will be given your underlying within-treatment variation?”

I could quote my graduate experimental design professor, Patrick Phillips, who said, “30 is closer to infinity than it is to zero.” but they generally don’t get that Read more…

Points of Significance column

March 8, 2015

Just a quick note because I just became aware of this.

At Nature, there is a column called Points of Significance and the columns are open access. It is about common statistical issues and the article are short. Might be of use to students of statistics or professors who teach statistics.

Enjoy,

Paul

Specifications Grading – Update #1

February 18, 2015

This semester I am trying out Specifications Grading in my upper level Animal Behavior class. I am doing this in part because our institution is going to be going through an accreditation visit in a few years and I want to explore assessment methods that are more authentic than perhaps traditional, points-accrual grading does. If you teach, you are familiar with traditional grading where one accumulates points over the course of the semester and if you cross some threshold number of points (or a threshold average of points across assignments), you attain a given grade. Traditional grading is how I was graded and how I have been grading for my entire career. Specifications Grading is not something I invented. I have been informed by my colleagues in our excellent Education Dept. that they have been doing this AND training their education students to do this for years. I also read a short book over the winter break that convinced me to try this. I am not plugging the book as the author has fairly negative things to say about students but there are a lot of good ideas in it (Specifications Grading: Restoring Rigor, Motivating Students, and Saving Faculty Time by Linda Nilson, 2015, Stylus Publishing).

As I thought about my class, I realized that for virtually every course I have ever taught, I can tell you the grade a student made in the course but I can not point to the specifics of how that grade related to what she knew or what she could do. This is one of the criticisms of current grading methods Read more…

The Insect Ecology Lab

at the University of Dayton (Dr. Chelse Prather & students)

ecoqui

Quantitative Genetics and more

Arthropod Ecology

Writings about arthropod ecology, arachnids & academia at McGill University

Random Walks

Mr. Chase blogs about math

Dynamic Ecology

Multa novit vulpes

Small Pond Science

Research, teaching, and mentorship in the sciences

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