Gene Autry and DDT

I watched another Gene Autry movie with good economics underlying the plot.  In Riders of the Whistling Pines, produced in 1949 and written by jack Townly, 60,000 acres of forest is infested with moth larva that will destroy the timber.  The forest land is a common resource sheltering land, timber, water and wildlife that is shared by all in the community.

The forest is patrolled by the forest rangers, and under contract, a logging company has an exclusive permit to harvest flagged timber, but the company would be more efficient if it could harvest more timber.  The infestation provides a profit enhancing scenario.  All dead timber is flagged for harvest.  The logging company and the forest rangers simultaneously discover the infestation.  A logger first attempts to suppress knowledge of the infestation by shooting the ranger, but fail as Gene Autry, a second forest ranger, discovers the infestation.

At Autry’s suggestion, his superiors decide that a DDT solution mixed in a proper proportion will save the timber and not harm wildlife or domesticated livestock.  This was certainly the best “scientific” response to the problem at the time, a response that Department of Agriculture would have approved.  Continued study of DDT demonstrated that it produces a negative externality.  It does affect more than just the moth larva, but how great is the negative externality?

The writer notes the controversy the use of DDT divides the community.  One group supports the forest rangers.  Another group fears that DDT would affect all local wildlife including livestock; the loggers attempt to incite this group to violent action.  A final group is composed of environmentalists concerned with the impact of DDT on both livestock and wildlife.  A conversation at 22:30 into the movie illustrates the divisions.

Logger: I hate to think what will happen when they lose it [DDT] from those airplanes.


Rancher 1: They claim it won’t do any harm.


Logger: If it kills the bugs in the trees, it will kill everything else won’t it?


Rancher 1: They say not.


Rancher 2: I heard of a fella that sprayed DDT on his dog to kill fleas.  It killed the fleas alright, but it killed the dog too. 


Loie:  What is going to happen to the fish in the streams?


Rancher 3: Oh, you talk foolish Loie, besides the timber is more important than the fish.


Loie:  Not to the fish it ain’t.

One may laugh at the naive scientific view that spraying DDT would not harm the ecosystem but it may be no more naive than the view that followed.  In 1962, Rachel Carson published Silent Spring, a book noting that DDT did not biodegrade quickly and that it harmed all creatures, including people.  The book caused led to a worldwide ban on the use of DDT, but the ban had a negative externality of its own.  DDT was used to kill malaria carrying mosquitoes in Africa and it has no close substitutes.  Millions of Africans died from malaria that might have been controlled by spraying DDT.  In 2006 a better balance was reached; the World Health Organization (WHO) recommended the use of DDT to control malaria and governments around the world including the Bush administration.  Some environmental groups including Sierra Club and Environmental Defense support a limited use of DDT to control for malaria (“WHO Backs Use of DDT Against Malaria”). 
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A B Western with a Great Economic Foundation

Feeling nostalgic for old cowboy movies I watched every Saturday morning when I was a lad, I downloaded a Gene Autry movie, “Cow Town” through Netflix.  In addition to a few songs, horse chases and shootouts, it had a very plausible economic foundation, a rare event in any movie let alone a B Western.

The story was written by Gerald Geraghty in 1950 and explains how barbed wire changed the West.  The movie opens with a documentary description of hardships faced by cattlemen raising their herds on the open range: lightning caused stampedes, hard winters, and rustling.  The description could have been improved by explaining how the common range was a “common resource” and was overgrazed, a problem that economists named the “tragedy of the commons.”The story pitted open range cattlemen against those who wished to control it by fencing property with barbed wire.  Closed range cattlemen believed that barbed wire fences would reduce operating costs and improve cattle genetics.  Cow hands, who were after all an operating cost, feared that the innovation would reduce employment opportunities, opposed closing the range.  Finally, two sheepherders attempted to fan the animosity between the three other groups into open warfare to push down land prices so they could make a killing on the market and turn cattle country into sheep country. 

Two scenes exemplified problems with ill defined property rights and resource allocation.  In one scene, open range cattlemen complain to the sheriff about fences blocking roads, the delivery of the mail and injuring cattle.  The sheriff asks for time to solve the problem stating that their is no law to covering their complaints.  These cattlemen were asking for enforcement of “range rights” or unwritten but respected rules governing behavior on the frontier.  Another scene anticipates the Coase theorem: if private parties can bargain without costs, they can solve problems with externalities (fences) and allocate resources efficiently.  In the scene, Autry confronts a neighbor who cut his fence. She said she had the right to use the road to get to town.  He replies that he would have built a gate had she asked.
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Wind Farms: Production Costs and Externalities

The pollution that results from the consumption of carbon based fuels is well known.  Less well known is the pollution produced by alternative sources of energy.  This post highlights pollution generated by wind farms.  The document I am quoting, “Why Wind Won't Work? - it's Weaker than Water.,” was produced by the Carbon Sense Coalition.  As the name implies, the group is doubtful of the value of alternative sources of energy.  They describe themselves as

…a voluntary group of people concerned about the extent to which carbon is wrongly vilified in Western societies, particularly in government, the media, and in business circles. We aim to restore balance and reason to the carbon debate, and to explain and defend the key role of carbon in production of most of our energy for heat, light, and transportation, and all of our food.

The scientific method involves methodical study and measurement and prudent researcher should examine sources and our own biases.  The article is not a scientific article but I believe that it makes valid points about problems associated with wind farms.  In part, the executive summary reads

Wind power is very dilute, and thus a large area of land is required to gather significant energy. Wind energy needs a wide network of roads, transmission lines and turbines which degrades any area containing wind farms. It has a huge land footprint.

The operating characteristics of turbine and generator mean that only a small part of wind energy can be captured.

Wind power is also intermittent, unreliable and hard to predict. Therefore large backup or storage systems are required. This adds to the capital and operating costs and increases the instability of the network.

Wind farms are uniformly hated by neighbours and will not be willingly accepted without heavy compensation payments. Their noise, flicker, fire risk and disturbing effect on domestic and wild animals are well documented.

The wind is free but wind power is far from it. Its cost is far above all conventional methods of generating electricity. Either taxpayers or consumers will pay this bill.

The third paragraph begins, “Wind power is also intermittent, unreliable and hard to predict.”  The article provides evidence from Texas and reported in the Daily Kos.

Wind turbines are prominent in Texas, but a cold snap in early 2008 caused power demand to soar and winds to drop. This sudden loss of wind power (from 1,700 MW to 300 MW) just as demand reached the evening peak caused the grid operator to declare a power emergency and start shedding load and  cutting power to customers. The operator cut supply by 1,100 MW within ten minutes.

Source: http://www.dailykos.com/story/2008/2/28/1303/48225/299/465497

The authors also comment on carbon emissions associated with wind.  Note that they do not say if wind generates more or les carbon emissions than a coal fired plant, but that wind produces a lot of carbon.

Superficial commentators think that because wind itself does not rely directly on carbon fuel, its introduction thus reduces carbon dioxide emissions. This is not necessarily so, and promoters should be required to prove their case. 

Firstly wind requires backup to maintain steady power generation when  wind power fails. The best backups are probably hydro power or gas power, both of which can be turned on and off as quickly as the wind changes. Coal and nuclear can provide backup, but it is very expensive to do it that way. Nuclear is forbidden in Australia and coal of course emits the dreaded carbon dioxide.

Secondly, wind farms are usually in remote locations and the turbines themselves are necessarily spread over a large area. Each turbine has 1,500 tonnes of concrete, 2 tonnes of rare earth metals, and lots of steel and copper and requires much heavy transport and earth moving equipment to construct the towers, the access roads and the transmission lines. They  also need maintenance over this large area. Every one of  these activities emits carbon dioxide.

Finally, the authors compare the cost per kilowatt hour of various energy sources.

Energy Source	USA Cents/Kwh
Natural Gas	8
Coal	9
Nuclear	11
Hydro-electric	12
Wind	14
Wind offshore	23
Solar thermal	26
Solar voltaic	40

Eventually, we will run out of oil and coal and these energy sources produce pollution even if you believe that these fuels contribute little to global warming or that the cost associated with global warming are relatively small.  My point is that other energy sources, particularly renewables, are expensive and dirty.  Rather than subsidize alternative sources of energy, the government should tax each according to the level of pollution they generate.  Setting the tax would be contentious but I would prefer this problem to rewarding government funding based in part of the political pull of recipients.
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Concord: The Bottled Water Nanny State

Some busybodies in Concord, Massachusetts, a city whose citizens were renowned for their contribution to the American War of Independence, won a vote to ban the sale of bottled water in their city.  The charge to limit freedom was lead by Jean Hill, an 82-year-old activist, who used the externality argument of "saving the environment" as her primary weapon (David Abel and Jason Woods, Boston Globe, "Concord fires first shot in water battle," May 1, 2010).

All these discarded bottles are damaging our planet, causing clumps of garbage in the oceans that hurt fish, and are creating more pollution on our streets.  This is a great achievement to be the first in the country to do this. This is about addressing an injustice.

The type of regulation that she recommends is called "command and control."  Economists consider it to be heavy handed and prefer a tax on goods producing the externality, discarded bottles, or a subsidy for recycling them.  To be fair, Hill also favors a change in the state's bottle law that would extend a refund to consumers who return bottles for recycling.  Activist like Jean Hill prefer command and control.  It fits their personalities.  Abel and Woods report

For Hill and other environmental advocates, bottled water is unlike other products, because there’s a ready and free alternative at the tap.

Hill's presumption that she knows how others should ingest water was not given in jest making her argument impossible to digest.  It is OK to drink bottled sodas but not water because we can get water through the tap?  Bottles containing soda pollute less than those containing water?  Bottled water consumers know preferences and elect to consume bottled water for reasons of their own.  They should not need to justify their actions. 

Heaven help us when environmental activists team up with the health police.  Their solution will be to eliminate bottled products entirely.  It will be better for their neighbors' health and the environment. 
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Can Reduction in School Funding Cost Taxpayers?

(HT Drudge Report)  Government budgets from the local to the federal level are bleeding red ink and many new proposals are being considered.  The Klamath County School District in Klamath Falls, Oregon is considering a four day school week as a way to save $6.3 million dollars or about 10% of the budget.  Apparently, the budget cuts would largely come from wages paid to classified staff: teaching assistants, cooks, custodians, secretaries, bus drivers, etc.  These workers are understandably concerned about the proposed cuts.

I have a somewhat different concern.  While the district will reduce expenditures students, parents and other taxpayers may be made worse off.  The student work week has evolved to fit around a traditional nine to five, Monday through Friday work week.  Has evolved efficiently?  If it has, then some thought was given to the length of time that children can learn during a day.  I am not sure students can remain focused during a longer school day.  It also seems plausible that the new school week will cost parents, the tax payers, more in increased baby sitting costs and loss wages than the district saves in expenditures.  Productivity of workers outside of the school district may decline as parents struggle to mange their children's activities from work.  Finally, if learning does decline, society may lose some of the positive externalities associated with education such as more skilled workers earning higher incomes. 
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When Carbon Limits Are Not Enough

(HT Drudgereport)  Self-righteous elements of the environmentalist population, whose belief in their own dogma is both devout and zealous, are convinced that they must impose their wisdom on others to save the planet from disaster, or to save the planet itself.  That was the purpose of the Copenhagen meetings.  With the CRUtape letters released, the meetings have degenerated into debating man's role in global warming.  Some don't find international attempts to limit carbon emissions enough to "save" the planet and the environment sufficient, insisting that we must impose a policy of one child per woman on the planet.  The right of a woman to control her body is thrown out like the baby with the bathwater.  Children are not a bundle of joy that will fund a country's retirement benefits but a negative externality that will impose costs on the strained resources of an overpopulated planet. 

If a growing population threatens to impoverish the world, shouldn't it have started already?  Population keeps rising, and with the exception of the past two years of financial recession, world income keeps rising.  Nor does an imposed limit on reproduction seem necessary.  Wealthy countries have falling birth rates and low or negative growth rates.  In these countries, populations are growing because of immigration and increased longevity.  In fact, the world population growth rate probably peaked in the 1960's at 2% annually and fallen to the current rate of about 1.12% annually.

Diane Francis, of the Financial Post expresses this opinion well in, "The real inconvenient truth."  Ms. Francis believes that China, a poor country whose air is choked with soot and whose rivers are flowing with toxins, and whose people are ruled by a totalitarian regime set the example of good environmental policy. 

The "inconvenient truth" overhanging the UN's Copenhagen conference is not that the climate is warming or cooling, but that humans are overpopulating the world.

A planetary law, such as China's one-child policy, is the only way to reverse the disastrous global birthrate currently, which is one million births every four days.

The world's other species, vegetation, resources, oceans, arable land, water supplies and atmosphere are being destroyed and pushed out of existence as a result of humanity's soaring reproduction rate.

Ironically, China, despite its dirty coal plants, is the world's leader in terms of fashioning policy to combat environmental degradation, thanks to its one-child-only edict...

The fix is simple. It's dramatic. And yet the world's leaders don't even have this on their agenda in Copenhagen. Instead there will be photo ops, posturing, optics, blah-blah-blah about climate science and climate fraud, announcements of giant wind farms, then cap-and-trade subsidies.

None will work unless a China one-child policy is imposed. Unfortunately, there are powerful opponents. Leaders of the world's big fundamentalist religions preach in favor of procreation and fiercely oppose birth control. And most political leaders in emerging economies perpetuate a disastrous Catch-22: Many children (i. e. sons) stave off hardship in the absence of a social safety net or economic development, which, in turn, prevents protections or development.

China has proven that birth restriction is smart policy. Its middle class grows, all its citizens have housing, health care, education and food, and the one out of five human beings who live there are not overpopulating the planet.

For those who balk at the notion that governments should control family sizes, just wait until the growing human population turns twice as much pastureland into desert as is now the case, or when the Amazon is gone, the elephants disappear for good and wars erupt over water, scarce resources and spatial needs.

The point is that Copenhagen's talking points are beside the point.

The only fix is if all countries drastically reduce their populations, clean up their messes and impose mandatory conservation measures.

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Protection Anyone?

With all the moral problems of pornography, who would have thought that the biggest complaint would be that the actors don't use condoms?  Shaya Tayefe Mohajer, of the AP writes in "Porn makers challenged for not mandating condoms," that

An AIDS advocacy group filed complaints with state officials against 16 production companies that show unprotected sex in porn movies.

The AIDS Healthcare Foundation filed the action Thursday with the California Division of Occupational Safety and Health, alleging the practice amounts to unsafe behavior in a California workplace.

"We will not stop until there is a policy of requiring condoms to be used in porn," foundation president Michael Weinstein said.

By law, U.S. adult film actors must prove they have tested negative for HIV and other sexually transmitted diseases within 30 days of going to work on a film...

Weinstein said AIDS could be spread through the on-camera behavior and noted that many people get their sex education from porn movies.

Watching unprotected sex could prompt them to be careless during sex acts, he said.

Why don't actors use condoms?

Hustler publisher Larry Flynt told The Associated Press, "people who enjoy viewing adult films do not want to see people using condoms."

"While it might provide some additional protection, the sales are not going to be there to make the effort worthwhile for the actors and actresses," he said...

Former porn actress Jan Meza said she asked about the use of condoms when she first started appearing in adult films in 2006.

"I was told that I would never get work again," said Meza, who later contracted herpes...

Why has the state of California done nothing?

Weinstein said no state legislators have agreed to sponsor the group's proposal to mandate condoms in porn movies.

Hirsch [of Vivid Entertainment] said the adult film industry would likely leave California if the use of condoms became mandatory.

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Carbon Subsidies?

I do not know if the use of carbon based fuels is causing anthropogenic global warming (AGW), but my readers know that I am skeptical of the doomsday conclusions of many AGW adherents.  Some scientists believe that the earth will grow cooler based on the relationship between solar cycles and weather, and that the cooler climate will adversely impact agriculture, decreasing the supply of some crops and by extension, forcing up prices ("Canada and USA agricultural weather issues and changes in our solar cycles," Watts Up With That, June 15, 2009). 

If the earth is growing cooler, and cooler is bad, and using carbon based fuels combats global cooling, is it time to subsidize their use because they produce a positive externality?Replace this text with...
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Pragmatism and Anthropogenic Global Warming

“U.S. to be pragmatic on Climate Issue,” is the headline that Roger Harrabin chose for his BBC article describing the Obama administration's policy on reducing carbon emissions. A pragmatic stance depends on the consequences of possible actions. If I am a smoker concerned with my health, a pragmatic response is to quit smoking. If a man in a neighboring community is a smoker who is knowledgeable about the health consequences and alternative programs to quit, a pragmatic response is to mind my own business. If my wife was an informed smoker, and her smoking affects my health, a joint solution is needed even if she is unconcerned with her health.  The final example describes an externality or spillover affect; a third party, me, the non-smoker, is affected by my wife's decision to consume tobacco.  It is the same problem caused by carbon emissions on an international basis; one country's consumption may affect other countries. 

There have been a great number of dire predictions of the climatic consequences of unabated carbon emissions.  The Stern Review is an important example of a document listing severe consequences.  The "Executive Summary" of the Stern Review estimates the cost.

The evidence shows that ignoring climate change will eventually damage economic growth. Our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes. Tackling climate change is the pro-growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries. The earlier effective action is taken, the less costly it will be.

War Chronicles estimates World War II deaths, both civilian and military, at 48 million, or approximately 2% of world population.  If the same percentage of deaths occurs, the approximate deaths would be 167 million assuming a population of 8 billion.  GDP losses would be of a similar magnitude, and would be caused by flooding, declining crop yields, deaths from malnutrition, heat stress, and vector-borne diseases.  Irreversibility of climate change is often called a tipping point.  The Stern Review states that annual emissions would have to fall by 80% to achieve a sustainable world climate. 

Harrabin interviews Jonathan Pershing, the head of the U.S. delegation to the United Nations meetings on climate change.  A few quotes from the article suggest that the administration assessment is in line with the Stern Review, but it pushes off much of the cost on future administrations.

But he [Pershing] said the US should not make promises for 2020 that it could not keep: "It is not the point in time in 2020 that matters - it is a long-term trajectory against which the science measures cumulative emissions.

"The president has also announced his intent to pursue an 80% reduction by 2050.

"It is clear that the less we do in the near-term, the more we have to do in the long-term. But if we set a target that is un-meetable technically, or we can't pass it politically, then we're in the same position we are in now… where the world looks to us and we are out of the regime...

Mr Pershing did promise that the US would help poor countries to fund clean technology. He would not mention figures but he hinted the sums would be much less than many developing countries demanded.

"The notion that the USA would transfer funds to pay for the entirety of the world's development is implausible. The characterisation often made in these meetings [from developing countries] is that we will only do actions that are paid for. That's a limited vision and we'd like to turn that round."

In "The Cost of Cap-and-Trade," I note that current implementation of a cap-and-trade system is estimated at $2 trillion over an eight year period, about 175% of the cost suggested by the Stern Review that would be necessary to reduce carbon emissions by 80%.   Congressmen who always seem ready to spend and reluctant to tax has voiced considerable opposition to the plan.  
There are methods of forcing reluctant countries to fund their own "clean" technology.  Some are discussed in a note by The United Nations Framework Convention on Climate Change.  The note lists negative and positive consequences for poor countries of carbon reduction policies by wealthy countries.  To be sure, the note envisions large transfers from wealthy countries to the poor, and expresses concern that lowering carbon emissions will be used as a pretext to impose protectionist policies.  The note also describes how tax regimes could force poor countries to fund carbon reduction technologies.  The numbers refer to the paragraph of the note.

21.  Carbon taxes or levies have been implemented in several countries, and have been proposed in many others.  They are generally based on the carbon content of the covered items, and tend to be focused on energy products such as fuels.  Imported fuels are also subject to the schemes, as the tax is typically levied at the point of domestic sale.  The key overseas consequences of such taxes would fall upon foreign exporters of relatively carbon-intensive energy products such as oil and coal, who could see their market share drop as the relative prices of their goods increased.  Conversely, foreign exporters of environmentally sound energy technologies would see increased market share...

34.  Border carbon adjustment:  Countries that take strong measures to address climate change often also consider parallel measures to address what they see as competitiveness and carbon leakage problems.  Among these measures are two types of border measures that have been widely proposed to impose costs on imports equivalent to that faced by domestic producers.  The first, usually considered as a complement to a carbon tax regime, is a tax adjustment, which imposes a levy on imported goods equal to that which would have been imposed has they been produced domestically.  The second, considered as a complement to a cap-and-trade regime, is a requirement to buy offsets at the border equal to that which the producer would have been forced to purchase had the good been produced domestically.  The impact of such schemes would be functionally equivalent to an increased tariff: decreased market share for covered foreign producers.  While border carbon adjustments would involve negative consequences for foreign producers, such schemes would not likely be implement in isolation, but would function as parallel initiatives to climate change action in the implementing state.  If they were implemented fairly, such schemes would leave trade and investment patterns unchanged, being aimed at just offsetting the competitiveness impacts of domestic policies such as carbon taxes or cap-and-trade.

My pragmatic response is somewhat different based on what I believe to be a possible overestimation of the cost of AGW based on a lower probability of extreme negative costs, the positive externalities of trade, negotiating complexities, and the negative tendencies of politicians to follow populist and badly reasoned trade policies.

After a review of the IPCC cited papers used to support claims of drastic climate change, Kesten Green and Scott Armstrong researched ("Global Warming: Forecasts by Scientists Versus Scientific Forecasts," Energy and Environment, Vol. 18, No. 7+8, 2007 ) conclude,

The forecasts in the Report were not the outcome of scientific procedures. In effect, they were the opinions of scientists transformed by mathematics and obscured by complex writing. Research on forecasting has shown that experts’ predictions are not useful in situations involving uncertainly and complexity. We have been unable to identify any scientific forecasts of global warming. Claims that the Earth will get warmer have no more credence than saying that it will get colder.

Green, Armstrong and Soon, ("Validity of Climate Change Forecasting for Public Policy Decision Making," International Journal of Forecasting, forthcoming) find that a model predicting no temperature change is as accurate in short range predictions, and more accurate in long range predictions than the .03 degree Celsius per year rate of change claimed by the IPCC. The policy implication is that government should not take action to reduce carbon dioxide emissions.

Beginning with Adam Smith, economists have stressed the good economic and moral value of trade.  Specialization through trade makes countries wealthier, and wealthy people demand a cleaner environment.  Trade results in shared ideas which are often converted into new production methods and products.  Finally, trade may result in a lower probability of war, as positive associations between people in different countries create an economic constituency for peaceful international relations--a sort of anti military industrial complex complex. 

Negotiations to reduce carbon emission are very complex.  The citizens of some nations would benefit from a warmer climate.  Others may not trust the science behind AGW.  Still others would cheat on agreements, viewing cheating as beneficial to them if others live by the agreement.  It is the prisoners' dilemma problem on an international stage, and peaceful enforcement of any agreement would be difficult.

Finally, politicians do what's best for them.  That may include continued employment and wealth as well as the public interest.  If their constituents want to seek in protectionist trade restrictions, they are likely to get them.  If inefficient "green" technologies benefit some constituents, we are likely to see impoverishing "green" technologies supported through law and tax subsidies.  Unless carbon emissions result in dire consequences, the cost of a global solution is likely to be higher than any associated benefit.
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James Hamilton On Improving Bailouts

James Hamilton of Econbrowser writes "Bailouts should be no fun." The trust of his argument is that bankruptcy proceedings are slow, freezing assets and lowering economic activity, exerting substantial spillovers or externalities on otherwise health pockets of the economy. A representative of taxpayers' could speed negotiations and lower externality costs by demanding concessions from owners, creditors, management, and workers in return for bailout funds. Taxpayers would benefit if the bailout funds were less than the avoided externality costs. Hamilton concludes,

If properly implemented, the taxpayers should leave the negotiating table pleased with the deal they achieved, and everybody else should leave battered, comforted only by the knowledge that, had they not made those concessions, things would have been even worse.

On the other hand, if everybody and their grandmother is lining up for a bailout, and pulling political strings...to make sure they get it, I read that as prima facie evidence that the taxpayers' interests are not being properly represented.

It appears that everybody and their grandmother is lining up. In a previous post, I named three banks, automotive firms, and a couple of pornographers. Cities, states, insurance companies, credit card companies and others can be added to the list. Hamilton's proposal might be a good way to shorten the line.

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Taxes, Externalities, and Free-Riders, Oh My!

(HT Drudge) Hasso Hering of the Albany Democrat-Herald reports that Governor Ted Kulongoski of Oregon is considering a new tax on mileage driven to fund highway infrastructure.

The governor's website gives insight to his logic, which I have to say, isn't bad.

As Oregonians drive less and demand more fuel-efficient vehicles, it is increasingly important that the state find a new way, other than the gas tax, to finance our transportation system.

I am not sure that the Governor Kulongoski's belief that Oregonians will continue to drive less and demand more fuel-efficient cars is correct. Those two trends may be the result of high gas prices that eased after July 2008 and the recession, but whether temporary or long-term they do highlight a dilemma.

High gasoline prices, the desire of drivers to save money no matter the price of gasoline, cafe standards and other government policy have increased the demand for fuel efficient cars. The Toyota Prius and other hybrids damage infrastructure and cause congestion, like all vehicles, inflicting worse driving conditions on others. In economics, this is known as an externality--imposing cost on someone else without compensating the harmed party.

Fuel efficient cars largely avoid gasoline taxes that fund road construction and repair. In economics, this is known a the free-rider problem--acquiring a benefit without paying for it.

These problems will only deepen if we are fortunate enough to see even greater improvements in technology that allow us to forego gasoline entirely. Most states would lose their biggest source of tax revenue for highway maintenance. Governor Kulongoski's mileage tax would help solve both problems.

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