06 Oct New Airport: Climate-hostile and also bad economics

posted from Seattle, WA October 5, 2022

The ad shown above is expected to run in the A-section of the Sunday Seattle Times on October 9.

Here is the text of the ad:

“Washington state must be ready to meet rising air demand” wrote Seattle Times editors, exhibiting a modernist economic mindset. Classical economics would say: “Supply whatever level maximizes utility.” It might also see irony in scrambling to build capacity for a product we are subsidizing. If the Port let prices float, that could alleviate congestion while finally getting the Port off the dole–and even pulling its weight. There’s also the external cost issue, and not just climate pollution. The plan here is to gang up on one community and force it to bear, among other things, land seizures, noise pollution, and increased learning disabilities and lung problems from the ultra-fine air pollution particles that only jets create.

As always, due to budget constraints, my ad is tiny but I still wanted to pack it with arguments. There are some points that I made as briefly as I possibly could so I’d like to expand on them, sentence by sentence.

1 “Washington state must be ready to meet rising air demand” wrote Seattle Times editors, exhibiting a modernist economic mindset.

This is a quote from an editorial in the Seattle Times from March 31 2022 wherein The Times asserted that SeaTac’s growth in capacity “comes with a ceiling, and Washington must be ready to meet rising air-travel demand as the airport reaches its limits.” In the ad I say this sentence demonstrates a “modernist” style of economics mainly because I didn’t want to use the word I really mean which is “macroeconomic,” a word that would have been unnecessarily confusing in a brief ad and might signal to some that I am on the political right, which I’m not. The Times sentiment is “macroeconomics” because it tends to presume no big changes in pricing policy and does not consider price nor remind us that price is a potent tool for us in this situation. It’s also “macroeconomics” because it tends to take a snapshot of the current economy’s levels of price and consumption and see them as sacred, something that we should struggle through the use of planning to keep exactly as they are into the future. It also is macroeconomic because it uses scolding based on a kind of altruism or boosterism to obfuscate the real question we should be asking, which is not what we are obligated to do for the tourist economy but what is best for us, and for our region and the world.

2   Classical economics would say: “Supply whatever level maximizes utility.”

Now we are back in economics. The way our system works, no producer does what the Times wants us to do, which is to be governed by needs of others in determining what or how much to produce. The farmers in Saskatchewan might be as altruistic as it gets, and care about world hunger more than all of us put together, but that doesn’t fully explain why they do get up at 4 in the morning to plant wheat and none of the rest of us get up at four to plant wheat. For these farmers, this effort offers a very reasonable chance of significant financial survival (first) and financial reward and that reward fits in with their overall plan to maximize their own utility, ie, have the best life they can have. In all of this, they factor in their own health and wellbeing.

By the same token, the people of this state should certainly consider the needs of the various sectors and interest=groups who want an airport but ultimately weigh them along with other factors like the total amount of pain this region and world will absorb and the distribution of that pain and ultimately make a decision that meets our own needs, rather than mindlessly obeying the will of the region’s economic-boosters and, travel=dependent businesses.

Many will point out that the whole region benefits from the visits that come through the airport, and that’s true in a sense, it’s very true of my own tiny little business among many others, but its not the whole story, it’s not true for everyone, and there is the marginal issue here. If more is better, when does that start to taper off? Do we want 2 billion visitors in the summer of 2029?

3   It might also see irony in scrambling to build capacity for a product we are subsidizing

My point here is that we are subsidizing airline travel, which drives up demand. We are subsidizing it in many many ways but the ones that concern this argument most is that the airline infrastructure, i.e., the airport, is making no or negative profit.  Think of it as the Port donating the profit a normal business in their position would make to the airline industry. This lowers the cost of travel to the consumer and increases the lines of cars at SeaTac. 

From a microeconomic perspective, building a new airport is like having the state own the Mariners and insisting on keeping the price of a Mariners ticket at $20. 150,000 people would buy tickets in the postseason now that everyone is happy again, so we would, in the spirit of the airport-building-rent-seekers, condemn the land around Century Link and build a $500 million expansion to the stadium to let all the ticketholders watch the game. Instead of just raising the price of a ticket. (PS this analogy might be better if I actually knew what the prices of a ticket currently are. I only read about sports teams in the newspapers, I do not go and watch them.)

4   If the Port let prices float, that could alleviate congestion while finally getting the Port off the dole–and even pulling its weight

From what I understand, the Port of Seattle and the Port of Houston are alone among major Ports in not returning anything in profit to help with the cost of local or state governance and are completely alone among large Ports  in demanding a share of tax revenues from the public simply for operations.

This is a shifting of the burden from publicly-owned businesses to citizens and taxpayers, and it’s egregious, even though you don’t often hear anyone complain about it around here. We should understand the need to pay taxes to deal with the homeless problem, for one example, but there’s no excuse for paying taxes to support an otherwise healthy business.  My point is often mistaken for a rightwing point but it’s a leftwing point. Property tax is a an extremely regressive tax, one of the big drivers of gentrification and wildlife destruction, and our ownership of the Port should be helping us to pay it not adding to the burden.

Think of it this as a big joke on we citizens—it’s normally a great thing to be a part-owner of a business! Hooray! We own a big business!!!  People who own shares of corporations like Microsoft or Boeing earn dividends! But if you are a part-owner of the Port, which is to say, if you like in King County, the joke is on you, and you have a bill coming due next February.

5   There’s also the external cost issue, and not just climate pollution.

First I want to say that external costs are a concept that was first formally understood and elucidated by a classical economist A. C. Pigou. Pigou was a classical economist to the point that he took the lead in writing a rebuttal of Keynes masterwork when it was first published.  Pigou later softened to Keynes, but that wouldn’t alone turn him into a macroeconomist, there’s a lot of complexity in the whole subject, Keynes was good guy, and some of what Keynes said needed to be said.

Externalities are costs that don’t show up in any market transaction. In a market transaction, the norm is that both parties walk away happy, they are a willing seller and a willing buyer.  On the other hand nonmarket transactions, transactions where no money changes hands, span the gamut between good and bad and often one of the partners is unwilling.. If they are bad, the bad is not paid for in any way.  Murder is a particularly virulent and awful nonmarket transaction, whatever or how unimaginably high its “cost” is, that cost is most certainly never paid for.  Pollution is a classic nonmarket transaction, an externality, nobody pays you for polluting your air, and you don’t pay anyone when you pollute their air either. People think Covid was bad but we are about to experience life-threatening events that will be attributable to an externality issue, climate change from fossil fuels. Do not be calmed by the climatologists who predict half-a degree warming by such and such year. What climatologists seem not to understand is that while it’s the climate that gets warmer, maybe by a degree or two 20 or thirty years from now, and everyone says “What’s not to like about 1 or 2 degrees warmer?,” But it’s not climate but weather that will kill us and even if climate is sort of predictable, weather is not. Heat waves are the deadliest of weather events, we already have people baking to death and heat also drives drying, both from a lack of rainfall everywhere but also increased evaporation that will lead to a disappearance of rivers, lakes, wetlands, creeks and springs. Soon billions of people will be desperately trying to relocate to any place that is still habitable.

A new airport that will externalize yet more costs of climate pollution should be dead-on-arrival, it shows the collective lethargy and fecklessness of our state that it seems not to be.

6  The plan here is to gang up on one community and force it to bear, among other things, land seizures, noise pollution, and increased learning disabilities and lung problems from the ultra-fine air pollution particles that only jets create.

In the case of the airline industry, we could rename this industry “Externalities are us.”

But we need to separate this new greenfield airport from Seatac as it has massively more externalized costs.

I mention land seizures first, because these can feel almost violent.  There’s a plaque in Connecticut to victims of eminent domain.  It’s sitting on the land that once had the house of a holdout, an 85 year old woman  who did not want to sell her house to the city of New London, CT. The city wanted to build a new upscale development on her and her neighbor’s land and she did not think that was a good enough reason for her to have to leave the house she had lived in her whole life now that she was at the end of it.  The Supreme Court, in one of the many low points of judicial history, (more are coming, fast and furious now) ruled against her and she was forcibly removed. Then the city decided not to redevelop the land after all.

Land seizure is a subsidy for air travel. I hear doubters say no, these people are paid for the land. Yes, they are paid but they are not willing sellers, and all they get is a willing seller price. Eminent domain is a subsidy because essentially it’s a way of stealing the land, it has to be compared to the cost of getting that land in a free market where folks could say, no, we like living here. If you own a house and don’t want to leave it until you die, what price is the right price to get you to move? It’s much, much higher. That price represents the real market price of this land, anything below it is a subsidy for air travel.

Here’s how Michelle Planck of Olympia characterizes the coming land seizures if their site is chosen:

When the State wants YOUR house or land, you are offered a ‘fair market value’ for it. If you refuse to sell or vacate, you become a ‘problem’. The State’s solution is to condemn your property under a clause called ’eminent domain’. It is theft softened by the word eviction. If you continue to refuse to leave your own home, you are dragged out by your heels. The State doesn’t care where you go as long as it’s out of the way of the bulldozers.

Michele Planck, Olympia writing in The Jolt, the Journal of Olympia, Lacey and Tumwater October 2, 2022

The information of pollution from airports can be found on the web and anyone is free to have their own opinion on it. It was related to me by my spouse Delia Scholes, Ph D in epidemiology and a retired epidemiologist.

The ultrafine air particle air pollution that only jets create has been found to be linked to learning disabilities, respiratory problems and a myriad other outcomes. Noise pollution has similarly been found to be very harmful to people’s well-being and health. What we are asking of this community is horrible. We should be ashamed of our region if this bad idea makes any headway at all.

A Postscript on Macroeconomics

How we think about the problems facing the region and the world matters. Macroecomics was born out of a real frustration that classical economists seemed to be out of ideas during the depression of the 1930s. A great man, John Maynard Keynes, shook things up, questioning the interest in the economics of supply and demand toward looking at the overall economy in the aggregate. He advocated a freer hand with government policy and spending in the hopes of getting the economy to behave in a way that he, the politicians, and the long-suffering public it to. To a point this was all a breath of fresh air as the economists of the times had hidebound dogmatic opinions that opposed the government ever helping anyone from the general public; ever doing anything to help anyone who wasn’t rich and successful already. But in the process, Keynes may have thrown out the baby with the bathwater.

During World War II, FDR offered many economists the job of taking over the wartime rationing office that was being set up. Classical economist after classical economist declined the position but Keynes-enthusiast John Kenneth Galbraith finally took up the challenge. Rationing during WWII is now seen my all classical economists and even many macroeconomists as having been misguided,and having made the ordeal of the the war more difficult than it would have needed to be for the public. One of the few laughs I have ever gotten about the subject of WWII happened when I asked our late friend CD Littlefield what he thought of WWII at the time. He said he hated it, because he was only allowed to have wooden toys. (He was three at the time.)

Macroeconomics is what Keynsianism began to be called in the aftermath of WWII, as I understand it. It underlies most current efforts to “combat” climate change. I would argue it is guaranteeing us failure in these efforts.

Paul Krugman, for instance is telling us we can defeat climate change with policies that involve spending and subsidizing but do not involve removing subsidies or adding a revenue neutral carbon tax.  “Government support for renewable energy may save us yet,” wrote Krugman in a Seattle Times opinion on August 19, 2021, explaining that ” …costs of wind and solar…have plunged to the point that quite modest incentives could lead to a rapid reduction in the use of fossil fuels.” I know, Krugman has one thing I lack, a Nobel prize in Economics, but I would call this magical thinking and here’s why:

The problem with subsidizing clean energy and the forced buildout of ‘clean energy’ is that it ignores the “leakage” problem. We can do all this but it won’t have any effect on the bottom-line-driver of climate change, which is the low price of and easy availability of fossil fuels. Keep in mind that for practical purposes the entire energy sector over the whole world can be viewed as fungible, it’s like water, it can move around to wherever it’s demanded, and with all the new subsidized “clean” energy out there, there’s actually more total energy to go around, thus a cheaper price for all energy, and that induces the whole world to choose methods of doing things that are more energy-intensive. So what happens is the fossil fuel energy that is displaced by reduced demand from new more efficient technologies or more ‘clean’ energy coming online is snatched up by somebody new, who likes the fact that the fossil fuel prices just went down a tad and doesn’t see any reason to leave any low-cost product sitting on the shelf. Industries that are already advantaged by leaking are the cryptocurrency industry, the internet with it’s energy hunger, and indoor marijuana growing.  

This point is made by a classical economist Shi-Ling Hsu of University of British Columbia in his great book “The Case for a Carbon Tax.”

Let me toss in a comment about a revenue-neutral carbon tax.  It looks like this idea of a revenue-neutral carbon tax is a goner unless there is a sea-change in the way people are thinking. (The phrase sea-change might take on new meaning as the sea actually begins to show up at people’s doorstep, giving it a more literal meaning.) But a revenue-neutral carbon tax is the only tool that would actually work to decrease climate change and if we aren’t going to go that road we owe it to our children to tell them we aren’t doing anything about climate change, and Good Luck! Lavishing money on fraudulent greenwashing schemes like ethanol, carbon sequestration, aviation biofuel, hydrogen power and biomass which is the burning of our forests that Europe is doubling down on, should not calm anyone’s nerves particularly if you are a young person who has a lot of future ahead of you. These things are expensive and make us all poorer and give us less chance not more, of beating climate change.

The leaking issue is important because it is the reason that all the so-called efforts we have been making to defeat climate change have no value and the strategy is bound to fail. I know analogies can be manipulative but bear with me as I set up a case involving crullers and doughnuts.  I hope everyone knows what a cruller is.  Suppose that we decide it’s important for some reason that we stop people from eating doughnuts. How are we going to do this? Ah hah, let’s subsidize crullers! Cost is no object. Let’s shower cash on all the Cruller-producers. Let’s mandate a buildout of places for people to buy Crullers! The price of crullers will drop, maybe way down to let’s say to 30 cents.

There’s absolutely no reason for anyone to ever buy a doughnut again!

But actually, this won’t work at all. Doughnut prices will fall also, not as much as crullers, but significantly, because the doughnut companies, in order to maintain market share, will lower the price of doughnuts. The end result will be more pastry sales in general because overall the whole pastry industry is now absorbing subsidies. There will be a drop in the consumption of doughnuts to some degree because as a response to the price signal some consumers will switch to crullers, but because the price of doughnuts is now lower and it turns out quite a few people strongly prefer doughnuts to crullers anyway, and the only change for them is that doughnuts are even more affordable than they used to be and these people up their doughnut buy. After all the sound and fury of the cruller campaign, the doughnut-makers look at their latest sales report and breathe a sigh of relief, noting that their sales have remained relatively unscathed or even gone up a little.

Contact Ed Newbold at [email protected].