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June 2, 2016 by David Driesen

Airlines' Bait-and-Switch Scheduling

During the last few years, airlines have increased their reliance on "bait-and-switch" scheduling. They induce travelers to choose their airline based on advertised routes and schedules. They know that especially good routes are valuable and generally charge more for a good route than a bad one. Long after travelers have taken the bait, often paying more than the lowest available price to avoid delay-prone airports, long layovers, and multiple stops, the airlines simply switch around the schedule. While many of these changes can be minor, changing departure and arrival times by 10 or 20 minutes, increasingly airlines feel no compunction at all about completely tearing up the deal they made, adding stops, drastically increasing layover times, and routing the hapless traveler through a different city than she would have selected when she had a choice. They often make these changes just a few weeks in advance, when alternative flights are either not available at all or fiendishly expensive. These last-minute changes can destroy customers' travel plans, causing travelers to miss scheduled meetings, forcing expenditures for extra nights in hotels, and fouling up rental car arrangements. 

Used car dealers used to do this sort of thing all of the time. They …

Aug. 28, 2015 by David Driesen
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CPR’s Unnatural Disaster report pointed out that current energy policies favoring fossil fuels made it “more likely that there will be disasters like Katrina in the future.” It explained that global climate disruption increases temperatures thereby causing sea level rise, a big threat to the Gulf Coast, and that climate disruption models suggest a shift toward extreme weather events.

Since Katrina, we have certainly seen lots of extreme weather. Perhaps most reminiscent of Katrina, on October 30, 2012, Superstorm Sandy hit much of the east coast, causing widespread flooding, especially in New York and New Jersey.1 On February 5-6, 2010, an unusually severe snowstorm, labeled “smowmaggedon” buried Washington, D.C. Looking beyond our shores, super-typhoon Haiyan, one of the largest typhoons on record, devastated the Philippines in November of 2013.

Scientists have become increasingly confident that climate disruption has contributed to the intensity of these …

Oct. 13, 2014 by David Driesen
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EPA’s proposed new rule for greenhouse gas emissions from power plants gets a lot of things right. For one thing, it recognizes that electric utilities can employ a variety of measures to reduce greenhouse gas emissions. They can switch to natural gas or even renewable energy sources. They can fund end-use efficiency improvements—such as energy efficient windows, better insulation, and light bulbs that burn brightly even while they conserve electricity. All of these techniques reduce power plant emissions. So, EPA is right to make them building blocks for its rule.

But the final rule should correct a very poor policy judgment about the form of the emission limits that utilities can meet with these technologies. EPA should demand state limits on the mass of emissions from power plants rather than limits on emission rates. Let me explain why this seemingly arcane issue matters.

In the …

March 7, 2014 by David Driesen
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The media has reported, erroneously, that the Obama Administration’s environmental impact statement concluded that the Keystone Pipeline would have no impact on global climate disruption. The facts are a bit more complicated, and much more interesting. Basically, the final EIS concedes that Keystone would increase greenhouse gas emissions, but it uses a silent political judgment masquerading as scientific analysis to minimize its estimate of the increase’s magnitude. Accordingly, President Obama has ample grounds to reject the Keystone Pipeline application.

Let me explain. The EIS concedes that the construction project creating the Keystone Pipeline would produce .24 metric tons of carbon dioxide equivalents (MMTCO2E) per year until TransCanada completes the pipeline. It also admits that operation of the pipeline after construction would produce 1.44 MMTCO2E per year, about the emissions of 300,000 passenger vehicles.

Although this is a lot of …

Oct. 3, 2013 by David Driesen
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This blog explains why President Obama should exempt proposals to mitigate climate disruption by reducing greenhouse gas emissions from OIRA review. First, the procedure that justifies OIRA review, cost-benefit analysis (CBA), just does not work for climate disruption measures. Second, CBA undermines just and legal climate policy. Third, climate disruption poses special risks that make the delay and weakening that comes from OIRA review unacceptable. 

Because of climate disruption's nature, prominent CBA proponents, such as Eric Posner and Martin Weitzman, have argued that CBA works badly for climate disruption. Weitzman emphasizes that climate disruption creates a risk of a catastrophe. Because the magnitude and likelihood of such a catastrophe remain unknown, CBA cannot include a reasonably reliable benefit estimate. Weitzman argues that this problem so dominates any rational response to climate disruption that conventional CBA becomes useless and highly misleading as a guide to climate policy …

Sept. 20, 2013 by David Driesen
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Almost every new power plant that the electric utility industry has built in recent years has been a natural gas powered plant. Industry rarely builds new coal-fired power plants anymore because gas has become much cheaper than coal. That is a very good thing. Absent rather expensive carbon capture and storage, new coal-fired power plants emit far more greenhouse gases than natural gas powered plants.

The new source standards promulgated today will tend to lock in the current status quo. They will likely impose no net cost on the economy, because natural gas has become cheaper than coal. Instead of generating electricity with the dirtiest fuel source, we will continue to rely more heavily on a somewhat cleaner fuel source. Given the effects of climate disruption one could argue that these standards do not go far enough. Climate disruption has likely caused heat waves, sea level rise …

Feb. 13, 2013 by David Driesen
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We will phase out fossil fuels.  We have no choice. They are a finite resource and at some point they will run out.  Admittedly, coal will not run out nearly as quickly as oil, but sooner or later all fossil fuel resources will run out. 

The only question we face is whether we phase out fossil fuels before we have set in motion climate disruption’s worst effects or instead just allow a phase-out to occur through price shocks and shortages that we are ill-prepared to cope with, and risk a climate catastrophe.  Obviously, a managed phase-out makes much more sense.  Climate disruption will plague us with increasingly violent storms, flooding, drought, a spread of infectious diseases, and other calamities.  A reasonably rapid phase-out will help us avoid some of these impacts by first reducing and eventually eliminating emissions of carbon dioxide, the principal greenhouse gas.  At …

Jan. 24, 2013 by David Driesen
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Cross-posted from RegBlog.

Nobody seems to have noticed, but the Center for Progressive Reform (CPR) recently recommended abolition of review by the Office of Information and Regulatory Affairs (OIRA) based on cost-benefit analysis (CBA). Its report on recommendations for the second Obama Administration made this proposal the sixth item in a list of seven executive orders that Obama could issue with a "Stroke of the Pen" (from the report’s title). In place of CBA-based review, which has often stymied or delayed needed environmental protections, CPR recommends a complete OIRA role reversal, charging it with addressing regulatory delay and helping agencies “achieve their statutory missions.” CPR also recommends abolishing review of minor rules altogether and improving transparency. 

What was first on CPR’s list of “stroke of the pen” reforms? An executive order to take action on climate mitigation – which would include a detailed list of regulatory …

Aug. 30, 2012 by David Driesen
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Reposted from RegBlog.

Traditionally, the field of law and economics has treated government regulation as if it were a mere transaction. This microeconomic approach to law assumes that government regulators should aim to make their decisions efficient by seeking to equate costs and benefits at the margin.

As I argue in a new book, The Economic Dynamics of Law, the microeconomic model of government regulation misconceives the essence of regulation. Government regulation produces not an instantaneous transaction, but a set of rules intended to influence future conduct, often for many years. Accordingly, regulation provides a framework for private resource allocation, rather than allocating the resources itself.   This framework performs a macroeconomic role by reducing systemic risks that might permanently impair important economic, social, and natural systems. As such, government regulation resembles monetary policy, which likewise affects, but does not control, resource allocation. 

Properly understood, the relationship between …

June 29, 2012 by David Driesen
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Although the Supreme Court upheld the Affordable Care Act’s requirement that most individuals purchase health insurance (called the individual mandate) as within Congress’ power to levy taxes, it stated that Congress lacked the power to enact it under the Commerce Clause.  Under prior case law, Congress could regulate activities substantially affecting interstate commerce by any means not offending the bill of rights.  Since the Affordable Health Care Act regulates a set of activities that substantially affect interstate commerce, namely the provision of health care (including insurance), it posed no substantial issue under that case law.  The objection to the “individual mandate” at bottom involved an effort by conservatives to defend individual liberty of the type protected by the Court during the Lochner era, when it created “substantive due process” doctrines to ward off progressive legislation. 

Yet, the Court agreed to redefine the issue as whether the …

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