Hummers for SMARTs. Brilliant. Though if folks paid the real cost of their gas guzzlers at the pump, I’d be agnostic about Hummers.

With the revelation that John Edwards had an affair back in 2006 and that Josh Green at The Atlantic has obtained hundreds of Clinton campaign internal emails and memos (never mind the Atlantic’s under-reported bombshell about Bill and Gina Gershon back in mid-June), I think it’s pretty safe to say that the Democrats chose wisely from their final three candidates.

What if, however, Edwards or Clinton had clinched the nomination?

I think it’s safe to say that Edwards wouldn’t have been so sloppy as to visit his former mistress and her child were he under the scrutiny of a 24/7 press corps. Even if the Enquirer had caught the Senator, however, John McCain has already proven that a simple denial is enough to make adultery allegations go away, right? (On the other hand, I’ve thought for a while that the Times would strike again on Iseman.)

As for Clinton… well, if you think the Obama/McCain matchup has been dirty so far and waded too deep into character territory, can you imagine the sorts of ads that would have been running against Hillary Clinton? Add to that the fact that the Gershon allegations would have been front page news had Hillary won in June, and I’m not sure Hillary would even be ahead in the polls right now.

Lightning in slow motion:

Megan McArdle delves into why Obama’s proposed windfall profits tax on oil companies is, well, dumb. The gist of her argument is that, at best, such a tax might on paper imitate the effects of a Pigouvian tax on carbon. But linking profits to pollution is probably a few degrees of separation too far to make this effective policy. Why not just tax pollution directly through tradable permits (which Obama has, to his credit, also proposed, and McCain has, sadly, hedged on) or a carbon tax? Meanwhile, at worst, we’re sending some mighty mixed signals to the economy if we at once loudly hope for growth but then turn around and penalize companies which are “too” successful.

I’d only add that if lower gas prices are the end goal, then the market already has a mechanism for achieving this: greater supply and greater competition brought on by more firms entering the market. The problem is, it’s so expensive and risky (need we be reminded where most of our oil actually comes from?) to extract oil that potential investors need at least a chance of a pretty hefty pay-off to be willing to put up the requisite capital. A windfall profits tax takes that incentive for market entry away, in essence guaranteeing that gas prices will remain high. A one-off tax would be better economically — oil investors would still be lured by future profits — but would be perceived by the American people, rightly, as even more of a shake-down than ongoing taxes.

Reasonable (read: economically-literate) people can disagree about the wonky details. I think I’d favor a state-based, revenue-neutral carbon tax that replaced sales taxes so that it wouldn’t affect the progressivity of the tax code, with a possible means-tested lump-sum refund every April not linked to your gas consumption. But whatever the plan, one common principle needs to be present: it’s pollution we’re going after, not profit. If an adequate market-based carbon solution were in place, I wouldn’t care how successful Exxon was (or, for that matter, whether you drove an H2, since you’d pay for it at the pump).

Anyway, there’s a lot about Obama I like, especially his thoughtfulness and his pragmatism, and I suspect coming from the University of Chicago he’s less skeptical of economists than many other politicians. So it saddens me when he succumbs to this shameless brand of snake oil economics.

All U.S. adults could be overweight in 40 years. The Simpsons aside, this study reminds me of a high school group English assignment where we had to craft a piece of satire à la “A Modest Proposal”. I don’t remember the details exactly, but I do remember presenting “evidence” that based on changes in the gay population between 1950 and 1990, America would be entirely gay by 2500 or so, and that as a result we might as well embrace the phenomenon and rename “Guy Fawkes Day” to “Gay Folks Day”. Or something. It was a lot funnier when I was 17. I swear.

At first glance, voters seem stupid and confused for simultaneously rapping McCain on his negative advertising and rapping Obama for hearing too much about him, an overexposure due, in many respects, to McCain’s negative advertising.

But it’s not a contradiction at all if voters are just sick of politics in general. I’m no longer the parliamentary advocate I used to be, but there is something to be said for the 17-working-day campaigns of British national elections (scaled up because the U.S. is so massive).

On a related note, I often tell Eva I’d like to move to Ohio so that our votes would actually “count”. I still think the Electoral College is a foul, bizarro system that rewards states for a) not having voters, and b) not having clear preferences, but I concede one of the advantages of living in all-but-conceded California is not being subjected to presidential agitprop during So You Think You Can Dance.

I call “not it” on installing a portable nuclear reactor under my house.

Ever since getting a job at a firm that primarily consults on water and wastewater finances, I’ve been meaning to post about the economics and politics of water and water pricing. Turns out there’s a terrific blog that does exactly this 24/7, but I’d like to throw in my two cents nonetheless.

You’ve probably heard California’s now officially experiencing a water shortage… y’know, otherwise know as a “drought”. Basic market economics tells us that when a good is in short supply, you raise the price. Otherwise, you have to start strictly rationing its consumption, and the people who want your product the most — those who are willing to pay the most for it — won’t necessarily be able to get it. This scenario is almost unambiguously bad, with the possible exception of a few rare, niche products where shortages create “buzz” (COUGHCOUGHWIICOUGHCOUGHIPHONECOUGHCOUGH).

Nothing intrinsic about water makes it an exception to these economic rules. If we raise the price of water to reflect its scarcity, we would expect consumption to decrease, holding the factor that drive demand for water such as income and yard size constant.

However, there are political barriers to raising the price of water in droughts.

The first is that we — consumers, developers, everyone — are used to artificially low water prices. It’s not even that water is subsidized everywhere, though it is in a lot of places: it’s that it’s hardly ever priced in a true market! Here’s some economic background:

In a competitive market, the price you pay for a good covers the marginal cost of producing it plus some scarcity value. In a perfectly competitive market, where firms enter and leave the market at the drop of the hat and always make just enough money to stay in business, that scarcity value should be zero. For physical and regulatory reasons, however, the market for water isn’t perfectly competitive. Not even close. You can’t, for example, wake up one day and open up a new water company. The infrastructure is prohibitively expensive while the marginal cost of delivering one more gallon of water is nearly zero. Even then, the Earth holds a fixed supply of water that’s zero sum: in the absence of new technology or new sources of water, a gallon that one company sells is a gallon that’s no longer available to another company. So, water does have a scarcity value to it.

But the price you pay for water usually has nothing to do with the marginal cost (which is nearly zero) or the scarcity value (which these days would be substantial).

Instead, a water district usually just charges enough in fixed and volumetric prices to cover its operating, capital, and debt costs.

Partly, this is because folding scarcity value into the water price would raise a substantial amount of revenue in the short term, much more than most water districts need. Sure, in theory the district could just refund excess revenue in the form of fixed lump-sum payments. In reality, however, the “spend-whatever-you-want-and-refund-whatever-you-don’t” model of public finance would not get very far in a city council meeting, and with good reason. What would prevent, say, East Bay MUD from doubling salaries? Or replacing the system with copper piping? It sounds silly, but never underestimate the ability of a public agency to spend money recklessly.

Another barrier to market pricing here in California is the regulatory lead-weight of Proposition 218, which perhaps ironically was pushed by folks suspicious of non-market pricing. It basically subjects any water rate/price increase to the veto of a majority of customers, and requires notice of any price change. In other words, if 50% + 1 of water users in a district get together and protest a price increase, it can’t be enacted. Plus, everyone needs 45-days notice in writing whenever there’s a proposed rate change. That would really put a damper on a dynamic water market.

I still think scarcity pricing is the way to go with water. But there are several steps between where we are now and where we need to be before we see anything like a market-approach to water.

So why do Northern Californians drop the definite article when referring to freeways, while Southern Californians keep it? Is it because SoCal built more loftily-named freeways back in the day (”The Santa Monica Freeway”, “The San Diego Freeway”)? Or is NorCal full of namby-pamby liberal Hamlets unwilling to commit to their freeways?

It’s been a couple hours since Obama stepped down from the Victory Column in Berlin’s Tiergarten after speaking for just a shade shy of half-an-hour. Partly because I have an opinion, but mostly because I’m thirsting for more reaction, here are my thoughts.

The fragile balance Obama had to strike today has certainly not gone unreported, but it didn’t fully strike me until I actually saw the speech just what strange circumstances Obama faces; or, perhaps more fairly, the circumstances he chose to face: Facing 200,000 cheering fans… who nevertheless are not the primary audience for your speech. Trying to elevating the content above the vague… but tramping down specificity so as not to appear hubristic. Pushing a cosmopolitan and worldly image… while also trying to strengthen your association with America.

Contrary to your typical Fox News panel — and many a fearful liberal blogger, too — America is not a rabidly jingoistic place where we tar and feather outlanders who dare cross our barbed wire. We in fact view our declining standing in the world as a major problem. We swell with pride when our presidents — indeed, our citizenry — are well-liked. The two things I remember most about my family’s trip to Italy in the mid-90s were our audience with the Pope in St. Peter’s Square and, while waiting for said audience, the applause that ensued from the mostly-European spectators when a group of American sailors joined the throngs to see JPII. That sort of reception isn’t important because it swells the pride of visiting teenagers (although it certainly did in my case), it’s the sort of soft capital that forges strong alliances and partnerships. So the tension between domestic and international appeal is not a zero-sum game per se.

That said, I think Americans are suspicious of politicians who appear too comfortable with or too beholden to overseas support. Too suspicious for my tastes, but I think that mistrust is rooted in a valid desire to have public servants who put America’s interests paramount. With only a couple of exceptions — climate change foremost among them, where all nations must bear costs — I see nothing inherently wrong with that.

All of which leads to Obama’s speech. Content-wise, it was very good, bordering on excellent in places. Obama peppered his text with echoes of JFK and Reagan (both referred to themselves as “citizens of the world”: JFK in his Inaugural, Reagan in a 1982 speech to the UN). The hard anti-Communist tilt of his historical parallelism was bold for a city that was, let’s not forget, half communist a mere 19 years ago, and bolder still when you consider that many East Germans at best don’t see a stigma against communism and at worst openly support the PDS, the modern-day successor to the former DDR’s ruling party. It was also unashamedly American, both in its patriotism and its optimism, without being deaf to the valid criticisms of American policy over the last eight years:

I know my country has not perfected itself. At times, we’ve struggled to keep the promise of liberty and equality for all of our people. We’ve made our share of mistakes, and there are times when our actions around the world have not lived up to our best intentions.

But I also know how much I love America. I know that for more than two centuries, we have strived — at great cost and great sacrifice — to form a more perfect union; to seek, with other nations, a more hopeful world. Our allegiance has never been to any particular tribe or kingdom — indeed, every language is spoken in our country; every culture has left its imprint on ours; every point of view is expressed in our public squares. What has always united us — what has always driven our people; what drew my father to America’s shores — is a set of ideals that speak to aspirations shared by all people: that we can live free from fear and free from want; that we can speak our minds and assemble with whomever we choose and worship as we please.

Another solid speech, then, from Obama, which is par for the course with him. So we should expect a big bump in his polling numbers, right?

Well, no, I don’t think so.

I plan to write another post on polling shortly, but basically, I’ve found Obama’s overseas trip to be a little inkblot: if you’re a supporter, you found him eloquent. If you oppose him, you found him hubristic and arrogant. I’m not sure this trip has been persuasive to many bona fide uncommitted voters. Now, maybe “persuasion” is too ambitious… maybe rather than being a tipping point for average voters, this trip is merely supposed to take the inexperience/foreign policy argument off the table. I can buy that, but 10 days of domestic campaigning is a high price to pay for that sort of issue mitigation, especially when, contra the tenor of the media, you’re actually not up by that much in the polls.

On the Berlin speech specifically, I don’t think a home run was possible. The tensions between foreign and domestic audiences, while not 1:1, precluded a performance that both would consider extraordinary. I think Obama did as well as he could, which was pretty damn good, but it’s not going to persuade many voters back home. Assuage some fears? Perhaps. Perhaps add some. But not convince.