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Friday, February 09, 2007

Econ-Utopia: The Northeast’s Regional Greenhouse Gas Initiative

Econ-Utopia: The Northeast’s Regional Greenhouse Gas Initiative
By Matthew Riddle, CPE Staff Economist

The Regional Greenhouse Gas Initiative, or RGGI, grabbed headlines in Massachusetts recently when Governor Deval Patrick signed onto it, committing Massachusetts to a cut in its emissions of greenhouse gasses from power plants, and reversing Mitt Romney’s decision to abandon the agreement. In addition to rejoining RGGI, Patrick also outlined some proposals for its implementation, which may prove to be even more significant than his decision to join.

But before going into the details, I should explain what RGGI is, how it came about, and why we should care. In 2003, the governors of nine northeastern states, from Delaware to Maine, got together to create a regional plan to reduce carbon dioxide emissions from power plants, in an effort to combat global climate change. They agreed on an approach often referred to as a ‘cap and trade’ system. Each state would set a cap on the total level of carbon emissions by releasing a fixed number of emission permits. Companies could then trade these permits to determine where the cuts would be made, but the total number of permits would not change.

This approach provides another solution to the problem raised in our last econ-utopia: that the market price of fossil fuels is too low because the costs of pollution and other ‘externalities’ are not taken into account. A cap and trade program would raise the cost of burning fossil fuels to bring it closer to its true level by forcing companies to pay for emission permits in addition to the price of the fuel.

The first use of a cap and trade system for controlling air pollution was introduced in the US as part of the Clean Air Act Amendments of 1990, where it was used to limit sulfur dioxide emissions from power plants. More recently, one of Europe’s key programs to meet its targets under the Kyoto Protocol is a cap and trade system for large emitters of carbon dioxide.

While these programs have been effective at cutting emissions, they suffer from one significant drawback: in the initial allocation, the emission permits were distributed to polluters at no cost. The result, which may sound surprising, is that electricity prices have been rising just as they would have if the emission permits were sold, and most of the additional revenue from these higher prices is captured by electricity generators as windfall profits. A recent study by IPA Energy Consulting found that under the European cap and trade system, companies in the UK would make £800 million ($1.4 billion) per year in additional profits beyond what they would have made with no restrictions. Meanwhile, consumers have to bear the cost, by paying higher prices for electricity.

On the other hand, if the permits were sold to polluters, this money could be collected for public use. It could support greater spending on energy efficiency and renewable energy, provide assistance to displaced workers, be redistributed to consumers, or any combination of these options. In one proposal, known as a ‘Sky Trust,’ the money would be evenly distributed to each person in the country. For the majority of the population, and especially for low income families, the payment would more than compensate for the higher energy prices.

The RGGI agreement among Northeastern states shows progress over these earlier programs: instead of giving all the permits away for free, the agreement requires that states auction at least 25% of the permits to polluters. In his announcement last month, Governor Patrick went farther, joining New York Governor Eliot Spitzer and the Vermont legislature in committing to auctioning not 25%, but 100% of the permits. The revenue from the auction in Massachusetts will be used to fund a new program promoting energy efficiency and the development of renewable energy, which would generate additional energy savings and help to reduce costs for consumers.

In addition to its direct benefit in the northeast, RGGI could also set an important precedent for the design of a nationwide system. If a nationwide cap and trade program were imposed that covered all US carbon emissions, the permits could be worth as much as $100 billion. If used effectively, this money could have an enormous positive impact. But if the permits are given away for free, the money would instead go to enhance the profits of polluters, and this opportunity would be lost.


For an overview of RGGI, see

For coverage of Governor Patrick’s recent announcement, see

For more on the importance of auctioning permits, see

For information about the Sky Trust proposal, see

© 2007 Center for Popular Economics

Econ-Atrocities and Econ-Utopias are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Thursday, February 01, 2007

Mutually assured hypocrisy w/r/t Iran's nuclear weapons

This morning's reports on French President Chirac's statement that, according to the NYTimes,
“what is dangerous about this situation [Iran acquiring a nuclear bomb] is not the fact of having a nuclear bomb,” he said. “Having one or perhaps a second bomb a little later, well, that’s not very dangerous.

“But what is very dangerous is proliferation. This means that if Iran continues in the direction it has taken and totally masters nuclear-generated electricity, the danger does not lie in the bomb it will have, and which will be of no use to it.”

Mr. Chirac said it would be an act of self-destruction for Iran to use a nuclear weapon against another country.

“Where will it drop it, this bomb? On Israel?” Mr. Chirac asked. “It would not have gone 200 meters into the atmosphere before Tehran would be razed.”
There's no doubt that this represents lame politics on Chirac's part, since, if this is his true belief, he shouldn't have been suggesting otherwise before now (or after, with his bungled attempts at retraction).

And it is worth noting that he does identify dangers that even he perceives as real, those of wider proliferation of nuclear weapons in the Middle East. So it's not as if he's encouraging Iran to get a nuclear bomb, just saying that he doesn't think that one or two Iranian nukes--in and of themselves--represent a marked increase in danger to the region or world. Instead, it's the secondary effects of proliferation, and the risks that come out of that of increased military tensions and rising risks of accidental usage, that are the main danger Chirac sees.

While I acknowledge in principal the arguments I've heard a few people make that either the world should be totally free of nuclear weapons or all countries should have the same right to acquire them if they deem them necessary for defense, it doesn't really cut the mustard for me. Nuclear weapons are, by definition, pure tools of terrorism. You cannot use a nuclear weapon without knowingly killing vast numbers of innocent bystanders (assuming any of your victims are so-called legitimate targets). To use a nuclear weapon is to commit the grossest act of terrorism possible; simply to posess nuclear weapons is to be terroristic of a sort since the mere existence of the weapon does what terrorism is all about--instill fear in a population as a way to force your political objectives onto them.

For that reason, I oppose any expansion of the world's nuclear arsenal either within any one country or to include previously non-nuclear countries. The need is for elimination of nuclear weapons, and narrow-minded strategic thinking about when this or that country might be served by gaining them miss the contextual point.

All that said, the hypocrisy that is being expressed in the "outrage" over Chirac's statements is annoying in its own right. ("Outlandishly insane"-Freedom's Zone; "This so clearly shows why the EU and 'Old Europe' cannot be trusted on Iran and other matters of security, I'm a little surprised the New York Times reported it."-Captain Ed [Ooooh, what a dig at the Ayatollah-loving NYTimes!]; "the French have had their heads in the sand so long that the sand is starting to work its way into their comments like this really shouldn't come as a big surprise"-Blogmeister USA.) To their credit, some of these folks try to argue that the Mutally Assured Destruction that was so loved by their hero Ronald Reagan (though created long before his presidency) doesn't apply to Iran, on the premise that the Iranian leaders want armageddon to happen as part of their messianic religious beliefs. Frankly, I don't buy it. The Iranian government behaves much too rationally to think that they have no cares for this earthly life. If they wanted armageddon, they could have triggered it long ago--for instance by launching an all-out war against U.S. troops in Iraq and simultaneously against Saudi Arabia. They don't need nuclear weapons for that.

Monday, January 29, 2007

The Second Best Theory of Tortilla Prices

I don't think that Tim Haab at Environmental Economics subscribes to the Econ-Atrocities, but by happy coincidence he's written a blog post that would fit perfectly in the series. His topic is the Mexican government's response to serious inflation in the cost of tortillas, which are a primary staple of the Mexican diet, and poor Mexicans (of which there are plenty) are getting hit by these price hikes like a punch to the gut. Should the Mexican government pursue a policy of price caps for tortialls? The "Theory of the Second Best" offers an interesting angle of analysis. I'll let Tim explain it himself, but as a teaser here's a bit of his conclusion:
If the price cap is a response to another inefficient policy, then the price cap may actually improve efficiency. The first best solution would be to remove the policies creating the inefficiently high corn prices. The second best solution might be to create a new policy to counteract the effects of bad policy. That's the Theory of Second Best.

This all makes best sense as part of his full post, so go read it (it's not long, so it won't hurt).

Thursday, January 25, 2007

Econ-Utopia: Greenbacks for Green Energy

Econ-Utopia: Greenbacks for Green Energy
By Jonathan Teller-Elsberg, CPE Staff Economist

With Al Gore on Oprah giving his “inconvenient” PowerPoint presentation, new reports of melting ice sheets and rising sea levels, and the release of the British government’s Stern Review, which is the latest major estimate of the economic costs of climate change, the issue of global warming is becoming a part of mainstream politics and kitchen-table conversations. Since the burning of fossil fuels (oil, natural gas, and coal) is the main source of human-caused warming, the need for alternative forms of energy is clear.

Historically, low prices for fossil fuels have meant that renewable energy systems were rarely economically viable. With improvements in technology and production methods, renewable energy has been closing the gap over time. But one thing has almost always been left out of the equation: the long term, hidden costs of global warming from fossil fuel use. These costs might be financial (the cost of building new homes for people displaced by rising oceans), human (the trauma people experience when their way of life is ruined), or something else (the loss of millions of species of life than cannot survive a hotter planet).

In the language of economics, this is an example of a “negative externality,” a cost that is not included in the market price. As a result, the monetary price is “wrong”—in this case, the monetary price of fossil fuels is too low, and so people use more fossil fuel than they would if they knew the “true cost.”

Lately, some governments have taken the question of energy’s true cost to heart, and created incentive plans called “feed-in tariffs” to promote renewable energy. Germany has been at the forefront with its 2004 law, the “Renewable Energy Sources Act.” The law mandates that electric utilities must pay a guaranteed price to anyone who installs a renewable energy system, and that price is guaranteed for 20 years. The price the utility pays is much higher than the price the utility charges for fossil-fuel derived energy that it supplies.

For example, if you put a small photovoltaic (solar electricity) system on the roof of your home and connected it to the electric grid, the German utility must pay you just over 68 cents per kilowatt-hour (kWh) (calculated at the exchange rate on 12/14/2006). Meanwhile, the price you would pay for electricity you get from the utility would be around 20 cents/kWh.

The German government’s logic is that each bit of electricity that comes from a renewable source instead of a fossil fuel has long-term savings built in, because the renewable energy isn’t contributing to global warming. The law turns those long-term savings into cash up front that citizens can use for investing in green power.

As a result, there has been an explosion of interest in alternative energy in Germany. In 2005, some 635 megawatts (1 megawatt = 1,000 kilowatts) of new solar electric systems were installed—enough power to supply the needs of nearly 60,000 average American homes (and the average German home is almost surely more efficient). Spain, Italy, Greece, South Korea and France have all followed Germany’s lead and established their own feed-in tariff systems.

Starting in 2007, residents of California will enjoy a similar incentive to go green; the state’s feed-in tariff guarantees a five year contract paying 38 cents/kWh for newly installed photovoltaic systems. With all that valuable beachfront property to worry about, it’s no wonder that California is leading the way in the U.S. to avoid catastrophic global warming. But the only hope for sufficiently reducing greenhouse gas emissions to save Malibu is that the rest of the country (and world) follow a similar path to make fossil fuels the economic losers that they ought to be.

Sources and resources:

For a taste of the bad news on global warming, see

For Al Gore’s An Inconvenient Truth

For information on photovoltaics, feed in tariffs, and electricity usage, see

For an overview of renewable energy options for homeowners, small businesses, and communities, The Citizen-Powered Energy Handbook by Greg Pahl.

© 2007 Center for Popular Economics
Econ-Atrocities are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Thursday, January 04, 2007

Econ-Atrocity: The 800-Pound Ronald McDonald in the Room

Econ-Atrocity: The 800-Pound Ronald McDonald in the Room
By Helen Scharber, CPE Staff Economist
Jan. 4, 2007

When your child’s doctor gives you advice, you’re probably inclined to take it. And if 60,000 doctors gave you advice, ignoring it would be even more difficult to justify. Last month, the American Academy of Pediatrics (AAP) issued a policy statement advising us to limit advertising to children, citing its adverse effects on health. Yes, banning toy commercials might result in fewer headaches for parents (“Please, please, pleeeeeeease, can I have this new video game I just saw 10 commercials for????”), but the AAP is more concerned with other health issues, such as childhood obesity. Advertising in general – and to children specifically – has reached astonishingly high levels, and as a country, we’d be wise to take the doctors’ orders.

Advertising to kids is not a new phenomenon, but the intensity of it is. According to Juliet Schor, author of Born to Buy, companies spent around $100 million in 1983 on television advertising to kids. A little more than 20 years later, the amount earmarked for child-targeted ads in a variety of media has jumped to at least $12 billion annually. That’s over $150 per boy and girl in the U.S. And it’s not as though kids only see ads for action figures and sugary cereal; the other $240 billion spent on advertising each year ensures that they see ads for all kinds of products, everywhere they go. According to the AAP report, “the average young person views more than 3,000 ads per day on television, on the Internet, on billboards, and in magazines.” Ads are also creeping into schools, where marketers have cleverly placed them in “educational” posters, textbook covers, bathroom stalls, scoreboards, daily news programs, and bus radio programming.

If advertising to children is becoming increasingly ubiquitous, it’s probably because it’s becoming increasingly profitable. Once upon a time, kids didn’t have as much market power as they do today. The AAP report estimates that kids under 12 now spend $25 billion of their own money annually, teenagers spend another $155 billion, and both groups probably influence another $200 billion in parental spending. Not too surprising, considering that 62 percent of parents say their children “actively participate” in car-buying decisions, marketers are also becoming more aware of the long-term potential of advertising to children (see the “Car makers direct more ads at kids” link below). While they may not be the primary market now, they will be someday. And since researchers have found that kids as young as two can express preferences for specific brands, it’s practically never too early to begin instilling brand loyalty.

But while small children have an incredible memory for commercial messages, they may not have developed the cognitive skills necessary to be critical of them. In 2004, the American Psychological Association (APA) also called for setting limits on advertising to kids, citing research that “children under the age of eight are unable to critically comprehend televised advertising messages and are prone to accept advertiser messages as truthful, accurate and unbiased.” Many people take offense at the idea that we might be manipulated by marketing. Aren’t we, after all, intelligent enough to make up our own minds about what to buy? The research cited by the APA, however, shows that children are uniquely vulnerable to manipulation by advertising. Marketers therefore should not be allowed to prey on them in the name of free speech.

Such invasive advertising to children is not only an ethical problem. The American Academy of Pediatrics cited advertising’s effects on health through the promotion of unhealthy eating, drinking and smoking as the main motivation for setting limits. Children’s health issues certainly merit attention. The Center for Disease Control, for example, has found that the prevalence of overweight children (ages 6 to 11) increased from 7 percent in 1980 to about 19 percent in 2004, while the rate among adolescents (ages 12 to 19) jumped from 5 percent to 17 percent. In addition to physical health problems, Schor argues that extensive marketing has negative effects on children’s emotional well being. In her research for Born to Buy, Schor found links between immersion in consumer culture and depression, anxiety, low self esteem and conflicts with parents. The big push to consume can also lead to financial health problems, as many Americans know all too well, with credit card debt among 18- to 24-year-olds doubling over the past decade.

Not even the staunchest critics of marketing to children would argue that advertisements are completely at fault for these trends. Yet the commercialization of nearly everything is negatively affecting children’s well being in rather profound ways. Why, then, is hardly anyone paying attention to the 800-pound Ronald McDonald in the room? Perhaps it’s because advertising appears to be a necessary evil or a fair tradeoff – maybe little Emma’s school couldn’t afford a soccer team without Coke on the scoreboard, for example. Or perhaps some would argue that parents who don’t approve of the commercial culture should limit their kids’ exposure to it. (See the Kids and Commercialism link below for tips on parenting kids in a commercial culture.) Increasingly invasive marketing techniques make it practically impossible to simply opt out of commercial culture, though. Thus, decisions to limit marketing to children must be made by the country as a whole. Sweden, Norway, Greece, Denmark, and Belgium have already passed laws curbing kid-targeted advertising, and according to 60,000 pediatricians, if we care about the health of our kids, we should too.


© 2007 Center for Popular Economics
Econ-Atrocities are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Thursday, December 28, 2006

On Carter on Israel, Palestine, and Apartheid

Any present or past President has got to be used to being scorned, so the hue and cry now erupting over Jimmy Carter's new book on the Israeli-Palestinian misery can't be terribly surprising for him. I haven't yet had a chance to read the book and so am not in a position to endorse or reject or somewhere-in-the-middle it. Still, some of the reaction is so clearly based on attacking Carter himself, rather than the content of his book--indeed it seems to be attacking Carter instead of attacking his arguments--and that's just plain wrong. An example.

Neal Sher's op-ed at the JTA: Global News Service of the Jewish People is a classic attempt at a hatchet job. Sher asserts (without a single example or refutation) that Carter bases his book, at least in part, on factual errors. But much more than that is the strained logic Sher uses to insinuate that Carter is a Nazi sympathizer--which is indeed exactly what he clearly implies. This is a very serious, even dangerous, implication, because exaggerated crying "wolf" over anti-Semitism results in people being likely to ignore true instances of that wretched prejudice.

In order to paint Carter as a Nazi sympathizer, Sher tells the story of the time he was working for the Office of Special Investigations, "the Justice Department's Nazi prosecution unit," on the case of a former Nazi SS officer, Martin Bartesch. (By the way, Sher would subsequently be disbarred from the District of Columbia bar for embezzling money from a Holocaust victims fund. Sher was never criminally charged, but apparently there was enough evidence to cause the DC bar to strip him of his lawyerly status.)

Sher writes that

Bartesch's family and 'supporters,' seeking special relief, launched a campaign to discredit OSI while trying to garner political support. Indeed, OSI received numerous inquiries from members of Congress who had been approached. After we explained the facts of the case, however, the matter inevitably was dropped; no one urged that Bartesch or his family be accorded any special treatment.

Sher makes no implication that these numerous members of Congress have a hidden pro-Nazi aggenda. Yet when Carter does essentially the exact same thing--merely forwarding a letter from Bartesch's daughter with a short added scribble urging OSI to allow for "humanitarian considerations"--somehow Carter is at minimum excessively naive or at most revealing some long-festering, pro-Nazi anti-Semitism.

In September 1987, after all of the gruesome details of the case had been made public and widely reported in the media, I received a letter sent by Bartesch's daughter to the former president.... I was ... taken aback by the personal, handwritten note Jimmy Carter sent to me seeking "special consideration" for this Nazi SS murderer. There on the upper-right corner of Bartesch's daughter's letter was a note to me in the former president's handwriting, and with his signature, urging that "in cases such as this, special consideration can be given to the families for humanitarian reasons."


As disturbing as I found Carter's plea, and although his attempted intervention has always gnawed at me, I chalked it up at the time to a certain naivete on the part of the former president. But now, in light of Carter's most recent writings and comments, I am left to wonder whether it was I who was naive simply to dismiss his knee-jerk appeal as the instinctive reaction of a well-meaning but misguided humanitarian.


The exposure of Carter's views on Israel and the Jewish lobby has shed a clearer light on his attempt to influence me in the Bartesch case. We know from his own confession that he has had lust in his heart. Unfortunately, he has given us ample reason to wonder what else is lurking there.

Apparently Sher wants you to believe that Carter day dreams of saluting "Sig Heil" and goose stepping through the nearest synagogue.

Sher does not say what he did in response to Carter's scribbled note on Bartesch's daughter's letter. While Sher apparently responded to the Congressional inquirers with explanations of why Bartesch's case required serious action, to which the Congress members responded with approval (or dropped the issue without response), did he reply to Carter and offer a similar explanation of OSI's position? If he did not, then doesn't that imply that at the time he didn't take Carter's interest to be serious, that perhaps he interpreted Carter as just doing a minor favor to molify a pleading woman? And if he did respond to Carter at the time, why doesn't he say so, and why doesn't he say what Carter's reaction was? Could it be that Carter accepted OSI's position once he was more fully informed--just as the Congressional interlopers did--but that Sher avoids mentioning this because that would undermine the odious view of Carter Sher is creating in this op-ed?

Either way, it seems that Sher is trying to make a racially-tinged tempest in a teapot in order to create a connection between an apparently offhanded action of Carters twenty years ago and Carter's efforts today to sway public opinion regarding the Israeli/Palestinian conflict. And what about all those other Congress people whom Sher seems to treat as fine and decent citizens despite their initial efforts on Bartesch's case? Is Sher simply waiting for any of them to write something critical of Israel, at which time he will accuse them of having been a stooge for the former Nazi?

Sher goes on to criticize the title of Carter's book. From what Christopher Hedges recently wrote in The Nation about the controversy over the book, Carter explicitly avoids describing Israel itself as an apartheid nation, and reserves the term only for the situation in the occupied territories. Frankly, the facts speak for themselves. Numerous observers of both South Africa and the territories have described the Palestinians as enduring something similar to, some say clearly worse than, the original Apartheid. And for that matter, while the conditions of forceful oppression are largely absent, the legal structure within Israel can--if one feels like doing so--quite reasonbly be described as apartheid-like: laws forbidding inter-religious marriages, laws forbidding ownership of land by non-Jews, laws forbidding many goverment benefits to non-Jews. So yeah, the title is confrontational, but it is not misleading and as for insulting, well, if the shoe fits...

Now, I think any critiques Sher makes must be judged on their merits (and I don't see much merit to those he lists in this op-ed), but for what it's worth, I'd also like to note that he is the former Executive Director of AIPAC, a group not generally viewed as moderate on issues of Israeli-Palestinian peace. In Hedge's Nation piece, he refers to former Israeli Prime Minister Yitzhak Rabin at the time that Rabin had realized that real efforts towards making peace were necessary. He describes Rabin's attitude towards the Jewish leadership in the U.S. as being expressly NOT supportive of Israel as a whole, but specifically supportive of Israel's hard right.

When Rabin, who had come to despise what the occupation was doing to the citizenry of his own country, was sworn in as prime minister, the leaders of these American Jewish organizations, along with their buffoonish supporters on the Christian right, were conspicuous by their absence. On one of Rabin's first visits to Washington after he assumed office, according to one of his aides, he was informed that a group of American Jewish leaders were available to meet him. The surly old general, whose gravelly cigarette voice seemed to rise up from below his feet, curtly refused. He told his entourage he did not have time to waste on 'scumbags.'

Sher was not at AIPAC at the time of this incident (he took the helm a year or two later), so perhaps Rabin would not have considered Sher a scumbag. Since Rabin was murdered by someone who shares the hard-right politics of people like Sher, we'll never know.

Regardless, since Sher refuses to debate with Carter on the substantive issues, will he devote himself fulltime to outing other Nazi sympathizers, like Desmond Tutu?

Wednesday, December 20, 2006

Econ-Atrocity: The High Cost of the Holidays

Econ-Atrocity: The High Cost of the Holidays
By Helen Scharber, CPE Staff Economist
Dec. 21, 2006

Ahh, the holidays. So full of joy, laughter, good cheer… and contradictions. The holidays are all about spending time with loved ones. Or are they all about finding the perfect gift? They are a time of relaxation and spirituality. Or perhaps a time of stress and consumerism? According to a 2005 poll by the Center for a New American Dream, more than three in four Americans (78%) wished that holidays were less materialistic, yet shoppers around the country planned to spend an average of $907 on gifts this holiday season. Sixty percent of people polled anticipated spending less this year than last, but according to the National Retail Federation, holiday retail sales were forecasted to rise five percent to $457.4 billion. As Howard Dvorkin, founder of Consolidated Credit Counseling Services, Inc. (CCCS), observes, “It seems that consumers are trying to be more conservative with spending this year over last, but many of the best laid plans fall through when the pressures of advertisers and unrealistic holiday expectations hit a fever pitch of season overload.” The fast pace and high cost of the holidays can seem to be out of our control, but there are a number of good reasons to take the reindeer by the antlers and reign in holiday consumption.

Let’s return to this $457.4 billion holiday sales figure for a moment. According to the National Retail Federation, this was the amount of anticipated retail sales in the U.S. for November and December 2006, and it constitutes one-fifth of total sales for the year. To put this number in perspective, only 26 countries have a yearly income above the $457.4 billion mark (that means at least 166 countries are below it), and it is roughly equal to the national income of the Philippines. According to the World Bank, the additional expenditure needed to achieve universal access to safe water and sanitation is around $30 billion. The list could go on, but you get the point: Americans spend a lot of money during the holiday season.

Perhaps spending 15 times the cost of safe drinking water and sanitation for everyone in the world could be justified if it were really making people happy. And we certainly shouldn’t underestimate the cultural importance of the holiday gift exchange, or the genuine satisfaction that can come from giving a particularly thoughtful gift. Yet, as a country, we don’t seem to be getting $457.4 billion worth of happiness out of the holidays. It is cliché by now to talk about holiday stress, and newspapers and magazines often print helpful tips this time of year for dealing with it. The National Mental Health Association even has a webpage devoted to coping with the “holiday blues,” which they say can be brought on by “unrealistic expectations, over-commercialization, financial constraints” and other pressures. Thanks to credit cards, financial constraints may not exactly be binding, but then, a poll conducted by CCCS in November found that 46 percent of all respondents were still paying off debt from last holiday season.

So spending the equivalent of the Philippine’s yearly income over the holidays seems to have bought us quite a bit of extra anxiety and debt. As you might imagine, $457.4 billion worth of stuff also represents a great deal of resource use and manufacturing pollution. Furthermore, all the packaging, wrapping paper, and items made redundant by gifts create a lot of waste. According to the EPA, the amount of household garbage in the U.S. generally increases by around 25 percent in the period between Thanksgiving and New Year’s Day. And the U.S. already leads the industrialized world in municipal solid waste generation, with each average American producing twice as much waste as the average German. Apparently holiday consumption isn’t great for mental or planetary health.

Isn’t there any good news? Here’s some: plenty of people have simplified their holidays by agreeing to cut back on gift-buying, or giving “alternative” gifts like donations to charitable organizations or gifts of time. You can too. For help, refer to the “Holiday Survival Kit” linked below or to your own ideas of what the perfect holiday might include (or not include).

Social and familial expectations can be powerful reasons to stick with the high-spending status quo, but listed above are some equally compelling reasons to challenge the norm. Perhaps you’re convinced, or maybe you didn’t need convincing in the first place. Still, you might be thinking, doesn’t the country need to keep consumer spending high for the health of the economy? Aha! Another contradiction to add to the list. It would be good if everyone cut back on holiday spending, but you’re worried the economy will collapse. Don’t worry too much. Consumption patterns don’t change overnight, and if (or when) Americans do trade in their thousand-dollar holidays for low-budget affairs, the economy will adjust just as it has adjusted to structural changes throughout history. And if there seems to be a contradiction between the well-being of the country and the health of the economy, we should be asking—what’s the economy for, anyway?

Statistics on holiday spending:

© 2006 Center for Popular Economics

Econ-Atrocities are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.