Conflicting Goals in California and All Over the U. S.

In a piece at Bloomberg Tyler Cowen expresses distress over the wildfires and blackouts in California:

The fires in Northern California — and the resulting power blackouts, affecting millions and running for days on end — show just how many nodes of failure Americans are willing tolerate or even encourage.

The practical and moral failings in this matter are so numerous it is hard to know where to start.

How about this: Systemic blackouts are commonly associated with nations such as Haiti or Pakistan, not the United States. Yet here is California, America’s biggest and probably most innovative economy, treating a blackout as some kind of unavoidable natural event. Why is this development not seen as an unacceptable outrage?

The No. 1 responsibility of a power company is to supply its users with power. So when the first-order response to a pending major problem is to cut the power for days, that is clear-cut evidence that the systems are badly designed.

High on the list of America’s failings would be its wanton disregard of climate change. True, it is difficult to pinpoint particular events as caused by climate change. It is entirely plausible, however, that climate change has made the fires more likely or more intense, due to the greater heat, dryness and wind.

Yet the U.S.’s carbon emissions are increasing. Even when there are successes in the fight against climate change, such as fracking natural gas to replace coal emissions, the benefits to the climate are an afterthought for most people.

In other words: Parts of our natural environment are deteriorating around us, and we are responding passively and defensively rather than with a dynamic, can-do attitude.

Add American liability law to the list of culprits. Because of legal liability from past fire-related events, the share price of Pacific Gas and Electric (PG&E), the public utility in California, has fallen from almost $50 to about $5 over the span of a year. It is thus no surprise that the utility is afraid of further fires and will limit them simply by pulling the plug on everyone’s power connections.

I’ll cut him off there. First, he misspeaks. A publicly-owned company’s #1 responsibility is to preserve the investment of its stockholders. Unless it does that it will be unable to provide the goods and services that are its #2 responsibility. California state law renders PG&E responsible for fires started by its equipment. That’s why its stock has collapsed.

I see the problem a little differently than Tyler does. California has a problem distinctly Californian but not unique to California. It has objectives that are in direct conflict with one another. Among these are its need to grow, a desire to preserve California’s natural beauty, California’s fragile ecosystem, and its tax base.

As you can see from the pie chart at the top of this page, California is highly dependent on the real estate and construction industries which account for about a quarter of the entire economy. Indeed, between government and its handmaiden economic sectors, i.e. those whose revenues derive mostly from tax dollars, and real estate and construction, that accounts for more than half of economic activity in the state. Add the financial sector and you’re around 2/3s of the whole economy.

Just about 40 million people call California home. That’s four times as many as lived there in 1950 and ten times as many as lived there in 1920. By comparison Illinois is about 50% larger than in 1950 and 100% larger than in 1920. New York State, too, has about 50% more people than in 1950 and 100% more than in 1920. Obviously, California’s population is growing very rapidly.

But, unlike Illinois or New York, California natural environment doesn’t lend itself to a large population. Unlike those states it has historically been quite sparsely populated. Equally obviously, there’s a conflict between preserving California’s natural beauty with the economic necessity of a huge and growing population. People control where and how housing may be constructed by means of restrictive zoning laws.

California can be wild as it has always been or it can be managed. But California is also home to the U. S.’s environmental conservation movement and that conservation movement has limited the state’s ability to manage its land.

People need electricity but unmanaged land lends itself to wildfires. You pays your money and you takes your choice.