Thread by @drvolts

All right: A THREAD. A long thread.

I had a thought I wanted to add to this piece, but it was a bit of a wonky diversion, so I left it out. I will instead tackle it here on Twitter, the ideal venue for complicated wonky diversions. 🤪 volts.wtf/p/america-is-m…

There's a concept in economics (from recently deceased Canadian economist Robert Mundell) of an "optimum currency area" (OCA). His idea was that common currencies should go beyond national borders to regions that share certain features. investopedia.com/terms/o/optimu…

The euro is the baby of this idea, though later some people (I think Krugman among them?) criticized it by saying that, in fact, countries like Germany & Greece are not similar enough, & do not share strong enough central gov't, for the euro to work well.

The specifics of OCA aside, it's interesting to contemplate the broader question: what is the right level of political aggregation at which policy can be most effective? What shared features (among states or countries) are necessary for shared governance to work?

In their recent book, @dcullenward & David Victor bring a similar analysis to climate policy. Their critique is that greens' long pursuit of economy-wide cap&trade is misguided because C&T systems attempt to aggregate together states or economic sectors... volts.wtf/p/why-carbon-p…

... that are simply too disparate to be coherently governed by a single system. The political tensions mean the systems never pass, or if they do, end up settling on a dismal lowest common denominator. The "optimum C&T area" is usually a small set of states or economic sectors.

The reason C&T is working better in the EU than anywhere else is that the participating EU countries are close enough in wealth, state of development, & quality of institutions to make common governance workable. The EU is an optimum C&T area.

So. Part of the motivation of the Paris climate agreement was the realization that the long pursuit of a single, legally binding system of mandatory CO2 reductions to govern all participating countries was simply doomed. Never going to happen. Too disparate.

The prevailing opinion is that, in most cases, the nation-state -- with its common identity, common governance, free internal movement of goods & labor, etc. -- is the optimum unit for climate policy. So Paris is built around voluntary national pledges.

And this brings us back, at long last, to the national US carbon target Biden announced (50% reduction from 2005 levels by 2030). I tried to articulate, in the post, why the target is less of a big deal than it seems. And it occured to me that one way to phrase my point ...

... is to say that the US itself is no longer a coherent unit of policymaking. There's even an open question whether it's still an optimum currency area. Why? Couple things, one specific, one general.

Specifically, an OCA features free internal movement of labor & resources. But as @ProfSchleich explains in this great pod w/ @willwilkinson, America's current extreme inequality & wildly dysfunctional housing policy (esp in big growing cities) ... modelcitizen.substack.com/p/how-zoning-s…

... mean that labor (aka people) is NOT freely moving. In fact many people are locked out of the growing cities where the jobs are by high housing prices caused by shitty zoning & NIMBYs. It's having huge (bad) macroeconomic effects!
yalelawjournal.org/article/stuck-…

More broadly, polarization & sorting have reached the point where it's not really clear that the US *does* have coherent central governance. Instead what we get is cons in charge of the feds & liberal states rebelling, or vice versa. Even now, red state pols ...

... are vowing to disregard or disobey federal policies. Red state gov'ts are passing laws prohibiting blue cities within them from passing their own gun or climate policies. The red Supreme Court is trying to restrain/hobble the blue federal gov't. We are no longer coherent.

In other words, it seems more & more that the US itself is not an optimum policy area or an optimum currency area. And thus it is incapable of making coherent plans or promises -- like Germany making promises for Greece, or vice versa.

This, to make a very long story short, is why Biden's Paris climate target doesn't mean much. He can't reliably state US intentions or promise long-term US action because the US is no longer U -- it's not united, not coherent, not governable.

The US no longer has the internal political & economic coherence to act as a singular entity. Or at least, that's where the current trajectory leads. To say the least, the implications are disturbing -- for America's international partners & its citizens alike. </fin>

One small addition to this thread. Only late last night did I discover that, in the Getty photo of Biden accompanying the piece, there's a small ... moth? cicada? ... sitting on his left shoulder. Zoom in! You may metaphor at will.

Apparently it's spotted lanternfly!

https://twitter.com/scooterbdoodle/status/1387540905201184772