The daylight saving tradeoff

Earlier this week, Scioto Analysis released our most recent demonstration cost-benefit analysis, this time looking at the impact daylight saving time has on Ohio. Overall, we found that the downsides associated with switching between daylight and standard time leads to about $40 million in social costs for Ohio every year. 

Essentially, we found that switching our clocks twice a year isn’t really worth the hassle it creates. 

However, if policymakers want to make a change, they will need to decide which time to adopt. If they choose permanent standard time, that means Ohio would have lighter mornings and the sun would set earlier. Permanent daylight time of course means darker mornings and later sunsets (currently, states are barred from adopting permanent daylight time at the federal level, so this policy would require a federal change first).

The decision between permanent standard time and permanent daylight saving time is particularly interesting because although our research shows that these two are roughly equivalent from a social benefit standpoint, there are important practical implications of each. 

The main tradeoff we found was between energy consumption and crime. Permanent standard time reduces overall energy consumption, but the earlier sunsets mean we expect to see increases in crime rates. Conversely, permanent daylight time should reduce crime as a result of the later sunset, but at the cost of increased energy use. 

The monetized value of these effects are basically equal (the benefit of reducing crime is just slightly larger), meaning from an economic perspective it largely doesn’t matter which choice policymakers go with. Either way Ohioans will get roughly the same value. To fully understand these two policy options, we need to understand how we monetize these benefits. How are we able to say that a reduction in crime is equal to a reduction in energy use?

The big question with monetization is the following: how much are people willing to pay for something? Consider the crime example. Some people are very risk-averse and would be willing to pay a lot to reduce their risk of experiencing crime. Those who are comfortable with more risk would likely find better uses for their resources elsewhere. But ultimately, everyone has a point at which they would stop paying to reduce their risk of crime.

We see this in security markets. Some people pay more than others for security systems on homes, showing that there are differences in willingness to pay for reductions in risk of crime victimization.

The important point is that our monetized values try to capture the opinions of everyone in a society, and individuals may disagree with these values. 

This means that although from a social perspective permanent standard time and permanent daylight saving time are basically the same, individual policymakers may see one benefit as outweighing the other. The preferred option will be the one that most aligns with the views of the people deciding on the policy. 

Either way, Ohio would benefit economically from doing away with the time change every year. The increase in car crashes and decrease in productivity that results from messing with peoples’ sleep schedules twice a year isn’t worth it.

As election season approaches, this is an excellent reminder that the people we choose to represent us have a lot of influence over the way our society functions. Even in years where there aren’t any federal or state offices to vote for, local elected officials can have a big impact. City councils, mayors, and school districts all have major sway over local policy. Make sure to inform yourself about the candidates in your area, and go vote on election day.

Intern perspective: What I learned during my first cost-benefit analysis

I just finished my first cost-benefit analysis on daylight saving time as a policy analyst intern for Scioto Analysis. During these last few months, I faced the ups and downs as anyone does when doing research. 

One minute I was finding rich data on the topics I need to calculate impact and the next, I found a report that conflicted with my past findings. While this was a frustrating process, when I was able to pull together all the pieces into the report, I was amazed by the amount of research that went into the study.  This experience taught me a lot about my time management, research and writing skills. 

One of the most important parts of building a cost-benefit analysis is choosing which impacts to calculate. During my early research, I was able to identify some impacts that are already well known to be affected by daylight saving time. 

Energy was an impact that first emerged when I began to look into why daylight saving time was initially implemented in the 1900s. There were many conflicting reports about the true effects of daylight saving time on energy and I decided to use a report done on Indiana as I felt it was applicable to Ohio. 

I was aware that daylight saving time added another hour of sunlight so my assumption was that we saved energy during this time but my research showed the opposite. I hadn’t taken into account the use of air conditioning or other energy sources whose usage increases during the extra sunlight and heat in the summer. This impact showed me that we make assumptions about things we don’t know much about because it makes sense to us.

Another impact that surprised me was the benefit of decreased crime. Crime was not in my original list of impacts until I came upon a report that claimed that the extra hour of sunlight saved the U.S $12 million every day it occurred. As I began to investigate, it amazed me the rate of crime reduction during daylight saving time because there was less darkness in which crime may occur. While the impacts of energy and car crashes had the odds stacked against daylight saving time, crime brought daylight saving time effectiveness back to the discussion. 

During this experience, I realized how important cost benefit analysis reports are to policymakers and vital to making the right decisions. Policymakers have to decide on many issues and without having the research to assist them, those decisions can be disastrous. These reports help provide evidence from a wide range of sources and collect all the data in an easy to read way. 

When I was deciding what impacts I wanted to investigate and include in the report, I felt a lot of responsibility. It did make me realize the pressure that policymakers deal with when making decisions that not only affect their own constituents but also potentially the country. I want to thank Rob Moore and Michael Hartnett for giving me this opportunity and all their support and wisdom during this process. 

This blog post was written by Scioto Analysis Summer Intern Amy Townend. Amy is currently studying economics at Bates College in Lewiston, Maine.

Permanent Daylight Saving Time would reduce crime

Earlier this morning, Scioto Analysis released a new study measuring the economic impact of daylight savings time. We found that if Ohio switched to permanent daylight savings time, the state could see net economic benefits ranging between $39 and $41 million annually. 

The most significant impact of permanent daylight savings time would be the impact it has on reducing crime. Having the extra hour of daylight in the evening has been found to lead to fewer crimes each year. By adjusting the clocks so the sun sets an hour later for part of the year that is currently standard time, we expect there to be a reduction in crime. We project Ohio would save $9.4 million every year from crimes prevented by changing to permanent daylight saving time.

If Ohio were to convert to permanent standard time, we project the state to see total benefits between $36 and $39 million. In this scenario, having the daylight be permanently earlier in the morning would lead to less energy use for Ohioans.

The other benefits of switching to permanent daylight savings time are related to removing the bi-annual changing of the clock , which research has shown can cause additional car crashes and lower productivity. 

Currently, states are not allowed to operate on permanent daylight savings time, only permanent standard time. In order for Ohio to permanently set their clocks on daylight savings time, a federal change would need to happen first.

This study is part of a series of cost-benefit analyses conducted by Scioto Analysis. Previous cost-benefit analyses were conducted on the recreational marijuana, child tax credit, harmful algal blooms, and urban canopy programs.All previous cost-benefit analyses can be found on the Scioto Analysis website.

The costs of recreational marijuana legalization

Earlier this week, Scioto Analysis released a cost-benefit analysis on legalization of the sale and purchase of marijuana for recreational use. As part of this, principal analyst Rob Moore and I had the opportunity to speak with the League of Women Voters of Metropolitan Columbus about our findings. 

Because we specialize in cost-benefit analysis, we decided to frame our discussion as using that context. Rob talked about the benefits of legalization (you can find his blog post about the topic here) and I got to talk about the costs. 

Here is what we found about the economic costs of legalizing recreational marijuana:

Productivity 

One major concern for opponents of recreational marijuana legalization is the effect the policy change will have on people’s ability to do their jobs. If legalization makes marijuana easier to access and enables more people to become users, there may be an increase in the number of people who fail to perform at their jobs because of marijuana use.

One paper used a difference-in-differences model and found that across four industries (mining; construction; arts, entertainment, and recreation; and accommodations and food Service), the legalization of marjuana led to a roughly 1% decrease in productivity. 

Although a 1% decrease in productivity seems small, these are extremely productive and important industries to our society. We estimate that this decrease in productivity would lead to a net loss of roughly $760 million across the state. 

From an economic perspective, this is actually a very surprising result. This is because productivity is not likely to fall by 1% for every employee in these industries. Instead, it’s much more likely that a very small percentage of employees become extremely unproductive. 

Because of this, we might expect the labor market to correct for this loss by letting go of less productive employees in favor of more productive ones. While this might be true in the long run, there is a lot of friction in the labor market that makes adaptations like this quite slow. 

For example, it can be very expensive for employers to fire old employees or hire new employees. If those costs are greater than the private cost of having less productive workers then employers won’t be incentivized to make a change.

Car Crashes

Another important downside of legalized recreational marijuana is the impact it has on car crashes. Similar to the productivity decrease, it follows that if we increase the number of people using recreational marijuana the number of people who end up driving while under the influence is going to increase. 

Our models project that in Ohio, the increased number of people driving under the influence will lead to just over $120 million of costs for the state. This comes from a combination of increases in property damage, injury, and fatalities. 

There are other potential negative effects of recreational marijuana that we chose not to monetize for our report. One significant one that gets a lot of attention in the media is the health effects of marijuana. 

We chose to not include direct health effects in our models for one main reason: the interaction between marijuana use and alcohol use. There is some evidence to suggest that marijuana use may be a substitute for alcohol use, meaning that legalized marijuana could decrease alcohol use rates.

If this is true, then depending on how much alcohol use decreased, we could see positive health effects from legalizing recreational marijuana. However, more research is needed to understand exactly what the health outcomes for society will be. 

At Scioto Analysis, we believe that good policy decisions happen when the policy makers are well informed about the subjects they are deciding on. This year, the public gets to help make some policy decisions. Hopefully this helps inform your vote when you head to the polls in two weeks.

The benefits of legalization of recreational marijuana

Earlier this week, Scioto Analysis released a cost-benefit analysis on legalization of the sale and purchase of marijuana for recreational use. A couple of months ago, I wrote a commentary for the Ohio Capital Journal about what the potential impacts would be of legalization of recreational marijuana infor Ohio.

A member of the League of Women Voters of Metropolitan Columbus contacted me soon afterwards to see if I would speak on the topic for their Education and Advocacy committee. They were interested in having someone come in to speak on the “pros” and “cons” of the initiative.

My colleague Michael Hartnett and I decided to present on the costs and benefits of legalization of recreational marijuana use, inspired by the cost-benefit analysis we were conducting at the time. I spoke on the benefits, and Michael spoke on the costs.

In that spirit, we thought it would be valuable for us to write a pair of blog posts on the topic as Ohio draws nearer to a statewide vote on the legalization of the sale and purchase of marijuana for recreational use.

Here is what we found about the benefits of recreational marijuana use.

Tax revenue for employment and substance abuse treatment programs

The largest benefit we project from the legalization of sale and purchase of marijuana for recreational use is tax revenue generated for employment and substance abuse treatment programs.

A 10% excise tax will be applied to all purchases of marijuana for recreational use. These funds will mostly go to a new “cannabis social equity and jobs fund” and “substance abuse addiction fund” which will finance employment and substance abuse treatment programs.

We estimate the state will raise about $190 million per year from excise taxes. Because estimates from the Washington State Institute for Public Policy show large social benefits for both of these types of programs, we estimate the benefits of these programs will generate a value of about $800 million per year.

It’s worth noting these funds may change after the ballot initiative is passed. The state legislature can amend Issue 2 however it wishes to since it is an initiated statute and some legislators have already indicated interest in particular in changing the use of tax revenue.

Industry Employment

Legalization of the sale and purchase of marijuana for recreational purposes constitutes creation of a new industry. Looking at the size of industries in other states that have legalized the purchase and sale of marijuana for recreational purposes, we estimate Ohio will add about 3,300 new jobs to support this industry. We estimate this will lead to about $190 million in new wages due to the new jobs.

Consumer Surplus

Another benefit of legalization of the sale and purchase of marijuana for recreational use is that more people will have access to a good they did not have access to previously. We estimate the total value consumers will get from having access to a new market at $98 million.

Crime

Finally, the legalization of a market means fewer people facing prosecution for marijuana-related crimes. Using trends seen in other states around legalization, we estimate there will be about 4,400 fewer arrests per year if the sale and purchase of marijuana for recreational use were legalized.

So there it is: more tax revenue for employment and substance abuse treatment programs, more jobs, more things people want, and less crime. There will certainly be benefits to the legalization of the sale and purchase of marijuana for recreational purposes. Now hang tight for when my colleague Michael releases his blog post on the costs of the program.

Tax revenue from recreational marijuana will generate hundreds of millions of dollars in social benefits

Earlier this morning, Scioto Analysis released its most recent cost-benefit analysis looking at the impact of Ohio’s Ballot Issue Two, recreational marijuana legalization. We found that this policy will likely generate about $260 million in net benefits for society, though likely results ranged between $200 million in net costs and $1.9 billion of net benefits. Although there is a chance the costs outweigh the benefits, our simulation model suggests that in 90% of likely scenarios, recreational marijuana legalization will have a positive net economic benefit on society. 

The largest reason for these benefits is the estimated $190 million of tax revenue that we expect to be collected from the sale of recreational marijuana. In the language of ballot initiative, this revenue would be earmarked in part for two highly beneficial programs: the Cannabis Social Equity and Jobs Fund and the Substance Abuse Addiction Fund. We expect both of these programs to generate over $800 million of social value by themselves. 

The most significant cost we monetized was the lost productivity of workers in certain industries. Past research has shown that states that legalized recreational marijuana experience reductions in productivity amounting to roughly a 1% decrease per worker. In Ohio, we calculate that this will lead to roughly $760 million worth of lost productivity in the short run. 

“The key reason benefits are likely to outweigh costs when it comes to marijuana legalization is how the tax dollars raised are going to be used,” said Michael Hartnett, policy analyst. “The programs outlined in the ballot initiative have historically been very efficient ways to use public dollars, and will likely generate a lot of value for Ohioans.”

This study is the most recent cost-benefit analysis conducted by Scioto Analysis. Previous cost-benefit analyses include research on water quality programs, municipal tree planting, volunteer programs, and school closures for COVID-19.

New ways to think about the economy

Part of Scioto Analysis’ mission is to change the way people think about the economy. We believe in looking beyond GDP and output, and actually trying to measure how well-off people are. We think that this base understanding will be a better basis for good public policy than the current tools we have.

To do this, our goal is to conduct a series of five analyses looking at different ways to measure the economy. We’ve done three already: the Ohio Poverty Measure, an Inequality Report, and most recently our GPI 2.0 report.

We are currently working on the fourth leg of this plan, a human development report that we are working on with the help of a group of undergraduate students at Ohio State University’s Department of Agriculture, Environment, and Development Economics. The final step that we will tackle sometime in 2024 is going to be a report on subjective wellbeing. 

Our subjective wellbeing report will come just over a decade after the Organization for Economic Cooperation and Development (OECD) released their initial guidelines on how to do subjective wellbeing measurement. Just last month, OECD released a new working paper exploring the current practice of measuring subjective wellbeing. Below are some of the highlights from that report. 

What we want to measure

The OECD report breaks up subjective wellbeing measurement into four categories:

1. Evaluative - Overall life satisfaction

2. Positive Affect -  How often people feel positive emotions

3. Negative Affect - How often people feel negative emotions

4. Eudaimonia - Feelings of purpose, motivation, and optimism/hope

Exploring all four of these categories is necessary to capture a more complete picture of how people feel about their wellbeing. These four categories are a great example of how to design an effective survey.

These four categories may be correlated with one another. For example, we might expect someone with higher overall life satisfaction to have more positive emotions and fewer negative emotions. But without all four categories, we could be missing a key piece needed to understand how people feel. 

A good example of these questions in practice is the recent US Happiness Survey released by Gross National Happiness USA. This is a grassroots organization that Scioto’s principal Rob Moore is president of. Their work is focused on measuring subjective wellbeing at the national level.

How wellbeing can influence policy

One of the main findings from OECD’s follow-up was that despite a growing desire to measure subjective wellbeing, there are still very few examples of policy decisions being made with these figures in mind. Some of this may be because policymakers still don’t understand how to use this new data to make decisions. 

One area subjective wellbeing could help improve policy decisions is when analysts examine policies that are going to have large non-market effects. Our economic toolbox often relies on market principles that sometimes aren’t relevant. In these cases, it may be better to take a subjective approach that more accurately represents how people act than to try and fit our current models to the situation. 

Future considerations

Finally, the report talks about how future subjective wellbeing research can help advance the field. One of the main points of interest is what other categories we can use to measure wellbeing.

Some potential affective measures could be how often people feel tired or relaxed. Generally, how often people feel things that don’t exactly fit into a positive or negative box. However, before we start asking these questions, we need to know how they relate to our current subjective wellbeing measures. The promise of subjective wellbeing measurement is big: we could help craft policy that makes people happier.

How are local governments forgiving medical debt?

There’s a dirty secret about medical debt held by debt collectors: they don’t want it.

In a health care market that requires much from payers receiving medical services, medical debt is built into the structure of the market. The market for medical debt in the United States is nearly $200 billion in a 2022 estimate.

Much of that debt is not going to be repaid. And the holders of that debt know that. They will do what they can to get those debts paid off, but many people holding these debts do not have the means to pay them back.

Debt collection executives Craig Antico and Jerry Ashton saw this and had an idea. What if holders of debt were given an option to cut their losses and get paid to let go of that bad debt? How much would these collectors be willing to accept to let go of that debt?

The answer is very little. Antico and Ashton started a company called RIP Medical Debt that used advanced analytics to identify where some of this debt existed. They raised money from donors, partnering with nonprofits and community organizations to buy debt at a penny on the dollar.

Then they forgave that debt in full.

More recently, governments have been getting into the debt forgiveness game. Last year, Chicago’s Cook County, Illinois allocated $12 million of American Rescue Plan dollars to erase $1 billion in medical debt across the county.

Toledo, Ohio has become the first city in Ohio to start forgiving medical debt. The city allocated $800,000 in ARPA funds and got a match from Lucas County. This could lead to nearly a quarter billion dollars in medical debt forgiveness in the county.

Then-Toledo City Councilmember and Now-State Representative Michele Grim sponsored the program and is now looking to expand it statewide.

Other cities across the state have had legislation introduced to allocate funds to buying and forgiving medical debt. Last night, city leaders in Columbus announced $335 million in medical debt forgiveness achieved through a partnership with the Central Ohio Hospital Council. Councilmembers on the Cleveland City Council have introduced legislation to allocate $1.9 million to forgive $190 million in medical debt.

These publicly-funded allocations are cropping up outside of Ohio, too. Less than a year ago, Pittsburgh, Pennsylvania earmarked $1 million in city funds to forgive $115 million in medical debts across the city.

Cancellation of medical debt can be a lifesaver for a family struggling with paying off debt. Mounting medical debt can keep someone away from preventative care and can help families that are putting off refill of prescriptions to get access to care they need. It also has the potential to remove a barrier to access to credit for families, which can be important for families working to buy a house or get a car payment.

Medical debt forgiveness will not end poverty or solve all problems, but it is one tool in the arsenal of local governments looking to provide relief for residents. And for some people, this sort of intervention could mean the world.

Can clean jobs drive Ohio’s employment future?

My first job as a policy analyst was with a group called the American Jobs Project. We were a group of researchers and graduate students at UC Berkeley working under the guidance of former Michigan Governor and now Secretary of Energy Jennifer Granholm to understand the possibility of clean jobs in the United States.

In this position, I drove across Ohio interviewing people in the clean energy and manufacturing sectors about the wind and advanced manufacturing industries. 

A decade ago, a lot of these ideas seemed abstract. Many parts of these industries were starting to get footing, but there had been starts and stops in Ohio’s clean energy industries.

I was excited recently to come across last month’s Clean Jobs America 2023 report. In this report, researchers found Ohio is home to over 110,000 clean energy jobs. These jobs make up over a third of the energy jobs in Ohio despite renewable energy only generating 4% of electricity in the state.

About 76,000 of these jobs were in energy efficiency with the rest made up of clean vehicle, renewable energy, storage and grid, and biofuels jobs.

Maybe more importantly, the number of clean jobs available is outstripping the general growth in employment in Ohio. While statewide job growth in 2022 was 2.1%, clean job growth was over double the rate at 4.6%.

The fastest-growing clean job subsectors were clean vehicles (13.0%), storage and grid (7.7%), and renewable energy (6.7%). Each of these grew three times faster or more than statewide employment.

An especially promising element of clean job growth is their concentration in industries that support working-class professions. About half of Ohio’s clean jobs are in the construction industry and another quarter are in the manufacturing industry. These jobs also support white-collar employment: about 15% of these jobs are in the professional services industry.

Breaking down Ohio’s energy efficiency jobs, they are split pretty evenly between efficient lighting, traditional HVAC, renewable HVAC, and advanced materials jobs. This indicates Ohio’s energy efficiency employment is diversified and split between upgrading existing infrastructure and building new infrastructure.

Over the past two years, Ohio’s clean energy employment has grown from 103,000 to 114,000 and its clean vehicle employment has grown from 16,000 to 22,000. And while its fossil fuel employment has hovered around 30,000, its gas and diesel vehicle employment has grown from 119,000 to 130,000.

If lawmakers in Ohio want the state to be a leader in the growing clean job market, it has options at its disposal.

Strengthening Ohio’s renewable portfolio standard will spur job growth in the renewable energy sector and help ease Ohio’s transition from a fossil fuel dependent electricity market to a more diversified market.

Joining the regional greenhouse gas initiative would introduce Ohio’s electricity companies to a new market of carbon allowance trading with twelve other states, including neighboring Pennsylvania. This would allow power companies to efficiently reduce carbon emissions through trading of allowances and incentivize creation of more clean jobs.

Enacting a carbon tax would have a similar impact, incentivizing the creation of clean jobs by discouraging the use of fossil fuels in the electricity and transportation sectors.

In 2021 Scioto Analysis found each of these strategies would abate carbon and have large economic benefits. Less climate change, a stronger economy, and more jobs: what’s not to like?

This commentary first appeared in the Ohio Capital Journal.

How much inequality is too much?

One thing that most people would agree on is that inequality is a problem. Especially in the United States where there is a great deal of inequality, I imagine it would be near consensus that our society would be better off with less inequality, all other things being equal. 

Inequality exists on a wide variety of dimensions such as race, gender, sexuality, and religion. These social examples of inequality are generally agreed to be bad for society. Unfortunately, because they are social issues, it is difficult to design policy focused on correcting them. 

In a liberal society, the government has little power to enforce social equality. This is not to say it is impossible, nor that policymakers shouldn’t work to correct these inequalities, but the levers policymakers have at their disposal to spur social change are few and far between.

However, policymakers do have very straightforward ways of reducing one type of inequality: income inequality.

A governing body that has the power to levy taxes could in a single bill completely exterminate income inequality. So, why doesn’t this happen anywhere?

The answer is because even though we might accept that income inequality is bad, we are willing to tolerate some amount of it when the benefits to society outweigh the negative impacts of income inequality.

It is true that our economy is set up to reward individuals who come up with ideas that people like. Jeff Bezos is a billionaire because people would rather have anything they want delivered to their doorstep than go to a store and buy it. 

In a vacuum, the creation of Amazon seemed to have made society better, despite the fact that it increased income inequality. But what if we could do better? Really, what I am asking is this: are we currently allocating these resources optimally?

What if some of the money that goes to the highest earners was taken and given to those who don’t have enough to get by. This already happens to some extent via taxes and social safety net programs, but are we doing enough?

The answer to this question largely depends on an individual's preference. One way to think of reducing inequality like this is by imagining a leaky bucket (an image first presented by Arthur Okun). If we want to take income from one individual and move it to another, we need to do so with our leaky bucket (taxes). The more income we try to move, the more we expect to leak out of our bucket in the form of administrative overhead and more importantly, distortions to our economy.

This presents two interesting challenges for policymakers. How much income should we try to move with our leaky bucket, and what can we do to minimize the leak? Both of these are important questions, and both can directly be influenced by policy.

How much we should reduce income inequality really is a function of how leaky our bucket is. If policymakers are able to design efficient ways of reducing inequality, then bigger reductions of inequality could reduce losses for society. We could even see gains in the long run, as studies of the child tax credit suggest.

Even though it’s impossible to close the leak entirely, our society could still benefit from reduced inequality. At extremely high levels of income inequality like we have in the United States, we might not even notice leaks at a societal level at all.