Environmental Economics

An error of omission in SuperFreakonomics

From the economics angle the biggest problem with the SuperFreakonomics climate change chapter is the lack of economics. That sounds odd, doesn't it?. As I've said before I have no idea if the 18 mile volcano tubes are ridiculous or not, but it should be considered a complement to reducing CO2 is a complement and not a substitute (at least in 2009, without a crystal ball). The misquotes are a concern too.

What bothers me most is the omission of a discussion of government policy that might be effective in reducing CO2. The strawman policy that is considered is voluntary behavior, encouraged by Al Gore's moral suasion. They argue that it won't work because physicians don't wash their hands often enough even though they know that it is in the best interests of patients. Environmental economists have long known that moral suasion is not effective in achieving the optimal amount of pollution reductions. So, while demonizing physicians makes for a nice story, I don't think it helps us understand climate policy.

Where do Levitt and Dubner stand on carbon taxes vs cap-and-trade? We don't know because those words are not mentioned. Where do they stand on Waxman-Markey? We don't know. Where do they stand on command-and-control vs economic incentives? We don't know.

What I did today

I just finished presenting Tim's (and Rob's and Kurt's) paper in our Department Seminar Series:

Appalachian State University
Department of Economics
Seminars
2009-2010

All seminars are in Raley 3010 at 2:00 P.M. unless otherwise indicated.

...

November 6, John Whitehead, "Angler Heterogeneity and the Species-Specific Demand for Marine Recreational Fishing"

They were wowed (not) and now they are going to buy me a beer (I hope) ... I'll post more details on this project later

"You guys are interested in cow farts, right?"

Well, I'm offended you even had to ask.

The title comes from a message from David Zetland (at aguanomics) who, besides asking questions with obvious answers, thinks posts about cow farts cheapen his blog.  To that I say, nothing can cheapen our blog--er, or something like that.

The World Watch Institute has released a new report arguing that the FAO’s estimate of livestock’s total contribution to global GHG emissions (18%) is a serious underestimate and that the true footprint of livestock production is around 51% of higher.
 
It bases this figure on the claim that the FAO report fails to count, misallocates or overlooks additional emissions that are attributable to livestock.
 

What's that saying about not wanting to be a member of club that would have you?

From the inbox:

Thank you for your interest in the [EPA Science Advisory Board] Environmental Economics Advisory Committee. This is to let you know that you were not selected. We were privileged to have many qualified candidates such as yourself from which to fill just 4 openings on this committee.

Well at least I wasn't not selected from a pool of unqualified candidates.

BREAKING NEWS (I just love writing that)

From Reuters:

The U.S. Senate Environment and Public Works Committee on Thursday approved a Democratic climate change bill that would require industry to cut emissions of carbon dioxide and other greenhouse gases 20 percent by 2020 from 2005 levels.

With Republicans boycotting the committee's work saying more analysis of the legislation was needed, 10 Democrats voted to approve the legislation and one Democrat, Senator Max Baucus, voted against it.

The bill will now become one of several initiatives aimed at attacking global warming. Senator John Kerry is leading an effort with some Republicans and the White House to craft a compromise bill, which likely would not be voted on by the full Senate until next year at the earliest.

"Ask yourself some questions about climate change and then answer them."

From an Ask the Expert column I wrote for onCampus: The Ohio State University faculty staff information hub (aka on-line newsletter):

What are the basics of the recent energy policy proposals in Congress?
There are two energy bills moving through Congress right now: The American Clean Energy and Security Act in the House of Representatives (*cosponsored by Waxman-Markey) and the Clean Energy Jobs and American Power Act in the Senate (**sponsored by Boxer-Kerry). The meat of both energy policy proposals is a Cap and Trade program for carbon dioxide emissions — a principal greenhouse gas to which climate change is attributed — in the US. Cap and Trade is a program for capping total carbon dioxide emission and creating a market for carbon dioxide (CO2) emissions among potential polluters. Regulators decide the total amount of CO2 society desires (the Cap) and then allocates permits or allowances to emitters totaling that amount. These allowances are fully marketable commodities (the Trade)***.

Read on to find out the potential economic impacts of Cap and Trade and why Ohio (and you) should care...

McFadden on contingent valuation

In the Review of Mechanism Design (page 84):

A largely independent development of stated preference methods, called contingent valuation (CV) and focused on eliciting preferences for public goods, occurred in resource economics (Davis 1963; Randall et al. 1974). The method has been promoted and used somewhat uncritically as a tool for valuing resource damage, and there is a large and contentious literature on its validity, but methodologically it is simply a form of conjoint analysis with a truncated design for the experimental presentation of alternatives. Hence, the concerns of its critics are those for stated preference methods in general, with added concerns about consumers’ ability to generate preferences for unfamiliar public goods, separate self-interested preferences from broader preferences incorporating social norms, respond consistently in hypothetical versus real choice settings, and respond predictably to hypothetically incentive-compatible framing of survey tasks.

And there is a longer section on referenda. Here is something interesting n hypothetical bias (page 92):

An overall assessment is that studies finding the least bias focus on private goods, and that proponents of CV find fewer problems with hypothetical bias than do critics.

I'm wondering how proponents and critics are defined. The causality matters. If you find hypothetical bias in your study do you become a critic or vice versa?

"Survey of 144 top economists finds strong consensus for climate action"

From the inbox comes evidence that "elite economic experts" (smacks of elitism) consider global warming a problem and think incentives might matter:

Most expert economists agree: reducing our greenhouse gas emissions can help avoid a major economic malfunction. Those are the findings of a survey conducted by the Institute for Policy Integrity, released [yesterday] morning in a report called Economists and Climate Change: Consensus and Open Questions. 

Malfunction?

Over 84% of the top economic experts responding to the poll said that the effects of global warming will create significant risks to important sectors of the United States and global economies. There was near unanimity—98%—that a price on carbon will increase incentives for efficiency and innovation.

Insert snide SuperFreakonomics remark here (i.e., snark). Such as: "But, what about the evidence that doctors don't wash their hands?"

Just a map that I thought was cool

From the Washington Post:

Scientists spent eight years tracking the movements of 179 great white sharks and discovered that these predators have very predictable migration patterns between Hawaii and the North American coast. Dots below show approximate locations where 68 sharks tagged with satellite sensors were recorded at various times.

Amartya Sen and I have something in common

Sen was born on this day in 1933. I was born on this day in 1969.

Sen has a Nobel Prize.

I don't.

Good bye to contingent "valuation"?

I'm typing up my notes for the contingent valuation method (CVM) lecture in the benefit-cost analysis course and it has made me ready to deal with something that's been bugging me for awhile*. I'm thinking it is time to drop the "valuation" part of contingent valuation and replace it with "behavior" (i.e., contingent behavior), or drop "contingent valuation" completely and go with "stated preferences."

Name that Halloween costume

Demented and sad, but social...

I think I may be an out of touch expert

Here's the beginning and end of a column I submitted at 11:30 today for an Ask the Expert segment in our campus newsletter:

The American Clean Energy and Security Act in the House of Representatives (nicknamed ACES and cosponsored by Waxman-Markey) and the Clean Energy Jobs and American Power Act in the Senate (with the much less pronounceable acronym CEJAP sponsored by Boxer-Kerry).  The meat of both energy policy proposals is a Cap and Trade program for Carbon Dioxide Emissions—a principal greenhouse gas to which climate change is attributed--in the U.S....

A strong case can be made for Carbon allowances to be allocated in such a way that the resulting redistribution of revenues from energy production results in increased investment in renewable energy production in Ohio, thereby reducing the economic burden placed on Ohio by Carbon pricing.

Here's the beginning of a Washington Post story I clicked on at 11:35 today:

The climate-change bill that has been moving slowly through the Senate will face a stark political reality when it emerges for committee debate on Tuesday: With Democrats deeply divided on the issue, unless some Republican lawmakers risk the backlash for signing on to the legislation, there is almost no hope for passage.

This is news to me

We're "reputable" economists (The simple math of green jobs):

From time to time we have reported on green job projections. Many reputable economists question these studies, among them Tim Haab and John Whitehead at The Environmental Economics Blog ...

From now on the acronym for "The Environmental Economics Blog" is TEEB (pronounced TEEB, the double e spelling always results in the long e sound, like geek).

My latest post at The Energy Collective

Begins like this (Some thoughts on SuperFreakonomics):

I admit that I’m torn in my opinion about SuperFreakonomics. I was predisposed to fully embrace it. The first book, Freakonomics, did great things for the economics profession. It made economics interesting and readable. It broadened the scope of the field in the mind of the public. Plus, Dubner is a graduate of Appalachian State University. He came to campus, gave the opening convocation talk, I went to his public reading, met him and he sent my kids a free copy of his Belly Button book. I’ve also contributed at the Freakonomics blog. So, I was horrified to hear that they got the science in their climate change chapter all wrong.

Don’t be mistaken. I don’t know if it is all wrong or not. I’m a simple economist. But it seems that real-life climate scientists, and not just the advocates, think that it is really, really wrong as well. The problem, to me, is that Dubner and Levitt stepped a bit too far outside their realm of economics.

And ends like this:

I wish SuperFreakonomics had stuck to economics.

In the middle I tell a fish story.

A SuperFreakonomics demand and supply example?

From the inbox:

Greetings from Amazon.com. You saved $1.69 with Amazon.com's Pre-order Price Guarantee! The price of the item(s) decreased after you ordered them, and we gave you the lowest price.
The following title(s) decreased in price:

SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance
             Price on order date: $16.19
       Price charged at shipping: $14.50
 Lowest price before release date: $14.50
                        Quantity: 1
                   Total Savings: $1.69

$1.69 is your total savings under our Pre-order Price Guarantee.

Prices fall with falling demand or increasing supply. Do those rules work at Amazon.com? If so, what does it say about the market?

This is really scary

I continue to cringe at the SuperFreakonomics reviews, but I can't stop reading and reposting them. Is that admission a cry for help?

David Roberts at Grist:

Steven Levitt and Stephen Dubner are the latest to do it, in their new book Superfreakonomics. Their chapter on climate change sits awkwardly with the rest of their work; the original Freakonomics was based on Levitt’s academic work, real data and models the authors used to make ostentatiously counterintuitive points about perverse economic incentives. But Levitt did no original work on climate. The chapter’s not about economic incentives. There’s no evidence of deep or sustained engagement with the literature or previous research on the subject. The authors just high-stepped in, cast a cursory glance around, and started condescending to the people involved in it (and stepping on rakes).

Why? What leads people to think that entire areas of climate science and policy, the subject of close study by thousands of very smart people all over the globe every day, can be overturned with facile points of logic and Silver Bullets Nobody’s Thought Of?

I read the section of the climate change chapter on negative externalities. It is good, except for one thing. I don't get how a stray bullet, intended for a drug dealer, that hits an innocent bystander is a negative externality. Negative externalities are the result of voluntary transactions that harm someone not participating in the transaction. Next up is the geoengineering section!

Image source: http://i.ehow.com/images/GlobalPhoto/Articles/4537453/pumpkinsick-main_Full.jpg

Real climate scientists aren't happy

An open letter to Steve Levitt at the RealClimate blog:

... if it has come to pass that we can’t expect the William B. Ogden Distinguished Service Professor (and Clark Medalist to boot) at a top-rated department of a respected university to think clearly and honestly with numbers, we are indeed in a sad way. ...

May I suggest that if you should happen to need some friendly help next time you take on the topic of climate change, or would like to have a chat about why aerosol geoengineering might not be a cure-all, or just need a critical but informed opponent to bounce ideas off of, you don’t have to go very far. For example…

But given the way Superfreakonomics mangled Ken Caldeira’s rather nuanced views on geoengineering, let’s keep it off the record, eh?

Your colleague,

Raymond T. Pierrehumbert
Louis Block Professor in the Geophysical Sciences
The University of Chicago

I finished reading the prostitution chapter (it was great, but "patriotic prostitutes"? that's a reach) and the global cooling section of the climate change chapter. I must agree with the critics, it really does present global cooling as the scientific consensus, implying that the current scientific consensus might be just as nutty.

$230,769 per job

From CNN.com:

The largest stimulus program in the nation's history has created or saved at least 650,000 jobs, according to a report released by the Obama administration on Friday.

Based on approximately $150 billion in spending from the $787 billion recovery package, the tally is the first broad, concrete look at the stimulus program's impact on the economy. The numbers are drawn from tens of thousands of reports from state and local recipients as well as private companies.

We're well read

From the inbox:

Today the Washington Post had an article on the tension at Virgina Tech between those who want to tailgate for Thursday night games and, um, academics. My favorite quote: ' having a prominent football team "does great things for the university, much more so than somebody discovering something in their PhD dissertation, which five people read. That's true, and we're going to have to live with it." '

HAHAHAHAHA. I will bet you money that no more than five people have read my dissertation, and that's generously assuming that my committee did.