Economics – Page 134 – a sibilant intake of breath

Morality of climate inaction

Happy Birthday Sasha W

One of the most interesting statements made at the climate change conference was Henry Shue’s moral categorization for inaction on climate change: he called it ‘the infliction of harm upon the defenceless.’ This, he said, is true independently from whether abrupt and harmful climate change scenarios arise. Given what we know, it is akin to forcing someone to play Russian Roulette: even if there is no bullet in the chamber, when the hammer falls, the imposition of the risk is immoral.

The idea of future generations being in a position of helplessness, relative to us, had not occurred to me before. Historical progress has generally involved increases in human capability. I suppose it is only now that we have the widescale ability to threaten vital biological systems that we stand to undermine whatever new capabilities our forebears will have, both technical and economic, by presenting problems insoluble even with future technology.

Scenarios like the disruption of the Thermohaline circulation circulation of the liberation of methane hydrate from the ocean floors definitely seem insoluble, even given vastly increased capability. Perhaps such arguments can help to generate the impetus in the minds of people and policymakers that will be required to move forward with GHG controls.

Back to the moon? But why?

Apparently, Lockheed-Martin got the contract to serve as prime contractor for a return to the moon, and possibly further travel from there to Mars. Now, when I first heard the ‘back to the moon’ proposal, I assumed it was electoral fluff. How can an agency that decided to scrap such a useful piece of scientific equipment as the Hubble Space Telescope possibly be considering the scientifically pointless mission of putting human beings back on the moon?

I believe that humanity will eventually expand outwards into space. It is advisable due to the small but catastrophic risk of asteroid or comet impact, as well as generally in keeping with an agenda of exploration that I find personally inspiring. The first moon landings were an astonishing demonstration of human ingenuity and American technical and economic might. With present technology, manned spaceflight is a symbolic and political endeavour, not a scientific one. That said, returning to the moon serves no purpose, scientific or political. If we could do it in the 1960s, we can do it again now. Even if you accept the argument that a moon base is necessary for a manned mission to Mars, the enormous question remains of why we should take on such an expedition at this time, with this technology, and the present financial circumstances of the United States.

When it comes to space science, people are very expensive and delicate instruments. Robots might not always work (note all the failed Mars landers), but they don’t require all the food, air, space, and temperature and acceleration control that people do. The things we hope to learn about our solar system and the space beyond are almost certainly better investigated by robots, at this time. And the moon is hardly a profitable place to go looking for new scientific insights. A robot sent somewhere interesting – like Europa – would almost certainly advance science more than sending scores of people to that great airless ball that lights up our night sky and causes our tides.

This plan is especially absurd given the magnitude of public debt in the United States right now. The existing level of federal debt is more than $8.5 trillion, more than $28,000 per person, and the federal budget is sharply in deficit. If we could choose to send people to the moon instead of developing one of the two hugely expensive fighter jets now being rolled out (the F-22 and the Joint Strike Fighter, a $256 billion program), I would be all for it. At least, going back to the moon would do relatively little harm (wasted resources aside). Of course, no such trade-off is being offered. This would be spending over and above the sums already being expended on pricey little projects like the JSF, the DDX destroyer (about $4 billion per ship), and the war in Iraq (more than $300 billion, so far). The comparison to military hardware is a sensible one, since manned spaceflight is, to a large extent, just another massive subsidy to the military aerospace industry. Hopefully, the passing of the mid-term elections will put this white elephant to sleep again.

Sulfate injection to stop global warming?

Apparently, Paul Crutzen, an environmental scientist who shared a Nobel Prize in 1995 for his work on the role of CFCs in ozone layer depletion, thinks we should correct for global warming by injecting two million tonnes per year of sulphate particles into the upper atmosphere. According to Wikipedia: “sulfates occur as microscopic particles (aerosols) resulting from fossil fuel and biomass combustion. They increase the acidity of the atmosphere and form acid rain.” He predicts that the process of injecting them into the upper atmosphere using balloons or artillery would cost between $25 and $50 billion a year, but would save more by mitigating the effects of global warming.

While I am no environmental scientist, what strikes me as most interesting about this is the ‘technical fix’ mindset that it embodies: a bit like those who decided to stabilize dune formation on parts of the Oregon coast by importing Spanish beach grass, or those who have sought to kill off one accidentally imported pest with an intentionally imported predator. Often, such schemes don’t work at all. When they do, they risk working much too well. Thanks to Spanish beach grass, the Oregon dunes will be a thing of the past in a few decades. The point is simply that, at a stage when we really don’t know the consequences of climate change or their magnitude, it seems awfully bold to predict that such a scheme will both work and do more good than harm.

As is so often the case, the most trenchant criticism of such schemes was expressed humorously on The Simpsons:

SKINNER: Well, I was wrong. The lizards are a godsend.

LISA: But isn’t that a bit short-sighted? What happens when we’re overrun by lizards?

SKINNER: No problem. We simply unleash wave after wave of Chinese needle snakes. They’ll wipe out the lizards.

LISA: But aren’t the snakes even worse?

SKINNER: Yes, but we’re prepared for that. We’ve lined up a fabulous type of gorilla that thrives on snake meat.

LISA: But then we’re stuck with gorillas!

SKINNER: No, that’s the beautiful part. When wintertime rolls around, the gorillas simply freeze to death.

The comparison between atmospheric science and ecology is less dubious than one might think. Both systems are complex and dynamic – they feed back upon themselves in ways which are both powerful and difficult to predict. Furthermore, both atmospheric and ecological systems both affect and are affected by other complex systems with which they are integrated. Consider, for instance, how the construction of the Aswan High Dam (the product of political and economic changes, above all) altered the salinity in the eastern Mediterranean, allowing for the migration of species from the Red Sea.

What would the consequences of blasting artillery shells full of sulfates into the upper atmosphere? Far be it for me to speculate. The intentional modification of atmospheric chemistry and physics is something we have never done as a species, though we have done a lot of unintentional tinkering. What I would venture is that it is likely to have unpredictable effects and that it is a particularly curious way of trying to deal with the problem of global warming.

George Monbiot, who I met at a short conference at the Environmental Change Centre, has his own objections.

Power conservation through geothermal temperature regulation

For those concerned about climate change or dependency on foreign energy, a home geothermal heating and cooling system may be just the ticket. Such systems take advantage of how the temperature is relatively constant underground, whether it is overly hot at the surface or overly cold. As such, it can be used to heat in the winter and cool in the summer, while using only a minimal amount of energy to carry out the heat exchange. While this is a pretty expensive thing to install in a single existing house after the fact, it seems plausible that it could be scaled in ways that make it economically viable in a good number of environments.

If electricity, oil, and gas really started to get expensive, you would start seeing a lot more such systems. Another example is the pipelines that draw cold water from the bottom of Lake Superior to cool office towers in Toronto during the summer.

Conservation may not be as technologically engrossing as genetically modified biofuels and hydrogen fuel cells, but it is definitely a proven approach.

Global warming damage curves

Perhaps the biggest question about global warming is what environmental economists refer to as ‘the shape of the damage curve.’ I would say that the scientific evidence that global warming is taking place is essentially ironclad (though the relationships of some events, such as more severe hurricanes, to it are rather more tenuous). Equally true is the fact that human beings are contributing to the warming of the planet. What the damage curve represents is the amount of harm caused by each additional unit of global warming, expressed in terms of the cost that would be required to mitigate it. Mitigation costs include everything from relocating people to dealing with larger malarial areas, making agricultural changes, and increased building heating and cooling costs in different areas. The costs are net of any benefits that global warming provides: such as being able to grow certain crops farther north, or having a longer growing season overall.

The most benign possibility would look something like this:

The damage increases steadily with the amount of mean global temperature change. This is helpful because it allows us to predict the degree of future damage quite effectively and make reasonably good choices with regard to how much reduction in greenhouse gas (GHG) emissions we should undertake.

A worse option looks like this:

The damage increases at an increasing rate, as temperature does. This seems intuitively more likely than the first option, since bigger increases are likely to unbalance more and more complex biological and climatological systems.

An even worse option looks like this:

It is possible that climate change would involve a big jump that we wouldn’t see coming until it was too late. An example would be the much talked about possibility that the Gulf Stream, which warms Western Europe, could be disrupted. The biggest reason this is problematic is because we might believe we were in a scenario like the one in chart one, only to be proved spectacularly wrong.

The trillion dollar question, of course, is which of these approximations we should adopt as the basis for policymaking, until such a time as compelling evidence for one of the possibilities or another emerges (hopefully not by means of humanity actually following one of those curves too far). The most cautious option is to assume that the progression would be like chart 3, with the break at an unknown location. The prudent policy, then, would be to try and stabilize GHG levels at their present positions. Of course, that could involve massive reductions in possibilities for economic growth in the rich world and poverty reduction in the poor world. A tricky decision to make, in the face of such important considerations on both sides.

Personally, I don’t think any serious action will be taken until some very real evidence of the harm that can be caused by global warming has manifest itself. As for the question of what should be done, in the ideal circumstance, I am profoundly uncertain. What do other people think?

The moral choices in assigning rights

The best piece of writing I have come across in the last week or so is a chapter from the Bromley and Paavola book on environmental economics that I have been reading. By A. Allan Schmid, it is called “All Environmental Policy Instruments Require a Moral Choice as to Whose Interests Count.” The argument is that the idea of solving environmental problems in a purely technical way (internalizing externalities, to borrow from the economics lingo) is impossible. When a policy is represented that way, there is always a moral choice being concealed. In tort law, this becomes explicit through an instrument called nuisance.

If my neighbours are making homemade beer and the process produces a constant cloud of nasty smelling gas that wafts into my yard and through my windows, I could seek remedy in court. It would then be decided whether or not the smell constitutes nuisance. If not, the court effectively grants a right to produce the smell to my neighbours. I would then be free to try to convince them to use that right differently, for instance by paying them not to make beer.

If the court rules in my favour one of two things can take place. They can grant an injunction, forbidding my neighbours to make beer without my permission. This is great for me, since I can effectively sell them the right to make beer if the amount they are willing to pay exceeds the amount the smell bothers me. This is what Coase is alluding to in his argument that it doesn’t matter who you assign rights to, as long as bargaining can occur (See: Coase Theorem). Of course, he ignores the distributional consequences of assigning the rights one way or another. As an alternative to an injunction, the court can fix a set amount of damages to be paid. This relieves the nuisance, but gives me less scope to take advantage of the court’s decision.

What the example illustrates is that in creating policies to deal with externalities, the rights in question must be effectively assigned to one party or another. We either assign companies the right to pollute, which people around them can negotiate for them not to do, or we assign those people the right not to live in a polluted place, in which case the company has to go to them with an offer. The assigning of rights, then, isn’t a mere technical instrument for achieving an environmental end, but a matter of distributive justice.

Consider the case of fisheries access agreements in West Africa. West African governments have the sovereign right to exploit the waters in their Exclusive Economic Zones (EEZs). They can also choose to sell that right, as many have done, to the EU. The governments end up getting about 10% of the value of the fish that are caught, while suffering the loss of future revenue that is associated with the depletion of the fisheries (since they are exploited at an unsustainable level). In this case, the distributional consequences of West African governments being rights holders are fairly adverse. The incentives generated inflict harm on the life prospects of those whose protein intake previously came from fish caught by artisinal fisheries now rendered less productive due to EU industrial fishing. Likewise, the life prospects of future generations of citizens are harmed.

One of the best bits of the Schmid piece is the following:

A popular phrase contrasts “command and control” with voluntary choice. Another contrasts “coercive” regulations with “free” markets. This is mischievous, if not devious. At least, it is certainly selective perception. First of all, the market is not a single unique thing. There are as many markets as there are starting place ownership structures. I personally love markets, but of course I always want to be a seller of opportunities and not a buyer. Equally mischievous is the idea that externalities are a special case where markets fail. Indeed, externalities are the ubiquitous stuff of scarcity and interdependence.

He puts to paid the idea that there is a tradeoff between economic efficiency and moral principles. That is simple enough when you realize there is an infinite set of economically efficient outcomes, given different possible preferences and starting distributions.

Those wanting to read the entire piece should see: Schmid, A. Allen. “All Environmental Policy Instruments Require a Moral Choice as to Whose Interests Count.” in Bromley, Daniel and Jouni Paavola (eds). Economics, Ethics, and Environmental Policy: Contested Choices. Oxford : Blackwell Publishing. 2002. pp. 133-147.

First eBay sale

I’ve joined the ranks of those who have at least listed an item on eBay. In this case, it’s the Sony headphones that I want to sell in order to get money for a snazzier pair. These are brand new and in the original packaging.

I may have set the minimum bid a bit high, but you can’t set a reserve price under £50 and I’m really not willing to sell these for less than £15 after spending almost £25 on them. In any case, we will see how this experiment in commerce goes.

[Update: 21 June 2006] With exactly 12 seconds left in the auction, someone placed a bid. Looks like I am offloading these headphones for £15 plus the cost of shipping.

The economics of it all:

Price initially paid on Amazon: £25.66 C$53.01

Payment received from eBay: £15.00 C$30.99
Shipping fee from eBay: £2.00 C$4.13

eBay listing fee: £1.29 C$2.68
PayPal currency fee: £0.86 C$1.77
Cost of packaging: £0.49 C$1.01
Cost of shipping: £0.68 C$1.40
Net eBay income: £13.68 C$28.26

Amazon cost – eBay income: -£11.98 -C$24.75

In the end, choosing to buy these headphones cost me about twenty-five bucks for three months’ usage. Let’s hope the ones I choose to replace them with last much longer.

On luxury notebooks

Encouraged by the approval of friends like Emily and Tarun, as well as the endorsement on Tony’s blog, I bought a Moleskine notebook today. I am quite ambivalent with regards to the symbolism of the things: they try to cultivate artistic chic, but through their absurd price, coupled with ready availability, they can easily be seen as absurdly pompous. This might be called ‘Powerbook syndrome:’ only very marginally better than iBooks, yet nearly twice the price.

I was able to justify spending eight quid on a 120-page notebook only because it is an eighteen month weekly calendar. As such, it is worth spending more for something that will not fall apart or lead to you cursing it daily for a year and a half. It is a better alternative to telling people: “Yes, Thursday might be good. Just email me and I will check in Outlook that I don’t already have something sorted out.”

The choice was between developing a memory for appointment-type details and getting some kind of day-planner. The redeeming qualities of spending money on something long-lived should be a useful antidote to accusations of notebook snobbery. As for the question of whether Moleskine notebooks are really all they’re cracked up to be, I will get back to you.

Hunger and disease

I promised myself the other day that I would write a post about something that I view as a serious fallacy related to development: the notion that dealing with infectious disease will just shift the death toll to hunger, rather than genuinely saving people. This view is misguided for reasons both moral and pragmatic. I will focus on the pragmatic here, since people who advance this neo-Malthusian argument tend to think of themselves as well-meaning but realistic. The first set of arguments have to do with the local capabilities of communities. The second, lesser, set have to do with the nature of the provision of aid. I will quickly examine each in turn.

The three big diseases upon which I will concentrate are HIV/AIDS, malaria, and tuberculosis (TB). These have been rightly banded together as the three most serious global health concerns, with regards to infectious diseases. Each kills more than a million people a year, as well as making far more ill. As a bacterial illness, effective cures exist for all but the most resistant strains of tuberculosis. While no effective cure exists for either malaria or HIV/AIDS, drugs exist that can extend survival dramatically, and mechanisms exist to greatly restrict the spread of such illnesses. The notion that doing so would produce an equally severe problem elsewhere is based on a misconception about how such illnesses affect communities.

Local capabilities

Sick people are not productive people. Communities with high prevalance rates of infectious diseases lose agricultural productivity as members of the working population either become ill or need to spend their time caring for those who are. This is especially bad with regards to HIV/AIDS, which tends to kill people during their most productive years. That has left behind millions of orphans, who further draw upon the capabilities of the community in which they live. All manner of grim statistics could be brought to bear upon this point, but it seems intuitively obvious enough to stand on its own.

The possibilities of simultaneously dealing with the various factors that make extreme poverty endemic are demonstrated by the ’12 research villages’ that Jeffrey Sachs has established throughout Africa. The plan is to have 1000 by 2009. Each receives practical aid at the level of $250 per inhabitant: directed towards dealing with disease, boosting agricultural output, education, and other objectives espoused by the Millennium Development Goals. The whole program can be expressed in terms of seven simple goals:

Fertiliser and seed to improve food yield; anti-malarial bed nets; improved water sources; diversification from staple into cash crops; a school feeding programme; deworming for all; and the introduction of new technologies, such as energy-saving stoves and mobile phones.

The results so far seem to be very good, in terms of declining levels of infectious disease, improved crop yields and educational results, and the like. As with so many other projects, the difficulty is in scaling up the the point where millions of lives can be changed, but the example demonstrates how even a relatively inexpensive aid policy can produce tangible results in a number of crucial areas, without hitting any of the Malthusian barriers imagined by those who say that feeding hungry children just makes hungry adults. Another laudable feature of the program: all aspects of it are implemented and directed at a local level, reducing the extent that neocolonialist intentions can be attributed to the donors or international organizers.

World capabilities

Even in those cases where a sudden burst of attention enormously lessens the burden of disease in a food-strapped community, the difficulties of dealing with that situation are far easier than those of dealing with a place where one of these big three diseases has become endemic.

That’s partly because food provision doesn’t require the delivery of expertise into an area. The lack of qualified medical personnel in places like Sub-Saharan Africa is a major reason for which infectuous disease is so problematic there. The rich world has a double guilt in this capacity: because the austerity programs that were part of the structural adjustment policies of the IMF and World Bank have prevented governments from investing in such human capital, and because lots of rich countries (including Canada and the UK) have been doing all they can to buy up doctors and nurses from the poor world to help address problems in their own health systems.

Conclusions

Obviously, just providing food aid or help with specific problems isn’t adequate for dealing with persistent extreme poverty. That said, it seems foolish to voluntarily refrain from deploying such assistance as is politically and economically viable because of concerns about “feeding those who will die anyhow.” On the global level, the economic emergence of Asia – in which extreme poverty levels have seen amazing reductions in recent decades – shows what is possible even in the face of considerable levels of corruption, disease, and mismanagement.

Malaria in the 21st century

Tonight’s lectures on malaria, presented by the Oxford Global Health Group, demonstrated once more the kind of opportunity that is being missed with regards to global development. According to the World Health Organization (WHO), one million people per year die from the parasite. In addition, the direct economic costs imposed exceed $12B a year: a figure agreed upon by the two scientists and the representative from GlaxoSmithKline. By contrast, the WHO estimate for the cost of controlling malaria globally is just $3.2B a year. While money alone can’t solve so complex a problem, the gap between what is possible and what is being done remains unacceptable.

Like HIV/AIDS, while efforts are being made to find an effective vaccine, the state of affairs at the moment includes treatment and prevention measures. As Adrian Hill – the Director of Oxford’s Jenner Institute – discussed, there has never been an effective vaccine developed against any human parasitic illness, and the incredible complexity of the malarial life cycle and the long period of endemic coexistence between people, mosquitos, and parasites makes it a task of fiendish difficulty. That doesn’t mean that a vaccine is impossible. Indeed, Dr. Hill stressed how two moderately effective vaccines based on different approaches could combine into a single highly effective treatment. What it does mean is that the existence of effective mitigation mechanisms like pesticide-coated bednets and combination anti-malarial therapies should be focused upon.

I was pleased to learn that Oxford is presently the only organization in the world that is carrying out any level of clinical trial for vaccines addressing tuberculosis, HIV/AIDS, and malaria. Each has an enormous global toll, in terms of lives lost and societies disrupted, and all are well within the present financial means of the world to reduce in significance enormously. When the constant refrain is that official development assistance gets spirited off by corrupt governments and into foreign bank accounts and BMWs, the case for funding large-scale research into the development and cost-reduction of medical responses to devastating illnesses of the poor world is clear and compelling.

The comparison everybody makes is with arms expenditures. That’s fair enough. Discretionary spending on armaments in the 2004 American federal budget was $399B. Three times more was spent on just missile defence than would cover the WHO’s estimated cost for global malarial control. $1.2B was allocated just for the V-22 Osprey aircraft: a design that many, even within the Air Force, consider hopelessly flawed and too dangerous to ever put into operation.

Though of another way, Canada’s GDP is about $1000B. The WHO estimate is therefore just 0.32% of the GDP of a single, relatively unpopulous, member of the rich country club. If anything, the global experience of smallpox and polio has shown that bold and properly funded global health strategies can yield fantastic returns. The chance to capitalize on that potential for AIDS, malaria, and TB is sitting right there for us to grasp.