Video - Fracking chat with David Zetland

I had a long video chat with David Zetland yesterday, where we discussed fracking, water pollution, property rights and a bunch of related issues. David's take on our talk is here.

Like many people, I find it very difficult to watch/listen to videos of myself. (Where did all those mannerisms come from??) Still, if you've ever wondered what a real South African accent sounds like, you're in for a treat!

In related news, the below video will act as supporting evidence for my submission as "the palest man in economics".

Recent Noonday Tune contributions

"Junk Bond Trader" -- Elliott Smith

"Love Spreads" -- The Stone Roses

(Worth clicking through for the descriptions alone!)

Milestones

Just clocked up our 30,000th pageview here at The Corral.

I feel that this a pretty respectable return for a (very) part-time hobby. It's certainly not something that I expected whilst penning that first post. 

Thanks to everyone who's visited, commented on, or linked to one of my posts. Apologies for the frequent lulls in blogging activity and severe lack of coherent subject matter!

Fracking and water pollution

My new article for The Energy Collective is up: Hydraulic Fracking and Water Pollution.

There's much debate about whether shale gas "fracking" (i.e. hydraulic fracturing) poses a risk to our freshwater resources. However, alongside the fact that the water demands of fracking are relatively small compared to other uses, the available scientific evidence actually paints a fairly optimistic view of the situation. Thus far, no causal link between drilling activity and water pollution has been found -- despite researchers scrutinizing some pretty extensive data.

That said, water is so fundamental to our lives that it's entirely reasonable for residents to demand insurance against possible contamination. I give a brief overview of how property rights plays a key role in all of this, and my preferred regulatory framework for making sure that people are protected in the event of a dangerous leak.

Here's my conclusion:

It would be strangely naive to suggest that there are no potential risks to our water resources due to fracking activity. Like all energy sources, there are trade-offs to securing the benefits of shale gas and the possibility of water contamination is one of those. However, anti-fracking advocacy groups do their credibility few favours through the selective interpretation of – or pure disregard for – the existing scientific evidence, and what this actually says about the extent of these risks. Several comprehensive studies have thus far failed to establish any systematic relationship between drilling activity and water pollution. Important research is ongoing, but we clearly have reason to be optimistic at this stage. Regardless of the final outcome, I believe that such matters should be handled according to a clear regulatory framework that incorporates full liability and assures other stakeholders of the requisite contingency plans should an accident occur. After all, effective risk management is an entirely different animal to prior restraint.

Click through to read the full article.

Am I being unreasonable?

See the back-and-forth here.

Generally, I try to be as civil as possible when it comes to internet debates. (Often is the time that I've rewritten a response simply to tone down the rhetoric and eliminate any implied derision.) Certainly, I think that it is a good thing to try and interpret your opponent's arguments in a generous light.

There are limits, though. Life's too short to spend it endlessly rebutting non sequiturs and side issues.

Monetary regimes and economic outcomes

Eric Rauchway has a post over at Crooked Timber that's generating a fair bit of interest, since it compares real economic growth and inflation for the "G7" countries over various monetary regimes.

His data is taken from a 1993 paper by Michael Bordo and consequently doesn't cover information from the last two decades. ("I made you some charts. Because I love you that much. (But not enough to extend the floating exchange rate regime data down to the present; that’s actual work.)")

Well, that sounds like a challenge. And if anyone is fit to do mind-numbing compilation of data[*], that would be your typical economic graduate student...

Behold: I give you Rauchway's charts brought forward to the present day!

Fig. 1

Fig. 2

Compared to Rauchway's charts, the updated versions bring both good and bad changes from the perspective of floating (fiat) currency proponents. On the positive side, inflation has come down quite a bit. On the negative side, so has real GDP growth -- although to a lesser extent. You can better see this by looking at the next two charts, which compare the 1974-1989 (i.e. as in Bordo's paper) and 1990-2011/12 periods of the post-Bretton Woods era.

Fig. 3

Fig. 4

Of course, this is more or less as one would have guessed. We know that late '70s and early '80s were a period of high inflation -- with various shocks and loose monetary policy to blame. On the GDP side, it's interesting to note that Japan appears to be the primary driver of slower growth in the latter part of the post-Bretton Woods era (Fig. 3). Given that it's stalling economy is probably suffering from a lack of monetary accommodation to drag it out of liquidity trap conditions -- Note: recent events may provide the decisive policy experiment to prove whether this is the case or not -- it's far from obvious to me that the strictures imposed by the alternative monetary regimes would have yielded better outcomes. (I've had my say at various times on this blog as to why I think returning to a gold standard is a rotten idea, so I won't go into that now.)

And, on that note, I should say that I fully agree with the various commentators in the Crooked Timber thread, who have been pointing out that these don't charts don't nearly suffice i.t.o. counterfactuals, etc, etc. Still, these eyeball comparisons remain an intriguing bit of blogosphere fun. 

___

[*] It actually wasn't that much work thanks to our friendly FRED friends.

Energy Collective post - Natural gas and long-term climate goals

I should perhaps have mentioned this last Friday when it was published, but my new post for The Energy Collective is up: Bridging the Gap? Natural gas and long-term climate change goals.

As the title suggests, my aim is to explore whether the scientific evidence supports the much-touted notion of gas as a "bridge fuel" (i.e. towards a low-carbon economy). This a hotly debated topic, with a lot of excited rhetoric and dubious assertion clouding the issue. Luckily, I've read it all so that you don't have to! A snippet:

However, even this is not to say that natural gas lacks credibility as the most viable, climate-friendly alternative to coal. Unpalatable as it will be for some people, the unavoidable conclusion from my perspective is that achieving very stringent emissions targets will always depend on a hefty slice of fortune… It is certainly no accident that studies which demonstrate hypothetical pathways towards achieving such targets must inevitably make fairly heroic assumptions – whether that be in the form of changes to economic behaviour and institutional reform, or in the presumption of substantial technology breakthroughs. In that light, it is not entirely obvious to me why CCS-enabled gas plants should be regarded as more unlikely than, say, thorium nuclear. And it certainly isn’t obvious to me that climate activists are best serving their cause by demonizing the one fuel source that has provably shaken coal’s grip on the global energy system.

PS - My post on Hugo Chavez and Margaret Thatcher has also been reposted at TEC -- with an updated intro in light of recent events.

New writing gig - The Energy Collective

Some exciting news for yours truly is that I'll be writing a series of articles for the excellent energy and climate website, The Energy Collective, as part of their Future Energy Fellows initiative.

I will be focusing on particular sub-topic that has aroused a lot of interest recently; namely, the economic and environmental impacts of natural gas.

My first post concerns the role that the North American shale boom has played in bringing U.S. carbon emissions to a twenty-year low, and the question of whether these climate gains are undermined by increased coal exports to Europe. (Short answer: not really.) The article expands on some earlier musings that I have presented here at the Corral and at the Recon Hub. Here's the opening gambit, which I use to set up the problem:

U.S. Shale Gas Meets European Climate Policy

Economists are suckers for a good paradox. Few things are more intellectually appealing to the practicing economist than a result which runs counter to his or her immediate intuition. Indeed, some of the most enduring ideas in history of economic thought have surprising implications at the heart of their allure; from the paradox of thrift to Ricardo's law of comparative advantage. For their part, the specialized fields of energy and environmental economics are not immune to the charms of counter-intuitive theories either. This includes textbook favourites like the green paradox and the rebound effect.

Beyond the intellectual appeal, it is clearly sensible to be mindful of such factors when designing policy. However, our inherent affinity for paradoxes is also problematic in that it can cause people to overstate their role in real world situations. To illustrate using the aforementioned rebound effect, Nature recently published a comprehensive literature survey on the subject by Gillingham et al. (2013). The authors show that the rebound effect’s significance is much overplayed, being typically only in the region of 10% (with an upper bound of about 30%). Hardly a compelling objection to improved efficiency standards then.[...]

Click through to read more!

Noonday Tune

I get quite a bit of flack from (non-economist) friends and family whenever this blog goes too long without a music intermission... or some other distraction from the usual fair of "mundane econo-mese". (Thanks guys!)

The good news then, is that I recently joined Noonday Tune as a contributor. As the name suggests, this is a very cool website that posts a new song everyday at noon.

My first three contributions are a mix of stuff that I've been listening to lately and then some Scandinavian bands that I feel deserve a wider international exposure:

1. "Augustine" - We Are Augustines
2. "Hjerteknuser" (Heartbreaker) - Kaizers Orchestra
3. "Sister to all" - Real Ones

Well, don't just sit there. Hit the links and indulge your ears with aural satisfaction.

Climate science is psuedoscience(?)

So says Ivo Vegter in his latest column, calling up the spirit of Karl Popper.

I drop by in several places in the comments, saying that this pretty much utter nonsense according to any reasonable definition of the falsifiability criteria. For example:

[...]As it happens, Ivo has also beautifully misconstrued the application of Popper's insights, by consistently conflating the actual science with the response to that science by various parties.

[...]At its heart, falsification is about using an underlying set of theories to make predictions that can be tested against the relevant evidence. The theory of (man-made) climate change satisfies the falsifiability criteria across multiple dimensions. The fundamental pretexts of climate science are rooted in physics that has been understood and tested since the early contributions of Fourier, Tyndall and Arrenhuis in the nineteenth century. For their part, modern day climate models absolutely meet the Popperian standards. Not only do they forecast how climate phenomena will evolve under conditions of continued emissions, but (crucially) they have been extremely successful in hindcasting previous changes to the climate. Indeed, this accurate replication of past events is how they are selected in the first place…

As part of his reply to this comment, Ivo made the strange assertion that the ability to hindcast models is weakened by the fact that these models can be "tweaked" to accurately match the observed data. I respond:

How is it a case against climate scientists that they were able to benchmark their theories against against a historic record with "perfect hindsight"? Speaking as someone with a fairly considerable amount of scientific training, that actually sounds pretty ideal. Models were back-tested, refined and then discarded in favour of ones that better fit the data... pretty much in exact accordance with the scientific method.

For the record, I am aware that the Popper doctrine is not without its problems. Still, and at the very least, if someone is going to invoke his authority to make specific claims, then they should at least make sure they are accurate within that framework.

UPDATE: Oh God, it gets worse. Someone responds to me with the immortal line: "I have not done the research but from my own basic calculations..." *headvice*

UPDATE 2: See this excellent 2005 post by NASA's Gavin Schmidt: Is Climate Modelling Science? It concludes: "So, in summary, the model results are compared to data, and if there is a mismatch, both the data and the models are re-examined. Sometimes the models can be improved, sometimes the data was mis-interpreted. Every time this happens and we get improved matches between them, we have a little more confidence in their projections for the future, and we go out and look for better tests. That is in fact pretty close to the textbook definition of science."