Irony

From the Wikipedia page on Agricultural Policy:

Some argue that nations have an interest in assuring there is sufficient domestic production capability to meet domestic needs in the event of a global supply disruption. Significant dependence on foreign food producers makes a country strategically vulnerable in the event of war, blockade or embargo. Maintaining adequate domestic capability allows for food self-sufficiency that lessens the risk of supply shocks due to geopolitical events. Agricultural policies[...] may be an ongoing subsidy designed to allow a product to compete with or undercut foreign competition.

Could this possibly backfire? Hmmm, let me think... This week in Scandinavia:

Danish dairies say no to Norway

Dairy producers in Denmark have said they won’t export butter to neighbouring Norway, despite moves by Oslo to cut tariffs as the country battles to get the product back on supermarket shelves.

Norway, like Sweden and Finland, has been hit by a major butter shortage in recent months. The Nordic trio have seen less raw milk available annually amid soaring demand for high-fat dairy products such as creams, butters and milk. 

[snip] 

But while the Danes are happy to help out the Swedes and the Finns, Norwegian shoppers look set to be left in the lurch with Christmas looming. 

Oslo has slashed import tariffs on butter for the month of December in an attempt to attract foreign producers, but leading Danish dairies remain unimpressed. 

“We’ve been bashing our head against an excise wall in Norway for more than ten years, so we don’t have enough faith in a little hole in the wall to start sending butter via that route,” said Mogens Poulsen from dairy Thise Andelsmejeri to news website foodculture.dk. 

Danish news reports said the country’s other main dairy producers were similarly disinclined to make a beeline for the Norwegian market. 

“We can’t start building something up only to dismantle it again three weeks from now,” said Arla spokesperson Theis Brøgger to foodculture.dk.

It may only be butter, but still a telling example. On a general level, I don't know which I find more impressive: The fact that so many people are in agreement about the need to drastically scale down agricultural subsidies... Or that these subsidies somehow remain as entrenched throughout the world as they do.

UPDATES: (1) Norway is a great place to live in many ways, but their protectionist trade policies suck. Most of the Norwegians that I speak to are pretty happy to echo these sentiments, although that might not be a representative sample. (2) Damn. Butter futures would have been a good investment. Black market bids currently going around $500 per half kilo!

Economics > Doing the right thing

Drowning in university work here, so no time for any blog posts. In the meantime, read this article by Gernot Wagner, who has a new book out explaining why economic forces and policies -- not individual acts of environmental goodwill or heroism -- are the only way to ensure meaningful action against climate change... and to resolve environmental problems generally.[*]

Cold, Hard Economics

Global warming is happening faster and with more intensity than anyone expected, yet the fossil-fueled right has succeeded in removing the issue almost entirely from the agenda through a false pretense of defending "free markets." In response, environmentalists have tended to retreat further into their own organically padded corners, when what's needed is to get back to economic basics: Markets cannot be free when benefits are privatized and enormous costs are being socialized. The only way out of this environmental crisis is to align citizens' economic self-interest with the planet's health.[...]

You can also watch a video of Gernot here.

[*] Lest it be unclear, economic policies also include "let prices and the market mechanism run their course". Environmental economics is not simply about knee-jerk, top-down regulation. Although, you already knew that. Right?

Facts vs Beliefs (George Monbiot edition)

When the facts, I change my mind. What do you do, sir? 

- Apocryphally attributed to John Maynard Keynes

A criticism often leveled at environmentalists is that they are far too wedded to their own ideological agendas to ever partake in rational debate.

Ignore, for the moment, that such criticisms are usually dripping in hypocrisy. (My experience is that extremists on both side of the aisle not only deserve each other, but have a remarkable gift for pointing out their own flaws in their opponents.) The unfortunate truth is that such characterisations of blinkered "green" thinking does hit the mark in many cases. While it's hard to fault someone's sincerity in arguing passionately for the environment, too often reason is thrust aside at the alter of Gaia.

All this points towards why I enjoy reading George Monbiot. His essays often provoke, but they always make you think. Alongside his ability to construct compelling arguments using detailed lines of evidence, his honesty makes him a rare commodity in the world of "opinion" columnists. He is not scared to challenge power or orthodoxy, but is also prepared to admit when gets something wrong.

Now, I've praised Monbiot along these lines before (e.g. here). However, he provides some deeper insight into this admirable trait in today's column. [Background: New data made available by a UK researchers show that resource use (at least in the UK) is diminishing with, and may even be caused by, GDP growth.]

Is the 'peak consumption' hypothesis correct?

I won't deny it: my first reaction on seeing the results of Chris Goodall's research into our use of resources was: "I don't want this to be true." Obviously, I'd like to see our environmental impacts reduced, as swiftly and painlessly as possible. But if his hypothesis is right – that economic growth has been accompanied by a reduction in our consumption of stuff and might even have driven it – this would put me in the wrong. I'm among those who have argued that a decline in our use of resources requires less economic activity, or at least a transition to a steady-state economy. 

[snip]

That was what the available research suggested at the time. But if Goodall's findings are correct, they put a coach and horses through something I strongly believed to be true. 

So, for a few minutes, I engaged in what psychologists call protective cognition. I started scouring his findings for reasons to reject them. It took an effort of will to shake myself out of it and remember that the intellectually honest response to new information is to adjust our beliefs to the evidence, rather than adjust the evidence to our beliefs. We must question and test new findings of course, but we must do so as dispassionately as possible. Otherwise we are in danger of doing more harm than good, and of wasting our lives promoting the wrong causes. Anti-vaccine campaigners please take note. 

Starting again, this time reading it as objectively as I could, I saw that Goodall's report appears to be rigorous and unbiased. It answered many of the questions and objections I raised as I read it. People like me have to step back and consider the possibility that Chris Goodall could be right when he states:

"Absolute decoupling of resource use from economic growth may possibly have occurred … GDP growth, because it brings technological progress which is correlated with more efficient use of resources, may help reduce environmental damage."

[...] 

Monbiot does go on to ask some legitimate questions that might challenge the extent to which we can generalise Goodhall's findings. (For instance, by pointing out that declining resource use in the UK is a relatively new phenomenon with much uncertainty over the longer term.) However, the principle is worth repeating: "The intellectually honest response to new information is to adjust our beliefs to the evidence, rather than adjust the evidence to our beliefs."

Homeopathic A&E

Following Monday's post, which touched on the murky world of alternative medicine... South African comedian, Warren Robertson links to a brilliant Mitchell and Webb skit, "Homeopathic A&E":

Quote of the day - Consensus

Reading through the comments on a YouTube video is normally enough to make you despair for humanity. Every now and again, however, you come across some gold. Like this:

"It's a personal opinion, which I feel should become popular consensus."

[Note to self: Claim as own.]

Rhino horn! Homeopathy! Psychics!

A few weeks ago, the South African government announced that it was appointing a team to reconsider the ban on the trade in rhino horn. In short, the idea is that SA could kill two birds with one stone by capitalising on what is effectively an extremely lucrative market. Since a single rhino horn is estimated to fetch $500,000 on the Asian black market, government stock piles of the stuff (from culling and thwarted poaching operations) could actually bring in substantial revenue towards conservation efforts.

Take things a bit further and you could easily argue that the ability to legally farm and "harvest" these animals generally would bring the same positive effects that hunting does for wildlife conservation. That is, it establishes a profit motive that incentivises the preservation of valuable animal species.

Save a horny friend?

The libertarian journalist, Ivo Vegter, penned a provocative column shortly thereafter in support of the government announcement. Unsurprisingly, the essay captures some of the essence of free-market environmentalist thinking. Contrasting the fortunes of sheep with dwindling rhino numbers, he writes that the ban on rhino horn has undermined market incentives for managing these animals:

If they want rhino horn, let's sell them some 

Sheep aren't endangered, because farmers farm them. They have a vested interest in making sure that they breed and stay healthy. The profit motive ensures that sheep are either kept alive (in the case of the woolly kind) or get killed less frequently than they get born (in the case of the eating kind).

Most economists would fully appreciate the logic of utilizing these types of incentives and market signals. I readily agree with the notion that ending the ban on rhino horn could be a boon for the rhino population. However, I do have problems with a subsequent paragraph:

Many environmentalists and armchair liberals are of the view that “we” merely need to educate the backward Orientals about the lack of medicinal qualities of rhino horn. This is rich coming from a group that routinely advocates the use of unproven herbal remedies. It is also supremely condescending. Imagine the Chinese coming to Africa and telling us to stop using muti, or better yet, instructing wealthy elites about the superstition that homeopathy works. We'd tell them to mind their own business and sod off back to China, and rightly so. Even if the Vietnamese and Chinese are wrong about rhino horn, re-educating half a billion people is as tyrannical as it sounds. And even the communists failed at that.

Apart from being wonderfully ironic in highlighting his own condescension -- something, it must be said, that Ivo does not lack for when discussing "greens" or "liberals" -- this paragraph merely serves to sidestep some very important ethical issues. The morality of selling unproven (say nothing of cruelly obtained) substances for human well-being cannot be simply disentangled from its economic outcomes. Indeed, a commentator draws attention to the matter by asking: "How can it be it ethically conscionable to sell, at huge profit, a remedy that has been proven to have absolutely no efficacy? SA should peddle rhino horn to cancer patients . . . shall we also farm and sell African potatoes to people who believe they will cure AIDS? How about exporting a few of our local evangelists to exploit the gullible in exchange for miracle cures while we are about it?" (posted on Wed, 5 Oct 2011 at 12:12)

Ivo responds, but I rather think he draws a line on the wrong side of this issue. To quote the truism: Two wrongs don't make a right... And just because some new-age salesmen are able to peddle their snakeoil wares to Western consumers -- under false pretences and without accurate labeling -- does not provide satisfactory justification for encouraging (or even allowing) others to do the same. Moreover, suggesting that it does, is simply to argue your case by association.

In another sense though, Ivo is quite right because inconsistency can be a maddening thing. The difference between us, is that I would like to see consistency achieved via some form of standard regulation -- at the very least in terms of evaluating product claims and policing false advertising -- rather than a free-for-all. Given the vast asymmetries of information involved, these are the type of situations where Government (and, yes, civil society at large) can play a crucial role in improving market outcomes; by providing accurate information on product effectiveness and regulating products that might otherwise thrive on fraudulent claims. More to the point, this why precisely we expect our doctors and drugs to be licensed in modern democracies, and why we have empowered state authorities to do so on our behalf.

===

I was reminded of all this today when I saw this morning's xkcd strip, which might accurately be described as what happens when homeopathy gets into the book publishing business:

Sad, but true.

Also worth reading is the "tooltip text" that you can see if you hover over the image on the actual xkcd site. It explains the inspiration for this particular strip thusly: "I just noticed that CVS has started stocking homeopathic pills on the same shelves with -- and labelled similarly to -- their actual medicine. Telling someone who trusts you that you are giving them medicine, when you know you're not, because you want their money, isn't just lying -- it's like an example that you'd make up if you had to illustrate for a child why lying is wrong". [UPDATE: See this post.]

===

Let me leave you with one more story that has been making the rounds in the run-up to Halloween, which highlights that fine line between deception and self-delusion. A group of skeptics (not the climate change kind!) has been offering a million dollar prize to anyone that can prove, under scientifically acceptable standards, that they posses paranormal abilities. Not content to see their money go unspent, the skeptics have publicly courted a number of high-profile TV psychics (e.g. Britain's Sally Morgan) and invited them to take up the challenge.

And, would you believe it, none of these self-proclaimed psychics have responded to this wonderful opportunity to earn international fame and scientific respect... say nothing of the cool seven-figure cheque. I know, I know... Unbelievable. The brilliant Derren Brown sums up the situation thusly:

You’d think psychics would be very eager to prove they can really do it. There’s a million dollar prize fund to be won by any psychic who can show under reasonable and controlled conditions (which they can decide upon in conjunction with the scientists) that what they do is real. This is money that could be kept or given to charity of course, not to mention the likelihood of also receiving a Nobel prize and the ability to give the world vital new knowledge that would change us forever. Imagine that! If I woke up to find that I could really do it, I’d be a selfish and odd creature to offer it only to TV viewers and theatre audiences. I’d be out there, doing every test I could until the scientific establishment sat up and listened. You’d be forgiven for doubting my sincerity if I said I had better things to do. 

"I  see  hear dead people. LOL!"

As far as "forcing" he likes of Sally Morgan to take the test, this seems to be most unsatisfactory solution and one that would impinge on any number of individual rights. However, there is the lingering sense that it is simply very wrong to charge grieving people for a service that amounts to little more than selling them outright lies at particularly vulnerable times in their lives. (Although, perhaps comfort is more important than truth in some circumstances?) In that sense, I'm glad she's being called out... Though I don't hold any hopes of either side being convinced.

THOUGHT FOR THE DAY: You often hear it said that economics is not a morality play. Perhaps there's some cold comfort in learning that, apparently, neither is the psychic business.
___
[*] I do wonder about the practicals implications of actually farming these animals, and whether doing so would actually lead to a collapse in poaching. After all, poachers would still be able to capture substantial "rents" through their illegal actions, so long as breeding and raising a fully grown rhino remains an expensive exercise. That, however, is a subject for another day.

Cover Thursdays - Ni' Zilund edition

In search for a unifying theme for this week's Cover Thursdays post, I suppose that I can do no better than tip my hat to the Rugby World Cup in New Zealand. Options for Kiwi bands are fairly limited -- let alone covers decent thereof -- but I think that I've got two songs here that you will enjoy...

First up, a very nice find by The Primate (keep up the good work, meneer). Boy & Bear get kinda bluegrassy on Crowded House's "Fall at Your Feet":



Next, The Naked & Famous see their synth-drenched "Punching In A Dream" given the ol' acoustic guitar and xylophone treatment by Antipodean fellows The Mission In Motion:



PS - If you are confused by the subject line of this post, then I suggest heading here for a little exercise in the Kiwi vernacular.

Support NZ for the World Cup... It's the right thing to do

So, South Africa bow out of the Rugby World Cup in a most frustrating and even inexplicable way. Yes, there is is justified cause for anger at the incompetence of Bryce Lawrence (which, let's be honest, was already something of a celebrated topic). However, the Springboks's failure to land the killer blow, despite complete dominance across nearly all facets of play, says as much about their own limitations as an attacking side, as it does about the sheer bloody-mindedness of Australia's fantastic defence or the curious ineptitude of Mr Lawrence.

Joining South Africa on their own flights home are the likes of England, Ireland, Scotland and Argentina. Post-mortems are already underway, but still to be decided is the little matter of who will actually win this damn thing. For neutral supporters, the next question that arises is: To which nation should we pledge our support for the remaining semi-final and the final encounters?

The first semi is a Henman if ever there was one. (In its original, literal form that is... 10 weeks ago I don't think anyone would have predicted these two contestants.) Thus, a vastly improved Welsh side, brimming with self-belief will take on the ever-mercurial French... who appear to have taken a leaf out of their national football counterparts' book by staging a player revolt mid-World Cup campaign. The only difference is that the French rugby side have managed to salvage at least one famous victory and now somehow find themselves in the last four, while Raymond Domenech's (former?) men imploded in rather spectacular fashion and were out by the group stages. Viva la Revolution, liberté, égalité, fraternité and all that, but I'm backing the Welsh for this one. I'll be happy to reward professionalism and structure over maddening inconsistency any day.

Did they even have colour photos back then?

In the second play-off, hosts New Zealand seek to finally recapture the title that has eluded them since they won the inaugural tournament in 1987.  They've been dealt a potentially devastating blow through the loss of key playmaker, Dan Carter, while captain Richie McCaw appears to be playing on one leg. However, fate may have handed them some strange recompense through the injury of back-up flyhalf, Colin Slade. Odd as this may sound, the latter's replacement, young Aaron Cruden, would seem a much safer bet than the woefully out-of-his-depth Slade. Harsh, but fair I'm afraid. Facing New Zealand, of course, is the same Australian side that bundled South Africa out during this weekend's quarter-final. Aus have some outstanding young talent of their own, not least the players that featured most prominently in the victory against SA: David Pocock, James O'Connor and skipper James Horwill. However, they are thin on depth if injury does strike and there remain big doubts about their set-piece, and the BMT of flyhalf Quade Cooper among other things. It's a big call, but I'm still backing New Zealand for the win that will see them through to play Wales in the grand finale.

And the final itself? Well, you'd have to pick New Zealand again wouldn't you?

Okay, I hear you asking, but do you want them to win? So, with a very clear conscience, allow me to answer: "Yes".

As much as anything, I've grown tired of the ongoing tragi-comedy that sees that the planet's consistently best team dumped out of the World Cup. Bloomsboy put it rather poignantly: "Watching the spectacle of another France-NZ upset in the final would be a bit like succumbing to the morbid fascination of the World Trade Centers falling." A rugby fan first and foremost, I feel no shame in saying that the Kiwis have played most of the very top stuff I have ever watched. If there was such a thing as cosmic rugby justice, New Zealand should win this thing.

But forget speculative pleas to the rugby gods. Anyone who can tell me that Mrs. Karma cares for the game of rugby when the likes of Ben Cohen and Justin Harrison have World Cup winner medals, but Christian Cullen doesn't, is an idiot or a liar. Quite possibly both.

No, much more than balancing the scales of sporting justice, I hope that New Zealand winning the World Cup would finally put an end to the inane excuses that other rugby nations -- and South Africa in particular -- have become comfortable with in shrugging off mediocre results. Another year without a Tri-Nations trophy? ("Ja, but at least we can win a World Cup, hey!") Thirty-three percent average against our arch-rivals since 1995? ("Two World Cup trophies, boet!")

Suitably lame explanations for lame results.

It may provide comfort to opposition supporters, but New Zealand's failure to win a World Cup has actually become an albatross around the neck of other rugby nations. For, as long as the ABs can't get their hands on the Web Ellis trophy, we can dupe ourselves into thinking that we're actually doing pretty well... when we actually aren't.

With some important exceptions, New Zealand have clearly set the standard in modern rugby terms. I certainly believe that South Africa (and maybe even a few other nations) could overtake them, but not while the four-year mindset persists. Until the Kiwis bury their World Cup hatchet, a misplaced superiority complex will simply be doing us more harm in the long-run than good. Let order be restored and the slates be wiped clean. Because only then can we focus on consistently being the best rugby nation in world... full stop. Not just having a go every four years.

So... unless you happen to be Australian, Welsh or French... get behind the All Blacks for the Rugby World Cup 2011. Forget that they deserve it, we need it as much as they do.

Bryce Lawrence Reffing Flowchart

A very interesting paper...

From the latest American Economic Review:

Environmental Accounting for Pollution in the United States Economy

By Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus

ABSTRACT

This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US which are multiplied times the quantity of emissions by industry to compute gross damages. Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. The largest industrial contributor to external costs is coal-fired electric generation, whose damages range from 0.8 to 5.6 times value added.

Unless you're on a university server, you'll probably find that the article is gated. [Update - The working paper version is accessible here.] Fortunately, there are a number of good summaries available on the net. Bottom line: We severely underpay for the goods and services provided by major industries, given the measurable effect that air pollution from these industries has on human health and productivity.

Crucially, the environmental damages that drive these results have nothing to do with any kind of long-term climate change effects. They are simply the local damages that result from compromised air quality and are happening right now.

Lest it be unclear, this most certainly isn't about turning our back on coal (or even agriculture, another industry with a surprisingly high un-costed air pollution damages figure). Or markets in general. It is simply about trying to account for full costs and thinking about the best ways in which we can do that. That's all that good economics is about.