Author: rolfgroeneveld

Why economists argue with ecologists (4): Economics and thermodynamics

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If you think environmental economists are a boring lot, look up this 1997 issue of Ecological Economics. It covers a debate between three economists on economic growth and the environment, but at times it reads like a transcript of a Jerry Springer show. On one side we have Herman Daly, one of the first ecological economists and co-founder of the journal Ecological Economics. On the other side we have Robert Solow and Joseph Stiglitz. Solow and Stiglitz are environmental economists, neoclassical economists, or mainstream economists, whatever you want to call them, although Stiglitz has lately turned into antiglobalists’ favourite economist due to his criticism of globalization.

The trouble actually started twenty years earlier, when Solow and Stiglitz pointed out that when we run out of one resource, we can substitute it by another one: when we run out of oil, we switch to natural gas; when gas runs out, we switch to solar energy; and so on. Because we can always invent better and more efficient ways of meeting our needs, the economy should be able to keep on growing for the foreseeable future, or perhaps even indefinitely. Not everybody agreed, and an economist called Nicholas Georgescu-Roegen wrote a scathing rebuke where he argued that not all resources will be as easily substituted: if we run out of fish, how will we make our paella? If we run out of oxygen, what will we breathe? The idea of eternal economic growth, he argued, violated the laws of thermodynamics. To put it very crudely, these laws state that although you could convert matter into energy (which is what happens in a nuclear reactor), or energy into matter (as happens in particle accelerators), it is impossible to create energy or matter out of nothing. Georgescu-Roegen accused Solow and Stiglitz of “ignoring the difference between the real world and the Garden of Eden” and of “conjuring tricks.” In the 1997 issue of Ecological Economics, Daly compares Solow to a medieval alchemist trying to turn lead into gold. You may not consider that particularly diplomatic, but Solow and Stiglitz pull no punches either. The opening sentence of Solow’s article reads

Dr Daly’s prose tends to dissolve at any moment into a dense cloud of righteousness. This makes it very hard to respond rationally to his performance.

Stiglitz’s reaction seems somewhat friendlier, until we get to the last few sentences:

No one, to our knowledge, is proposing repealing the laws of thermodynamics! Doing so would make as little sense as the act of one state legislature that thought that students’ intellectual resources could be economized by changing the value of π from the highly inconvenient 3.1416… to just 3.
In the end, we hope we have made our essential points, using somewhat fewer trees and other resources than Daly did in his 15-page note.

I will not go into all the arguments used in this debate now. There is a lot to be said about economic growth, too much in fact for one blog post. But that these people argue over the law of thermodynamics points towards another difference between ecologists and economists.

The laws of thermodynamics are central to many environmental sciences. Climate scientists include in their models the amount of heat the sun directs at the Earth, as well as the amount of heat that the Earth radiates or reflects into space: the difference is net warming, or net cooling. Biologists model animals as barrels of energy where energy goes in as food and goes out as movement and body heat: this helps biologists explain under what circumstances a species thrives and when it goes extinct. Whatever the system, if there is energy or matter coming out of it, the same amount must also be going in somewhere, or the system is either collecting or losing something. No wonder ecologists are critical of economic growth: if you produce more, it must be because you are losing something somewhere else. So how can these economists claim that we can produce ever more with ever less inputs?

Like Stiglitz says, no economist proposes to repeal the laws of thermodynamics: they govern how we can convert raw materials, energy, and labour into cars, computers, and so on. In other words, they would apply if we were talking about producing ever more stuff. But economics does not necessarily deal with stuff, but with the value of that stuff. And believe it or not: it is possible to create value out of nothing, and to make it disappear into nothing.

In fact it works a lot like information. A while ago I read a rather strange question in Intermediair, a Dutch career magazine: does a USB stick get heavier when you load it with data? The answer, of course, is no. To a computer, a USB stick is like an Etch-A-Sketch: it uses it to write things down by moving stuff around, not by adding stuff. A USB stick contains loads and loads of switches that can be either turned ‘on’ or ‘off’ (if I’m not mistaken, my 16GB USB stick has 134,217,728 of them). A computer ‘reads’ the information on a USB stick by observing which switches are ‘on’ and which ones are ‘off’. Together, these switches can contain the latest Ufomammut CD, a movie of your PhD defense, or your illegal copy of Matlab. Put these files on your USB stick, and the USB stick has become a lot more valuable to you. How often do you read that some official has lost a USB stick with sensitive data? And this is all possible without changing the mass, nor the energy contained in the USB stick. (OK, to be honest, there may be some swapping of electrons between the stick and the computer, but that is negligible.) But leave it near a strong magnetic field and all your data are lost. And the USB stick has become worthless.

I sometimes get the impression that ecologists tend to treat value as they would treat the number π, or the density of some material, or the temperature of a body. Some studies measure it for a few samples and then aggregate them over the entire planet. And the folks who cite those studies seem to assume it remains unchanged over time. But value is a strange concept. Ever wonder why water is so much cheaper, yet so much more important to human life than gold? Value also varies between individuals and over time. You may not give a rat’s ass for Trout Mask Replica, but there are folks out there willing to lose an eye for an original vinyl copy. Likewise, is there anyone who still listens to The Sweet? I mean, seriously?

Granted: so far economies have grown partly because we are getting more effective at extracting and using ever more inputs, and thereby producing ever more stuff. This is something we cannot keep doing indefinitely: resources are finite, the amount of solar energy our planet receives is finite. There is only so much stuff you can produce, period.

But economies also grow by producing more value with the same inputs, by tayloring products to people’s wishes ever more precisely, or by enhancing the efficiency of production. How long we can keep that up is lot more difficult to say.

Economists need the softer social sciences

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A follow-up to my remark on how few valuation studies include proper qualitative research: this remark was provoked by two travel cost studies presented at EAERE 2012. One looked at the effect that forest fires have on visit rates in Portuguese forests, whereas the other studied how people trade off entrance fees and mortality risk while visiting a nature reserve in Japan.

The Portuguese study reminded me of a paper by Erwin Bulte and others on what they called the ‘outrage effect’. They found that people are willing to pay a lot more for conservation of Wadden Sea seals if you tell them the population suffers from pollution than if you tell them the seals suffer from a viral disease. I would expect something similar to happen with regard to forest fires. People might even appreciate a scorched patch of forest if you tell them it is part of a natural or at least indispensible process, but they would be apalled if the fires were caused by human carelessness. I would also expect it matters whether multiple hectares are gone, or whether there are only occasional blackened patches. The researchers did not ask their respondents what they thought was the cause of forest fires, but almost all forest fires in their region were man-made, and they assumed their respondents were aware of that fact.

The Japanese study reminded me of the Darwin Awards, or rather, the fact that most of its recipients are intoxicated, overconfident males. Suppose a respondent prefers a $20 dangerous hike over a $30 safe one, does that mean that he considers $10 too much to lower his risk of getting killed? Or does he (I’m afraid it’s mostly a ‘he’) assume that bad stuff only happens to other people? In this case the researchers stated that it was widely known which hiking trails are dangerous, and that casualties have been all over the news. But that argument ignores how good some people are at downplaying risks – at their peril, indeed.

The bottom line for me is that too much economic research, especially the valuation stuff, seems to blindly jump into the issue, imposing wildly unrealistic assumptions on human behaviour, without doing proper explorative research first. Why not interview a few hikers first, to get an idea what considerations may be at play? Why not talk to a psychologist, or a sociologist, who has done research on how people view their own mortality risks?

I think economists should observe more, and take more heed of what other social scientists have found so far about human behaviour. Economics is a world apart from most other social sciences, notably sociology and anthropology. (Supposedly, an unnamed Hindu economist once claimed that bad economists reincarnate as sociologists.) But I think this is finally changing, as Economics Nobel prizes1 are being awarded to behavioural economists and political scientists, and economic experiments have become fashionable enough to be published in top journals like American Economic Review.

So how does this relate to my own work? Besides other activities, my work involves modelling of how people exploit natural resources, and estimating how valuable those resources are to them. I think the time is ripe to do such work together with anthropologists and sociologists. I am about to start a research project on international cooperation in management of Pacific tuna, together with Simon Bush from Wageningen University’s Environmental Policy Group. But I’ll keep my eyes open for opportunities to do more such interdisciplinary work.

Footnotes:
1 Actually, I don’t like calling the Economics Nobel an Economics Nobel. It’s just that Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, as it is officially called, is a bit too long. But there is no such thing as a Nobel Prize for Economics. The only reason why there is an Economics prize that has “Nobel” in its name, and not, say, a similar biology prize, is that economists work at banks such as the Swedish central bank, and thereby have access to enough money to create the fund for such a prize. Unlike biology faculties.

Should one species be allowed to choke a fishery?

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The North Sea bottom trawl fishery is a typical multispecies fishery. A single haul catches many different species, including plaice, sole, cod, turbot, red mullet, tub gurnard, and monk fish. These species tend to associate with other species instead of swimming together in schools, so it is almost impossible to catch one species without also catching a lot of others. Fisheries scientists like to call this a technical interaction between the species: they interact not through predation or competition, but through ending up in the same net.

If a bottom trawl fisher runs out of cod quota he can do three things: buy additional cod quota from other fishers, stop fishing, or keep on fishing but throw all cod that he catches back into the sea (which is what we call discarding of fish). So if this fisher is not allowed to discard his cod catch, and there is nobody who can sell him any cod quota, he is forced to stop fishing altogether. Cod is then called the ‘choke species’: the species that stops you from fishing when its quota runs out. If you were allowed to discard fish you would continue fishing as long as there is at least one species that can still be caught. As far as I know there is no term for this sort of species, but I kind of like the term slack species.

The EU is about to introduce a ban on discarding, and to set TAC (Total Allowable Catch) levels for a number of species whose catch has so far been unrestricted (for instance red mullet, brill, and sea bass). Unsurprisingly, fishers are adamantly opposed. To them ‘more species under a TAC regime’ means ‘more potential choke species’. They prefer fisheries policy to regard a few major species only, and to accept the bycatch of all other species.

MSY is flawed in two ways…

I admit that my first reaction was something like “oh, so these guys just want the right to fish a species to extinction if it suits them”. But on second thought they point towards two flaws in the principle of Maximum Sustainable Yield (MSY), which is currently the guiding principle in fisheries policy worldwide. MSY is the largest possible annual catch you can get sustainably. If a stock is never fished, it is at its maximum possible size, but you don’t catch anything. If you fish a little every year, the stock will be a bit smaller, and you catch a little bit every year. Fish some more, and the stock will be somewhat smaller while your catches are larger. As you keep on intensifying your fishing, however, you reach a point where not only the stock declines but also your catch. The maximum catch you can have every year without depleting the stock is called MSY.

The first problem with MSY is that it is based solely on biological principles. Economists have long argued for Maximum Economic Yield to be the guiding principle: this is the annual catch that maximizes, in a sustainable manner, the total revenues minus the total costs from fishing. MEY means that you take into account not only biological growth, but also the costs of fishing and the price of the fish. In the simple text book models this actually means fishing a bit less than under MSY to take advantage of the fact that more abundant fish is easier, and hence cheaper, to catch.

Second, the principle of MSY does not only ignore costs and prices, but also technical interactions. If you took these into account, a policy that maximizes the sum of the MEY over all species would allow fishers to overfish some species, and to underfish others. Mind you: ‘overfishing’ does not necessarily mean depleting a fish stock. It simply means that fishing pressure is higher than the fishing pressure that would lead to MSY. So you can sustainably overfish a stock! It’s just that in general you shouldn’t do that, because it gives you less fish under higher costs than you would have under MSY. In a multispecies fishery, however, it may be more efficient to overfish some species because that would allow more catch of other species that are more valuable, more productive, or both.

Note that trading quota could relieve some of the pain, but not all. If cod quota are very low compared to other quota, cod will eventually become a choke species, trade or no trade.

…but what is the alternative?

Ideally TACs should be set taking technical interactions into account. Fisheries biologists are working on this problem, but I suspect that it remains a very complex issue. On the other hand, current TACs are certainly not realistic in multispecies fisheries, so any consideration of technical interactions would be welcome.

Then there is the issue of discarding: the EU can either allow fishers to discard unwanted catch, as has been the policy so far, or ban discards, as the EU is about to do. In theory, if discards are allowed, fishers can keep on fishing as long as there is a ‘slack species’. It sounds horrible that fishers go on fishing, throwing over board everything they don’t need, but be aware that not all discarded catch is dead or dying, although the survival rate can be very small. A discard ban will have the advantage that the researchers who do stock assessments have better catch data, because so far they had only very crude estimates of how much fish were discarded. This matters, because stock assessments lean heavily on landings data, which underestimates catch if part of the catch is discarded. On a longer term a discard ban may also give a strong incentive to develop more selective fishing technologies, although it is highly unlikely that bottom trawling will ever be 100% selective.

Additionally, perhaps the current system of catch quota could be complemented with the possibility to rent additional quota from the government for, say, the first few choke species. Under such a policy you would indeed catch a bit more of the choke species and a bit less of the slack species, because catching all species would become too expensive. The rental price would still give an incentive to fish more selectively, but the fishery would not be shut down completely as soon as the choke species quota run out. The problem, of course, is setting the right prices: they should reflect the value of the loss of future catches of the choke species, which depends not only on biological growth, but also on the price of the choke species, the costs of catching it, and the discount rate. A daunting task indeed.

AIR on stupidity and optimizing your wedding party

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Here is a journal I’d love to publish in someday. It’s from the same folks who issue the igNobel prices. Its latest issue is a delightful exposition of the science (including economics!) of stupidity, and how a marrying couple of scientists applied mixed-integer programming to design the optimal seating plan of their wedding party. In the acknowledgements it says:

MLB gratefully acknowledges JDLP for still agreeing to marry her after writing this.

Congratulations folks.

Ecological Economics must be economizing on language editors

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How else can you explain the publication of a paper with the title

Economical sustainability of pinestraw raking in slash pine stands in the southeastern United States

Economical? As in the meaning of “thrifty”? What on Earth is “thrifty sustainability”?

I can forgive my students, especially non-economists, making this mistake, and as a non-native English speaker I understand the confusion between “economy” and “economics”, the Dutch translation of which is “economie” in both cases. But I wouldn’t expect such a mistake in the title of a paper in an international peer-reviewed journal that has “economics” in the name.

I know I’m being a bit of a language nazi here, but the point is also that Ecological Economics has a strange position in the environmental economics literature. The quality of the publications varies wildly between highly influential and original ideas on one hand, and vague econophobic claptrap on the other. Nevertheless, its impact factor is high enough to make it an A-journal. Perhaps that is why I have so far submitted most of my papers to that journal.

More thoughts on Stapel, Smeesters, and scientific fraud in general

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Whenever there is a new case of scientific fraud the question pops up: does publish or perish force scientists to lie about their results? What makes this question all the more relevant is the fact that many universities employ their academic staff (including me) under some form of tenure track. Here the publish or perish is translated into a principle of up or out: either you keep increasing your education evaluation scores, publication list, Hirsch Index, project acquisition, and so forth, or you’re out of a job. Needless to say it gives quite an incentive to cook the books.

The first thing to realize here is that neither Stapel nor Smeesters are good examples of such a mechanism. Both had tenure, and Stapel has been making up data for the entire length of his career.

The second thing to realize, however, is that there are many forms of scientific misconduct, not all of which are outright fraud. Stapel is an extreme example of blatant fraud as he fabricated complete datasets. But there are more ways of behaving badly in science:

  • Skip observations that don’t support your hypothesis. This is what Smeesters is being accused of.
  • Copy text or ideas without citing the source.
  • The mirror of that: support a claim with a reference to a source that does not provide such justification.
  • Leave out details of the research method that would have put your results in a different light.
  • Run lots and lots of regressions on any combination of variables. You are bound to find a statistically significant relation between one or more variables somewhere. Present it as something you intended to investigate in the first place. (Be aware that “statistically significant at 5%” means “the probability that this relation is due to random fluctuations is 5%”, meaning that 1 in 20 of such “statistically significant” relations are really just a coincidence.)
  • Include the name of some big shot who hardly contributed to the paper but will make your paper look important. The big shot has yet another publication and you can bask in his glory.
  • When you do an anonymous peer review, tell the authors to cite some of your papers, especially the ones that improve your Hirsch Index if they are cited once more.
  • When you do an anonymous peer review, reject the paper if it presents results that you present in a paper that you just submitted to another journal. After all, you want to be the first to present the idea!
  • Or even worse than that: reject the paper (or a proposal) and submit the idea yourself. (Admittedly, given the huge time lag in publications you wouldn’t have a high chance of success.)

Note how difficult it is to identify bad intentions behind some of these, and that the line between good scientific practice and scientific misconduct can be surprisingly thin:

  • You can have very good reasons to skip an observation (protest bids in contingent valuation surveys are one). This is Smeesters’s defence.
  • You may have always thought that author X said Y in article Z, but actually you were confused with another article.
  • Nobody ever includes those details of the method in their papers, so why should you?
  • You’re a PhD student and you don’t want to let your professor down by not including him as an author – he is your supervisor, after all.
  • The paper you are reviewing would be incomplete without that reference, whether you wrote it or not.

It is easy to say that there are no such things as small sins and big sins: thou shalt not sin, period. But for most people it just doesn’t work that way: they wouldn’t mind crossing the speed limit by 10 km per h but object to crossing it by 100 km per h. And crossing the speed limit by 20 km per h may make you feel slightly worse about yourself, but when you are in a hurry it becomes easier to silence that guilty feeling.

So yes, I do believe the principles of publish or perish and up or out increase the incidence of scientific misconduct, but not in the way we read about it in the news. The cases you read about in the news are poor examples of such pressures. These are the sensational ones, the blatant fabrication of data by prestigious professors with big egos. The main damage is in the everyday nitty-gritty of science, and most of it may never be detected. Does that make it less bad? No, it may actually be worse because we don’t see, let alone quantify, the damage.

So is tenure track bad? Well, to paraphrase Churchill, it is the worst system except for all the other ones. The alternative we had in The Netherlands, where you had to wait for the current professor to die or retire before you could become one, has stifled scientific progress and chased a lot of talent out of the country. I believe the solution lies not in abandoning tenure track, but rather in the way we publish our results – but I’ll leave that for another post.

My highlights from EAERE 2012

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My highlights from the 19th annual conference of the European Association of Environmental and Resource Economists:

  • I was surprised to see how crude estimates of travel costs still are in non-market valuations of recreational sites;
  • Also, how few of those studies have done a proper qualitative analysis before they do their quantitative study;
  • Linda Nøstbakken had a very nice paper on how a combination of diversified monitoring and self-reporting incentives can greatly enhance monitoring of fisheries legislation;
  • Martin Quaas proposed using a “shadow interest rate” as a way of expressing the quality of fisheries management;
  • Nick Hanley is a Les Paul man:




And rightly so; Fender people are evil.

I played the fiddle in a Prague biker bar

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So this is Bajkazyl:

It started out as a bicycle repair workshop but since last year they have a bar and live music almost every evening. Prague has a small but growing scene with young people interested in traditional Breton and Czech dances, so we played some Breton, French, Dutch and Czech tunes and pissed off a lot of cyclists doing that. Prague has a wonderful liberal atmosphere: any Dutch bike repair workshop trying this would have its ass sued to hell within a week.

Yet another scientific fraud scandal in the Netherlands

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Dirk Smeesters, professor Consumer Behaviour at the Erasmus University of Rotterdam, is suspected of scientific fraud. Worse than that, he is not the first one. And what really irks me about the issue is the complacency among many researchers, especially natural scientists. Many of them argue that these cases only prove the self-cleansing power of science: after all, hasn’t the impostor been caught? Fraud will always be detected.

But how many impostors do not get caught? I think it is more difficult to detect fraud in the social sciences than it is in many (but not all) natural sciences. Take Hwang Woo-Suk, the Korean guy who faked data claiming he cloned human embryos. Such fraud is bound to be detected. His peers will have good reasons to reproduce his results so they can apply the same technique, or even improve on it. Companies may want to commercialize the technique. When it turns out it doesn’t work, people would ask him for more details on how he did it, and try again. Somewhere down the line they would get suspicious because he is either not willing to share the details of his work, or his recommendations don’t help.

The work of Diederik Stapel and Dirk Smeesters is different. There is less incentive for replication, because the experiments tend to be fairly simple: it is not that they are some fancy new technology. You would not learn anything new from it, and you would not be able to publish it (“We did the same as Stapel et al. but it didn’t work” – “Well, your experimental set-up was probably wrong”). Diederik Stapel’s findings have been applied in many Dutch schools. The only way to find out whether they worked would have been to do randomly select the schools where we apply the insights – try explaining to parents why their kids are not being taught according to the latest insights in educational science. And even then, our evidence would be no more than a p-value: a probability that the treatment has no effect. Graham Bell could demonstrate his telephone worked, but it doesn’t work like that in the social sciences.

Granted: bad arguments against ecological footprint

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While writing my post on Ecological Footprint I came across a lot of sound arguments against it, but, to be fair, also a few less convincing ones. Here are two that hold more than a grain of truth, but simply will not convince the EF’s proponents.

“Land prices will stop you from sequestering carbon”
The argument goes like this: it’s unrealistic to assume all carbon emissions are mitigated by planting trees, because as more and more land is covered by ‘carbon farms’ (yes, not only the term exists, so does the practice), land will become so expensive that you will resort to other ways of climate change mitigation.

Of course you would expect land prices aree extremely high when the last square meter of agricultural land is converted to a carbon farm: after all, we only have one planet. But perhaps that is exactly what EF tries to tell us? Nevertheless, the argument points towards another problem with EF: it assumes sequestration is the only way to deal with GHG emissions, or at least the cheapest way. But although adaptation to climate change has long been a dirty word in the climate debate, it would be bad science and bad policy to dismiss it straight away – especially if sequestering carbon becomes prohibitively expensive. Given the choice between starvation and building better coastal defenses, my motto would certainly not be let em eat tree bark.

“You can overshoot temporarily without wrecking the planet”
EF counts any policy that increases stocks of carbon as unsustainable, but it is possible to accept a slight, temporary increase in carbon stocks without inflicting major damage to the climate system. Indeed, it might even be optimal to do so. If we could eradicate poverty by a temporary spurt in economic output to build up capital (read: build machines, infrastructure, establish institutions, etc), after which we close biophysical cycles again, bringing our impact on the planet within safe boundaries, the elevation to a higher but sustainable standard of living may more than offset the temporary damage inflicted on the environment.

But to me this sounds too much like the drunk who is caught by police while starting his car and tries defending himself with the excuse that he wasn’t planning on actually driving it. Are you really trying to tell me that flying to distant holiday destinations several times a year (just to name an example) is supposed to be temporary, and to help developing countries get richer? Don’t get me wrong here: I think everybody is free to take a long vacation on the other side of the globe if he or she likes, although we should do so facing prices that convey all relevant costs, and that includes our impact on the environment. But most people would assume that our current way of life is at least supposed to be maintained indefinitely, and otherwise to be expanded. The EF’s proponents argue that this is impossible. There may be a lot to be said against their position, but claiming it’s all meant to be temporary is not one of them.