Answer: both are complex disciplines. But because they deal with every-day events, amateurs regularly assume that they know enough to dismiss the entire field.

Suppose you wanted to know what was wrong with climatology: how far is it really understood, what can it usefully describe and what not, what can it usefully predict: who would you ask? Not, I hope, one of the many “climate skeptics” whose meaningless ranting echoes around the wub. If you really wanted to know, you need to ask a climatologist. Preferrably, I’d admit, one slightly outside the mainstream and prepared to be forthright. Do we know any of those?

Now suppose you want to know what’s wrong with economics: does it understand the discount rate fully, for example. Where would you get your information: from people who just didn’t like the consequences of having a discount rate, or from people who had actually studied economics? What about the people who don’t like the discount rate but have never studied economics: would you take their views seriously?

You know who you are. Anyone else who wants to know can look at the comments on The ETS is stupid, part n.

To push this further: there are any number of people out there who don’t believe in Relativity, Special or General (some of them might even know the difference, many not). What 99.9% of such people have in common is that they’re utterly clueless about the theory they don’t believe in. So they should be ignored; on that subject.

I’ve said all this before of course. Perhaps I’ll get into the habit of saying it once a year.

This isn’t, BTW, an attempt to end the discussion on the ETS post, merely to provide a more obvious forum to continue it. Because I want to win over the “economics skeptics”.

[Updated: to add the pic. Which is the important bit, not the post behind it.]

Refs

* Models versus radiosondes in the free atmosphere: A new detection and attribution analysis of temperature – Lott et al., JGR 28 MAR 2013, DOI: 10.1002/jgrd.50255.
* Tol / Ackerman fun
* Is the Uncertainty about Climate Change Too Large for Expected Cost-Benefit Analysis? – Richard Tol. See more.

Comments

  1. #1 Jamie
    2013/04/21

    Interesting. First I agree with you about ETS. And I can accept as a rule of thumb that one asks the most-likely-to-be-objective authority for one’s information on any topic. But there is a bit of a Dunning-Kruger effect at play here. One needs the skills to evaluate the science in order to be able to evaluate the authorities. Ultimately the question of which authority to turn to has to take a backseat to the question, “How do I advance my understanding of the subject?” One has to learn some of the science, not just figure out which authorities can be trusted, and one has to learn some of the science even to be able to figure out which authorities can be trusted.

  2. #2 OPatrick
    2013/04/21

    What’s the difference between economics and climatology though?

    My initial thought is that economics is changed radically by significant (and unpredictable to economists) shifts in climate, but climatology is only marginally affected by significant (and unpredictable to climatologists) shifts in economics.

  3. #3 Eli Rabett
    http://rabett.blogspot.com
    2013/04/21

    Not the anthropic parts of it, which include emissions and land use:)

    [Besides which Tol is a tosser]

  4. #4 mt
    ATX
    2013/04/21

    There are numerous similarities. One of the most notable of them is that they have vehement critics who do not have depth in the discipline. So far we agree.

    You somehow conclude that the epistemic position of the critics is similar.

    But look, you know very little about the theoretical basis of astrology, about which many books have been written. Yet I presume you are comfortable dismissing it. Homeopathy has even managed to sneak into legitimate universities if I recall correctly. Yet I doubt you would hesitate to dismiss it either.

    [I understand the basic position of science, which is enough to destroy Astrology. I know that Astrology has no theoretical basis. So I don’t think that’s a good example. Homeopathy I know little about. I’ve just looked it up on wiki (http://en.wikipedia.org/wiki/Homeopathy) and the opening paras will do for me -W]

    So the first point to make is, contra your implied position, one does not need to accept the authority of a discipline just because one is not steeped in it.

    [I didn’t say you needed to accept its authority. I said you needed to understand it -W]

    I have always said that climate science needs to actively defend itself from any reasonable scientific challenge, not to idly dismiss it.

    [Agreed, but that’s not the point -W]

    I have a whole cluster of criticisms of economics as a discipline and as an academic culture. I actually have been inclined to set up an “economics audit” blog wherein I am endlessly harsh and obnoxious toward economics, but I’m afraid I don’t have a nasty enough personality.

    [Then I think you should make some of those criticisms in a clear and constructive way, choosing your best examples. I don’t think you’ve done that. Could you point me at your best example? -W]

    I think, though, that in addition to a tendency to overvalue academic authority, you misunderstand these criticisms.

    Obviously the discount rate is a solid, useful concept within economics. I believe there are quite a few.

    But what it discounts is the predictability of the future insofar as investments are concerned, not the ethical importance of the future.

    In a sense this is the same error as that “Forecasting Principles” guy, Armstrong, makes, when he suggests that because “forecasting never works beyond a few months” in stock market predictions, climate models must inevitably be of no utility.

    Another way to look at it is this: if we have hyperinflation, the discount rate becomes very high. You should spend your paycheck on durable goods as soon as you get it because its value will be less by the end of the week. But that doesn’t make spilling dioxins into the lake more ethical.

    [I think that’s just a misunderstanding on your part. Discount rates are on “underlying” activity; hyperinflation is irrelevant, as is inflation. Is there an economist in the house? -W]

    So the biggest criticism I have of economists is overreach – unlike fluid dynamicists they seem to have no concept whatsoever about dynamical regimes, domains of applicability of their approximations. They confuse conditionally useful approximations with universal truths.

    They have a hammer, and so to them everything is a nail. Including the future of our progeny. This is utter intellectual fraud and it needs to stop.

  5. #5 mt
    ATX
    2013/04/21

    OPatrick refers to the similarities between the processes under study, not between the disciplines. That is a separate matter.

    One key similarity I’d propose is that for the most part each discipline has only a single instance under study which creates interesting epistemic problems.

  6. #6 mt
    ATX
    2013/04/21

    Re #3 Argh

    I look these things over for typos, and then they appear suddenly after I post. “Far” for “fat” obviously. And drop the “it is when economists” fragment.

  7. #7 Victor Venema
    http://variable-variability.blogspot.com
    2013/04/21

    Do you know the ultimatum game? A very interesting economic game played in experimental economics labs.

    Person A get to split a sum of money and person B can accept the offer or B can refuse and both get nothing. The game is typically played once, the people cannot see and do not know each other.

    When I first heard of the game, I did not understand why it is interesting. A splits the money 50/50 and B accepts that.

    The economist, however, would assume that B is rational and would be willing to accept any sum, getting something is better than nothing. Knowing this, A would only offer the smallest possible part to A, according to economic theory.

    The experiment shows that many people split 50/50 and then the offer is accepted. And you have to make a substantial offer, 30 to 40%, to have a good chance of being accepted. This and similar experiments have shown that people have an innate sense of fairness and are willing to altruistically (at a cost to themselves) punish unfair behavior.

    The rationality assumption, at the basis of the entire economic theory has thus been refuted. Economist still continue using it, because otherwise they cannot compute anything. My impression of climatology is more favorable.

    [I know the game, but you’ve missed the point. Yes, you’re right that if you do this, many people will reject a 90/10 split as “unfair” (but only if the 10 is on their side. They’d accept it if the 90 was on their side. So this isn’t “altruism” exactly).

    But the point is: economists also know the game. Part of their study is why people behave this way, and how systems work in the presence of such behaviour.

    I think that by insisting that economists assume that people behave rationally at all times you’re attacking a strawman -W]

  8. #8 John Mashey
    2013/04/21

    One of these must obey laws of physics.

  9. #9 mt
    ATX
    2013/04/21

    Discount rates are on “underlying” activity; hyperinflation is irrelevant, as is inflation.

    Perhaps so, and thanks for the correction. I would suggest the ethics of, say, dumping toxins in a lake or an aquifer are not affected by the “underlying growth rate”, (whatever that means – the idea of an inflation-adjusted currency being a crude approximation, I believe that “growth” is not well-defined over long time scales.)

    http://en.wikipedia.org/wiki/Social_discount_rate

    If you stop assuming perpetual growth all these calculations seem to vanish in a puff of smoke. Is there any point to macroeconomic reasoning at all when the discount rate goes negative?

  10. #10 Victor Venema
    http://variable-variability.blogspot.com
    2013/04/21

    WC: “I know the game, but you’ve missed the point. Yes, you’re right that if you do this, many people will reject a 90/10 split as “unfair” (but only if the 10 is on their side. They’d accept it if the 90 was on their side. So this isn’t “altruism” exactly).”

    It is altruism, because people are willing to suffer a cost to uphold moral rules. If A only wants 10%, I see no reason to object, if I were B. A is the one proposing the split. The situation is not symmetrical.

    There are actually cultures in giving is the norm and not taking. If you play the ultimatum game in these cultures they may offer a split better than 50% and then such offers can be refused, because B does not want to be in debt with A.

    WC: “But the point is: economists also know the game. Part of their study is why people behave this way, and how systems work in the presence of such behaviour.”

    I am not so sure about that second part. For some other sweeping assumptions, such as the assumption of perfect foresight or stable preferences, there is some work. Removing the rationality assumption is difficult.

    WC: “I think that by insisting that economists assume that people behave rationally at all times you’re attacking a strawman -W]”

    Now you are attacking a strawman. I only claimed that the *main economic theories* are based on the rationality assumption.

    There are certainly economists who are good scientists. Knowledgeable economists will acknowledge that humans are not always rational. Still they typically go on to assume that it is not important in real life, because they need the rationality assumption so that they can compute something and give policy advice. Maybe they will be lucky and it is not that important. The dynamics of selling a kg of butter may be different as the ultimatum game. Currently no one knows how important these problems are.

    Do you know any unresolved fundamental problems of this magnitude in climatology?

  11. #11 guthrie
    2013/04/21

    Hmm, similarity? That’s kind of hard, because economics is a social science, so not exactly comparable.

    There’s also the difference between economics as used and abused by politicians and oligarchs, and economics as successfully researched by academics. The former are usually decades behind the latter, often deliberately so because the findings don’t agree with their fixed ideology. (see also the condem’s mad, bad and dangerous austerity policy)
    Economists can’t even seem to agree on a unifying theory yet, whereas climatology, as a physical science, fits nicely into the overlaps of physics, chemistry, biology, geology and astrophysics and doesn’t need a unified theory, but then it doesn’t have warring camps who have different notions of how the climate works.

    Perhaps a similarity is that if you merely stick to honest investigation in either, you won’t get rich, although if you choose to shill for rich people you will make more money, although so far there seems to be more economics trained people doing it than climate trained ones.

    So what is the position of the ‘economics sceptics’?

  12. #12 Tom Curtis
    2013/04/21

    WC also misses the point of the ultimatum game in that to a reasonable approximation, people who decline to offer 90/10 splits in favour of offering a 50/50 split are rejecting the 90% as unfair when they receive it. In one variant of the ultimatum game in which the offers of only a 90/10 or a 50/50 split could be made, and in which there was no right of refusal, 76% of subjects offered 50/50 splits.
    http://www.researchgate.net/publication/4719534_The_Ultimatum_Game/file/79e41510fce9496e3d.pdf

  13. #13 Tom Curtis
    2013/04/22

    The graph in the update is, by the way, thoroughly misleading out of context. Used to suggest that the income increase from 1.25 to 2 dollars a day (PPP) of the 20th to 40th percentile makes them the “winners” of globalization, and bigger winners than the top 1% whose (minimum) increase from 220 to 352 dollars a day (PPP) is absurd. Further, lumping the top 1% together when there are large differences in income increase between 99-99.9% and 99.9%+ groups is also misleading, overstating the gains of the lower group while drawing down the average of the upper group which have increased faster than any other bracket.

    Ignoring the latter point, this graph needs urgently to be put into context by comparison with figure 5 of the original report; and more importantly, with figures 5 and 7 of the 2011 UNICEF report.

    The figure above is an antidote to those who reject globalization outright; but is hardly an endorsement of globalization as currently practiced. As practiced, it turns out to be a mechanism whereby the very wealthiest enhance their incomes by trading away the income gains of the lower and middle classes of their nations, thereby lifting the poorest from total destitution to mere abject poverty.

    http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2012/11/06/000158349_20121106085546/Rendered/PDF/wps6259.pdf
    http://www.unicef.org/socialpolicy/files/Global_Inequality.pdf

    [The figure isn’t misleading, unless you’re making up a wrong reading and deciding people will read that into it.

    What I read from it was an explanation of why there’s a large sector of western society that is ripe for believing that globalisation is bad. They’re seeing their own elite get much richer, and they’re seeing poor folks who they previously assumed would just naturally stay poor, get richer; but not themselves -W]

  14. #14 TheGoodLocust
    2013/04/22

    The obvious answer is that both are scientific fields that occasionally persist in incorrect beliefs despite evidence to the contrary.

    For example, when a certain Harvard-educated Keynesian economist proclaimed doom without continued and/or increasing government spending, many influential people took notice.

    Of course, I’m not referring to Paul Krugman, another Harvard-educated Keynesian economist who repeats similar idiocy ad nauseum, I’m actually referring to Alvin Hansen, who sounded like Obama talking about the sequester (prior to the sequester) when speaking of the massive cuts to government spending immediately following WW2.

    Hansen was, obviously, wrong about his predictions of doom, but we still have Keynesians telling us the same baloney despite the numerous examples that contradict their theories on the economy.

    Likewise, another Hansen’s predictions of doom, this time of a climatological nature, have and will continue to fail, but some people will still cling to his “science” for decades to come.

  15. #15 David B. Benson
    2013/04/22

    “Conventional economics is a form of brain damage.” David Suzuki

    Suzanne Moore: “{Economists} have no foresight, no hindsight, and little humanity.”

    John Kay: “Economics may be dismal, but it is not a science.”

    etcetera ad nauseum

  16. #16 Dan Moutal
    planet3.org
    2013/04/22

    I think the underlying difference is the foundation they are built upon. Climatology is based on a solid foundation of physics, economists aren’t so lucky.

    This means that given a similar level of skill the conclusions of a climatologist (about climate anyways, things get much more murky when the talk moves to policy) are probably more robust than those of of an economist, simply because the climatologist has the benefit of a solid foundation.

    So while I agree about the similarities and the importance of relevant experts, I do think the bar required to challenge the expert consensus of economists is lower than that of climatologists.

    Of course the other difference is that one field is more likely to make silly errors in excel:)
    http://arstechnica.com/tech-policy/2013/04/microsoft-excel-the-ruiner-of-global-economies/

    [Pfft, everyone makes silly errors sometimes. And you shouldn’t oversell the problem. The debt-vs-growth stuff doesn’t disappear in that one error; it just stops being a sharp break at 90% -W]

  17. #17 PeteB
    2013/04/22

    One thing that I was surprised about was how much agreement there is among many subjects within economists of all stripes

    http://www.economist.com/news/finance-and-economics/21569378-if-economists-agree-something-public-will-almost-certainly-think

    based on this paper

    http://dss.ucsd.edu/~gdahl/papers/views-among-economists.pdf

    “Summary

    The immediate finding when examining the responses of this Panel of economists is the remarkably high degree of consensus.The few disagreements that exist seem to arise largely when the academic literature on a question is small or non -existent, allowing differing prior beliefs to remain an important determinant of posterior views. Men and those with experience working in Washington have fewer such inhibitions. Surprisingly, there are no detectable systematic differences in views across Departments, or across school of Ph.D. In addition, there is no evidence to support a conservative versus liberal divide among these Panel members, at least on the types of questions included so far in the surveys.”

    Another couple of links for those that are interested

    http://crookedtimber.org/2011/03/17/a-simple-model-of-disagreement-among-economists/#more-19344

    “Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most.’

    and

    http://thinkprogress.org/yglesias/2011/03/17/200252/the-illusion-of-disagreement/

    “The fact that the economics profession can offer so little in the way of consensus guidance about dramatic, crucially important events like the panic of 2007-2008 is a huge problem and a very legitimate knock on the enterprise, but it doesn’t actually undermine the overall epistemic status of the discipline. The hope is that over time things improve. And, indeed, for all the horrors of the current recession it’s been managed much better than the Great Depression of the 1930s was. Progress is happening. The only way to make more rapid progress on the science of macroeconomic stabilization would be to have many more recessions so as to gather better data.”

  18. #18 Marco
    2013/04/22

    Dan, that’s just silly. Blaming Excel for a coding error that likely would just have easily occurred in other programmes.

    On the other hand, we have the Gergis et al paper, in which a processing method was claimed to be used in the Methods section, when in reality it wasn’t done. I doubt they used Excel for that (and I also doubt people will blame the software they used).

  19. #19 Tom Curtis
    2013/04/22

    WC: “The figure isn’t misleading, unless you’re making up a wrong reading and deciding people will read that into it.”

    The “wrong reading” that I purportedly “made up” is exactly the reading given by Forbes magazine, from whom you sourced the figure. They write:
    “The quite remarkable thing about this globalisation, this neoliberalism, is how incredibly pro-poor it all is. And, of course, the related fact that if we want to continue down this glorious path of making the poor rich then we’d better keep on keeping on.”
    http://www.forbes.com/sites/timworstall/2013/04/20/the-most-notable-thing-about-the-global-economy-is-how-well-its-doing/

    If you disagreed with their interpretation, you needed to say so up front; and having not said so up front it is rather dishonest to accuse me of making up the reading from which you source the graph.

    [You can take your take your “dishonest” and stick it where the sun don’t shine. Try basic reading comprehension on your part instead: Updated: to add the pic. Which is the important bit, not the post behind it.

    However, I do indeed largely agree with Timmy on that. The poor – the truely poor on a global scale – have indeed benefited -W]

    As it happens, your reading is rather an obscure take on the graph. It is also wrong in that, so far as I have noticed, the working class and middle class of Western democracies simply don’t notice the genuine poverty of third world. The only picture they see is themselves getting poorer while the rich of their nation get richer.

  20. #20 Paul S
    2013/04/22

    GISing for ‘economics’ and ‘climatology’ suggests the first involves zig-zaggy lines while the latter involves pretty rainbow-coloured maps.

  21. #21 Hank Roberts
    2013/04/22

    More income at what cost?

    The “wealth” isn’t being adjusted to reflect the source being degraded. Eventually, going in this direction, all you’ll have is money.

  22. #22 TheGoodLocust
    2013/04/22

    @Dan Moutal “I think the underlying difference is the foundation they are built upon. Climatology is based on a solid foundation of physics, economists aren’t so lucky.

    This means that given a similar level of skill the conclusions of a climatologist (about climate anyways, things get much more murky when the talk moves to policy) are probably more robust than those of of an economist, simply because the climatologist has the benefit of a solid foundation.”

    The problem with your analysis is that you don’t take into account the fact that we are so much more knowledgeable of economic variables.

    We know nearly precise inputs and outputs. We understand basic human behavior with regard to economics.

    Climatology has to worry about what it doesn’t know that it doesn’t know. Economics doesn’t really have that problem because, as humans, we understand the limits of collective human behavior.

    Not only that, but we have numerous laboratories of experimentation with economics, which might actually make it a more scientific field than climatology.

    The one real flaw of economics is ideology. People wanting to believe their view of the world is correct and so they’ll see what they want to see in the evidence and explain away the rest.

    That flaw, however, is not exclusive to economics.

  23. #23 MMM
    2013/04/22

    “Now suppose you want to know what’s wrong with economics: does it understand the discount rate fully, for example.”

    Hmm. Well, I think it is pretty clear that economics hasn’t really fully grappled with long-term discount rates. It is good on short-term (10-20 years), but getting beyond that, and things get fishy… let’s take the basic Ramsey discount framework, r = p + n*g: eg, r (discount rate at time t) = rho (rate of time preference) plus eta (marginal utility of consumption) times g (growth at time time).

    For intergenerational problems, does it even make sense to have a pure rate of time preference*? Picking eta is an interesting question because it has implications for equity: the larger the eta, then, assuming economic growth in the future, the more we discount the future, but also the more we should care about the poor today (and the more we should tax the very rich). But the key is g, the growth assumption: will economies continue to grow at about 2 percent per year? If that’s true, then maybe we don’t need to worry so much about the future. If it is not, that’s a problem.

    Marty Weitzman has written a number of papers on discounting, and has made two statements which I found interesting. 1) If we are uncertain about g, then in the short term, then the expected value of future worth would be approximately equal to a median choice of future growth. But for the long term, the expected value of the future will be close to the low end of growth, because low growth futures will come to mathematically dominate any expected value calculations. 2) If a given choice today has a chance of changing future growth, then that has some serious implications, because you’d actually change the right discount rate to use: and can potentially create negative discount rates.

    As you can see by this workshop summary paper, there are a lot of remaining issues that the community doesn’t have answers for yet: http://rff.org/Documents/Events/Workshops%20and%20Conferences/110922-Discounting/Main_Points.pdf

    -MMM

    *I’ve heard a theory that the inter-generational “pure rate of time preference” should be approximately equal to the chance of a civilization-ending catastrophe…

  24. #24 Marlowe Johnson
    2013/04/22

    It’s been said around these parts that WG II is at the stage now where WG I was at 20 years ago. If that’s the case, where that does that put WG III?

    At the risk of invoking the wrath of he-who-shall-not-be-named, the interested reader might wish to take a look at the sources used in the FUND model and take note of the age of the underlying reference material

  25. #25 Eli Rabett
    http://rabett.blogspot.com
    2013/04/22

    Marlowe, as the bunny who put that ball into play, Eli would note that anyone who shakes hand with he who must not be named, should count his fingers. The problem, IEHO, with econometricians, is one of them had a big success publishing wise glibbing about things he knew nothing about, and it took a while to catch up with the mistakes.

  26. #26 Marlowe Johnson
    2013/04/22

    Indeed. an entertaining dust up with Ackerman was happily put on display a while back by retraction watch. hell hath no fury like an economist scorned apparently.

    On a more serious note, the depressing thing IMHO when it comes to climate economics is how poorly understood it is within the poilcy community that the error bars on the estimates of the social cost of carbon are so wide as make it essentially useless in terms of providing meaningful policy guidance.

    Ah to hell with it. is there any worse stealth advocate than Richard Tol? And if so, why has RP Jr remained silent all these years…

  27. #27 MMM
    2013/04/22

    “how poorly understood it is within the poilcy community that the error bars on the estimates of the social cost of carbon are so wide as make it essentially useless in terms of providing meaningful policy guidance”

    I actually think a decent part of the relevant policy community understands quite well that social cost of carbon estimates are highly uncertain – read the Interagency Working Group document for the US Gov’t SCC carefully, and you can see all the caveats put in by the document writers. Highly uncertain is not, however, “essentially useless”. There’s a big difference between using “zero” as the benefit of reducing carbon, and using, say, $20/ton, even if the real value might exceed $100/ton. Especially when regulating on a $100/ton basis is currently politically infeasible.

    -MMM

  28. #28 Tom Curtis
    2013/04/23

    So we now learn that the “wrong reading” that I “made up” is not only the reading of your source, but also a reading you agree with (“I happen to agree with Timmy”).

    My original criticism is that shorn of context, the graph to easily misled people. It suggests the global poor (excluding the poorest) have been winners from globalization. It is impossible to determine that from a single measure, however. Changes in economic activity for the poor may have resulted in changes in bundle of goods used by the globally poor that eat up the meager economic expenditure. Such changes in purchasing patterns would not be reflected in purchasing power parity measures, so that a real increase in PPP income may reflect a net loss of real income. Further, changes in PPP income do not factor in changes in externalities, some of which are known to be significant and negative. Does 50c a day PPP compensate for living in a Chinese industrial city with their lack of pollution controls? Probably because workers are entering not leaving, the cities – but simply quoting percentage change in PPP income does not show workers to be net beneficiaries, and certainly does not show them to be beneficiaries on a scale comparable to the very rich.

    So, while an antidote for those who thoughtlessly assume globalization is of no benefit to the poor, it is a graph that needs extensive context to be properly interpreted.

    And how’s this for reading comprehension:
    “Updated: to add the pic. Which is the important bit, not the post behind it” does not provide context.

    So, my original criticism stands. The graph is too easy a mechanism for the thoughtless, the gullible and the ideologically driven to read a simple and false message from a complicated situation.

    And my secondary criticism looks pretty good too. I suggested that it was dishonest to claim my reading of the graph, which was the reading of your source of the graph was “made up” and a “wrong reading”. Not only was it not made up (at least not by me), but it now turns out that you don’t even think it is a “wrong reading” in that you agree with “Timmy”.

  29. #29 PaulB
    2013/04/23

    It seems to me that someone should post a link to Branko Milanovic’s working paper, which is the source of the graph Tim Worstall used.

    The message I read from the graph is that globalization has enabled workers in the poorer nations to compete to some extent with workers in the richer nations, with a consequent slight shift of income to the poor. Does anyone want to say that that is a bad thing?

    The paper as a whole tends to support my general belief that economists can be useful if you use them for what they’re good at. Much like anyone else.

  30. #30 David B. Benson
    2013/04/23

    Causal Entropic Forces
    A. D. Wissner-Gross and C. E. Freer
    DOI: 10.1103/PhysRevLett.110.168702

    Abstract: Recent advances in fields ranging from cosmology to computer science have hinted at a possible deep connection between intelligence and entropy maximization, but no formal physical relationship between them has yet been established. Here, we explicitly propose a first step toward such a relationship in the form of a causal generalization of entropic forces that we find can cause two defining behaviors of the human ‘‘cognitive niche’’—tool use and social cooperation—to spontaneously emerge in simple physical
    systems. Our results suggest a potentially general thermodynamic model of adaptive behavior as a nonequilibrium process in open systems.

    From the conclusion: These results have broad physical relevance. … In econophysics, they suggest a novel physical definition for wealth based on
    causal entropy . …

  31. #31 mt
    ATX
    2013/04/23

    PaulB “The paper as a whole tends to support my general belief that economists can be useful if you use them for what they’re good at. Much like anyone else.”

    Indeed. As I have said as well.

    But Worstall’s graph is very misleading; if one showed absolute wealth rather than rates of increase, one would see that the notched out middle class and the growth at the high end is the dominant story in terms of where economic activity actually happens.

    [Its a graph. Its only misleading if you have some reading you don’t want to see it presenting, and which you think people will read in it. I take it to show that the very poor have got richer in relative terms -W]

    (Worstall tries to claim that “all of us” are in the top percentile on that graph – that made me angry. He can perhaps speak for himself, but he doesn’t speak for everybody reading.

    [It falls to me to defend Timmy again. He said “We can also see that the top 1% have done very well: do note though that this is the global 1%. That’s everyone making more than about $50,000 a year around the world, a number that presumably includes both you and me rather than just the plutocratic billionaires”. That certainly includes me, and a large number of academics in the US. Whether you or not, I don’t know. But the point is not whether or not you actually earn over $50k – its what he says: that the global top 1% is not just the super rich, very far from it, it contains very many ordinary people -W]

    It’s easy to demonstrate that the top percentile on his graph is at least as wealthy as the top decile in the wealthiest countries having sufficient population to be 10% of the whole. So those of us not in the top 90% are not included, much as he might want to wish that away. I flatly don’t believe him that a 50K annual income would suffice.)

    [I notice, though, that you don’t provide your own numbers. I’ll ask him -W]

    One thing economists seem to be good at is irritating people who aren’t wealthy.

    More to the point, though, economists have no special expertise on ethical matters, and efforts by economists to short-circuit our ethical responsibilities by application of the discount rate constitute ideology, not science.

  32. #32 Tim Worstall
    Usti nad Labem
    2013/04/23

    Paul B does provide the link to the relevant paper. Here’s a discussion of it by Milanovic:

    http://www.theglobalist.com/storyid.aspx?storyid=9788

    “Who are the global top 1%? The global top 1% are those with per capita after-tax incomes above 50,000 international dollars annually. Yet despite its name, it is a much less “exclusive” club than, say, the top 1% in the United States. The former consists of more than 60 million people, the latter of just three million. ”

    And describing the changes:

    “But the biggest losers of globalization — or at least the “non-winners” (other than the very poorest 5%) — were those between the 75th and 90th percentile of the global income distribution. Their real income gains were essentially nil.

    These people represent what can be called a global upper-middle class. Their ranks include the citizens of rich countries with stagnant real incomes as well as many people from former Communist countries and Latin America.

    From the fall of the Berlin Wall to the global financial crisis, global income distribution has changed in some remarkable ways in just two decades. We have probably witnessed the most profound global reshuffling of people’s economic positions since the Industrial Revolution.

    Broadly speaking, the most significant consequences of this reshuffling are:

    The bottom third, with the exception of the very poorest, became significantly better-off, and many people there escaped absolute poverty.

    The middle third (or more) became much richer, seeing its incomes rise, in real terms, by approximately 3% per capita annually.

    The most interesting development, though, happened among the top quartile. While the top 1%, and somewhat less so the top 5%, gained significantly, the next 20% in the global income distribution either gained very little or faced stagnant real incomes. ”

    One interesting thought expermient is to dial back to 30 odd years ago. When Bob Geldof bestrode our screens demanding our fucking money. For the aim was to make the global poor rich. We seem to have managed that, at least we’ve managed it better than any previous generations ever have, yet people are whining about the fact that we’ve managed it.

    It’s also even worth pointing out that your common or garden basic right wing style (ie, neo-classical) economic theory would predict that this is what would happen. And Lo! it did!

    “But Worstall’s graph is very misleading; if one showed absolute wealth rather than rates of increase,”

    “More to the point, though, economists have no special expertise on ethical matters,”

    indeed, that’s absolutely correct. Which is why, in discussing these numbers, I do then go on to pose the ethical questions. Look, the poor are gaining from this globalisation thing. Isn’t globalisation great?

    Sorry, buzzer sounds, you’re wrong. We are not talking about welath here (which is grossly more unequally distributed) but income. The former is a stock, the latter a flow. Getting that wrong is I’m afraid a gross, gross error, which casts significant doubt upon anything else you might say about the subject.

  33. #33 Tim Worstall
    2013/04/23

    Bugger, paras got mixed up.

    “But Worstall’s graph is very misleading; if one showed absolute wealth rather than rates of increase,”

    Sorry, buzzer sounds, you’re wrong. We are not talking about wealth here (which is grossly more unequally distributed) but income. The former is a stock, the latter a flow. Getting that wrong is I’m afraid a gross, gross error, which casts significant doubt upon anything else you might say about the subject.

    i’m trying to think of an analogy that makes sense here. Hmm, try mixing oC and oK. A 2 oC rise could be described as a 10% increase in a global average temp of 20 oC (just to make up numbers for the purpose of the example). But that would have you howled out of the room. The actual percentage increase in such a case should be in K: and thus a 0.00whatever% increase.

    “More to the point, though, economists have no special expertise on ethical matters,”

    indeed, that’s absolutely correct. Which is why, in discussing these numbers, I do then go on to pose the ethical questions. Look, the poor are gaining from this globalisation thing. Isn’t globalisation great?

  34. #34 deconvoluter
    2013/04/23

    Need to be careful: Consider what others are doing with this weak analogy:

    This so-called “coding error” sounds to me more like the numbers were cherry picked form the data to prove a point.
    This is almost as farcical and disingenuous as the so-called “hockey stick graph” that exposed the world’s leading climate change scientists.

    The error refers to an important paper in economics.* This quotation illustrates both your point , i.e. that the commentator was foolish in disregarding the true experts i.e. those who did the work on hockey sticks, and my point, which is that it is dangerous to confuse a slight similarity with a true analogy.
    —————-
    * by Reinhart and Rogoff who have been arguing that debt can hinder growth. It is interesting that the fault is supposed to have been discovered by a relatively inexperienced graduate student (BBC Radio 4 this morning).

    Ref.1
    Ref1

    Ref.2

    More later.

  35. #35 Andrew Dodds
    2013/04/23

    Tim –

    Of course, when discussing the subject we are excluding alternatives to globalization-as-currently-practiced. Which could in theory be saying ‘Look! Being stabbed is so much better than being Shot! Why do the ingrates complain so..’

    Furthermore, the aggregation of the wold’s population ignores the obvious problem that voting only happens at the level of the country; there is no world government. SO whilst the general tide may be up, we have entire countries where a voting majority are seeing their living standards decline. Big picture arguments are unlikely to help here; after all, a similar story could easily have been told in 1914. The analogy here is the common assumption that a 2K rise in global temperature means that everywhere gets 2K warmer. Which doesn’t sound too bad, especially if you happen to be English. But it’s not the real story.

    It would also be very interesting if we looked at absolute amounts instead of percentages. For example; if a person on $50k takes a 20% hit to $40k, and a person on $5k gets a 100% pay rise to $10k.. by your reckoning that’s fine. As long as we ignore the fact that $5k has gone missing from total labour returns (and hence consumer demand). Such a graph may lead to different conclusions.

  36. #36 Hank Roberts
    2013/04/23

    “… while there is considerable scientific research suggesting serious threats of irreversible damages from climate change, models such as FUND (among others) suggest that the problem is quite small in economic terms. The dissonance between these two ways of framing the climate problem should give rise to serious inquiry about what’s missing or misstated in the economic analyses.”
    –Ackerman, in * Tol / Ackerman fun

    [I agree there is a massive disparity between the economic analyses and the fears of irreversible damage. Economic analyses – at least up to the next few centuries – always struggle to find levels of economic damage that aren’t significantly less than the benefits of a decade’s worth of growth (in all of that I’m speaking in econ terms, so this isn’t the place to say “ah, but is growth a benefit”).

    “fears of irreversible damage” are generally vague, and incommensurable with the econ analyses. Many of the damage things appear, to me, to be less about GW per se and more about general developement and de-wilderness-ing. Using the same arguments you could say that the growth we’ve had so far is bad. I don’t dismiss those as arguments, but anyone making them does need to state their context clearly -W]

  37. #37 PaulB
    2013/04/23

    I flatly don’t believe him that a 50K annual income would suffice.

    And a lot of people flatly don’t believe in AGW. So what? Milanovic has spent a lot of time compiling and processing data from Household Surveys around the world, and if he says the number is $50k I’ll take his word for it until someone finds something significantly wrong with what he’s done. Data trump prejudice.

    (But note that this is an after-tax number, and I think it’s per capita for the household.)

  38. #38 Hank Roberts
    2013/04/23

    > de-wildernessing
    aka great extinction, depends on your point of view I guess.

    “… the magnitude of observed trends in precipitation and the bias toward more extreme precipitation events are, in some cases, larger than simulated by global climate change models, particularly since 1970. Extrapolating those relationships to the changes in precipitation observed over the past century suggests increases in soil erosion ranging from 4 percent to 95 percent and increases in runoff from 6 percent to 100 percent could already be evident on cropland in some locations….”
    http://www.swcs.org/en/publications/conservation_implications_of_climate_change/

    [Well, that’s what I mean about non-commensurate. How much does that soil erosion matter? If you insist in speaking in terms of soil erosion, its a thing in itself. Compare that to, for example, the graph at http://earlywarn.blogspot.co.uk/2013/04/initial-conference-impressions.html -W]

  39. #39 mt
    ATX
    2013/04/23

    The poor are benefitting from globalization and it is a good thing.

    But the vast bulk of the wealth is still accumulating on the far right, and the graph misleads the eye on that subject.

    I have not confused stocks and flows; it’s a very common theme of mine that people misunderstand these. Perhaps we are agreed on that account.

    I do not say your graph is wrong. I say it is misleading, because it is arranged by percentiles of the population, without reference to the actual amount of wealth in each bin.

    [Why is that misleading? If you’re interested in what has happened to segments of the population, its the correct way to graph things. If you want to see a graph per wealth, errm, you could draw it I suppose -W]

    The transfer of wealth to the poorer 2/3 of the graph is tiny compared to the total wealth in the picture. I’m not saying it;s insignificant or unwelcome. I’m saying it doesn’t support a claim that the economy is doing well.

    [No-one is using it to support such a claim. People are using it to say that the poor are getting less poor. Timmy was pretty explicit on that point. It seems to me that you insist on misreadin ghte graph, and people’s arguments, and then insist that the graph is misleading because you’ve misread it -W]

    It looks like the growth is widely shared, but it’s a misimpression. This is because you show neither stocks nor flows in your graph. You show the relative rate of change in the flow. But the baseline flow is, by construction, much smaller on the left.

    If you plotted absolute rates of change (absolute rather than relative increase in per capita income ) you would have a dramatically different picture. I am trying to say that this different picture is equally valid and arguably a more revealing picture of the state of things.

    I accept that the top 18% in the US may be in the top 1% globally. Let’s consider that settled. (50 K per capita after taxes is a lot different from 50K gross household income which is how the article read to me. I wonder if the text hasn’t changed a bit.)

    [OK. But there’s a wider point here, that you initially flatly rejected the $50k number. Faced with incontrovertible proof that its correct you’ve accepted you were wrong. But how many other similar economic matters, harder to demonstrate so clearly, are you flatly rejecting, incorrectly? -W]

  40. #40 Quiet Waters
    2013/04/23

    http://www.bbc.co.uk/news/uk-politics-13633966

    $50k = roughly £33k = 7th decile & above in UK.

    http://en.wikipedia.org/wiki/Income_in_the_United_States

    = roughly top third in US

  41. #41 mt
    ATX
    2013/04/23

    me: “More to the point, though, economists have no special expertise on ethical matters,”

    Tim W: ” Which is why, in discussing these numbers, I do then go on to pose the ethical questions. Look, the poor are gaining from this globalisation thing. Isn’t globalisation great?”

    Well, sure, in that respect it certainly is.

    My gripe about ethical overreach isn’t about celebrating the advances in the poorer countries. It is about insisting on using a growth-based discount rate in all conversation about the distant future.

    This essentially formalizes the traditional habit of treating the natural commons as valueless or nearly so.

    In fact most of our wealth is not in our bank accounts, but in our actual, astonishing, I might even say miraculous, existence in the first place. But looking at the fact that our existence and the existence of a natural world which gave birth to us is astonishing and has nothing to do with wealth, well, trying to account for that screws up the pretty mathematics. So I guess we have to ignore it.

    Actuarial tables are forced to value lives, of course, and the absurdity of it gets people into undeserved trouble. But the common resistance to the concept of the revealed value of a life saved is not merely irrational.

    Not all value is reflected as money.

    It would be nice if we had an objective metric of well-being that we could project into the future. The presumption that “wealth” as construed by economists is that metric is wrong. The insistence that we not consider the question is unethical.

    It is not hard to construct a scenario wherein “wealth” increases forever until the world is utterly unlivable without life support, and we might as well be on the moon. Indeed that appears to be the happier outcome of business as usual.

    Then of course there’s the issue, raised by MMM in #23, ” If a given choice today has a chance of changing future growth, then that has some serious implications, because you’d actually change the right discount rate to use: and can potentially create negative discount rates.”

    It encourages me that someone is seriously thinking about this – it ameliorates my blanket disrespect for economic thinking that this is the case.

    Indeed, I think that the possibility that “growth” will not only saturate but backfire is far more likely than the scenario that we will actually “succeed” in “growing” ourselves into a moon-colony hell.

    A failure to limit net carbon emissions to zero or slightly negative values would be a good step toward one or the other of these dystopias. It’s a step, moreover, that we seem intent on taking.

    Yet in what appears to be conventional economic thinking it’s a tradeoff between a couple of smallish risks, ho-hum. I can’t fathom it.

    Perhaps the concept of negative discount rates finally being on the table will allow us to fold the really crucial issues into economic reasoning.

  42. #42 David B. Benson
    2013/04/24

    Once again, here is the end of growth in carbon dioxide emissions:
    http://en.wikipedia.org/wiki/Anoxic_event
    Doesn’t appear ‘discountable’ to me.

  43. #43 mt
    ATX
    2013/04/24

    The comment window is a bit too small to do proper proofing of complex arguments. I will paste from elsewhere in the future.

    In #41 paragraph 6 will be greatly improved if you substitute “wealth as conventionally construed” for “wealth” in “nothing to do with wealth”.

    My apologies.

  44. #44 Tom Curtis
    2013/04/24

    mt @39:

    “I accept that the top 18% in the US may be in the top 1% globally. Let’s consider that settled. (50 K per capita after taxes is a lot different from 50K gross household income which is how the article read to me. I wonder if the text hasn’t changed a bit.)”

    No, the text did not change. There are in fact two different articles. The one by Milanovic in The Globalist said:

    “Who are the global top 1%? The global top 1% are those with per capita after-tax incomes above 50,000 international dollars annually. Yet despite its name, it is a much less “exclusive” club than, say, the top 1% in the United States. The former consists of more than 60 million people, the latter of just three million.

    Thus, among the global top 1%, we find the richest 12% of Americans — more than 30 million people — and between 3% and 6% of the richest British, Japanese, German and French.”
    (My emphasis)

    The one by TIm Worstall in Forbes said:

    “We can also see that the top 1% have done very well: do note though that this is the global 1%. That’s everyone making more than about $50,000 a year around the world, a number that presumably includes both you and me rather than just the plutocratic billionaires.”

    Note the absence of the qualifier.

    In fact, you need an income greater than $70,000 per annum before tax to be in the top 12% of US incomes ($75,000 in 2010)

    The absent qualifier is, like much else in Worstall’s article, quite misleading.

  45. #45 Tom Curtis
    2013/04/24

    Tim Worstall @32:

    “It’s also even worth pointing out that your common or garden basic right wing style (ie, neo-classical) economic theory would predict that this is what would happen. And Lo! it did!”

    I would be very interested in a citation from those neo-classical economists predicting the stagnation of incomes of the lower middle class and below in western democracies because I don’t remember it. In fact, what I remember is the “rising tide which floats all boats”, a “prediction” that has been falsified. But, it’s very easy to confirm a theory when you allow yourself to rewrite the predictions after the event.

  46. #46 Tom Curtis
    2013/04/24

    WC responding to MT @39:
    “I accept that the top 18% in the US may be in the top 1% globally. Let’s consider that settled. (50 K per capita after taxes is a lot different from 50K gross household income which is how the article read to me. I wonder if the text hasn’t changed a bit.)

    [OK. But there’s a wider point here, that you initially flatly rejected the $50k number. Faced with incontrovertible proof that its correct you’ve accepted you were wrong. But how many other similar economic matters, harder to demonstrate so clearly, are you flatly rejecting, incorrectly? -W]

    Except that MT was not wrong. Rather Tim Worstall and you were wrong in that you claimed 50K whereas it was 50K after tax. That is a large difference. So I think you need to turn your question around – how many other errors in matters economic are you and Tim making which are less easy to demonstrate?

    [You’re being silly. mt flat rejected the number as entirely wrong. Not a minor matter of pre or post tax – he thought it was entirely unbelieveable. He was wrong, and has been good enough to admit it, so having you un-admit it for him isn’t exactly helpful -W]

  47. #47 Tom Curtis
    2013/04/24

    From the same post:

    “The transfer of wealth to the poorer 2/3 of the graph is tiny compared to the total wealth in the picture. I’m not saying it;s insignificant or unwelcome. I’m saying it doesn’t support a claim that the economy is doing well.

    [No-one is using it to support such a claim. People are using it to say that the poor are getting less poor. Timmy was pretty explicit on that point. It seems to me that you insist on misreadin ghte graph, and people’s arguments, and then insist that the graph is misleading because you’ve misread it -W]”

    The concluding paragraph of TIm Wostall’s article:

    “Yes, we in the rich world aren’t having that great a time of it at present. But the IMF estimates that global economic growth will be 3.3 % this year and 4% next. As pretty much none of this is taking place in the already rich world that’s just more of the poor catching up with us. Which is great, isn’t it? Or, as I say, the most notable thing about the global economy is how well it’s doing.”
    (My emphasis).

    And if that is not explicit enough for you, read the title of the article.

    WC, just because you did not make the argument does not mean it was not made. And unless you are going to plead massive lack of reading comprehension, it is dishonest to keep on saying that nobody made argument X when argument X is precisely made in an article you linked and got the graph from.

  48. #48 Neven
    2013/04/24

    mt wrote:
    My gripe about ethical overreach isn’t about celebrating the advances in the poorer countries. It is about insisting on using a growth-based discount rate in all conversation about the distant future.

    This essentially formalizes the traditional habit of treating the natural commons as valueless or nearly so.

    [No, it doesn’t -W]

    In fact most of our wealth is not in our bank accounts, but in our actual, astonishing, I might even say miraculous, existence in the first place. But looking at the fact that our existence and the existence of a natural world which gave birth to us is astonishing and has nothing to do with wealth, well, trying to account for that screws up the pretty mathematics. So I guess we have to ignore it.

    [You’re doing your best to prove my point – that the env folks have no grasp of economics. Where did you get this info from? -W]

    Actuarial tables are forced to value lives, of course, and the absurdity of it gets people into undeserved trouble. But the common resistance to the concept of the revealed value of a life saved is not merely irrational.

    [This is the “incommensurability” argument. It all sounds very pretty-pretty cute-fluffy-bunny and moral: “Lives cannot be measured in pounds, shillings and pence. They are invaluble!” Yeah, yeah. Stay in dreamworld if you like, and accept you cannot possibly even begin to talk the same language well enough to influence policy.

    In the real world people regularly make decisions about resource allocations that affect people’s chances of living and dying and their lifespan. How much money should go into hospitals, how much into preventative care? How should we value the lives saved by going by rail instead of road. Etc, etc etc ad infinitum. Its even possible to try to do this quasi-objectively, by looking at how much people effectively spend per life. Revealed preferences and so on -W]

    Not all value is reflected as money.

    It would be nice if we had an objective metric of well-being that we could project into the future. The presumption that “wealth” as construed by economists is that metric is wrong. The insistence that we not consider the question is unethical.

    It is not hard to construct a scenario wherein “wealth” increases forever until the world is utterly unlivable without life support, and we might as well be on the moon. Indeed that appears to be the happier outcome of business as usual.

    Well-put. Whether it’s the ultra-rich getting ultra-richer or the poor getting more crumbs, you have to ask yourself at the expense of what? Fairy dust?

    Are economy and ecology separate, existing side by side, or does the former exist within the latter?

    Like John Mashey wrote: “One of these must obey laws of physics.” Which also leads to my assumption that a big difference between climate science and economics is that practically any climate scientist could become an economist if (s)he wanted to. Most economists can probably forget about becoming competent in a hard science like climate science.

    The stupid kids in my class became lawyers, dentists and economists (for the money), so perhaps I’m prejudiced because of that.

    [Aie. When I first responded here, I “corrected” Neven’s mark-up to only be quoting the first para. But that was wrong. I’ve now corrected that, so I’m now seen (correctly) as responding to mt. If I’d realised that in the first place I’d have responded inline to mt’s original, of course -W]

  49. #49 Arthur Smith
    2013/04/24

    Micro-economics is very solid and rigorous and useful to businesses, farmers, etc who need to plan and work with rather complex combinations of input and output products. With “micro” you actually do have large numbers of instances under study, avoiding the epistemic issues mt mentions in an early comment above. Micro is not that different from regular scientific disciplines, just adding “cost” to the physical parameters studied.

    The problems are with macro-economics – studies of nations as a whole, or the world economy, for which the number of instances is indeed small or one. What determines overall income and price levels, what is the significance or even meaning of money, of international trade, of unemployment, of financial instruments, what role do governments/the state play? The problem is fundamentally different from micro because of the large-scale constraints – both sides of every exchange need to be included, not just costs or income to the one entity you’re interested in – and because it’s not even clear how to measure many of what seem the most important properties.

    So to understand things you need models; much like climate, the behavior of the world and individual national economies should provide some constraints on which models best match reality. Unfortunately, unlike climate, we don’t have millions of years of paleo-data, just maybe a couple hundred. So the models economists use to understand the macro-world are somewhat poorly constrained – surely their predictive skill will be a factor in winnowing them to the ones that are actually useful?

  50. #50 Marlowe Johnson
    2013/04/24

    readers interested in a more detailed discussion of discount rates might be interested in this paper. It boils down to this:

    “In many ways our discussion about how to parameterize the formula revisits a long-standing debate about the
    “descriptive” versus “prescriptive” approach to discounting
    —the former approach arguing that discount rates should reflect observed behavior in markets, and the latter that ethical considerations should be used to set the utility rate of discount and the elasticity of marginal utility of consumption. This debate was described many years ago by Arrow et al. (1996) and is more recently reflected in the literature critiquing the Stern Review (Nordhaus 2007; Weitzman 2007a).

    Now it seems to me that much of the disagreement described above really comes down to where you sit on the descriptive/prescriptive issue…

    @MMM
    I want to agree that any use of social cost of carbon is better than not using it at all. But then I can’t help but wonder if by using values that very may be far, far too low that we are inadvertently giving decision makers the mistaken impression that mitigation isn’t a valuable use of limited resources.

  51. #51 Marlowe Johnson
    2013/04/24

    oh and +1 to Arthur @ 49 for the important distinctions between micro and macro.

    [In that case I cannot help remarking that this is a distinction that Timmy “the Dark One” Worstall has also pushed. E.g. http://www.adamsmith.org/blog/economics/ditching-at-least-for-the-moment-macroeconomics -W]

  52. #52 mt
    ATX
    2013/04/24

    50 K per capita after tax is not reasonably construed as “presumably including you and me”; in particular it is quite presumptuous and flatly wrong about me.

    I have agreed that 50 K *per capita after tax* is reasonably construed as the top percentile globally.

    I rejected the proposition that the population of plausible readers of the article is an almost perfect subset of the top percentile of global income. I stand by this. That claim is transparently wrong.

    Assuming a *household* income *before* taxes of 50 K of the reader seems somewhat defensible (though many students may be excluded), assuming a *per capita* income *after* taxes of 50 K is outrageous. It reminds me of Romney’s ridiculous offhand comments about his wife driving “a couple of Cadillacs.”

    I will stipulate that the latter group, assuming a household size of 3 and thus earning a pretax income in excess of a quarter million dollars per year, are in the top percentile. This is in order to move on to more interesting topics, not to backpedal.

    But it’s hardly up to me to be doing the apologizing here.

  53. #53 mt
    ATX
    2013/04/24

    William’s inline comments in #48 respond to my #41 and not to Neven.

  54. #54 MMM
    2013/04/24

    “a big difference between climate science and economics is that practically any climate scientist could become an economist if (s)he wanted to. Most economists can probably forget about becoming competent in a hard science like climate science.”

    Well, I was a chemistry undergrad, but have published papers in both economics and climate science journals (more the latter), and I’d disagree with this assumption. I studied both in grad school, and found both to be challenging fields of study. “Fluffier” sub-fields do exist in both fields, where one can play without a deep understanding of the underlying theory and math, and there’s plenty of cross-fertlization of economists who dabble in climate and vice versa in these subfields, but that doesn’t mean that these economists understand Rossby waves or that the climate scientists could build a good CGE model. A really good understanding of either field would involve both the deep mathematical underpinnings and the fluffier instinctive understanding.

    In my opinion, the difference is that the fundamentals of economics rest on human behavior, which is trickier than the fundamentals of climate science which rest on physics. This is reflected in the relative complexity of the models: climate models are huge and take days to run. There’s little point in creating equivalent economics models, because we can’t grasp the interactions between fundamental building block units as easily as we can with climate (not that it is easy with climate).

    -MMM

    ps. I agree that we understand micro much better than macro. I disagree that this means ditching all macro entirely, because I think the big important questions (like unemployment, recessions, etc.) are fundamentally macro questions.

  55. #55 mt
    ATX
    2013/04/24

    I said:

    Actuarial tables are forced to value lives, of course, and the absurdity of it gets people into undeserved trouble. But the common resistance to the concept of the revealed value of a life saved is not merely irrational.

    William replied:
    [This is the “incommensurability” argument. It all sounds very pretty-pretty cute-fluffy-bunny and moral: “Lives cannot be measured in pounds, shillings and pence. They are invaluble!” Yeah, yeah. Stay in dreamworld if you like, and accept you cannot possibly even begin to talk the same language well enough to influence policy.

    In the real world people regularly make decisions about resource allocations that affect people’s chances of living and dying and their lifespan. How much money should go into hospitals, how much into preventative care? How should we value the lives saved by going by rail instead of road. Etc, etc etc ad infinitum. Its even possible to try to do this quasi-objectively, by looking at how much people effectively spend per life. Revealed preferences and so on -W]

    In response:

    Yes, I understand all that. We discussed this at length fifteen years ago. Notice I said “undeserved” trouble.

    [But you also said “absurdity”. I understood that to apply to the concept of valuing lives through actuarial tables. That is what I was jumping on -W]

    But I also said that the objection to this is not merely irrational. There’s a basis for it.

    Not all our “revealed preferences” are financial. If I could kill someone I disliked with confidence that I could not be caught, I would not do so, even if hugely rewarded. Thus my revealed preference for not murdering someone is infinite.

    Values are contextual, and this is the whole point. While an actuarial life has to have some revealed value, in practice we also have an infinite “sin tax”, an absolute proscription against taking another person’s life. This does not mean we are required to spend infinite resources to prevent accidental death. The context matters, because the matter is ethical, not just financial.

    I would love to have objective ways of weighing policies about the distant future. But we can’t get there by pretending the ones we have suffice without considering the arguments that they don’t. A hermetically sealed economist worldview may be consistent, but that doesn’t mean it’s adequate.

    [I’ve got nothing to say that I haven’t before: I think you’re speaking and thinking in a way that leaves you unable to interact with the pol / econ types -W]

  56. #56 mt
    ATX
    2013/04/24

    MMM, thanks for your input. I find the PDF you pointed to, i.e.,

    http://rff.org/Documents/Events/Workshops%20and%20Conferences/110922-Discounting/Main_Points.pdf

    heavy sledding, but I wish to oblige William’s insistence that I learn about the field if I am willing to criticize it.

    I’d appreciate pointers to tutorial material about the “Ramsey discount formula” in particular.

    While I don’t agree with putting down the intellectual capacity of economists, I remain unconvinced that you have a useful framework for thinking about intergenerational equity. The summary implies that this is cutting edge work, not canon. But it’s good that people are working on it.

    While you mentioned negative discount rates, the summary does not discuss them; at least a search for the word “negative” came up empty. I am particularly interested in how scenarios where “growth” is negative are accounted for, and how ensembles are constructed.

    Again, without dismissing the intellectual effort or seriousness involved, it is absolutely clear that the mathematics involved are trivial compared to those in common use in climatology, particularly in fluid dynamical branches of meteorology, oceanography and glaciology.

    Indeed, if you could make the model clear enough for me to understand it, I suspect that some ensemble methods at my own disposal could provide some advances.

    If there are no tutorial materials, would you consider writing some? If you have no other obvious venue for them we could feature them at http://planet3.org .

  57. #57 mt
    ATX
    2013/04/24

    http://www.adamsmith.org/blog/economics/ditching-at-least-for-the-moment-macroeconomics

    Nice link.

    So it’s okay for Tim Worstall to say

    “I’m deeply unimpressed with macroeconomics”

    “We just don’t know enough about macroeconomics to know what to do. ”

    “This might be betraying my own lack of knowledge of the subject, even my uninterest in it, but I’m not aware of a macroeconomic model, one that actually provides policy responses, that you could get more than perhaps 50% of economists to sign up to.”

    “I don’t mean to support or argue against any of these positions here: just to note that the senior practitioners of the craft are arguing as if medicine were still based upon the four humours, chemistry upon the four elements and biology without genetics or inheritance.”

    but somehow it is not okay for me to say very similar things.

    True, we do seem to come to very different positions about how to react to this ignorance.

    I am a bit baffled as to why supposedly conservative people conclude that we should continue our game of planetary Russian roulette indefinitely. But that’s neither here nor there.

    If the point is that economics offers no reliable guidance on the matters at hand, the inability William ascribes to me to interact with “pol / econ types” is arguably a feature, not a bug.

  58. #58 TheGoodLocust
    2013/04/24

    @Arthur Smith “Unfortunately, unlike climate, we don’t have millions of years of paleo-data, just maybe a couple hundred.”

    Data? Perhaps, but not exactly verifiable as accurate.

    How can you possibly build a reliable model on “data” where the standard error is equal to or exceeds the natural variability and all the processes involved aren’t even identified, much less quantified?

    Economics has much firmer ground.

  59. #59 MMM
    2013/04/24

    One issue about “value of a statistical life” is that people sometimes forget the key word “statistical”: no individual life is valued at 6 million dollars (or whatever) – the value only applies when it refers to a small risk spread across thousands of people. Not everyone thinks that such math is appropriate, but people make that kind of calculation all the time anyway (e.g., do you buy the safer but more expensive car?). But it disintegrates when risks get high – if someone told me that they’d give me 1 million dollars to play Russian roulette with a six-shooter, I wouldn’t take that bet, even though I wouldn’t be surprised if my revealed preference for 1 in a million risks is about $6. Not that humans do well with small probability problems, which we weren’t really evolved to understand. Which is why we use algorithms like the VSL…

  60. #60 Hank Roberts
    2013/04/24

    > soil erosion … incommensurate …
    > how much does that soil erosion matter?

    >> economics offers no reliable guidance on the
    >> matters at hand

    I’m waiting for the terraforming estimates.
    Once we know the cost of making a bare planet into a living one, we’ll have some idea of the value of the one we had.

  61. #61 John Mashey
    2013/04/24

    Negative discount rates: we had a discussion of that a few years ago at Rabett’s, with some of the same participants as here:

    As I did, ignore the D-K anonymous, but various people pointed out interesting issues. Richard Tol writes:
    ‘Climate-change-induced negative consumption discount rates are a real possibility. See
    http://ideas.repec.org/p/sgc/wpaper/3.html

    http://ideas.repec.org/p/sgc/wpaper/83.html

    http://ideas.repec.org/p/esr/wpaper/wp276.html

    http://ideas.repec.org/p/esr/wpaper/wp348.html

    [Thanks John. I’ve added the first of those as a ref to this post -W]

  62. #62 Tom Curtis
    Australia
    2013/04/25

    WC inline @46:
    “You’re being silly. mt flat rejected the number as entirely wrong. Not a minor matter of pre or post tax – he thought it was entirely unbelieveable. He was wrong, and has been good enough to admit it, so having you un-admit it for him isn’t exactly helpful -W”
    What mt actually wrote in rejecting the 50 K claim was (with your response):

    “It’s easy to demonstrate that the top percentile on his graph is at least as wealthy as the top decile in the wealthiest countries having sufficient population to be 10% of the whole. So those of us not in the top 90% are not included, much as he might want to wish that away. I flatly don’t believe him that a 50K annual income would suffice.)

    [I notice, though, that you don’t provide your own numbers. I’ll ask him -W]”

    So mt’s “flat rejection” postulated that the top 10% of US incomes where in the top 1% of global incomes. That is a lot closer to the 50 K figure before tax, which is in the top 25% of US incomes (2010 figures). In fact Milanovic puts the 50K after tax in the top 12% of US incomes (though at one point in the paper he cites it as top 11%).

    Put in absolute terms, and using 2010 figures because they are available, the 50 K figure without the “after tax” qualification is out by around 33%. It’s a bit of a fudge using the 2010 figures, agreed, but if the 50K figure is based on the data analyzed, it is actually 50 K in 2005 dollars, and a very significant fudge not to have mentioned that.

    The point is that mt’s estimate was very close to the actual figure, and and a lot closer than Worstall’s inaccurate report which you so uncritically have accepted. It is far from silly to point that out. It is perplexing that you should be unwilling to admit it.

  63. #63 Tom Curtis
    2013/04/25

    Also thankyou to Arthur for raising the micro/macro distinction, however WC inline at 51 says:

    “[In that case I cannot help remarking that this is a distinction that Timmy “the Dark One” Worstall has also pushed. E.g. http://www.adamsmith.org/blog/economics/ditching-at-least-for-the-moment-macroeconomics -W”

    What he fails to note is that Worstall’s initial comment that:
    “I’ve said before here that I’m deeply unimpressed with macroeconomics, stating that as the man didn’t say in the long run it’s all microeconomics.”

    and his conclusion that:

    “Which leads me to a suggestion. We really should be concentrating on those parts of economics where we know that we’re at least roughly right. Those microeconomic matters: get the incentives right, get the price system right, and leave that attempted manipulation of the wider economy until there’s actually an agreement on how to do so. Or even why to do so.”

    both represent a position on macroeconomics, specifically, the position of the Chicago School (aka Neo-classical economics). So despite his claims, he is not expressing scepticism about macro-economics – only a preference for a particular branch within macro-economics.

  64. #64 mt
    ATX
    2013/04/25

    Tom C, the per capita vs per household distinction is also important in Tim W’s claim. A household with three people in it will have in excess of $200K annual gross income to fit into his $50K category. I doubt that he can presume such wealth among his readership, even at the Forbes website.

    Perhaps if the article were behind a pay wall it would be otherwise.

  65. #65 Neven
    North Pole
    2013/04/25

    Reading Timmy’s piece on macro-economics I also came away with the impression that what he meant to say, was: “We don’t know how it works, we don’t know what we’re doing, so just laissez faire, mes amis. Laissez faire.” But that’s my interpretation.

    If correct though, you’d have a nice, little parallel between conventional, policy shaping economic thinking and climate denial (both fueled by free market fundamentalism).

    But that’s off-topic.

    Herman Daly has an interesting chapter on micro vs macro in Beyond Growth, if I remember correctly. I’ll try and re-read it and report if it’s interesting (it’s bound to be interesting, as Herman Daly, “the Patrick Michaels of economics” (© WC), wrote it).

  66. #66 Alexander Ač
    Belgium
    2013/04/25

    William,

    actually you *can* dimiss (neo-classical) economics almost at hand, since it is not sience (check what economist Steve Keen has to say about this). The same approach you did with astrology (though you need a little more study on economics).

    Why economics is not science? Since their basic *assumption* is endless economic growth.

    [I think you’re wrong about that. You’re talking about only a sub-set of applied econ -W]

    Look at misguided debate of “austerity” vs. “stimulus” for the glaring example…

    And as a definite quote from Tomas Friedman:

    “Truly important and significant hypotheses will be found to have assumptions that are wildly inaccurate descriptive representations of reality and, in general, the more significant the theory, the more unrealistic the assumptions.” from: http://www.declineoftheempire.com/2013/04/economics-as-religion.html

    I hope I was clear enough to dismiss economics as a serious science… ;-)

  67. #67 Alexander Ač
    Belgium
    2013/04/25

    William,

    maybe the growth ideology is only a small subset of economics, but almost all policy “decisions” are made under this ideology, which I hugely see supported by mainstream economists. Including decisions on climate change, which I hope is obvious to everyone here…

    Dont accuse me of mixing economics and politics :-)

    And also most of the economic models (ideas) fails to deal with non-growing societies. Corect me, if I am wrong.

    Alex

  68. #68 mt
    ATX
    2013/04/25

    I believe it is an implicit axiom of a great deal of economic thought that growth exists except in the most pathological of situations. The possibility that it will not exist as a matter of course sends economists into almost as much of a panic as it does bankers.

    But it’s the banks and financial institutions, not the academics, that present the problem – much of what we actually do is also based on this presumption (which I consider both irrational and ideological).

    It seems as though economists’ main function is in large measure to validate the endless growth presumption and distract from its dubiousness by arguing about secondary questions.

    This belief is less than a century old, and observational evidence in its support is not much older. But if growth fails, many of our financial mechanisms fail along with it. Hence the desperation to keep it going. It’s explicitly not just an important policy goal but considered the most important one.

    It’s at the root of many distortions and dysfunctions, not to mention arguably of disasters, that plague modern life.

    As an unsustainable exponential process, this economic “growth” does increasing damage not only to the environment but arguably to human well-being even in the absence of environmental stresses.

    Those of us who say such things could be wrong, and I for one would like to see the counterargument, but what we generally get is more or less outrage and denial. Even our host, generally a very engaging sort, just seems to come up with “no it isn’t”s or “how would you know”s. I’d love to be dissuaded from my opinion but that isn’t the way to do it.

    [Yes, I’m afraid I do. I don’t know much economics, but I can recognise others who don’t, I think. Anyway: exponential growth appears to be about two centuries old, not one (http://www.relooney.fatcow.com/00_New_2733.pdf). That’s a fair span of time, so an observationally-based assumption of growth seems fair enough. Certainly you’d need something other than past observations to justify predicting anything else.

    Your growth as “unsustainable exponential process” may or may not be correct; I suspect its based on the resource fallacy, which you know about and have been referred to, so its a bit unfair to say you haven’t been told. You don’t have to agree, though.

    As “arguably to human well-being” – yes, you can argue that. Others can argue otherwise. With no objective measure, its not clear this argument will go anywhere -W]

    Without an economic system that can tolerate long term zero growth (and short term negative growth periods as a corrolary) it would seem that we have nothing sustainable. Consequently we are putting the future at grave risk.

    The incapacity of so many intelligent people to even appear to grasp the argument is puzzling. If there’s a proper answer, the least they can do to start with is to demonstrate that they understand the question.

  69. #69 Paul Kelly
    2013/04/25

    Attitudes toward climate science and economics are both highly influenced and possibly predetermined by cultural and ideological values. MT rejects economics because it conflicts with his principal value of sustainability. For him, the question of what to do must be answered by something other than economics. Unless he changes his principal value, no amount of additional education or understanding will change his attitude toward economics.

    However, his attitude does not disqualify his criticism of macro as inapplicable to climate issues. He’s right for, perhaps, the wrong reasons.

  70. #70 Hank Roberts
    2013/04/25

    so as an example where economics and climatology are apt to overlap, how’s this bee slash nicotinoid issue playing out ?

    How are these valued?

  71. #71 John Mashey
    2013/04/26

    I hope everyone in this discussion is familiar with Total Factor Productivity, Cobb-Douglas, Solow Residual, etc.

    The Wikipedia discussion of Ayres &Warr needs some work.
    IF the TFP is mostly from technology progress, and it it can keep improving ,then growth can continue as long as that happens.

    If (as Ayres+Warr think, better expressed than in WIkipedia:
    TFP ~ work = efficiency * energy used
    with some modification in last 30 years for computing, i.e., higher efficiency.
    THEN for many decades, economic growth will depend on having more work = energy*efficiency,
    and while it need not mean this, it might mean burning a lot more fossil fuels.

    The problem is that the the last 100 years have seen highly-correlated rises in energy use (mostly from fossil fuels), technology, efficiency and population. Hence “we’ve had growth for the last 100-200 years and therefore it will continue” easily can be a TOTALLY-bogus assumption, no different from picking 1940-1970 temperature records and saying the world would cool. The last 100 years have seen a huge growth in work/person. part from efficiency, part from big increase in energy used. One always has to be careful about causation arguments when working with a set of correlated variables over a (relatively short) time period. Borrow the A+W book: Chapter 8 on “Growth Forecasting” is relevant.

    [You seem to have picked up mt’s 100 years, even though its wrong. The correct number is 200. Perhaps you’ll want to revise your “the last 100 years have seen highly-correlated rises” up to 200 to match? That would rescue your argument.

    I’m certainly not saying that “past growth implies future growth”. But I am saying that 200 years of past growth means that the default assumption is future growth – you need a good theory to assume otherwise. That much practical econ assume future growth seems fairly natural to me. To pick up the temperature analogy, we’ve seem 150 years of temperature rise, even in the absence of theory the default would be to assume this likely to continue, and the burden of proof is on those who think a sudden cooling is likely to arise. 30 years, a much shorter period, of rather weaker trends isn’t a good counter-example -W]

    On the simplest level:
    a) A subsistence farmer may just have the energy of their family, not even draft animals (as in some places with tse-tse flies). No subsistence farmer is wealthy.

    b) A farmer might have teams of horses or oxen, which supply more energy, although land must be used for pasture/hay to feed them. They might have a windmill to run water pump. They can do OK: even fairly strict Amish have lives that many in the world would envy.
    This was about ~1800AD in US, when 80% of the population were farmers. I.e., each 4 farmers could feed themselves and one more person).
    (By comparison, about 50% of India population is in farming+forestry+fishing (Wkipedia).).

    c) A farmer who owns 400 acres in Iowa, has 300HP combines, tractors with GPS, air conditioning, electricity, near a railway system that can get corn to market, can do fairly well, even take vacations sometimes. They have rather more energy. ~2% of the US are now farmers, so each feeds another 49, which doesn’t happen without a lot more energy., even with better crop breeds, scientific farming, etc.

    So, the question is whether Chicago or Ayres+Warr have better models of reality. If the former, then growth rates of the last century can continue indefinitely, as having little or nothing to do with energy.

    If Ayres+Warr are closer, that work=energy use*efficiency really accounts for much of TFP, then energy actually matters to GDP/person … and it is very hard to see a 2100AD scenario that increases energy*efficiency as much as happened in the last 100 years.

    All this raises the problem: whether IPCC or Stern or anybody else, everybody uses 2100AD growth projections more-or-less modeled on the last century, which then say the world will be much, much richer. That’s the denominator. Then people calculate climate damage costs or mitigation costs, as a fraction of the denominator, and as though it were guaranteed. So, I hope Chicago is right, but having had Ayres (who trained as physicist) here for dinner, I keep asking people to explain why he’s wrong, and haven’t yet gotten a good answer.

  72. #72 Tom Curtis
    2013/04/26

    Having independently noted the relationship between energy use and TFP, I have a certain fondness for the theory. It is, however, limited in its own way.

    First, some technological or social developments can result in major improvements in total utility without significant increases in energy consumption or efficiency (unless we define energy efficiency in terms of utility gain for energy used). One example is the internet and the computing revolution. Further technological advances are likely to lead to further advances in utility gained, even with constant energy usage, and simple improvements in energy efficiency will also continue to grow utility.

    Second, the utility gain for a given energy expenditure is heavily dependent on environmental factors. Maintaining current global utility at the LGM, for example, would require a far greater energy expenditure than is currently used. In a world facing global warming, this certainly raises the risk of falling global utility even with improved technology and and increased energy use.

    In a world facing global warming, this is a significant consideration; but one that economic models do not (to date) include. Consequently we have economic models assuming that Queensland will maintain it rate of economic growth despite the near certainty that it will lose the Great Barrier Reef. That is a reductio absurdum for those models, IMO.

    Returning briefly to the OP, the unwillingness or inability of economists to model such effects is sufficient reason by itself to not accord the concensus of economists any significant credibility.

    However, ignoring global warming, there is no reason to assume a limit on growth in the near term. Nuclear energy can be increased to ten times current global energy consumption before thermal waste becomes a global environmental threat. Renewable energy can be increased to 20 or 30 times current energy consumption with no global impacts. So, over the next century or two, energy is not a limiting factor. Innovation is unlikely to be a limiting factor for several centuries beyond that. So, excluding global warming from the picture, while there are immediate limits on population growth, there are no such limits on economic growth that need concern our generation.

  73. #73 David B. Benson
    2013/04/26

    Somewhere I read recently a quote from a ‘famous’ economist to the effect that we don’t know what ‘financial stability’ means.

  74. #74 Quiet Waters
    2013/04/26

    “How are these valued?”

    I don’t think wasps are valued very highly, though they may perform some pest control activity…

    Also:
    http://www.ufz.de/export/data/1/22686_Potts_et_al_2010.pdf

    Don’t be so quick to jump on the anti neo-nic bandwagon, there’s plenty more issues facing bees than one seed treatment…

  75. #75 deconvoluter
    2013/04/26

    Other similarities between climatology and economics.
    Isn’t this familiar? “Its all just models”. “The models don’t agree with the real world”. “The models can’t be falsified”.

    These have all been leveled against both economics and climatology. In addition economics has been accused of being just a set of thought experiments applicable only to an ideal world. But the fact that the accusations against climatology (perhaps originated by economists?) are invalid for climatology does not make them implausible for economics.

    The layman is confronted with several black boxes containing different department of inquiry. Every now an then, they produce outputs which (s)he can understand. Can these outputs be trusted? Is it possible that one such box is producing nonsense? The best policy is to begin skeptically and assume that this is very possible. It has happened all too often in the past. You need experts to provide their accounts, otherwise you could be totally misled by the media. But if the subject is nonsense appealing to the experts will be insufficient. So how is the layman to judge?

    The answer to this question puts the box labeled science in a privileged position. It has existed in our culture for a long time and has been shown to provide a good method for reaching agreement (if you are patient), providing contact with the real world and being generally useful. It is much harder with the other boxes labeled philosophy , history etc. partly because they are so strongly influenced by opinion and ideology. Thats quite acceptable, and the outputs can be also be important. In most cases the ideologies are usually obvious. One charge against economists is that they smuggle in ideological assumptions covertly and then unjustifiably claim to be part of the sciences.

    Some of the severest critics of large parts of economics, are themselves economists. The only counterpart this has in the sciences is in the immature research areas.

    If you think about climatology in a reductionist way you can drill down until you reach the individual molecules. The foundations there are quite firm and some important questions can be answered rigorously. Why, as Tyndal discovered in the 1850’s, do trace molecules in the atmosphere, have such a dominant effect on the climate? It is because they have lower symmetry. In contrast the others, when isolated, retain their bilateral symmetry even when they vibrate, and so do not absorb or emit infra-red. No debate required.

    In the case of economics, you arrive at the individual person who is associated with a demand curve which is “the maximum price he or she is prepared to pay for any given quantity” and also the individual seller who is associated with a supply curve which is “the minimum price that (s)he is prepared to accept for any given quantity.”

    The obvious question is whether this pair of functions can be compared to observables in the scientific sense?. I am an outsider and have not looked very hard in the library. But this issue has not been resolved for me by receiving a copy of Hill and Myatt’s : A Critical Thinker’s Guide to Microeconomics, which states on page 53 and elsewhere that “perfect competition is the only market in which a supply curve exists”. I have not read the rest, but these microeconomists clearly regard this limitation as having very serious practical consequences affecting predictions about minimum wages,rent controls, taxation etc.

    As indicated by its main title “The Economics Anti-Text Book” argues that most introductory books provide a heavily biased view of real Microeconomics. The criticisms are so serious that I wonder whats left of the subject at the more advanced level? How many arrogant policy makers rely on this type of “text book economics” when they dismiss people for being economically illiterate. Hill and Myatt provide plenty of examples which illustrate the allegations made at the beginnng of this comment.

    @#49. I have very much enjoyed your blogs on climate science Arthur. I think you may be interested in Hill and Myatt section 2.1 page 15, where they discuss macro and micro and arrive at what looks a bit like the opposite conclusion to yours.

  76. #76 andrew adams
    2013/04/26

    Paul Kelly,

    Pointing out there are questions around action on climate change which can’t be answered by economics is not the same as rejecting economics outright.

  77. #77 Hank Roberts
    2013/04/26

    http://www.npr.org/blogs/money/2013/04/19/177999020/episode-357-how-much-should-we-trust-economics
    “… On today’s show, we hear from the grad student who found the error. And we ask: How much should we trust economics?..”

  78. #78 Hank Roberts
    2013/04/26

    > wasp
    You got the joke but missed the point, which is that the ecosystem pollination services are to a large extent coming not just from commercial beekeeping from that “wilderness” that economics doesn’t value well if at all:

    http://www.fs.fed.us/wildflowers/pollinators/animals/wasps.shtml

    see also: http://www.benthamscience.com/open/toecolj/articles/V002/74TOECOLJ.pdf

  79. #79 Patrick
    Germany
    2013/04/26

    Well, without having the time to read all the comments and Dr Connolley’s responds to them, I would strongly reject the idea that there are many overlaps between “modern” (neoclassical) economics and climatology, which is a serious, respected science. Economics, at least the neoclassical and Keynesian school of thought, are more like a type of philosophy. As was mentioned before, the modern versions of economics basically assume that “land” (which, as traditional economists defined it, includs almost all natural resources), is only a subset of the “capital”, and natural resources can therefore always be substituted with “technology”, which is obvious nonsense. Fertile soil cannot be replaced with technology, as well as clean water. Application of industrially faciliated fertilizers, for example, in many cases, may yield high initial returns, but undermine the capability of the land to produce at sufficient rates in the long term. But I run off track.

    Main point, neoclassical economics is based on a number of assumptions that are clearly wrong. Take the notion that man always acts rational, always has access to perfect information, and, as his main goal, longs for ever greater acquisition of wealth, and thus, consumption. Clearly this is not supported by evidence, as most people see in their everyday life. We make decisions that are not “economically” rational (we sacrifice material well-being in favour of our offspring), and we do not have access to perfect information. Also, many people do not long primarily for ever greater quantities of “material” wealth.

    Furthermore, the idea that perpetual growth is the normal state of things is dubious at best. Though we might have had two centuries of exponential growth, prior to that, growth was slow, and sometimes even reversed. Just taking a “short” (and 200y is short on a historical timescale) period, and extrapolating it, is just not scientific. It is like any other simple extrapolation not useful for estimating possible futures. As you are a scientist, Dr Connolley, I think you would agree that simple extrapolation in not sufficient to model any complex system.

    Neoclassical and keynesian economics have also utterly failed to predict, or even anticipate, the financial crisis. Austrian and Chicago school economists did a much better job regarding the purely financial aspects. Biophysical and ecological economics, both subsets of economics that actually take into account the biophysical condition of the world, are also much better in appreciating the complexity of our world.

    You can also hardly falsify economical hypotheses, or test the “experiments” under repeatable conditions. That is not true for climatology. This is the science of perhaps the most complex system there is ( next to the universe itself), and as such it is subject to constant testing, and redefining of hypotheses. If a new thesis is postulated, it is usually critically examined via the peer-review process. This is perhaps the reason why the blogosphere is home to so many outlandish and weird claims about our climate, because it is not subject to this process eliminating errors.

    Climatology is also based on the laws of physics, chemistry, and biology. Current mainstream-economic thinking is not. Furthermore, economics is highly normative, in that it constitutes economic growth (measured in GDP) as the sole indicator of success and well-being. Interestingly, when a natural disaster strikes, GDP goes up, because economic activity increases as a consequence (just think about the clean-up)! Clearly, a storm brings much suffering to the citizens of a certain area, but hey, GDP goes up, so don’t worry, all’s fine! I agree that it is difficult to measure well-being, but just because it is difficult, it does not mean that one cannot try. GDP, on the other hand, is a very simplistic device to estimate the “well-being” of an economy.

    I am deeply sorry if I repeat anything anyone has said before, but I really did not have enough time to read every comment here.

    Regards

    Patrick Flege

  80. #80 Arthur Smith
    2013/04/26

    deconvoluter – thanks for the recommendation, I’m trying out Amazon’s “Send Sample now” to get the beginning of the book and see if I actually will enjoy it…

    As Tamsin Edwards likes to quote, all models are wrong, and can certainly be critiqued as such. Nevertheless, microeconomic models can be very useful – and the subjects when I’ve seen them applied best are usually not so dependent on those particular markets (labor and rent) that are perhaps least close to the “competitive ideal”. Most physics models are absurd simplifications of the real world, and yet they capture the essence pretty well, and I think micro is in a similar vein. But I’ll read a bit at least and see if my opinion changes!

  81. #81 John Mashey
    2013/04/26

    In the real world, logistic curves are rather more common than exponential, although they can look rather similar in the high growth phase, a fact wellknown to people who’ve spent their lives doing high-tech innovation or funding it.
    Moore’s Law still can run for a while (density), but the clock rate improvements we used to get as a side-effect mostly stopped years ago … Or we’d have 10-20Ghz laptops.

    Venture capitalists talk about hockey sticks often, but not the climate kind, rather the growth projections of startups seeking funding. VC’s of course know eternal growth unlikely, so the question becomes: how big is that market, really?

  82. #83 Paul Kelly
    2013/04/26

    Andrew,

    My comment was in support of MT. Ethics, not economics, is the applicable discipline. It’s about solving the tragedy of the commons, not the discount rate equation.

  83. #84 Tim Worstall
    2013/04/27

    “My gripe about ethical overreach isn’t about celebrating the advances in the poorer countries. It is about insisting on using a growth-based discount rate in all conversation about the distant future. ”

    Great. So don’t use it then. Run with Stern’s estimate of the appropriate discount rate. Roughly, none, except for the possibility that we’ll all be wiped out by an asteroid or volcanos or something.

    It doesn’t change the answers all that much.

    Negative discount rates: sure, they’re possible. All that would be necessary is that people in the future be poorer than we are. Then the appropriate discount rate would be negative.

    However, do note that you cannot just plug a negative discount rate in and voila, you’re done. For back before the IPCC we had the SRES. Which are the economic models (so that we know population, technology, wealth, so we thus know cumulative emissions) that the IPCC is based upon.

    And those models assume that 2100 will be 5 to 11 times richer than 1990.

    Now that might be true. Or it might be true that the future is poorer than us. But we cannot base our findings on the idea that they will be vastly richer than us and then also impose a negative discount rate: for that assumes that they will be poorer than us. If we want to use a negative discount rate then we have to go back and rework the SRES, thus the IPCC and thus all of our computer model runs. For if the future is poorer then all of our current estimations of future emissions are entirely and completely wrong.

    We must at least be consistent in our assumptions.

    $50k: yes, per capita, post tax. Yes, top third or less of advanced societies. And yes, I do assume that includes most of my readers at Forbes.

    As to my advocating laissez faire: erm, I’m the guy who has been bouncing up and down demanding a carbon tax. Even convinced William here. That may be many things (not enough, all we need, right wing, and so on) but it’s not laissez faire.

  84. #85 Neven
    Shismaref
    2013/04/28

    I am deeply sorry if I repeat anything anyone has said before

    No problem, it bears repeating. A lot.

  85. #86 Hank Roberts
    2013/04/28

    Climate Change, Climate Science and Economics
    2013, pp 59-100
    Climate Science and Paleoclimatology
    G. Cornelis van Kooten http://link.springer.com/chapter/10.1007/978-94-007-4988-7_3#page-1

    Spooky.

  86. #87 Hank Roberts
    2013/04/28

    > spooky
    click the “look inside” button to get past the bland abstract

  87. #88 Alexander Ač
    Belgium
    2013/04/28

    Here is a quote from atmospheric physicist Tim Garrett, who takes a critical look at economic models in his work (recommended):

    “Stabilizing atmospheric CO2 concentrations below a level of 450 ppmv that might be considered dangerous requires civilization to begin a collapse of its wealth almost immediately.”

    This is NOT what most economists suggest, I think.

    http://www.inscc.utah.edu/~tgarrett/Economics/Economics_and_Climate.html

    Alexander

  88. #89 John Mashey
    2013/04/28

    Not spooky at all, he used to be a Heartland expert, speaks well of Tim Ball, Calvin Beissner, Seve McIntyre and was on Ross McKitrick’s PhD committee, etc.
    The Front Matter PDF is freely available.

  89. #90 Eli Rabett
    http://rabett.blogspot.com
    2013/04/29

    TW of course, is confusing discount rate and social discount rate. Been there, discussed that.

  90. #91 Paul Kelly
    2013/04/29

    I think MT understands that the Worstall/Connolley carbon tax line is an elegant construction. Even if the carbon tax were a worthy goal, the amount of time required to enact them is in direct conflict with the principle that significant action must take place right now to avoid serious problems in the future. This is one of several ways the carbon tax fails the ethics test.

    Using the market to reduce emission is very good idea. The carbon tax is a faux market solution. It is odd that an Adam Smith fellow would propose it rather than a true market approach.. Markets cannot be created from the top down. They arise from the bottom, created by new consumers and products.

    A true market approach looks at the climate concerned as the consumers and climate mitigation as a product (which is best marketed as energy transformation). You want to buy down some externalities with a carbon tax? Don’t wait! You can buy down externalities today. How many units of energy transformation would you like? Here’s a handy suggestion. Calculate the monthly cost to you of a typical carbon tax and spend that.

    What kind of a product is a unit of energy transformation? First of all, it is an ethical product. It counters the tragedy of the commons with what might be call the joy of the commons. Energy transformation is, at heart, a vast technical undertaking that will necessarily proceed one efficiency and technology deployment step at a time. Each unit of energy transformation – or kelly :) – pays for a small part of one of those steps.

    [Timmy and I (and indeed many other people who think CT will fail for political reasons) would both argue that carbon taxes are the best “market solution”. Your proposal appears to be that we must establish – how – a market in “energy transformation” – what exactly is that? – and require people to buy it – who enforces this? This looks very much like the carbon-offsetting to me, with all its problems. I think you need to clarify your proposal -W]

  91. #92 Tim Worstall
    2013/04/29

    “is confusing discount rate and social discount rate. Been there, discussed that.”

    I would take that discussion slightly more seriously if he’d got Nordhaus right. He does indeed argue for highish discount rates. But the real core of his argument (low tax now, rising strongly into the future) is to work with the capital cycle.

  92. […] 2013/04/21: Stoat: What’s the similarity between economics and climatology? […]

  93. #94 Hank Roberts
    2013/04/29

    > work with the capital cycle

    Has anyone demonstrated that in actual fact there is a capital cycle during part of which taxes are cheerfully paid to cover these low-tax times?

    My impression is it’s always “later” for adequate taxes, and “sooner” for tax relief just until there’s more money some day.

  94. #95 Hank Roberts
    2013/04/29

    “… Gerard Roe of the University of Washington argues, even if climate sensitivity were as high as the IPCC suggests, its effects would be minuscule under any plausible discount rate because it operates over such long periods. …”
    http://www.economist.com/news/science-and-technology/21574461-climate-may-be-heating-up-less-response-greenhouse-gas-emissions

  95. #96 Hank Roberts
    2013/04/30

    forbes.com ‘climate’ result includes:

    Countdown To Climate Change: It’s Only 297 Years Away!

    Legislation, sausage, and climate assessments. read »
    Patrick Michaels Patrick Michaels, Contributor Apr 01, 2013

    As I’ve Been Saying The Solution To Climate Change Is A Carbon Tax
    Tim Worstall Tim Worstall, Contributor Apr 08, 2013

    and

    Climate Change Is Now Less Of a Problem. So We Need To Do Less About Climate Change
    Tim Worstall Tim Worstall, Contributor Mar 29, 2013

  96. #97 Steve Bloom
    2013/05/01

    It’s hilarious that vK would start out with an exposition relying on Benny Peiser’s claimed refutation of Oreskes after the former was so thoroughly pantsed by Tim Lambert. I have high confidence that it’s all downhill from there.

  97. #98 Paul Kelly
    2013/05/01

    “Your proposal appears to be that we must establish – how – a market in “energy transformation” – what exactly is that? – and require people to buy it …”

    If that’s what you read, I am a poor writer indeed. A market is first, last and always based on voluntary cooperation. Markets in energy transformation already exist. There are industries involved and thousands of people. A wide selection of energy transformational products are available already.

    A market exists anywhere there is a willing buyer and a willing seller. I am proposing that right here be a market for the kelly, a unit of participation in an energy transformational project. The kellies now on sale purchase participation in maximizing efficiencies and 21st century technologies on Habitat for Humanity houses in Austin, Texas. They are remarkably easy to purchase by mail to Austin Habitat for Humanity 310 Comal, Suite 100; Austin, Texas 78702. Please write kelly on the memo line.

  98. #99 andrew adams
    2013/05/01

    Paul Kelly,

    My comment was in support of MT. Ethics, not economics, is the applicable discipline. It’s about solving the tragedy of the commons, not the discount rate equation.

    I completely agree – it seems I misunderstood your previous comment. Apologies for that.

  99. #100 Hank Roberts
    2013/05/01

    > the kelly, a unit of participation in an energy
    > transformational project.

    Compare https://joinmosaic.com/

    full disclosure, I sent them $50 on two different occasions.

  100. #101 Hank Roberts
    2013/05/02

    found another hockey stick:
    http://research.stlouisfed.org/fred2/data/BASE_Max_630_378.png

    I’ll stop now.

  101. #102 Eli Rabett
    2013/05/02

    “(low tax now, rising strongly into the future”

    What Hank said about pie in the sky by and by, but in addition since CO2 accumulates doing less now is accepting more damage into the far future. The discount rate on that is deadly

  102. #103 David B. Benson
    2013/05/03
  103. #104 Hank Roberts
    2013/05/03

    ‘oogle this one, it’s good. Soil is your capital, is the basic point.

    The Nexus of Soil, Water and Waste_1.ppt

  104. […] Suggested topic for discussion – in designing future policy, how much reliance should the public place on the opinions of various academic disciplines? Specifically, is there an economic consensus? How reliable is it compared to the climatological consensus? […]

  105. #107 grypo
    2013/05/03

    Just a word here, it should be noted that the “anti-globalization’ movement is not at all against the free movement of goods and labor across the globe. This is a misnomer because of the press’s inability to understand that anything can be against neoliberal politics and still be a vital economic idea. In fact the ‘anti-globalization’ movement takes the idea much further than the simple border to border trade agreements that lock in patents and change the face of labor. Considering the the ‘anti-globalization’ is actually anti-border and anti-patent, the idea that this movement has, in any way, attempted to stop the growth of poor economies and fix the inequality within borders, would be making up a strawman.

  106. #108 Paul Kelly
    2013/05/04

    Hank,

    Kudos to you for Mosaic. It is set up on a micro lending business model that sells “kellies” with a promised return with interest. It is somewhat different than Kickstarter or crowdfunding or cashmobbing, all ways that kellies are already being marketed. The kelly isn’t presented as a new concept, but merely to give a name to and easily describe what already exists.

  107. #109 Hank Roberts
    2013/05/05

    > that sells “kellies”
    There’s a word for that, but that isn’t it.

  108. #110 old_salt
    2013/05/06

    Interesting about kellies–did you know they were part of a drill rig?
    http://en.wikipedia.org/wiki/Kelly_drive

  109. #111 freddy
    2013/05/06

    I am strictly agains any carbon taxes and will always decide against

  110. #112 Doug Proctor
    Calgary, Alberta
    2013/05/06

    Economics can have its skeptics the same way that climatology can have its skeptics: by looking at the results of their experiments.

    Chicago Friedman market economics has been applied to many South American economies. Its application has improved or detracted from the wellbeing of the nation and populace depending on which part of the social strata you place most emphasis on, but that is not the point: what has happened is notable (even if “measurable” is difficult).

    Now make sure you are not saying that the application is flawed. The point of economic theory vs application is that one may be mathematically correct (what I call Procedurally Correct) while being a failure in application (what I would call Representationally Correct). If people do not behave as modelled or necessary, then the theory is not a “truth” in the human sense.

    Same thing with climatology. You don’t need to be a climatologist to be a skeptic (or a believer, for that matter). All you have to do is check theory (model) with observation.

    In climatology, many scenarios have been postulated. The scenarios start about 1988 and go forward. Unless there are scenarios that include the temperature history to 2013, or in the models there is some way to get back to the model projections from the history to 2013, one would be forced to say that those models don’t work, while the others appear to work.

    As a skeptic you have questioned and come, like the economics situation, to a reasonable conclusion about the correctness of the theory or models without needing to be an expert, indeed by accepting that others are expert and should be listened to.

    Communist economic theory is not incorrect as a theory but as a hypothesis it has obviously failed. Given some other set of circumstances, however, it might work (not with any humans I know of, perhaps). The climatology theories as they develop (testable) hypotheses have enough variations in results that similar pass/fail (or even not-pass-yet/not-fail-yet) conclusions could be made.

    For climatology, and specifically the IPCC CAGW models,

    [Sigh. What’s the point? You need to actually read the IPCC stuff some time, rather than rely on your paranoid fantasies of what it might be -W]

    there are certain intrinsic results we should see. Keep in mind that what we are concerned about is not a 1.4C/century rise but a >2C/century rise. These results might include:

    1. a global temp profiles that match to-date histories OR include variations that get historical trends back to their overall trends,

    2. a resultant sea-level rise that fits a global increase in retained heat from GHGs that would speed glacial ice melting or movement into the sea,

    3. an atmospheric CO2 ppm rise that fits the global known CO2 emissions data,

    4. a mid-tropospheric hot-spot as seen in radiosondes that matches the models, and

    5. a globally based regional distribution result, especially wrt polar areas, that matches the models.

    If we are to say that discrepancies from the above are within the variations allowed within the models, then, being generous, we would just have to admit that the match, so far, is equivocal, that the fundamental science may still be good but, like Friendman or Commnist economic theory, the application of climatological principles is not certain.

    The entire CAGW argument is about settledness of the science and certainty of outcome. If we are to be worried about outcome of Hansen’s Scenario A while our temps track somewhere around C (as he positioned it, not as some have repositioned, which is another issue), then it is reasonable to ask how we get to there from here. If we aren’t where the models said we would be (for a disaster) then it is reasonable to ask what deficiencies the models have and how these deficiences affect the settledness of the science or the certainty of the outcomes.

    You don’t have to be an expert to question or doubt an expert. You just have to have the expert tell you things, definitive AND UNIQUE things, that must happen for him to be right. And then look for them.

    Rocket science is only “rocket science” before the rocket is built. After that, the truth of the science is determined by whether the rocket gets to orbit as was programmed.

  111. #113 Magnus W
    2013/05/08

    It is not exactly rocket science to understand a discount rate… which builds on ethics and… that is something you can clearly have different opinions on.

  112. #114 Magnus W
    2013/05/08

    To take a recent example just look at the miss of our recent melt down or the austerity debate… not exactly firm predictions…

  113. #115 Paul Kelly
    2013/05/09

    Agreed, a discount rate which builds on ethics is something you can clearly have different opinions on. The criticism isn’t that a climate discount rate cannot be divined. It is that even a correct discount rate does not answer the question of how to we proceed.

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