Winners and Losers in International Trade Theory

No "globalisation" based blog would be complete without a comment on the recent Rodrik-Mankiw-Krugman "love in" on basic international trade theory and the costs of adjustment (also my PhD topic many years ago).

It is useful for Rodrik to highlight this issue.

There is a distinct difference between how globalisation is perceived by economists and "the man in the street" revolving around how big the pie is becoming and whether we all get bigger slices or whether some people's slices are becoming a lot smaller. The assumption that those with bigger pieces of pie give a little back to the man with the smaller piece was always a weak assumption. The real question is how upset and angry the people with the small pieces become (and how much lobby strength they have).

Economists tend to feel that they have to defend free trade in the light of the "anti-globalisation" brigade (Wolf/Bhagwati etc.).

In a sense, this weblog acts to highlight one potential market failure - that of the environment (touched on by the Rodrik post).

The globalisation and environmental debate is similar with economists arguing that free trade is good for the environment. Of course, this is equivalent to the larger pie argument - in reality there will be environmental winners and losers. The existence of cross-boundary pollution and possible global warming effects may mean however that the winners do not remain so for very long.

The kicking off of this debate is good timing for the launch of Rodik's new weblog HERE.

I was going to rehash some of the posts on this blog but instead I refer the reader to the Economist's View article that does an excellent job of bringing all the parties together including all the various updates. I include just the summary.

An article for all undergraduate and postgraduate students to read. Teaching international trade was always fun even if I did have to remind myself of the difference between all the theorems every year.

The summary below highlights why the future of economics is empirical :-)

On the Other Hand . . . . Rodrik versus Mankiw (Others Also Weigh In)

Trade and Prices: An Attempted Summary. Can we all agree on these?

1. Trade policy works through its effect on the relative prices of goods, not through the price level.
2. Depending on what side of the change in relative prices they find themselves, any specific group of consumers or producers can be made worse off by a move to free trade.
3. A corollary: there is no guarantee that free trade raises real wages.
4. The Carlos Diaz-Alejandro rule: For almost any particular conclusion you want to arrive at, there is some economic model that will take you there.
5. Throw in some scale economies (dynamic or otherwise), and then just about anything can happen (including free trade making some countries worse off).
6. The positive spin: This does not diminish the value of economic modeling; it simply means we have to be more careful with generalizations and be more explicit about the assumptions that lie behind our reasoning.
7. Bottom line: It is possible to have an illuminating (sometimes), intelligent (mostly), and entertaining (almost always) economic debate in the blogosphere.

Advice on giving an Academic Presentation

I advise students (undergraduate and postgraduate) and any other academics who may have stumbled across this blog by some happy accident to read the article below.

I may even have to change a few of my small idiosyncrasies ;-)

I agree that laser pointers are pointless and am a firm believer that big long sticks are the way forward as my Econ101 class will hopefully testify even if the said stick can appear unwieldy at times especially when attempting a particularly tricky powerpoint/overhead anecdote switch with the time approaching 10 to the hour.

I have immortalised this link in the sidebar with some other "sources".

Giving an Academic Talk

H/T. Greg Mankiw

Carbon trading: A ‘smokescreen’ but not a shock

Quick link to the FT's recent article on the "widespread failings in the new markets for greenhouse gases".

To be honest, I would have been very surprised if they had found anything different. What exactly did they expect. This is a "straw man" article really. Such new schemes are always going to have teething problems and also attract a certain number of crooks and those after a fast buck.

The article, for those that missed it, is still worth reading.

Industry caught in carbon ‘smokescreen’

The growing political salience of environmental politics has sparked a “green gold rush”, which has seen a dramatic expansion in the number of businesses offering both companies and individuals the chance to go “carbon neutral”, offsetting their own energy use by buying carbon credits that cancel out their contribution to global warming.

Here are the conclusions:

■ Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.

Surely not a surprise even, I suspect, for those that bought them.

■ Industrial companies profiting from doing very little – or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.

Duh - all companies will try and profit from doing very little. Not a shock conclusion. This is called profit maximising and it is of course all legal and above board.

■ Brokers providing services of questionable or no value.

Again, come on, Brokers are there to make a profit and if they can sell something of no value for something they will do so.

■ A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.

What do they expect? Why verify and lose customers when there is no requirement to do so. This is still wild west territory at the moment but it will improve.

■ Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.

This was poor planning by the EU and has to go down as a simple "cock-up". They will learn from this hopefully (although not certainly).

For all this it is still useful for the FT to highlight this issue in case there are any idealists out there who thought differently.

Multinationals and Pollution: Indonesia Protests.

Protesters Carry Posters of Who They Say are Pollution Victims

INDONESIA: April 27, 2007

Protesters carry posters of people who they say are victims of pollution during a demonstration against Newmont Mining Corp. in front of Manado court, North Sulawesi.

An Indonesian court on Tuesday cleared the local unit of Newmont and the unit's American president of dumping toxic waste into a bay near a gold mine in North Sulawesi and making people sick.

Arnie "4 Hummers" Schwarzenegger Pimps his Ride

In the UK we have the labour politician John "2 Jags" Prescott with whom the national press have a love-hate relationship where the word Jag is often replaced with "Jab" following a little altercation with an egg thrower a couple of years ago.

US politicians of course tend to "have it large". In contrast JP is a fully paid up treehugger.

Today's news that Arnold Schwarzenegger has decided to have an 1965 Chevy Impala converted to run on bio-diesel as part of Earth Day on the excellently named "hit" show PIMP MY RIDE.

However, the article concludes that, in the face of public uproar Arnie has reduced his Hummer fleet to 4 (2 of which run on green energy). This still begs the question of why any individual needs four cars whether they are gas guzzling or not.

This quote from one of the articles at the end of this post is telling:

Despite this however, in March 2003 he bought an Austrian six-wheeled tank called a Pinskower, and modified to render it legal to drive on city streets.

I wonder how many mpgs one gets from that little run about.

Schwarzenegger to promote biofuel on 'Pimp My Ride'

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger is headed to MTV to promote Earth Day with an 800-horsepower car that runs on renewable biodiesel fuel.

The governor's appearance on a special Earth Day episode of the popular show "Pimp My Ride" set for Sunday is the latest environmentally themed event for Schwarzenegger, who drew international attention for signing a global warming law last year.

For the show, videotaped earlier, mechanics installed the powerful engine in a converted 1965 Chevy Impala, producing a vehicle that accelerates from zero to 60 mph in three seconds.

The governor said the converted car's emissions of greenhouse gases will be 50 percent lower than a comparable gas-powered car. And biodiesel fuel can be made from recycled products such as vegetable oil.

"We take this cool show and they did something, and added something that was environmentally hip," Schwarzenegger recently told a student crowd at Georgetown University.

When Schwarzenegger ran for governor in 2003, he was criticized for popularizing gas-guzzling Hummers. He has since reduced his personal Hummer fleet to four, two of which he says have since been converted to run on alternative fuels.

For those interested here are a couple of other links to Arnie and his cars.

Stars & their Cars:Arnold Schwarzenegger

Impressed by the military jeep’s performance in the first Gulf War in 1991, he got hold of a couple shortly afterwards, and certainly the vast bulk of the car seems to match his tough-guy image. He spent many months persuading AM General (now part of General Motors) to make a civilian version, which they eventually did with the H1. Later the company produced the somewhat more practical, but still gigantic, H2. Striving to soften and widen his image, Schwarzenegger talked to Hummer owner GM about making a model that was, ahem, somewhat less environmentally uncompromising. In response GM has come up with a hydrogen powered version, the H2H.

Schwarzenegger's guiltless green

"For too long the environmental movement has been powered by guilt," Schwarzenegger said in a keynote speech Wednesday at a global warming conference at Georgetown University.

"You know the kind of guilt I'm talking about: Smokestacks belching pollution and powering our Jacuzzis and our big-screen TVs and, in my case, powering my private airplanes. It's too bad for us that we can't live the lives of Buddhist monks in Tibet, but you know something, it doesn't happen."

Private airplanes - one suspects that converting a Hummer or two will be a proverbial drop in the acidic ocean compared with a flight in a private airplane.

In a link to the first "Pimp my Ride" article:

He boasted to the crowd of mostly Georgetown students that he'd recently been a guest on the MTV show "Pimp My Ride," where he helped put an 800-horsepower engine into a '65 Chevy Impala that could now reach 60 miles an hour in three seconds. But the muscle car was outfitted to run on biodiesel, which he said could cut its greenhouse gas emissions in half.

Only in America.

Consumers and Climate Change: UK and US compared.

This post is derived from a survey from BusinessAssurance.com.

Under the by-line "Green, Prove it" the headlines from the results of a recent survey of consumers in the UK and the US are as follows:

Independent verification
70% of consumers want climate change claims made by businesses to be proven by independent third parties. (63.0% in the US, 76.8% in the UK)

Government intervention
Over 50% of consumers believe governments should be forcing businesses to phase out products that contribute to global warming. (45.7% in the US, 57.1% in the UK)

Better information
60% of consumers want companies to provide more information at the point of sale about the effects of their products on climate change. (56.3% in the US, 64.4% in the UK)

About the Survey:

The survey was undertaken by GlobeScan in March 2007 with a representative sample of 2,734 from the US and UK general public aged 18+. The research was conducted online amongst 1,347 and 1,387 participants in the US and UK respectively. With a margin of error of 2.7%, 19 and 20 times in each country respectively.

So far, so predictable. It is no surprise for example that consumers want proof of a firm's "green credentials".

What is more interesting is the significant differences in the headline figures for the UK and the US. In answer to all 3 questions UK consumers appear to be more environmentally concerned. Looking at this another way, perhaps this only reflects a difference in attitudes towards the role of government with Americans far happier with the idea of "small" government and minimal intervention.

There are some other interesting questions in this survey such as:

Governments should force companies to phase out products that contribute to global warming so that I can make better choices as a consumer.

As predicted, 45.7% of US citizens and 57.1% of UK citizens agreed that governments should be forcing businesses to phase out products that contribute to global warming.

When the questions examine consumer attitudes more closely things get a little more worrying. For example:

1. 47% of Americans believe Global warming is a natural event, not one caused by humans.

2. 55.5% of Americans and 63.9% of UK citizens DISAGREED with the statement "Global warming is such a big problem that there is no point in consumers trying to take action".

Finally, the last two tables of this report talk about consumer behaviour. When asked "Which of the following have you done in the past 6 months, or intend to do in the next six months? In the US or UK..." the results, although not showing great differences, still have the UK consumers being the most proactive.

The full report and tables can be found HERE.[PDF]

Economics of Hunting: Killing in the name of...

I recently saw Harvard's Alvin Roth give an excellent overview presentation of his work on market design as applied to Kidney transplants and school place allocation in New York and Boston (as the Frank Hahn lecture at this year's RES conference). He has also recently written a NBER paper on "repugnance"[PDF] suggesting that economists cannot provide a market for everything - market for body parts being an example.

Such a concept must surely apply to the current debate in Kenya to legalise big game hunting for the very rich. The alternative argument is that everything has a price and that the money raised from such big game hunters can be ploughed back into other conservation projects and to help stop poaching. It certainly seems to work for Tanzania and South Africa.

The quote of interest from this article is in bold:

"Tempers have flared, and one Kenyan journalist recently protested at the idea of Arab royals and rich Americans, "bored by ordinary living," blasting away at big game while children in rags look on from the doorways of mud huts."

I suspect that one man's repugnace is another man's sport.

Hunting debate splits Kenya's wildlife community

NAIROBI (Reuters) - A controversial proposal to help save Kenya's wildlife by scrapping a 30-year ban on sport hunting split delegates at a conference in the east African nation on Thursday.

Tens of thousands of tourists flock to Kenya each year to see lions, leopards, elephants, wildebeest and other wildlife roaming the parks and reserves. But animal numbers have fallen by at least two-thirds over the last three decades, and experts blame poaching plus human destruction of their habitats.

Those backing sport hunting say it would preserve wildlife by encouraging better management and earning big money that could be ploughed back into conservation. It would also bring Kenya into line with neighbors Uganda and Tanzania, and with South Africa, which all profit from restricted hunting.

Opponents have denounced any moves to re-introduce the blood sport and accused elitist hunters of colluding with wealthy local landowners.

"It is such an emotional issue right now," Sarah Macharia, a Kenyan environmental consultant, told Reuters at the meeting.

"Every time they try to count our animals there are fewer and fewer. I am against hunting because we don't have the capacity to enforce any rules on it. Maybe later, but not now."

Last year, Kenya's government appointed a committee to formulate a new wildlife policy. The draft report, completed in February, recommended lifting the ban on hunting, but its publication has been delayed by the wrangling.

BIG GAME

Tempers have flared, and one Kenyan journalist recently protested at the idea of Arab royals and rich Americans, "bored by ordinary living," blasting away at big game while children in rags look on from the doorways of mud huts.
Opponents say locals want a bigger share of tourist revenues from the parks and reserves, which go mostly to the service sector, and compensation for loss of property or crops caused by wildlife -- but not hunting.

Supporters of hunting include not only ranchers and sports hunters themselves, but also some veteran conservationists who have worked in the country for decades.

They say countries like South Africa and Tanzania have prospered hugely, partly because hunters spend thousands of dollars, many times more than regular tourists, and partly because they have experienced an increase in animal numbers.

Mike Norton-Griffiths, an expert on the economics of wildlife management, says natural habitats in Kenya are being destroyed by landowners because the returns from agriculture are currently much higher than from wildlife.

Money-making activities like selling animals, culling locally abundant populations, marketing trophies and -- most valuable of all -- sport hunting, should be allowed, he says.

Well-funded foreign animal welfare groups, mostly based in the United States, have muddied the debate, and even "subverted democracy," in Kenya, he says.

These groups seem determined to make sure hunting never returns, apparently regardless of whether this leads to further falls in wildlife numbers or continued rural poverty, he says.

"If they succeed in derailing the wildlife policy review, the decline in the country's wildlife will carry inexorably on," he wrote in the magazine New Scientist last month.

"That would hardly be a victory for conservation."

Rain Forest for sale: 2 bags of sugar and some hoes.

It is quite clear which side of this deal had the most economists. This is an example of corporate social responsibility gone mad.

But how do you price such assets in such inhospitable places. Perhaps this was the market price although I suspect not.

The full Guardian article makes good reading. I have picked out a select few paragraphs.

Vast forests with trees each worth £4,000 sold for a few bags of sugar

Lamoko, 150 miles down the Maringa river, sits on the edge of a massive stretch of virgin rainforest in central Democratic Republic of Congo (DRC). On February 8 2005, representatives of a major timber firm arrived to negotiate a contract with the traditional landowners.

Few in the village realised that the talks would transform all their lives, but in just a few hours, the chief, who had received no legal advice and did not realise that just one tree might be worth more than £4,000 in Europe, had signed away his community's rights in the forest for 25 years.

In return for his signed permission to log thousands of hectares for exotic woods such as Afromosia (African teak) and sapele, the company promised to build Lamoko and other communities in the area three simple village schools and pharmacies. In addition, the firm said it would give the chief 20 sacks of sugar, 200 bags of salt, some machetes and a few hoes. In all, it was estimated that the gifts would cost the company £10,000.

It was the kind of "social responsibility" agreement that is encouraged by the World Bank, but when the villagers found out that their forest had been "sold" so cheaply, they were furious..

../

But according to a Greenpeace report released today, Lamoko did better than many communities. Some contracts seen by the Guardian show only promises of sugar, salt and tools worth about $100 (£55) in return for permission to log. Others have reported that pledges made three years ago have still not been fulfilled. The report, which took two years to compile, claims that industrial logging backed by the World Bank is now out of control. "Younger people feel that elders have failed to look after the long-term interests of the community," it says.

../

It is believed that 20 foreign-owned forestry companies are active in the DRC, and that Chinese and other logging groups are also seeking to gain concessions. The companies should be prevented from doing so by a moratorium negotiated by the World Bank in 2002 as part of an initiative to control the forestry industry.

The "China" issue is an important one that will become increasingly prominent. We will post on this again.

Environmentally friendly death: feed the trees and not the atmosphere

This post links to a previous post on local protests against the location of crematoriums.

Crematorium Location: The Dead that Keep on Killing

I have to say that I agree - a nice little tree and a cardboard box would be fine (maybe a wooden box to help slow the tree feeding a little).

Scientist says cremation should meet a timely death

SYDNEY (AFP) - An Australian scientist called Wednesday for an end to the age-old tradition of cremation, saying the practice contributed to global warming.

Professor Roger Short said people could instead choose to help the environment after death by being buried in a cardboard box under a tree.

The decomposing bodies would provide the tree with nutrients, and the tree would convert carbon dioxide into life-giving oxygen for decades, he said.

"The important thing is, what a shame to be cremated when you go up in a big bubble of carbon dioxide," Short told AFP.

"Why waste all that carbon dioxide on your death?"

Short said the cremation of the average male in Australia, during which the body is heated to 850 degrees Celsius (1,562 degrees Fahrenheit) for 90 minutes, produced more than 50 kilograms (110 pounds) of carbon dioxide.

And that doesn't include the carbon cost of fuel, or the cost of the emissions released during the production and burning of the wooden casket.

Short, a reproductive biologist at the University of Melbourne, said the contribution of cremation to harmful greenhouse gases was small, and he did not wish to prevent people from choosing how their body was disposed of according to their religion.

But to bury the hatchet with environmentalists, he suggested it would not be a bad idea to bequeath one's body as food for a forest.

"You can actually do, after your death, an enormous amount of good for the planet," he said. "The more forests you plant, the better."

H/T. DC.

World Economics and Climate Change

The latest issue of World Economics has 2 papers written by Nicholas Stern and colleagues.

I am afraid an academic subscription may be needed to read the full article. Sorry.

WORLD ECONOMICS
CLIMATE CHANGE
This issue of World Economics, like the previous one, devotes considerable space to the important global issue of climate change. Some of the papers are responses to articles published in the previous issue of this journal, which in turn were responses to The Stern Review on the Economics of Climate Change that was published in October last year.

How Can Norway Become A Climate-Friendly Society?
Jørgen Randers & Knut H. Alfsen

Addressing Climate Change
Is there a role to be played by the IMF?
Peter S. Heller

REFLECTIONS ON THE STERN REVIEW (1)
A Robust Case for Strong Action to Reduce the Risks of Climate Change
Simon Dietz, Chris Hope, Nicholas Stern & Dimitri Zenghelis

REFLECTIONS ON THE STERN REVIEW (2)
A Growing International Opportunity to Move Strongly on Climate Change
Lorraine Hamid, Nicholas Stern & Chris Taylor

Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change
Wilfred Beckerman & Cameron Hepburn

The Stern Review and the Costs of Climate Change Mitigation
A response to the ‘Dual Critique’ and the misrepresentations of Tol and Yohe
Dennis Anderson

Response to Carter et al.
John Mitchell, Julia Slingo, David S. Lee, Jason Lowe & Vicky Pope

Response to ‘The Stern Review: A Dual Critique’
Nigel Arnell, Rachel Warren & Robert Nicholls

A Response to ‘The Stern Review: A Dual Critique’
Andrew Glikson

For other Climate Change papers see our designated page at our Globalisation and the Environment websiteHERE.

The Benefits of Being Economics Professor A (and Not Z or even E)

This is a general academic post but is an issue that crops up in economics (and of course environmental economics) from time to time. As the paper states, the economics profession tends to order co-authors alphabetically. This keeps things simple and friendly.

However, there are costs (and benefits?) to those further down the alphabet.

This paper seems to suggest that those with names beginning with a letter nearer to A will experience a faster growth rate in publications as a result of higher visibility and reputation. I think there is something in this. However, on the downside higher visibility might result in more papers to referee and more reports to write (less fun). When it comes to internal University politics it can often be beneficial to have a higher reputation and visibility when it comes to pay bargaining and even getting outside offers.

In theory I was dealt a good card with E. Unfortunately my three main co-authors were dealt A, B and C. That is either bad luck or careful planning :-)

A related question therefore is why does an individual choose to enter academia?

Is it for money? Certainly not in economics where the outside job opportunities pay considerably more and where our undergraduates starting salaries are close to our wages after 10 years of dragging ourselves us the greasy pole or indeed for many staying at the bottom of the pole.

Is it for glory? Some may wish to maximise ego rents but this can surely only apply to a few - although there do seem to be an increasing number of "pop" economists out there. Where does blogging fit in? As Mankiw has pointed out in his own blog, starting one is not a good career move (although obviously not in his case).

Is it to be able to teach the next generation all about supply and demand? This should be part of it but I suspect not as great a motivating force as it should be. We could after all have become teachers.

Is it for pure intellectual pursuit reasons and the quest for knowledge? In the main I suspect this is what motivates many an individual to go into academia. This final reason holds whatever letter your surname begins with. In fact, avoiding the trappings of "visibility" may even help in this endeavor. Are economists more or less driven by this argument that academics from other subjects? As individuals we should be maximising our own utility where hard cash is only a bit part player so perhaps the answer is yes.

"The Benefits of Being Economics Professor A (and Not Z)"
IZA Discussion Paper No. 2673

Contact: MIRJAM VAN PRAAG
University of Amsterdam - Department of Economics,
Tinbergen Institute, Institute for the Study of
Labor (IZA)
Email: C.M.vanPraag@uva.nl
Auth-Page: http://ssrn.com/author=245853

Co-Author: B.M.S. VAN PRAAG
University of Amsterdam - Faculty of Economics &
Econometrics (FEE), Institute for the Study of
Labor (IZA), Tinbergen Institute in Amsterdam,
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research)
Email: b.m.s.vanpraag@uva.nl
Auth-Page: http://ssrn.com/author=246066

Full Text: http://ssrn.com/abstract=977540

ABSTRACT: Alphabetic name ordering on multi-authored academic
papers, which is the convention in the economics discipline and
various other disciplines, is to the advantage of people whose
last name initials are placed early in the alphabet. As it turns
out, Professor A, who has been a first author more often than
Professor Z, will have published more articles and experienced a
faster growth rate over the course of her career as a result of
reputation and visibility. Moreover, authors know that name
ordering matters and indeed take ordering seriously: Several
characteristics of an author group composition determine the
decision to deviate from the default alphabetic name order to a
significant extent.

Sandcastles in the sky: China and environmental degradation

China's rapid growth has resulted in environmental degradation on many levels. In addition to general air and water pollution that we have covered before, one of the most visible manifestations of the problem is the increasing prevelance of sandstorms.

The economics - well it appears that considerable effort has gone into reversing the desertification of large regions of China to little effect. It is clear that prevention would be significantly cheaper than the cure. However, it may be the case that a tipping point has been reached and that any solution would be uneconomic. Moreover, money spent on poverty alleviation may do more to stop desertification than any ecological solution. As always, economics could save the day.

With continued global warming things may not improve any time soon.

It appears that good old fashioned "bad management" is responsible for a large percentage of the wasted time and money. Trees and grass and very different beasts.

Here are some choice paragrpahs from a recent ChinaDialogue article.

Stopping the sandstorms

In Beijing, the weather forecast says that more sandstorms are on the way. The capital was hit by four sandstorms in March, and even Shanghai was recently smothered by dust clouds from the north. Television reports now describe these events as “sandy weather”, rather than “sandstorms”. But whatever you call them, they are becoming ever more frequent visitors to Beijing in springtime.

While everyone is cursing the weather, I find myself worrying: how many tonnes of soil are being lost? And how long will it be before there is nowhere in China for plants to take root? Academics argue to what extent these sandstorms are “imports” from Mongolia and the former Soviet Republics, or whether they are the “domestic” products of the arid deserts and damaged grasslands of China's west. But either way, there is no denying the degree of environmental degradation in western China over the last three decades. Regardless of whether the capital’s weather comes from beyond its borders, China needs to put measures in place to restore the grasslands and reduce the risk of sandstorms.

Sixty billion yuan has been invested in projects to control the sandstorms that are hitting northeastern China. Tree-planting projects have also been running for 30 years across north China. But why haven't they worked? And more importantly – what will?

So why have the Chinese spent the last 30 years planting trees?

The current strategy – to plant trees to help with problems caused by a lack of grass – contradicts principles of ecological management. In fact, our repeated calls for change have now resulted in more attention being placed on scrub. Scientists agree that millions of years ago these areas were once covered with trees, but this is the distant past – no amount of spending will bring ancient forests back. In fact, grass is much more effective than trees at stopping sandstorms, and it does not need to be planted. Simply protect it, and it will grow. Trees use up groundwater, while grass uses only rainwater. Grass is denser and fixes the soil in place; it also keeps the ground moist by retaining precipitation, meaning there is no dust to blow away – something trees cannot do.

This next paragraph contains my favourite quote: "Who would notice?". This one sentence sums up why the West must take environmental degradation of China seriously.

Currently, our work ends up being concentrated in areas that are easy to reach and monitor: regions that are accessible by road. Lots of money has been spent, with some good results. But nobody asks questions about the very remote, ecologically-degraded areas that are less accessible, but have more responsibility for sandstorms. I once asked a local forestry official why they were not using aerial sowing techniques to rehabilitate these areas. His answer was simple: “Who would notice?” Current schemes are designed to be seen by the officials who approve their funding. Do not get too excited by those recovered grasslands and forests you see alongside the highways; they only cover 10% of the total affected area. The other 90% causes the continuing sandstorms.

Finally, we cannot discuss China's environmental problems without touching on the issue of population and the standard Malthusian concerns. In this case, as in other developing countries, pressures on land use continue.

Thirdly, we need to look at the relationship between man and nature. Arid and semi-arid areas can only support one or two people per square kilometre. In China, population density in these areas is over 10 people per square kilometre. The original inhabitants were nomadic, and would move in search of grass and water, giving the grasslands a chance to recover. But now they have settled, increasing the pressure on the environment – and inevitably damaging it. Measures are needed to move this scattered population into towns and cities; funds for ecological management should be used to this end.

Then there is the actual cost.

Fourthly, we must reconsider the relationship between ecological management and poverty relief. Sandstorms are caused by the consumption of grass by livestock, by the clearing of grasslands for crops and by deforestation. At present, sandstorm-control programmes have little regard for the lives of local people. The money that is being spent brings them scant benefit, and only helps the people that receive the funding directly. My rough calculations show that spending on major sandstorm control projects amounts to around 326 yuan (US$42) per mu (666.67 square metres). In the south of Inner Mongolia that works out to almost 500,000 yuan (around US$64,705) per household. If as little as one-tenth of that figure was actually spent on getting the locals to give up their livestock and plant trees, there would be no danger of sandstorms. And the locals would still end up better off – at present, none of this funding reaches them, and most struggle to earn 10,000 yuan (US$1,294) per year. In one part of Inner Mongolia, a fortune has been spent on restoring the grasslands, but no one can come up with the 10,000 yuan needed to retain it.

A final quote brings in some good old black humour:

Can China stop the sandstorms? If we do not take heed, maybe not. Of course, it may not be too long before all the soil is blown away. That would put an end to the capital’s sandstorms, but it might also put an end to Beijing.

Risky behaviour and parasites

Sometimes as an academic you come across an article or blog post that makes you think "it all fits" or "there must be a paper in here somewhere".

With the current trend for "field experiments" from John List and company this strikes me as an interesting, if not dangerous, experiment. As someone interested in risk and why some people are more risk averse than others ceteris paribus, this might be the answer.

Some of the new economics coming out of the US looking at brain scans and the propensity to gamble is particularly interesting. Maybe during these scans they need to look out for this little fella.

H/T: Development Crossing

Sneaky Parasite Can Influence You

When you see a cat pounce on a rat, it seems like a classic story about a predator and prey.

But scientists have recently discovered that sometimes the main actor is actually a tiny parasite in the rat's brain that makes the normally fearful rat think "oh how nice" when it smells a cat.

The parasite wants the rat to be caught by the cat because it needs to be in the cat's stomach to reproduce. New research sheds light on how this surprising little organism can manipulate a rodent to do its will. There has been speculation that human behavior may also be affected in some ways, and correlations have been found between latent Toxoplasma (parasite) infections and various characteristics such as increased risk taking behavior, slower reactions, feelings of insecurity, and neuroticism.

Could this genetic adaptation caused by parasite used against humans?

Recent pollution episode in the UK

Writing in the Guardian newspaper Tim Chatterton notes that last month saw one of the biggest pollution episodes that the UK has witnessed for several years, at least outside of the summer months. This was caused in part by a pre-polluted flow of air arriving from the continent but also of course from our own home grown pollution. Around the country almost 30 sites breached pollution target levels for PM10. There was a palpable lack of action on the part of the Government who seem not to have any kind of strategy for dealing with peak pollution episodes or even warning people. Many people will have been suffering from respiratory symptoms as a consequence. The lack of a warning strategy is particularly unfortunate given the opportunities for individuals to take avertive behaviour as outlined in an earlier posting.

The Legacy of the Stern Review

Apologies for the lack of posts over the last 2 weeks - academic research has a way of disrutpting blogging especially when you are in countries with insufficient internet speed.

Obviously much has been missed but I hope to post a few catch up posts over the next few days.

The first is a nice little paper by Gary W. Yohe, Richard S.J. Tol and Dean Murphy relating to the recent Stern Review.

On Setting Near-term Climate Policy while the Dust Begins to Settle: The Legacy of the Stern ReviewDate: 2007-03

By: Gary W. Yohe
Richard S.J. Tol (Economic and Social Research Institute, Dublin)
Dean Murphy

URL: http://d.repec.org/n?u=RePEc:sgc:wpaper:129&r=env [FULL DOCUMENT].
We review the explosion of commentary that has followed the release of the Stern Review: The Economics of Climate Change, and agree with most of what has been written. The Review is right when it argues on economic grounds for immediate intervention to reduce emissions of greenhouse gases, but we feel that it is right for the wrong reasons. A persuasive case can be made that climate risks are real and increasingly threatening. If follows that some sort of policy will be required, and the least cost approach necessarily involves starting now. Since policy implemented in 2007 will not “solve” the climate problem, near term interventions can be designed to begin the process by working to avoid locking in high carbon investments and providing adequate incentives for carbon sequestration. We argue that both objectives can be achieved without undue economic harm in the near term by pricing carbon at something on the order of $15 per ton as long as it is understood that the price will increase persistently and predictably at something like the rate of interest; and we express support for a tax alternative to the usual cap-and-trade approach.

Keywords: Stern Review, climate change, climate policy, social discount rate; risk and equity aversion
JEL: Q54

We have not started a page within our Globalisation and the Environment project website that will attempt to collate research papers in this area.

The Economics of Climate Change: The Stern Review

IPCC report declares that there are no winners from global warming

The draft IPCC report declares that there are no winners from global warming and that hundreds of millions may be put at risk of hunger and water shortages. At the same time the survival of hundreds of thousands of plant and animal species is threatened. Lacking a scientific background I am in no position to evaluate these and other claims made in the report. Nevertheless I have some concerns about comments made by two contributors that I would like to air. Rajendra Pachuri, chair of the IPCC panel is quoted in the Guardian as saying:

It's the poorest of the poor in the world, and this includes poor people in prosperous societies, who are going to be the worst hit.

This is an example of someone clearly overreaching himself. The correct answer is (probably) that the extent to which individuals gain depends on whether climate change takes them closer to or further away from their preferred climate. I speculate that poor individuals residing in countries that move closer to their optimal climate will gain more than rich individuals probably will.

Likewise Neil Adger who is now Professor at the Tyndall Centre in the University of East Anglia comments:

There are no winners from the impacts of climate change. No country is immune.

I'm sorry but I think that this is absurd if taken at face value and find the very tone of the remark troubling. I can easily imagine some countries gaining from climate change even if the majority of countries will lose. There are also going to be winners from climate change if one thinks about it in terms of certain groups, regions and economic sectors. Again, these are likely to be outweighed by those who lose. Why would anyone wish to deny these possibilities?

Avertive Behaviour

Yesterday's copy of the Guardian had a particularly interesting piece on the ways in which individuals might diminish the dose of air polution that they receive, short of moving to a less polluted area. The article contained ten simple measures compiled by Dr. Roy Colville, a senior lecturer in air pollution at Imperial College London. The main text of the article can be found by clicking here but briefly the measures advocated include changing the routes that one takes preferring back streets to major urban arteries and avoiding pollution spikes particularly when exercising. One can also purchase a smog mask or fit indoor air purifiers (it seems that the air inside our homes is much dirtier than the air outside). I would guess that many people are already engaged in this kind of averting behaviour.

I found this article interesting because it emphasises once again that the risk from ambient levels of air pollution is partly determined by the individual him or herself. This perspective is somewhat different to the mechanistic dose response function approach so favoured by epidemiologists. Using the dose response approach the observed number of health incidents associated with a given ambient concentration is multiplied by the value per adverse health outcome e.g. the cost of a respiratory hospital admission. But when people exhibit avertive behaviour this approach provides only a lower bound on the benefits from reducing air pollution. The costs of time and money spent reducing risks should also be included.

Bio Fuels and Climate Change

There is continuing concern about whether and to what extent bio fuels have a role to play in tackling climate change. The following story taken from the BBC website makes several important points:

Some oil representatives have told the government that they cannot meet the UK target of 5% biofuel on the forecourt by 2010 while also protecting wildlife. The EU recently announced plans to double the biofuel total by 2020. One government official told the BBC: "The policy is running ahead of the science; we have to be very careful that this doesn't all go badly wrong." The biofuel bonanza is being promoted by the car industry as a way of achieving cuts in greenhouse gas emissions. Biodiesel comes from plant oils, and ethanol from fermenting starchy or sugary plants. Experts agree it makes sense to maximise wood waste and to grow energy crops on land that is marginally productive for food. The problem is the scale of the enterprise. Many biologists warn there is simply not enough land on the planet to feed a growing number of people who are hungry for more protein, but also want to run cars on fuel from plants. Already President Bush's highly-subsidised drive to get fuel from the Prairies has triggered food riots in Mexico because it has pushed up the price of corn. The biofuels issue is particularly acute in Indonesia where the natural forests are being razed to make way for palm plantations to produce vegetable oil, soaps, shampoos, industrial substances - and now motor vehicle fuel too. The oil giants have promised they would obtain their palm oil from sustainable sources; but they define this as taking oil from plantations where forests were felled more than five years ago. Some oil industry experts are now admitting that this makes no sense, because it simply increases overall demand for palm oil.

At some point the marginal external costs of biofuels will rival those of more conventional sources of energy. What then did last November's Stern Review assume about the environmental costs of biofuels? As was pointed out in a recent paper by Robert Mendelsohn, the Stern Review ignores entirely the environmental costs of alternative energy sources and fails to account for the escalating costs of land that a major move into biofuels would entail. This is another reason why the Stern Review's recommendations are not to be relied upon.

Birmingham: Worst City in the UK by 2099

According to Dr. David Viner of the Climatic Research Unit at the University of East Anglia global warming will have a catastrophic effect on Birmingham making it the worst place to live in the country by the end of the century. These claims were made on the BBC's Inside Out series. The BBC website states:

But the Fens isn't the worst place to live as our country heats up. For that - perhaps surprisingly - we have to go inland. Birmingham is one of England's most congested cities with 13 million journeys every year. It also has the worst air pollution outside London. Big cities like Birmingham fare worse during climate change because of what's called "the urban heat island effect", as David Viner explains: "Buildings absorb the heat of the sun so they're always hotter at night. 2007 is already predicted to be the hottest on record. "And global warming means by the end of the century it could be up to 4 degrees C hotter in Birmingham. "More air condition uses more energy and brings more pollution. It's a vicious cycle." Midlanders can expect drier summers and wetter winters. The centre of England is also more susceptible to freak storms such as the tornado which hit the city in 2004.

Since the contributors to this blog all work in Birmingham University naturally we were shocked and dismayed by Doctor Viner's prediction. But upon reflection we think that his predictions do not stand up to scrutiny. Instead we believe that adjustments in land prices and wage rates will equalise the net benefits of different locations throughout the United Kingdom. We also suspect that whilst some changes in climate might reduce human welfare others might increase it. In particular, it could be that some people in Birmingham might actually prefer warmer weather throughout the year. We realise of course that it is politically incorrect to suggest that climate change has advantages as well as advantages but we do not fear controversy.