Monday, September 17, 2012

Banning the bulb - the information critique

I'd noted a few problems with banning incandescent lightbulbs. First, we can't be sure that one bulb is really friendlier than another without very comprehensive information on how they're manufactured; second, where New Zealand's ETS has things roughly right, at least when it comes to power generation, it's pretty hard to make a case for banning lightbulbs.

Bryan Walker notes a couple of studies suggesting that the cheaper-to-run bulbs are also friendlier to manufacture:
However I had a look to see what I could find, and came across this assessment of CFLs from a writer initially inclined to be sceptical about them, and this report on LEDs. It doesn’t look to be an issue.
A commenter at Offsetting found this one too.

I've no particular dog in this fight; if CFLs and LEDs are friendlier to manufacture, so much the better. But I'm still not sure that it's actually knowable. For example, Bryan's first link provides this table:

Here's a summary of the embodied energy in a light bulb (all numbers represent energy in kWh):
CFLIncandescent8 Incandescent bulbs
Glass0.170.110.88
Plastic0.6800
Electronics0.6600
Brass0.180.181.44
Operation*12060480
Recycle**1.6900
Total123.3860.29482.32
* This assumes the CFL bulb operates for 8000hrs and the incandescent bulb operates for 1000hrs
** This assumes that the energy required to recycle a CFL bulb is equal to its production 

Let's think about the plastics in the CFL and assume that the table has everything right about the direct energy costs of making plastic. But what about the energy costs of the machines that had to be bought to make the plastics? What about the costs of the machines that made those machines? We'd need to know everything about all the materials that go into all of the pieces of equipment that make the machines that make the machines that make plastics, and then everything involved in the materials used in making that prior set of machines, and so on all the way back.

Read Leonard Reed's I, Pencil. If a pencil's that hard to figure out, an LED bulb isn't going to be easier.

That's just the information problem on the supply side. What about heterogeneous customer demand based on their having very different uses for lightbulbs in different places? In large parts of the country in large parts of the year, waste heat from incandescent bulbs is not waste. It's just a less efficient way of partially heating your house. When I spend a dollar in power heating my house with my lightbulbs, I'm wasting about fifty cents if my heat pumps are twice as efficient as radiant heat; I'm not wasting the whole dollar. I don't want CFL bulbs in some outlets because they take just too long to wake up and provide light; in other spots in the house, it doesn't matter if it takes a couple of minutes to get useful lighting levels. A ban says there is no possible reason for a consumer to prefer an incandescent bulb that can outweigh the difference in power cost, and that just isn't true.

Walker continues:
Crampton’s second point was that an ETS which is functioning well removes the need for any regulatory interference in the market. “If power prices incorporate carbon charges via the ETS, then there’s no real economic case for pushing consumers to choose bulbs they don’t want.” He goes on to say that if the ETS isn’t producing the desired effect the answer is to improve the ETS, not make piecemeal interventions. It crossed my mind when I was writing the post that if the ETS was functioning at a level designed to drastically reduce carbon emissions there mightn’t be a need to bemoan the Government’s action on incandescents. But it is not functioning at that level, and the Government seems determined to ensure that it never will, or will only so far in the future as to be much too late.
If the ETS is broken and unfixable, then you can start making second-best cases for all kinds of stuff. But I'd thought it was least broken when it came to electricity generation.

But should New Zealand's ETS really go beyond that which everybody else is doing? "Drastically reduce" seems a pretty tough standard. Maybe it's the right one if everybody does it at the same time and agrees to be bound by it, but surely NZ going it alone in pushing for drastic reductions does a lot more to ruin the NZ economy than to delay global warming; we'd have to expect the rest of the world to be remarkably strongly swayed by New Zealand's example to expect otherwise. And that's just not going to happen so long as the mess in Europe and the looming potential economic mess in China are the headlines.

Walker continues:
Reining in carbon emissions has become a matter of high urgency, far outweighing concerns about government intervention in the economy. For that matter the ETS itself is an intervention, designed in its original intention to make markets assume the environmental costs which left to themselves they ignore. I see no reason why it should not be accompanied by other government directives which ensure that markets are not permitted to operate in areas that clearly slow the transition to a decarbonised economy.  We accept government mandates in many parts of the economy such as the compulsory insulation of new buildings and we rue failures in regulation such as allowed the emergence of leaky buildings.
Banning incandescents does not to my mind invoke the spectre of a centrally planned economy. It’s simply part of boundary setting for markets to operate within, a proper function of government and one buttressed by the urgency of the climate crisis.
The terms of the argument I think here have shifted a bit. First, my critique of lightbulb banning wasn't that it was interventionist; rather, that it was a worse regulation than having a working ETS. If the ETS were working correctly, there would be no efficiency case for banning lightbulbs; I'm not even convinced that there is a case for banning lightbulbs given the problems in our actual ETS.

I was hardly making the case that banning bulbs leads to a centrally planned economy. Rather, the knowledge requirements for assessing whether a ban is desirable and being really sure about it aren't far from the knowledge required to make central planning feasible.

If we want a shot at drastic reductions, though, we could do well to take another tack entirely. The ETS imposes some costs on the economy. Not huge ones, but they're real. Ditch the ETS and pour money into ag biotech research into improved pastoral systems for low methane; provide a free licence for anyone to use the resulting research. If it does nothing, then we've hastened global warming by maybe a day a century from now relative to NZ's having kept the ETS.* If it works, we substantially abate global agricultural methane emissions. A small country in the middle of nowhere with little influence might do better with the high variance play


* My baseline assumption here is that if New Zealand as a whole were shot into outer space tomorrow, with no further emissions of any kind, we'd at most delay whatever carbon concentration or temperature milestone we'd have otherwise achieved a century from now by at most two or three days. We're a pretty small dot.

Thursday, September 13, 2012

Critique and the customer

If the point of an economic consultancy report is to convince serious officials at Treasury, the Reserve Bank, or the relevant Ministries of the economic case for something, and if the consultancy report has serious errors, you can do good by loudly critiquing it if it is wrong. Those who need to know whether the report is right will check the critiques and, if truth-seekers, will update. I understand that some of the serious folks at the Ministry of Health have strongly updated their views as to the appropriateness of Cost of Illness studies around alcohol consequent to critiques, very correctly noting that cost-effectiveness is the better measure.

But if the point of an economic consultancy report is to excite the hooples and to give a sciency justification for whatever some bunch of rent-seekers is trying to push, then critiquing it loudly only serves to provide advertising: this firm will produce the big shonky but sciency-looking number that your industry needs to get public support for whatever you're trying to push.
"Noise made, overtures to outside interests and enlistment of the hooples’ participation is what this situation demands." Al Swearengen, Episode 20, "Childish Things", Deadwood.
If that's what the reports provide, critiques might make things worse by letting the interests know who's best at exciting the hooples.

Want to show that your industry is the key linchpin for the regional economy? Want to show that your party's policy is the one for advancing economic prosperity? Yelling about how a particular consultancy produces numbers that are great for propaganda but bad for policy only serves to fuel demand where the ultimate audience are the hoopleheads.

What else can you say about a consultancy report that includes this in the concluding remarks?

The biggest cost will be loss of face for the “Mainstream Economists” especially the Bank economists, who have continually told us that this is the panacea: There Is No Alternative.  Their experiment will be at an end.
The audience isn't Treasury, the Reserve Bank, the boffins in the Ministry of Finance, academic economists, or anybody serious. It isn't you, Matt, as correct as your critique may be. Neither is it you, Paul: I watched you writing your critique as I went meta.  It's the hooples. And it's the reason that the New Zealand Economic Association really really needs an annual awards ceremony for the worst piece of economic consultancy work produced in the country every year.

So that the hooples can better be advised of the reputation of certain outfits.

Sell or lease?

Greece may lease some of its sovereign islands to help pay the bills:
As international inspectors in Athens scrutinise the country’s fitness to receive the latest aid payment, Prime Minister Antonis Samaras has said commercial exploitation of some islands could generate the revenue lenders need to see to continue funding the country.

The shortlist includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3 million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years, Mr Taprantzis said.

Legislation needs to be passed to allow development of public property by third parties and reduce the number of building, environmental and zoning permits needed before the plan can proceed, Taprantzis said.

Outright sales have been ruled out because the returns for the Greek state wouldn’t be higher than a leasehold arrangement, he said. Greece will attract more investment if an island is turned into a resort, he said.
I believe the explanations later in the story that complete sales would be politically difficult. But I sure don't believe that leasing out the islands would raise as much as selling them. As I'd written back in March:
Greece has somewhere around 6000 islands in one of the most beautiful parts of the world. Islands of legends and Greek Gods and stuff. Islands that, you'd expect, would be worth something to somebody. Some of them are privately owned and do trade. Here's one place you can go to buy one.

But all those islands are encumbered with Greek sovereignty. Own the island, own the  entanglements of the Greek state that make development, well, hard.
First of all, to date it is rather hard for someone to develop a private island because of the Greek state bureaucracy and the domestic Archeological Agency, which is stringent in its examination of every case that involves an island that may have antiquities of any kind lurking under its soil. 
And that's just for setting up the island as a holiday home. If you have to provide a stool sample to get through the regs letting you set up a web-based business, a Greek Island isn't going to be your first pick for doing anything innovative.

Imagine being able to bid on an island in the middle of the Mediterranean within a short flight of Europe, the mid-East, and northern Africa where Greece wouldn't just hand you title, they'd hand you sovereignty? There has to be a ton of value locked up in those islands that could be released by Greece being willing to relinquish sovereignty. Restrict it to the uninhabited islands to keep things simple, for starters.

Seasteading is cool. But imagine kickstarting it by letting a thousand sovereign islands bloom in the Aegean Sea? 
Leasing out islands with fewer regulatory encumbrances adds some value where the regulatory abatement is credible. But hasn't recent experience suggested that bare-land Greece would be worth more under alternative ownership?

Wednesday, September 12, 2012

Dispatches from the front: Public Health edition

As semester constraints continue to bind, please enjoy this little interlude in our regular programming. The #PHC2012 hashtag captures tweets from attendees at the 2012 Population Health Congress in Adelaide. A few conference highlights (I'm not attending; I don't get invited to those shin-digs), from attendees via the Twitter feed. I'm surprised that Adelaide didn't collapse under the cloud of smug.
What?

In Australia? Really? I'd bet pretty heavily against it.

Recall Blakely's prior work in this area. [and here]. I like increased life expectancy, so long as it's not achieved by forcing people to lead bland lives. The stream seemed to suggest worries about ecological footprints and life expectancy.


I'm trying!

Wilkinson, of The Spirit Level, was keynote. Recall that The Spirit Level was completely debunked by Chris Snowdon (on the right) and is viewed as unreliable by Andrew Leigh. Leigh wrote:
One set of arguments suggests that we should care about inequality for what are called ‘instrumental reasons’. Inequality, some contend, is associated with worse outcomes in areas that society cares about, such as health, crime, savings and growth. This argument is put most strongly in The Spirit Level, by Richard Wilkinson and Kate Pickett. It is an argument that I used to believe. Indeed, I deeply want to be true, but my own research persuades me otherwise.[25] The closer you get to these asserted effects, the more fragile are the findings. If there are negative effects of inequality on those social outcomes, they must be extremely small. (There are also small positive effects. For example, my own work shows that inequality boosts growth, though the trickle-down process is slow.)
And, recall that Justin Wolfers destroyed the "not lead to happiness" result:
Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to that between subjective well-being and income observed within countries. Finally, examining the relationship between changes in subjective
well-being and income over time within countries, we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.
Back to the twitter stream:



Prepare to be managed.


Yes. Very brave.

I assume they're looking to ban ads for fatty foods and that they're not trying to cancel reruns of Roseanne.


Ummm.... if they mean an arms-length body like Pharmac for funding decisions, that's totally justifiable. But I'm not sure that's what's here advocated.

I think this is a KPI for some folks.

Did Otago get a grant for this? Weeping.

And so you have a little glimpse into the world that the Public Health advocates are trying to bring forth.

Monday, September 10, 2012

What can you do with a B.A. in Econ?

Make awesome video games even more awesome, that's what. Valve's hiring another economist:
Economist

Valve’s multi-player games, as well as Steam (Valve’s successful trading platform), have allowed for the spontaneous emergence of complex virtual, yet quite real, economies. These economies are replete with rich trading patterns, fascinating ‘institutions’ (which have also sprung up organically), socio-economic conventions, and, generally, a host of economic phenomena that partly reflect what we observe in the analogue world and partly constitute new and unexplored behavioural patterns.
The task of a Valve economist is to make good use of the incredible wealth of data concerning these social economies, to pose fresh questions about their workings, and to generate methods for converting new knowledge about these economic vistas into tangible ideas that help improve our customers’ experiences.
Duties:
  • Research, design, develop, and validate economic models to explain user behavior for all of Valve’s products.
  • Design experiments to validate experimental hypotheses for in-game economies.
  • Provide insight into short- and long-term behavioral patterns of participants in virtual economies.
  • Inform decision-making at Valve by providing quantitative and economic rationale for various lines of inquiry.
  • Create new avenues of analysis based on existing economic metrics, as well as generating new domains of data to collect and investigate.
  • Collaborate with our business development team to improve the performance of existing pricing strategies and incentives for our customers and partners.
Requirements:
  • Graduate degree in Economics or related field
  • Advanced knowledge of statistics
  • Four years experience with:
    • Econometrics/data-mining or related field
    • Relevant analysis techniques that inform the creation of economic models
Recommended:
  • Proficiency in one or more of the following programming languages: C++, SQL, PHP, or equivalent
Now, what do I mean another economist?  Yanis Varoufakis has been working at Valve and blogged on his experience. I'm not sure if he's still there, but the blog doesn't say that he isn't. Here's Varoufakis on his first visit to Valve:
Within hours, an agreement was reached: I would become, in some capacity (that was to be hammered out later), Valve’s economist-in-residence. Valve is not the first video game company to have brought an academic economist on board (e.g. EVE Online were the first to do so, recruiting Eyjólfur Guðmundsson – whom I would like to thank for making my name sound almost easy-going…). My intention at Valve, beyond performing a great deal of data mining, experimentation, and calibration of services provided to customers on the basis of such empirical findings, is to to go one step beyond; to forge narratives and empirical knowledge that (a) transcend the border separating the ‘real’ from the digital economies, and (b) bring together lessons from the political economy of our gamers’ economies and from studying Valve’s very special (and fascinating) internal management structure.
Academia's a pretty good place. When it's working properly, it doesn't sound all that different from work at Valve, at least according to Varoufakis:
If I were asked my opinion of what Valve’s symbol should be, I would recommend a depiction of a wheel, like those which every desk at Valve comes equipped with so as to enable us to move about the company at will, to join whichever working group we want, to form new ones spontaneously and without seeking anyone’s permission. The said wheel, at least in my eyes, symbolises Valve’s attempt to create, within the company, a successful ‘spontaneous order’ based not on price signals but, rather, on decentralised, individuated, time allocations.

Many enlightened corporations do a song and dance about their readiness to let employees allocate 10% or even 20% of their working time on projects of their choosing. Valve differs in that it insists that its employees allocate 100% of their time on projects of their choosing. 100% is a radical number! It means that Valve operates without a system of command. In other words, it seeks to achieve order not via fiat, command or hierarchy but, instead, spontaneously.
I wonder what Paul Walker would make of this form of organization for the knowledge-based firm. As the New York Times writes:
Mr. Newell said that there was a better chance that Valve would “disintegrate,” its independent-minded workers scattering, than that it would ever be sold.
If the firm is just a bundle of contracts....

Sunday, September 9, 2012

Rationalist reading

It's hard to fit magic into the rational universe. What happens to the laws of physics around conservation of mass if a wizard can turn herself into a cat?

I'd missed this one when it came out: Harry Potter and the Methods of Rationality. [HT: Aimee on the SciBlogs Google group]

Half-way down the first page, it started sounding an awful lot like Eliezer Yudkowsky. After this bit from the second chapter, it would have been shocking had it been anyone other than Eliezer.

The witch-lady was smiling benevolently upon them, looking quite amused. "Would you like a further demonstration, Mr. Potter?"
"You don't have to," Harry said. "We've performed a definitive experiment. But..." Harry hesitated. He couldn't help himself. Actually, under the circumstances, he shouldn't be helping himself. It was right and proper to be curious. "What else can you do?"
Professor McGonagall turned into a cat.
Harry scrambled back unthinkingly, backpedalling so fast that he tripped over a stray stack of books and landed hard on his bottom with a thwack. His hands came down to catch himself without quite reaching properly, and there was a warning twinge in his shoulder as the weight came down unbraced.
At once the small tabby cat morphed back up into a robed woman. "I'm sorry, Mr. Potter," said the witch, sounding sincere, though the corners of her lips were twitching upwards. "I should have warned you."
Harry was breathing in short gasps. His voice came out choked. "You can't DO that!""It's only a Transfiguration," said Professor McGonagall. "An Animagus transformation, to be exact."
"You turned into a cat! A SMALL cat! You violated Conservation of Energy! That's not just an arbitrary rule, it's implied by the form of the quantum Hamiltonian! Rejecting it destroys unitarity and then you get FTL signalling! And cats are COMPLICATED! A human mind can't just visualise a whole cat's anatomy and, and all the cat biochemistry, and what about the neurology? How can you go on thinking using a cat-sized brain?"
Professor McGonagall's lips were twitching harder now. "Magic."
"Magic isn't enough to do that! You'd have to be a god!"
Professor McGonagall blinked. "That's the first time I've ever been called that."
A blur was coming over Harry's vision, as his brain started to comprehend what had just broken. The whole idea of a unified universe with mathematically regular laws, that was what had been flushed down the toilet; the whole notion of physics. Three thousand years of resolving big complicated things into smaller pieces, discovering that the music of the planets was the same tune as a falling apple, finding that the true laws were perfectly universal and had no exceptions anywhere and took the form of simple maths governing the smallest parts, not to mention that the mind was the brain and the brain was made of neurons, a brain was what a person was -
And then a woman turned into a cat, so much for all that.
I'm enjoying this far more than I've enjoyed any part of the original Potter series (full disclosure: movies only, sorry). Watch especially for Harry's imagining how to arbitrage between Muggle-land and Hogwarts' where the latter runs a bimetalllic currency at a fixed exchange rate that differs from our price ratio. And fixing Quidditch.

The Last Ringbearer similarly dominates The Lord of The Rings. Hoorah for those authors (and their estates) who don't prosecute those creating fan faction!

Wednesday, September 5, 2012

Tobacco plain packaging, if we cared about evidence

The Science Media Centre provides an expert round-up of commentary on a new paper finding, unsurprisingly, that people like branded tobacco packs more than they like plain packs. What's more relevant for policy, and what we really have no clue about, is whether changing the branding on packages has effects on aggregate sales or whether it works instead to break brand loyalty and move consumers to lower-cost no-name packs. As Professor Richard Edwards noted in his plenary address to the Oceania Tobacco Control Conference in Brisbane last October:
Plain packs have not been implemented, so evidence of the probable population impact must come from experimental studies, focus groups, surveys and so on; rather than rigorous controlled studies of the impact of the actual intervention in the real setting, as would be the ideal.
If we cared about knowing whether tobacco plain packaging has any effect, we could find out pretty easily. Set the whole thing up as a randomized policy trial. Some parts of the country get plain packs, some parts don't, and watch what happens over the subsequent few years. I'd sketched out a framework for that kind of trial back in April. Even better: if Australia is implementing the same policy, run the trial across both countries.

Instead, we're designing policy to avoid ever being able to find out whether it's had any effect. In Oz, they're bundling plain packaging with a simultaneous national increase in tobacco excise taxes. The effects of price increases will be hopelessly confounded with the effects of plain packaging unless there's reasonable ex ante state level variation in tobacco prices.
The price of cigarettes would rise to $20 a pack under a Gillard Government proposal that would reap an extra $1.25 billion a year in taxes.

The West Australian understands the Government is considering a 25 per cent rise in tobacco excise that would raise $5 billion over four years.

The plan emerged from a Treas- ury reconsideration of so-called "sin" taxes. It would repeat the financial windfall from an identical move in 2010.

The proposal is in line with long-standing advice from the National Preventative Health Taskforce and would lift the price of a pack of 30 cigarettes by $2.62.

Peter Jackson 30s, now about $18.30, would cost almost $21 under the measure and the price of Dunhill 25s would increase $2.18, taking the retail price to more than $19.50.

The excise increase may be timed to coincide with the introduction of mandatory plain-packaging for tobacco products on December 1. [emphasis added]

International research has found there is a 4 per cent fall in smoking rates for every 10 per cent increase in price. Anti-smoking crusader and Curtin University Professor Mike Daube said higher cigarette prices would discourage children and people on low incomes from smoking. "An excise increase sooner rather than later could also prevent tobacco industry efforts to subvert the impact of plain packaging by lowering prices," he said.
There are non-crazy reasons for wanting to bundle excise increases with plain packaging. If, absent brands, smokers see there being less difference between low cost off-brand cigarettes and higher cost branded cigarettes, they may substitute down to the lower cost cigarettes and then smoke more - I expect this is the main worry of the tobacco industry as they make their returns on the branded product. Consumption goes up but margins go down more than proportionately. Countering this with excise increases isn't entirely nuts if you want to curb smoking rates, but it makes it awfully hard to tell whether plain packaging does anything other than destroy the value of the tobacco companies' brands.

I still think a randomized policy trial is what's needed if we care about finding out truth rather than just beating up on Big Tobacco.