vrijdag 31 augustus 2012

Carbon is carbon, but water is not water and land is not land

Besides the ecological footprint you might also have heard of the carbon footprint and the water footprint. Only carbon footprint makes sense; I criticized ecological footprint in an earlier post, but I did not mention another problem that also holds for water footprint.

Why do I think carbon footprint makes sense? It's about one environmental problem: climate change. It's about one type of pollutant, greenhouse gases such as carbon dioxide and methane, and it doesn't matter where you emit them. Whether you burn coal in Las Vegas, Shanghai, or Maasbree: the radiative forcing of the greenhouse gases you emit is similar.

How different that is with water. Growing fairly thirsty crops in Las Vegas is a much bigger problem than growing very thirsty crops in Maasbree, simply because there is much more water in the Dutch province of Limburg than in the American state of Nevada. In Nevada you would have to extract groundwater to irrigate your crops, and you would have to extract a lot of it because a big part of what you spray on your crops will evaporate before your crops can drink it. The groundwater aquifers you extract your water from will take a very long time to be replenished. In Limburg, on the other hand, you can use water from the Meuse (which is what Maasbree is named after), and even if you extract groundwater there is plenty of rain and river water to replenish it. Nevertheless, the water footprint will simply look at water use or the thirstiness of your crops, so growing very thirsty crops in areas where there is plenty of water is worse than growing somewhat less thirsty crops in areas where water is very scarce. Water depletion is a local problem: you can't compare Dutch water to Nevadan water. This problem does not hold for greenhouse gas because a Dutch ton of CO2 has the same effect as a Nevadan ton of CO2.

Ecological footprint has the same problem. Here the unit is not tons of carbon or liters of water, but hectares of land. With land it is important to consider the opportunity cost: if, say, you would use it to store carbon, what uses of the land would you have to forgo? In other words: if you would not use it to store carbon, what else would you have done with it? And then it turns out that it actually matters a lot whether we are talking about highly productive land in a well-drained and fertile Dutch polder or some remote wasteland with no biodiversity to speak of. Ecological footprint aggregates all land used by a person, a city, or a product, including the hypothetical hectares one would need to store carbon. Whether it is office space in the centre of Hong Kong, a highly diverse rainforest in Brazil, the fertile polder of Het Groene Hart or the barren desert of the Sahara: land is land, according to the ecological footprint. But it isn't, just like water is not water.

zondag 26 augustus 2012

How to cram the whole world in a small Dutch pub

One of the greatest things about Wageningen is that you meet people from over the world. It's a fairly small university, but it is very internationally oriented, so there is no escaping our international students and staff.

Some of them find themselves in a small pub on a Sunday afternoon listening to a couple of folks playing bagpipes, fiddles, hurdy-gurdies and other strange acoustic instruments. That would be me and my fellow musicians at the monthly traditional music session in Café De Zaaier:


(I'm the one holding the camera.)

We have been doing this every month for more than 10 years now, and I know we should count ourselves very lucky. It's the perfect setting for a traditional music session: the pub is a traditional 'bruin café' (literally "brown pub" - a type of Dutch pub named after its dark brown wooden interior) with a large collection of Dutch and Belgian genevers, many different beers (including Guinness and Kilkenny - Irish sessioneers seem to be quite keen on that) and the owner is a musician with a love for folk music. This being Wageningen, we have enjoyed the company of musicians and listeners from Mexico, the Czech Republic, Sweden, Eritrea, and, lately, the Basque country:


Everybody is welcome to come and listen or to play along. All traditions are welcome - this diversity is one of the fun things! The only thing to mind are three rules:
  • We play 'around the table' so that all musicians get a chance to start a tune or a song;
  • It is better to play something simple you feel confident with than to play something difficult that you have to start over and over again. In other words: if you play, you play;
  • Feel free to join somebody else's tune or song, but don't overdo it, especially if you don't know the song or tune.
Curious? We have a website where you can find all the details.

dinsdag 21 augustus 2012

Two draft course documents

What do you do when you need only one chapter of Perman et al., or Tietenberg, but you can't reasonably ask your students to buy the whole book? You either distribute illegal copies, or you write the text yourself. Of course I'm a decent guy so I just posted two draft texts on my WUR website:

A very basic introduction to Stochastic Dynamic Programming
This is a text that I prepared last year for my lecture on stochastic dynamic programming in a course on the economics of natural resources. Dynamic Programming is one of the more elegant ways of presenting the problem of natural resource depletion: how much should we harvest now, and how much should we save for later? The problem is that most introductory texts in natural resource economics say little about DP, whereas the specialized texts on DP are too difficult technical.

Market failure and natural resource depletion
I co-teach a course on marine resource management where I explain the basic principles of natural resource economics to MSc students with almost no economic background. I have not yet found a text that explains natural resource economics in an accessible manner to this audience. So far this document only features the basics of supply, demand, consumer surplus, and producer surplus, but I intend to extend it in the near future.

Feel free to download, use, comment, etc.

woensdag 15 augustus 2012

My two hands, I mean cents, on Monbiot's anti-valuation rant

I am happy to say that James Delingpole and George Monbiot make my toes cringe in equal measure (don't you think they even look alike?). Whether it's about the leftist conspiracy to strangle the economy with cap-and-trade or the neoliberal commodification of our athmosphere by cap-and-trade, I always find it difficult to reach the end of their writings with the same blood pressure as when I started reading them.

This time it's Monbiot who writes yet another econophobic rant against Payments for Ecosystem Services: pricing nature is wrong, PES is just a slippery slope towards privatisation of nature, without markets we wouldn't be in this situation in the first place, blah blah blah.

Tim Worstall writes a rebuttal of Monbiot's piece in The Telegraph (indeed, Delingpole's home newspaper) where he makes two major points:
  1. If we didn't try to estimate the value of nature in monetary terms, it would be priceless, which in today's world means worthless (and hence, defenceless);
  2. It's not the establishment of property rights, but their absence that is driving overexploitation of natural resources. Monbiot's rejection of private property rights takes us back to the days when nature was a free-for-all, with all the depletion and extinctions that come with it.
Worstall's second point is very valid, and I'm glad somebody is making it (although I doubt it convinces George "markets are evil and governments are saints" Monbiot). His first point, however, raises two question marks, making me feel somewhat like the proverbial two-handed economist.

On my left hand, I admit (albeit grudgingly) that Monbiot has a point: there are more reasons to preserve nature than just its contribution to the economy. It's the classical dichotomy between utilitarian and deontological ethics: Worstall uses utilitarian arguments (show how important nature is and people will more likely preserve it), whereas Monbiot argues that it is simply morally right to preserve nature, because it has a value in itself regardless of how highly humans value it.

On my right hand (call it my Delingpole hand if you like), arguments like Worstall's first point make me suspicious. Too much research in this matter is being done to "raise awareness", "wake up the politicians", or something like that. It makes for terrible, politically biased science that accepts any wild guess as long as it gives a big number. People still seem to believe the global ecosystem is worth $33 trillion, although any serious economist can tell you that this number as well as the method used to arrive at it (and, indeed, the sheer idea of calculating a total value of the entire ecosystem) is nonsensical: economist Michael Toman called it "a serious underestimate of infinity." Moreover, when you price nature you should be aware that it may turn out not to be that valuable: perhaps it is still sensible to cut that forest and build a hospital instead. This is of course the outcome that folks like Monbiot dread; on the other hand, the folks who use the "raise awareness" argument gloss over it, or worse.

The bottom line is that economic valuation of ecosystem services is best done in the context of a concrete, well-defined policy question. Pricing nature improves that decision-making by making values visible that would otherwise be ignored, in a way that makes them comparable to goods and services that do have a market price. Prices can never tell the entire story (this is where I agree with Monbiot), but it is a laudable goal to make the cost-benefit analysis as complete as possible (which is where I agree with Worstall). But whatever you do, "raising awareness" is just about the worst reason to do it.

woensdag 1 augustus 2012

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

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

The trouble actually started twenty years earlier, when Solow and Stiglitz pointed out that when we run out of one resource, we can substitute it by another one: when we run out of oil, we switch to natural gas; when gas runs out, we switch to solar energy; and so on. Because we can always invent better and more efficient ways of meeting our needs, the economy should be able to keep on growing for the foreseeable future, or perhaps even indefinitely. Not everybody agreed, and an economist called Nicholas Georgescu-Roegen wrote a scathing rebuke where he argued that not all resources will be as easily substituted: if we run out of fish, how will we make our paella? If we run out of oxygen, what will we breathe? The idea of eternal economic growth, he argued, violated the laws of thermodynamics. To put it very crudely, these laws state that although you could convert matter into energy (which is what happens in a nuclear reactor), or energy into matter (as happens in particle accelerators), it is impossible to create energy or matter out of nothing. Georgescu-Roegen accused Solow and Stiglitz of "ignoring the difference between the real world and the Garden of Eden" and of "conjuring tricks." In the 1997 issue of Ecological Economics, Daly compares Solow to a medieval alchemist trying to turn lead into gold. You may not consider that particularly diplomatic, but Solow and Stiglitz pull no punches either. The opening sentence of Solow's article reads
Dr Daly's prose tends to dissolve at any moment into a dense cloud of righteousness. This makes it very hard to respond rationally to his performance.
Stiglitz's reaction seems somewhat friendlier, until we get to the last few sentences:
No one, to our knowledge, is proposing repealing the laws of thermodynamics! Doing so would make as little sense as the act of one state legislature that thought that students' intellectual resources could be economized by changing the value of π from the highly inconvenient 3.1416... to just 3.
In the end, we hope we have made our essential points, using somewhat fewer trees and other resources than Daly did in his 15-page note.
I will not go into all the arguments used in this debate now. There is a lot to be said about economic growth, too much in fact for one blog post. But that these people argue over the law of thermodynamics points towards another difference between ecologists and economists.

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

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

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

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

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

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