Value Function Iteration in R, Python, GAMS

So I've spent a couple of evenings debugging my code, trying it in different languages to see whether it was me or the built-in functions I used (it was me), so I ended up with the same model in R, Python, and GAMS. I figured I might as well post the code on the web.

Yes, I found the problem, and no, I'm not going to tell what it was because I find it too embarrassing.

"I want a MOOC"

How many university boards are like this guy when you replace "iPad app" by "MOOC"?

Client: "I want an iPad app."
Designer: "For what purpose?"
Client: "I don't know, I just want an iPad app."
Source: Clients From Hell

Don't get me wrong here. Some MOOCs are great. I recently discovered two great online courses on Real Analysis, and I'm currently going through Tom Sargent's and John Stachurski's online course on Quantitative Economics in Python. But the question why you want a MOOC, for whom it should be made, and to what purpose, should always be asked.

Why are Dutch fish mongers so terrible?

For a country that controls a chunk of sea one and a half times its land mass, the Dutch are pathetic eaters of seafood. OK, granted - we're rightly proud of our slightly-cured herring (which is mostly caught by the Norwegians) and our kibbeling, fried chunks of cod (although many Dutch consumers think kibbeling is a fish species). But for the rest we export most of our mussels, sole, and oysters to people who know properly how to appreciate them, like the French and the Belgians. Instead, we import a tasteless excuse for a fish like tilapia.

But the fish mongers aren't helping either. Two weeks ago I was buying a tuna steak at the open market in Wageningen. (After my trip to The Philippines I had but one thing on my mind: I want to make that delicious ceviche with fresh ginger and coriander myself!) A youngish bloke for whom this must have been his way of earning his Saturday night drinks served me, and I asked him whether the tuna steak I was buying had been frozen. Silly question, I know - there is no way you can get tuna from its fishing grounds to a Wageningen market stall without freezing it somewhere along the way. "No, it's all fresh," he said. So where did it come from? That turned out to be a difficult question. "I don't know," he stumbled, looking at me as if I had just asked him about the sound of one hand clapping. "I should ask my boss." "Pacific ocean," said a colleague. OK, thanks. "Indian ocean," said another colleague who looked like she was in charge. "Is that OK with you?" Sure, I was only curious - I wasn't going to report you to Sea Shepherd or anything.

How can these people not know where their wares come from? I decided against asking the species, because I did not want to prolong their agony. I'm quite sure it was yellowfin anyway. But the limited information they had available was shocking. Even more shocking is the fact that they get away with it, because Dutch consumers just don't give a rodent's backside for quality when it comes to fish - let alone how it was caught, whether any other species had been caught in the process, and so on.

Last week I made this picture at the open market in Ede (just North of Wageningen):

This is what tong, or sole (solea solea) looks like; this is what schol, or plaice (pleuronectes platessa) looks like. You'd expect the orange spots should be a bit of a giveaway.

I guess every country gets the fish mongers it deserves.

Bumfights transactions

In 2002 a Las Vegas film maker came up with a hideous business model: pay homeless people a few dollars or a six pack of beer to conduct dangerous stunts, or to engage in fistfights with other homeless people, and film them. The movies, marketed under the insensitive brand name Bumfights, caused a storm of criticism, especially from advocacy organisations for homeless people, who argued the movies legitimized violence against homeless people, and were demeaning and dehumanizing to the people who participated.

The film makers responded that all homeless featured in the movies participated voluntarily. Surely they can make their own decisions? To which a professor responded

“Even if the homeless aren’t forced to perform, it’s inaccurate to describe people without adequate shelter, food or clothing as having choices.”

I hear the same argument in debates on international trade, Payments for Environmental Services, and other transactions between highly unequal parties: once an African lady reacted angrily to the concept of REDD+, arguing "it's not a free choice!" I believe it points towards a moral flaw in economic theory that many of my colleagues either do not see, do not want to see, or just don't care about. I call these transactions Bumfights transactions, after the movie series.

Forgive me for getting a bit theoretical here. Consider Rufus, the homeless man who featured prominently in Bumfights. Back then, Rufus had no home, no job, and he lived by what little he could earn by collecting empty cans. Let's call the situation he lived in A. Say the film maker offered Rufus $5 if he would ride a shopping cart down a flight of steps. In other words, the film maker offered Rufus a new situation B, which you could define as A + $5 + S, where S is the humiliation and risk of serious injury that goes with the stunt. If Rufus preferred B to A (A ≺ B in mathematical notation), he would participate in the movie; if A ≻ B he would not. Obviously the film maker preferred A ≺ B: for only $5 he would have a lot of fun filming Rufus putting his life at risk, and he would make a big buck selling the video. So they could move from A (no transaction) to B (after the transaction), which they both preferred to A. What's not to like? In economic terms this is called a Pareto improvement: a change that makes at least one person better off, and none worse off.

The objection to this logic is that Rufus "had no choice", but an economist would point out that he did: he could choose to refuse participation and stick with collecting cans for a living. No matter how bad this situation was (I surely don't envy him), obviously participating in Bumfights was better than not participating: after all, he participated, right? Not offering the choice would have left him in A, which is worse than B. The problem is not the transaction; the problem is poverty.

The flaw in this logic is that this may work in the sterile, utilitarian world of microeconomics, but in the real world the film maker also had a choice. He could have paid Rufus $100; he could have offered orange juice instead of alcohol (offering alcohol to somebody with a drinking problem is particularly nasty); he could have refrained from the transaction altogether and donate his $5 to the Salvation Army.

Another issue is that this line of reasoning only works if you care only about the consequences of an act: in other words, it follows a consequentialist ethic, where one could also follow a deontological ethic, or a virtues ethic. Many people consider making money in this way unethical, regardless of the consequences, just for its abusive nature.

Collecting up to 80 kg of sulphur in
a cloud of toxic volcanic fumes and
carrying it down the slope of
Mount Ijen, East Java: hey, it beats
starving to death!

Nevertheless, the line between an "equitable" transaction and a Bumfights transaction is blurry. To take the example of REDD+ again, many developing countries have come round to this idea, after initial opposition; it seems Costa Rica and Indonesia are quite keen on it. And how many people have jobs that are dangerous, or just mind-numbingly boring, just because the only alternative is starvation?

So next time you buy your clothes in a cheap clothes store, ask yourself: am I helping a poor Bangladeshi earn an income or am I taking advantage of his poverty? The question is more difficult than you might think.

Trash fishing in Pangandaran, Java

I visited the fishing village of Pangandaran, Java, during my holiday in Indonesia. It's a beautiful place, delicious fresh grilled fish (ikan bakar), and you can watch the local fishing traditions:

I was shocked, however, by the sheer amount of litter in the sea, especially plastics. The problem is, apparently, that a nearby river discharges a lot of litter from upriver villages and towns, and the shape of the coast makes it a natural garbage collector. The result is heartbreaking:

Memories of Holland, and Indonesia

It was Saturday and I felt a craving for nasi goreng, perhaps with some tempeh goreng or beef rendang. Luckily, Saturday is market day in Wageningen, and I had noticed earlier a small stall selling Indonesian food at the open market on the church square. I decided to check it out. There is something strange with Indonesian food in The Netherlands: the Dutch eat a lot of it (nasi goreng, babi panggang, krupuk, sambal, acam campur), but because the trade is dominated by Chinese restaurants selling their own poor imitation of it, a lot of people think they are eating Chinese food.

A Dutch man so tall he barely fitted in the small cramped minivan took my order. I thought he looked a bit silly in his traditional Indonesian batik shirt, but when I learned his wife was from Indonesia I could forgive him. I asked who his costumers usually were. Do many Indonesian students buy his food? Or perhaps residents of the home for Dutch-Indonesian elderly people, here in Wageningen? Yes, every now and again, but not many, he said.

The elderly home is called Rumah Kita: Indonesian for "our house." There is a small catch here, because in Indonesian the word for "us", "we", or "our" can be inclusive or exclusive. Kita is the inclusive form: it includes the person spoken to. The exclusive form is kami. If it were called "Rumah Kami" it would have sounded a bit like "You! Cheeseheads! Sod off, this is our house." But the name Rumah Kita sends a welcoming message to all elderly members of the Dutch-Indonesian community: come and join us, we have nasi campur on the menu today.

These are the people who were born in places that at the time were called Batavia, Buitenzorg, Weltevreden, Bandoeng, or Soerabaja. Their father might have been a Dutch clerk for the colonial government, who started a family with a Javanese woman and decided to stay in The Emerald Belt. Or perhaps their grandfather was a planter who went to the Dutch Indies to put his study at the Landbouwhogeschool Wageningen to practice on a plantation near Malabar or Kalibaru. Overwhelmed by the Japanese invasion in the Second World War, they would have gone through unspeakable hardships in Japanese concentration camps. After the war they would have sought refuge in those same camps during the Indonesian uprising, when many Dutch, Dutch-Indonesians and ethnic Chinese were killed by the insurgents. Eventually they would have migrated with their parents to The Netherlands, most of them after Indonesia became independent. A lifetime in a cold country they only knew from their schoolbooks awaited.

As a folk musician and traveller, I have been searching for songs in the Dutch musical tradition about homesickness. The only songs I found so far are written in the 1950s, by Dutch-Indonesian artists, about their homesickness for the Indies. I admit I have mixed emotions about these songs. We were never supposed to be there. The Dutch have been terrible overlords to the Indonesians: when the Brits handed back the Indies to the Dutch after Napoleon was defeated, the Javanese revolted because they would rather live under British rule than under the Dutch. But the emotions expressed in these songs are genuine, and intense. Whatever you think of the geopolitics, you can't deny their longing for the place that features in their earliest memories.

A small, fragile elderly lady with a walking stick came up to the stall with a long list of orders. Rendang, ketopak, some pisang goreng, and did you still have that delicious chicken curry with sereh? Yes, all frozen please, it's for the week. For now I would just like one lemper please. When she sat down next to me with her snack I noticed a slight trace of Asia in her features. I asked whether she was from the Indies. Yes, she said, born and raised in Surabaya. We munched away on our food and chatted a little with the batik-clad man's Indonesian wife. I watched as a group of Dutch students walked past on brightly painted wooden shoes - an initiation tradition of one of the local student societies. A group of Chinese students stared at them, giggling and taking pictures.

"I always get tears in my eyes when I eat this," the elderly lady said. The Indonesian woman replied by asking "Are those tears of joy or sorrow?" The elderly lady looked at her with a thoughtful smile and said "I think it's because of the tastiness."

10 Good things about Canberra

When I told the lady of my B&B in Brisbane that I was going to Canberra, she looked puzzled: why do you want to go there? I'm in Sydney now, and when I told the bloke at my hotel's reception that I had just come in from Canberra and all he said was: "I'm sorry." Today somebody even apologised for Canberra!
Come on guys, it's not that bad! Here is a list of good things about Canberra.

1. No Few distractions. It is the perfect place to work on your research vision and your Python modelling skills.
2. It's supposedly one of the best places to spot kangaroos. There are so many of them that there are culling programs in place.
3. It has four seasons, so you can enjoy Winter in July.
4. There is no Starbucks. The Evil Mermaid has laid her greedy claws on places as beautiful as Ubud on Bali, the Cameron Highlands in Malaysia, and just about every street corner in downtown Santa Barbara, California, but so far Canberra has remained untainted by her presence.
5. When you feel homesick, the shops have kale and the pubs serve bangers & mash, which is a little bit like a Dutch stamppot met worst. (Why aren't Dutch pubs serving boerenkool met worst? It's the perfect pub food!)
6. There are a couple of decent Asian restaurants around, among which a vegetarian Vietnamese restaurant with delicious banh xeo.
7. It has the Wig & Pen: a traditional brewpub with some delicious homebrewn beers.
8. It might be just about the greenest city of Australia, with lots and lots of parks.
9. It's a good place to cycle: many bike paths, and reasonably good traffic. Sometimes it's difficult to see where you're supposed to cycle though.
10. Sydney is not that far either, and it's a beautiful train ride.

Judd and Guu's stochastic perturbation model in Python

I just uploaded a Python version of Judd and Guu's perturbation code to my website (code; notes).

If you happen to be a Python programmer, or a computational economist (even better: both!), then any feedback you can give on the code is highly appreciated. I'm fairly new to Python, so I'm sure I could have programmed some parts more efficiently.

Oh, and here is a picture of a bunch of Canberran kangaroos:

I thought you'd like to know.

In case you were wondering what I'm doing in the Australian winter

I'm here for two very interrelated goals.

I'm having another assessment meeting in September 2014; this time it's about a possible promotion to associate professor. So Goal #1 is to take a good look again at my research and education vision, and discuss it with whoever I can discuss it with. I got quite some inspiration from the keynotes and discussions at IIFET2014. Not that I went there with a blank slate, but it was good to see my ideas confirmed, in a way, and complemented by other people's ideas.

I have decided long ago that I will focus on the economics of coastal and marine ecosystems. My background is mainly in bioeconomic modelling, so it is logical to focus my research on the kind of questions that require such modelling. But then the question arises: aren't many other people doing that already? People have been doing theoretical fisheries economics since the 1950s (or longer, if you consider Jens Warming's work). And there are gigabytes of applied bioeconomic fisheries models like FishRent and Mefisto, and wholesale ecosystem models like Atlantis, where fishers are included as some sort of predators.

But that's it, actually: either the models are very abstract and qualitative, so that they can be analysed on paper, or they are very detailed and quantitative, so that they can be used for policy assessment or scenario analysis. The problem with the first is that they lack realism; the problem with the second is that they lack transparency. Either you can explain what drives your results, but then your results are close to useless for policy makers, or you can advise policy makers but you cannot explain where your advice comes from.

What has not yet happened much (I know there are people doing it, but not many), is to take the theoretical models, and make them more realistic to the point where you can maintain some intuition as to what drives your results, even though you cannot prove fancy theorems anymore. Macroeconomists and financial economists have reached that stage long ago: where their models get too complicated to be solved by some math magic, they use computation. This way you can add more realism, while maintaining a fair amount of insight into the mechanisms at work. My intention is to apply such computational methods to problems with coastal and marine ecosystems. This includes a lot of fisheries, but also other ecosystem uses, goods, and services.

Which brings me to Goal #2. The Crawford School of Public Policy of Australian National University has among its staff a number of people who have applied computational economic tools to fisheries problems, like Tom Kompas, Hoang Long Chu, and Quentin Grafton. I'm here to learn at least some of the methods they use. Originally I wanted to stay about two months, but for several reasons I only have about two weeks. But in the short time frame I have I'm trying to get the most out of it.

And lo and behold, I have a first result to show you. My first hurdle was writing a perturbation model in a program I can work with. Their models run in a combination of Matlab and Maple, but I don't have a license for either of them, and I'm not well-versed in Maple. Hoang Long Chu was so kind to give me a paper by Kenneth Judd and Sy-Ming Guu on writing perturbation models in Mathematica - another program I don't use, but luckily the paper explains the method well and it presents the entire Mathematica code for a simple optimal growth model. So I decided to write the same method in Python - my language of choice for its elegance, simplicity, and speed (ok, compared with R, which is neither elegant, nor simple, nor speedy). It took me a few days but here it is: the Python code and a pdf with some notes on the paper and the model.

Just a short note

I was going to write a long post about IIFET 2014, and how great a city Brisbane is, and how cold Canberra is. But honestly, now with the MH17 crash, I feel this is just inappropriate. But neither can I not write - I can't pretend it didn't happen. So just a short note for those who were wondering where I am.

I flew to Brisbane via Singapore on 4 July 2014 for the IIFET conference. I remember looking at the map (you know how they like to show you where the air plane is) thinking: "whoa, we're above Ukraine." I just assumed it was safe - they wouldn't fly over the place if it weren't, right? Anyway, I enjoyed Brisbane, gave my presentation, met a lot of friendly and interesting people, had a great dive on Stradbroke Island, flew to Canberra, checked into an Airbnb place, set my iPhone at air plane mode so that I wouldn't be woken up by any e-mails or text messages in the Australian night, woke up again, switched off air plane mode, and immediately I got a message from a friend asking whether I was safe and sound, what with the plane crash and all.

I think all that must be said has been said in the news media and I have little to add to it. Of course I'm shocked, but anything I can say would just repeat what others have said already. It's a weird feeling that both my country of origin and the country I'm visiting are in mourning. Flags will be half mast in The Netherlands and Australia tomorrow.

My condolences to the families and friends of the victims.

Burn the schools down

I guess it's a tradition that every once in a while students revolt against the economics they are being taught. When I was doing my PhD it was a movement calling itself "post-autistic economics", which was mainly active in France, but also got support elsewhere. I agreed with some of their complaints, although the argumentation was not always that strong and sometimes outright politically motivated ("Capitalism boo! Neo-feminist post-constructionalism yay!"). Later on they changed the name to "Real-World Economics", perhaps not to offend people suffering from autism. Looking at their review I still don't get the impression that they're making much of a dent in the economics debate. Neither am I convinced by what they write, to put it politely.

But now a new revolt has emerged in Manchester. As far as I can see it is more constructive, and more well-argued than the post-autist movement. I agree with some of their points, but not all.

I agree with their proposition that economics teaching should take heed of insights from such fields as psychology, law, and policy science. I don't know the Manchester program, but I find it curious that such subjects receive as little attention as the Manchester economics students claim. Besides microeconomics, macroeconomics, and econometrics, students in our BSc Economics and Governance program take courses and lectures on history, policy science, institutional economics, and behavioral economics. I guess it's a question of discussing one particular model or theory very thoroughly, or discussing several different models or theories in a more shallow manner. Our Economics and Governance BSc chooses to be broad, and I agree with that, especially for a problem-oriented university as Wageningen.

I also agree with the Manchester students' call for a more evidence-based economics, and more attention for the conditions under which different theories and models have more explanatory power than others.

But that's also where my main objection lies: the call for "pluralism" is translated into more attention to other "schools of thought" than just neoclassical economics. According to the Merriam-Webster Dictionary, a school of thought is

a group sharing a common point of view in respect to some matter (e.g. "she belongs to the liberal school of thought"); also: a point of view recognized as held but not necessarily accepted (e.g. "there are two schools of thought about this question")

An economist can be "of" a particular school of thought: for example, Paul Krugman is generally considered a Keynesian; Milton Friedman was a monetarist; Herman Daly is an ecological economist; John Kenneth Galbraith was an institutional economist. The natural scientists I work with can only shake their heads when I tell them this. In their fields, there are different theories that compete or need to be reconciled (e.g. general relativity versus quantum mechanics). Or there are different models for different situations, based on simplifying assumptions, and usually developed for a selection of cases but not for all (e.g. metapopulation theory, or the Beverton-Holt stock recruitment model). In that sense, economics is close to ecology: both deal with complex systems that cannot always be experimented on to test competing hypotheses, so we use models that describe a subset of the mechanisms at work. The difference, however, is that whereas even Ilkka Hanski will acknowledge that not all populations can be approached as metapopulations, economists argue as if either Krugman or Friedman is right. On the other hand, schools of thought also have a danger of being politically motivated: if schools of thought are just "points of view", then you can pick and choose whichever one fits your political preferences. So if you like bow ties, become a Hayekian; if you want to keep your really cool Che Guevara t-shirt, declare yourself a Marxist. (If you're looking for a steady job in economic policy, follow Keynes.)

In my humble opinion economists must get rid of schools. We should treat our theories like ecologists treat their models: to paraphrase George Box, our models are always wrong in some respect, but they may be useful in some cases. The challenge is to identify the conditions under which they can be useful.

Matteo's mangrove paper

Go here for the very first peer-reviewed article of our former MSc student, Matteo Zavalloni. The article quantifies the trade-off between two different alternative uses of a mangrove ecosystem and finds that it is crucial to take into account spatial links in this process.

The general idea behind the paper is that a mangrove ecosystem can serve many different purposes, but as space is limited you cannot have them all: in other words, we have a typical economic problem of satisfying wants under limited resources. In his paper Matteo (and I, and Paul van Zwieten) focused on the trade-off between two uses: cultivating shrimp in aquaculture ponds; or providing nursery habitat for juvenile wild shrimp. There is a lot more to mangrove ecosystems than just those two functions: tourists also like to come to mangrove forests (I loved the mangrove forest in Ca Mau, for example), and mangroves also form important coastal protection. In this paper, however, we wanted to explore some methodological issues in a spatially explicit manner, and these two uses were the most appropriate for this analysis.

So Matteo developed a model that maximizes the mangrove forest's nursery function, under the restriction that aquaculture production should not drop below some given level. If you run the model for many different levels of aquaculture production, you typically get a picture like this:

(Be aware that this is not the original picture in the paper but a stylized version of it.)

In economics lingo we call this a production possibilities frontier (PPF). It shows all combinations of two goals (in this case aquaculture production and nursery habitat) that are maximally attainable. Combinations above the curve are impossible to attain; combinations below the curve are feasible, but not very efficient.

Why are there two curves? The green curve indicates the PPF you get if you use all available information on differences in habitat quality, and you take into account that in order to function as a nursery, a mangrove forest must in some way be connected to the water course. The blue curve indicates the PPF if you would ignore (or simply not know) that last piece of information. You see that if you ignore the connectivity you arrive at solutions that provide much less benefits in terms of nursery habitat than what would in theory be possible. The reason is that you locate your shrimp farms at the wrong places:

Maximum provision of the nursery ecosystem service at 24% of the possible aquaculture benefits, with and without taking into account the connectivity of nursery habitat

Note that the left picture has all aquaculture clustered together in the west corner of the study area, whereas the right picture has aquaculture located along the water course, blocking the mangrove forest from access to the river. The reason is that farms near the river have lower transport costs, but the consequences for the nursery function are not taken into account.

So how does this help us? First, we wanted to demonstrate that conservation, no matter how noble, has costs, and that those costs should be considered in policy decisions. Second, it illustrates that functions can be combined if you use your information wisely. The approach we developed is one small step towards methods to find the best compromise between different interests in coastal zones.

Random thoughts on freedom

On the day that the Dutch commemorate their liberation from Nazi Germany.

With all the attention going to the Second World War you'd almost forget that this year is also the sad 20-year anniversary of the slaughtering of up to a million Tutsis. I know the Rwandan genocide took place on another continent, whereas the Holocaust happened on our doorstep, so the Dutch could be forgiven for focusing on their own history. Nevertheless, it feels uncomfortable how easy the West seems to forget about one of the most recent, and intense, ethnic cleansings. Every year, when I remember Auschwitz, I also think of Rwanda. And Srebrenica.

Because our commemoration of freedom coincides with the commemoration of the Second World War, the Dutch have a tendency to equate freedom with peace. I consider that too simplistic. If you ask me for my definition of freedom, I would say: the right to deviate. I consider individual rights one of the most important institutions that make us free. Even in a democracy, we need institutions like individual rights to protect us from the government. Without inalienable individual rights, democracy collapses to majoritarianism: two wolves and a sheep voting on lunch. Days like Liberation Day should remind us that although it sometimes feels uneasy or unjust that even the bad guys have individual rights to protect them from the government, the alternative is worse. Just so that next time a criminal gets acquitted because the evidence was acquired through illegal means, we remember what the world would look like if the cops were above the law.

Another reason why I disagree with the "freedom=peace" simplification is that we did not get rid of the Nazis by asking them politely. People were killed. Not just soldiers, but also civilians - my grand parents barely survived the infamous Bezuidenhout Bombing by the Royal Air Force. It's a painful truth that war - any war - kills not only the bad guys, but also lots and lots of innocent people. Nevertheless, we have forgiven the RAF for its mistake (the Brits were quick to offer their apologies after they realized they bombed civilians, not V2 rockets), and we are still grateful to the British (and the Canadians, the Americans, the Polish, and all other Allied Forces) for liberating us. Had those soldiers not taken the unimaginable risks they took, we would "all be speaking German" as some would have it. Therefore, I believe that veterans - all veterans, not just WW2 veterans - should be an integral part of the Liberation Day events. To thank them, and to honour those who died in service.

That even includes the veterans who fought (and died) in wars we now perhaps think we should not have gotten involved in, like the Indonesian war of independence or the 2003 Iraq war. The Dutch still refer to the Indonesian war of independence as the "Politionele Acties" - a preposterous whitewash of a shameful history if you ask me. The Indonesians deserved to be independent of their colonial masters, and we had no right to govern them. Nevertheless, the soldiers who went were not the people who made the decisions. Only a few had the courage to refuse to go, and their refusal was considered high treason at the time.

Americans treat their veterans with a lot more respect than the Dutch do. When I was in Santa Barbara during Veteran's Day I read a letter in the local newspaper by a Californian of German-Jewish descent. He explained how American soldiers rescued him, a little kid more dead than alive, from a concentration camp. He stayed with them because he could translate between German and English, and eventually went with them to the USA and became an American citizen. He wrote the letter to express his gratitude to all American veterans, and to the United States in general, for granting him a new lease on life and his freedom. I never forget that story.

Wanted: matching world maps of EEZs and marine productivity

I want to show to my students that only a minority of fish are caught in the high seas, and it would be nice to compare a world map of EEZs to a world map of marine and coastal productivity. So far I've found two sources of such information:

• GRID-Arendal's productivity map (eps or jpg)
• Marine Regions' EEZ map (shapefile)

For the time being I combined those but the result is not exactly pretty:

(Click on the picture for a closer look.)

The problem is that

1. The two maps have different centres (Pacific Ocean for GRID-Arendal, Atlantic Ocean for the EEZ map)
2. The two maps have different projection methods (Gall-Bertin for GRID-Arendal, and I haven't the faintest idea how to project the EEZ map as such in QGIS)

Are there any maps (preferably shapefiles with the same coordinate systems) of fishing yields and EEZs? Preferably with the Pacific Ocean in the centre? I know the latter is not standard but the Pacific is way more interesting than the Atlantic in this respect.

A simple Python script to make a literature table

Geeky post again - no math this time, but computer code.

I'm sure people have done this before, but I thought it would be a nice opportunity to practice my Python skills to write a small script for the following problem.. Usually when I read a scientific article I watch out for the following elements:

• Innovation: what does the study do what others haven't done before?
• Method: what method did they use?
• Data: where did they get their data from?
• Results: what are the main results?
• Relevance: who benefits from this research, and how?

I also like to place the research in one of the four quadrants in this post. I find it helpful to make an overview of these questions in a table:

1st author	Year	Journal	Quadrant	Innovation	Method	Data	Results	Relevance
Kompas	2005	Journal of Productivity Analysis	4	Estimates efficiency gains quota trade for Southeast Trawl Fishery, AU	Stochastic frontier analysis	AFMA and ABARE survey data	ITQs gave efficiency gains	Policy debate on ITQs
Kompas	2006	Pacific Economic Bulletin	3	Estimates optimal effort levels and allocation across species	Multifleet, multispecies, multiregion bioeconomic model	SPC data	Effort reduction needed; optimal stocks larger than BMSY	Policy debate on MEY

But here's the problem: I usually make my notes in a bibtex file (as a good geek should), which looks like this:

@ARTICLE{Kompas2006PacEconBull,
  author = {Kompas, T. and Che, T.N.},
  title = {Economic profit and optimal effort in the Western and Central Pacific tuna fisheries},
  journal = {Pacific Economic Bulletin},
  year = {2006},
  volume = {21},
  pages = {46-62},
  number = {3},
  data = {SPC data},
  innovation = {Estimates optimal effort levels and allocation across species},
  quadrant = {3},
  keywords = {tuna; bioeconomic model; optimisation; Pacific},
  method = {Multifleet, multispecies, multiregion bioeconomic model},
  results = {Effort reduction needed; optimal stocks larger than BMSY},
  relevance = {Policy debate on MEY}
}

@ARTICLE{Kompas2005JProdAnalysis,
  author = {Kompas, Tom and Che, Tuong Nhu},
  title = {Efficiency gains and cost reductions from individual transferable quotas: A stochastic cost frontier for the Australian South East fishery},
  journal = {Journal of Productivity Analysis},
  year = {2005},
  volume = {23},
  pages = {285-307},
  number = {3},
  quadrant = {3},
  data = {AFMA and ABARE survey data},
  innovation = {Estimates efficiency gains quota trade for Southeast Trawl Fishery, AU},
  keywords = {individual transferable quotas; stochastic cost frontier; fishery efficiency; ITQs},
  method = {Stochastic frontier analysis},
  relevance = {Policy debate on ITQs.},
  results = {ITQs gave efficiency gains}
}

I don't want to copy it all by hand, so I wrote this little script in Python to convert all entries in the bibtex file to a csv file:

import csv
from bibtexparser.bparser import BibTexParser
from dicttoxml import dicttoxml
from operator import itemgetter

def readFirstAuthor(inpList,num):
    author1 = ""
    x = inpList[num]['author']
    for j in x:
        if j != ',':
            author1+=j
        else:
            break
    return author1

def selectDict(inpList,name):
    outObj = []
    for i in range(len(inpList)):
        if name in inpList[i]['author'] and \

            inpList[i]['type']=='article':
            outObj.append(inpList[i])
    return(outObj)

def selectFieldsDict(inpList,fieldNames):
    outObj = []
    for i in range(len(inpList)):
        temp = {}
        for n in fieldNames:
            if n == 'author':
                author1 = readFirstAuthor(inpList,i)
                temp['author'] = author1
            else:
                if n in inpList[i]:
                    temp[n] = inpList[i][n]
                else:
                    temp[n] = 'blank'
        outObj.append(temp)
    return(outObj)

fieldnames = ['author','year','journal','quadrant',\

    'innovation','method','data','results','relevance']

with open('BibTexFile.bib', 'r') as bibfile:
    bp = BibTexParser(bibfile)
    
record_list = bp.get_entry_list()
record_dict = bp.get_entry_dict()

dictSelection = selectDict(record_list,'Kompas')

fieldSelection = selectFieldsDict(dictSelection,fieldnames)


test = sorted(fieldSelection, key=itemgetter('year'))


test_file = open('output.csv','wb')
csvwriter = csv.DictWriter(test_file, delimiter=',',\

    fieldnames=fieldnames)
csvwriter.writerow(dict((fn,fn) for fn in fieldnames))
for row in test:
     csvwriter.writerow(row)
test_file.close()

If you are a Python developer: any comments on this are welcome. I'm sure it's not perfect.

My thoughts on Daniel Bromley's critique (3): Are ITQs private property rights?

In my first post in this series I argued that although open access is just about the worst property rights regime to have in a fishery, it is too simple to blame all overfishing on 'lack of property rights'; rather, we need to go into the details of the institutional setting. In my second post I argued that asking whether private property rights can manage a fishery is a waste of time: marine ecosystems are too complicated to implement any real form of private property.

But wait a minute. Aren't ITQs supposed to be private property? You can find many articles in the scientific literature and the press, whether they're in favour of ITQs or against them, that present ITQs as private property. Daniel Bromley does not agree. In his Fisheries article he lists as one of the deceits of fisheries economics its claim that "ITQs are private property rights." His objection to this idea is that the Magnuson-Stevens act (which is by far the most important fisheries law in the United States) states that ITQs are permits, which can be revoked, limited, or changed by the government without compensation to the owner of the permit.

The reply of some economists is that in practice, even American ITQs are traded between fishers, they are used as collateral for loans, and they are subject to legal disputes over divorce and inheritance, just like houses or cars are. So de jure they might not be private property rights, de facto they certainly are.

In any case, I'm a European, and in Europe we could decide to make ITQs irrevocable rights that have an unlimited life span, and cannot be changed by the government (unless in cases of eminent domain). Would they then be private property rights?

If I were a German I would say: jein. The certificate would be private property: the law can be made such that you can freely trade the certificate, the government cannot take it from you without compensation, you can use it as collatoral, and if you die your kids might fight over it in court. But that's the certificate - not the fish. As I argued in an earlier post: owning an ITQ does not mean that there's a fish with your name on it.

As far as I know the closest equivalent of ITQs (assuming the most extreme case of privatization) would be shares in a corporation (or LLC, PLC, SA, BV, NV, whichever country you happen to live in - I'm no legal expert). In the fishery, the 'company' would be the fish stock; the 'dividend' would be the TAC; the 'shareholders' would be the fishers, who, unlike regular shareholders, are supposed to come and catch their 'dividend' for themselves. I'm no more a business economist than I am a legal expert, so I don't know whether I should consider a corporation private property or common property. If I strictly follow Bromley's terminology I'd guess they are common property, because it is the shareholders who commonly own the asset and have influence - albeit sometimes limited - on the company's management. But I'm glad I'm writing this on a blog and not in a peer-reviewed article (that's what blogs are for, aren't they?).

There are some interesting differences between ITQs and corporate shares, but I'll save that for later.

My thoughts on Daniel Bromley's critique (2): Are private property rights a silver bullet for overfishing?

From the diagnosis that missing property rights drive overfishing it's only a small step to prescribing property rights to manage fisheries. In his Fisheries article Daniel Bromley criticizes that idea that, in his terms, "Private ownership is necessary and sufficient for socially beneficial stewardship." He cites an article that investigates the link between catch shares (i.e. ITQs) and stock collapse. The article fits in a sequence of articles that link 'ownership' of a resource to 'stewardship':

Examining specific cases, Beddington et al. (10), Hilborn et al. (11), Grafton et al. (12), and Griffith (13) argue that rights-based fisheries reforms offer promising solutions. Rather than only setting industry-wide quotas, fishermen are allocated individual rights. Referred to as catch shares or dedicated access privileges, these rights can be manifest as individual (and tradable) harvest quotas, cooperatives, or exclusive spatial harvest rights; the idea is to provide - to fishermen, communities, or cooperatives - a secure asset, which confers stewardship incentives.
Source: Costello et al., 2008, Science

The first author of the article, Chris Costello, explains it as follows in laymen's terms:

The difference [between rights-based management and other sorts of fisheries policy instruments] is comparable to renting an apartment versus the house you own. [...] If you own something, you take care of it - you protect your investment or else it loses value. But there's no incentive for stewardship when you don't own the rights to it.
Source: Marine Science Institute, UCSB

The ownership-stewardship link

This link between ownership and stewardship is also made elsewhere in the literature, and it has explicitly been object of research in at least one article that I have seen. The fundamental idea here is that people must have a stake in conservation of natural assets before they support it: if they don't have a stake in it, why would they care? This idea is also part of the rationale behind many PES schemes, or programs like CAMPFIRE.

Bromley's arguments against this idea are twofold. First, if the interest rate is very high, the owner of the asset is better off depleting the asset and investing the proceeds in, say, a savings account. Second, other people besides the owner might also be affected by how the owner manages the asset.

To hell with Orange Roughy and the Eiffel Tower!

The reply to the first argument is that interest rates are rarely so high that it becomes optimal to deplete a resource and put the proceeds on the bank. Some species do indeed grow so slowly that leaving them in the ocean would be like leaving your money on a low-interest bank account - you would earn more by withdrawing your 'money' from that account and investing it somewhere else. Orange Roughy, with an annual growth rate between 4% and 6%, springs to mind. Most species, however, grow much faster than this. You could also argue that in a well-working market, if it is optimal for the owner to deplete a resource and put the value thus generated on the bank, it would be optimal for society.

But this is probably not a well-working market, and that is how we get to the second argument. People might appreciate natural assets, like fish, for more than just their consumptive value. Economists call this existence value: economic value ascribed to things just for their mere existence, like whales or pandas. But even if you don't like this concept (it's debated), you can still argue that living creatures should be preserved for their own sake: call it intrinsic value, or animal rights. All these are considerations why we don't like leaving natural assets at the mercy of a small group of owners. Imagine how Parisians would react if the Eiffel Tower were sold to the highest bidder, who is allowed to sell it on the scrap market if the steel price is high enough.

But should it be private?

The question, however, is whether we need private property rights to induce stewardship. The Costello paper does not say so explicitly. Other authors do refer to ITQs as a way to privatize ocean resources, and that this is a good thing (but I have to admit I still need to read that book). But making fish resources private property, i.e. making fish stocks the property of a single person or company, is a pipe dream anyway. How do we deal with stocks that cross borders? How do we deal with interactions between species through predation or bycatch? Imagine owners of top-of-the-food-chain stocks getting sued by owners of lower species, just like dog owners are liable for what Brutus does to Fifi.

That's why I think the whole question is moot. Private property rights - real private property rights, like owning land, or a dog - are nearly impossible to implement in a fishery. Some form of property rights, be it state property, common property, or private property, is necessary but not sufficient. Although most fish resources fall under some form of property regime, many are still overfished; nevertheless, high-seas fisheries, which are as close to open access as it gets, are managed worst of all. If you want people to support conservation, it surely helps to give them a stake in it. However, unlike Zimbabwean farmers, who have little to expect from biodiversity conservation but crop damage and sleeping sickness (which is why CAMPFIRE was developed), fishers do have a stake in good management of fish stocks - regardless of the property rights regime. So why shouldn't they be good stewards already?

My take-home lessons from Fish In Figures 2014

Mmm... Marine biodiversity

Friday I ended my working week at a shindig in Catch By Simonis (should definitely have a seafood platter there someday!) where LEI presented the latest edition of their annual status report of the Dutch fisheries sector. My take-home lessons:

The beam trawl, which used to be by far the most important fishing gear in the Dutch demersal fishery, is disappearing rapidly. Its users were squeezed between high fuel prices, low fish prices, and public outrage at discards and disturbance of the sea bottom. So Dutch cutter fishers are lining up to use the pulse trawl, which combines bottom trawling with tiny electric pulses. The biggest advantage for the fishers is the lower cost of fuel: about 30% of revenues where the beam trawl burns about 55%. Environmental NGOs, notably Greenpeace, are less convinced, but I don't agree with them. Yes, some species like cod and sharks might be affected (the effects are still under investigation) but it sure beats the effect of the traditional beam trawl on shellfish and other benthic life, let alone its use of fossil fuels. As for the taboo on electric fishing: pulse trawling is nowhere near what this guy tried to do.

A number of possibilities were discussed to raise prices. There is an interest in MSC certification, but people are skeptical about the price premium. This is a genuine concern as the price premium for certified fish has so far been disappointing. The main 'advantage' of certification seems to be that big players in the value chain (restaurant chains, supermarkets) might simply refuse to sell non-certified fish.

Another development is the involvement with fresh fish markets. This fits within a wider trend towards 'local' food (which is usually a bit too much romanticized, me thinks). So far it's very small-scale but I like it. Why is it that the Dutch don't appreciate fresh fish? Johan Baaij, a fisher who is involved in a project called Vers van de Visser (fresh from the fisher), argued that the consumer has no idea where the fish comes from, or who is involved in it. It reminded me about how many people think kibbeling is a fish species.

All in all I got the impression that the fishing sector is more or less where our farmers were, say, 15-20 years ago: financial problems, public unease with bulk production and its impact on the environment, but also a lot of creativity and entrepreneurship, and a readiness to engage with their critics.

My thoughts on Daniel Bromley's critique (1): Is open access the problem?

In 2008 Daniel Bromley gave a keynote lecture at the biannual conference of the MARE Centre in Amsterdam where he strongly criticized economists for giving flawed adivce to policy makers (to use the more polite terms). The conference organizers must have had a hard time finding an economist willing to write a reply to his lecture, because they even contacted me - I chickened out. I felt I hadn't been working on fisheries issues long enough yet to have a well-founded opinion on Bromley's writings. Shortly after his keynote lecture, he published an article in Fisheries with a central message similar to that in his earlier keynote, but phrased in stronger terms - and with a lot more impact. In his Fisheries article he took a few arguments further to the point where just about every economist I know disagreed wholeheartedly (again, I'm being polite here). I discussed it with some of them, and with other fisheries scientists. I also discussed it in class once, but the students, most of whom were no native English speakers and had little economics background, had serious trouble with Bromley's rather difficult use of vocabulary.

Lately, after coming across other work written by Daniel Bromley (and his co-author, Seth Macinko), I started reading these two articles again. Although I broadly agree with the mainstream economic analysis of fisheries management, I got the impression that perhaps he has been misunderstood by my fellow economists and it would be a shame if his ideas were ignored because of the impression his Fisheries article made on most economists (again, to put it politely). I decided to put my thoughts on his criticism of fisheries economics in a few posts.

To start with, there is the conceptual confusion on what is open access, what are commons, and whether fisheries resources fall under any of those regimes. In casual conversations with colleagues I do find that some of them present fisheries as an example of open access resources; some economics textbooks do the same. But are fisheries open access resources? In his book Environment & Economy: Property Rights & Public Policy Bromley distinguishes four property regimes, similar to the four property regimes in ancient Roman law:

• No property (res nullius): the classical open-access regime
• Common property (res communis): a regime where a group of people owns, manages, and uses the resource together
• State property (latin name not given, but I believe it should be res publica): the government, as a representative of society as a whole, owns and manages the resource, and sets the rules by which citizens are allowed to use the resource
• Private property (I believe this should be res privata but my Latin is pretty non-existent): an individual owns the resource and has the right to manage and use it as he or she pleases.

If you look at it this way you see that most fish are caught within the Exclusive Economic Zones of individual countries; in fact, only one sixth of global catch comes from the high seas. Within the EEZs aquatic resources are either private property (for example, oyster and mussel fishers own parcels, which they seed, and they have the exclusive right to harvest them) or state property (with regard to most fish species, the government sets the rules on how much to catch, and with which methods). So strictly speaking, open access is more an exception than a rule.

This doesn't mean, however, that the open access regime is irrelevant to our understanding of fisheries problems. By looking at fisheries under open access, we lay bare the mechanisms that make fisheries policy so difficult: the individual fisher reaps the benefits of catching one more fish, whereas all fishers bear the costs to the resource, i.e. the future productivity lost because the fish is in the basket instead of the sea. In theory, state property regimes are able to deal with this problem as governments can exclude people from fishing. In reality, however, governments have problems of their own that prevent them from keeping in check the forces that lead to overfishing: many fish stocks are shared by several countries, there is lobbying by special interest groups, rent-seeking, and so on. It's like Hobbes's Leviathan (named after a sea monster!), which starts with how unrestrained human nature leads to a war of all against all, and then explains how this restraining of human nature should take place. To understand the regime you also need to understand the forces it is supposed to rule.

Another confusion, by the way, is that between open access resources and common property resources. The confusion started when the American ecologist Garrett Hardin wrote his Science article named The Tragedy of The Commons, where he explained how common lands will inevitably be degraded because the individual land user reaps the benefits of an extra sheep while imposing the costs of overgrazing on all users. Daniel Bromley has repeatedly argued against this article and I understand why. The problem is the choice of words: commons. Commons are owned, managed, and used by an exclusive group of users who have every possibility and motivation to make good arrangements and stick to them. In fact, researchers like Elinor Ostrom found that many commons are managed quite well. The "Tragedy" that Hardin describes takes place in open access regimes, like the high seas. Unfortunately the confusion is still omnipresent: just this week The Economist refers to the Tragedy of the Commons to discuss the problems with high seas fishing.

To me, this underlines the importance of defining your concepts well, and being wary of oversimplification. It's too easy to use the broad brush of open access to paint all problems with resource overexploitation. We need to get into the details to really understand the matter. How are rights, priviliges, obligations, and such distributed? How do they work on paper (de jure) and how do they work in practice (de facto)? How are things like decision-making, monitoring, and enforcement organized, and what resources do they need? What is the role of official laws on one hand and unofficial norms and customs on the other hand, and where do they contradict? I feel that these questions have been overlooked in the debate that was unleashed after Bromley's Fisheries article.

On discounting (1): Vindicated!

Warning: geeky post. It's got math in it.

I first came across the concept of discounting somewhere in 1994 or 1995 when I studied Environmental Studies at the Hogeschool Delft (a hogeschool is more or less comparable to a polytechnic institute). Somewhere in my final year I suddenly got interested in environmental economics so I took an introductory course in that field given by the Open University of The Netherlands. (This course got me firmly on the track that eventually led to the work I am doing now. Thank you Open University!)

I remember reading the course's textbook on discounting and thinking: this is madness! Looking back at that moment, and at the literature that has evolved since, I feel vindicated. I was right.

For non-economists: the idea behind discounting is, basically, that time is money. Nobody is indifferent between receiving €100 now and receiving €100 in a year's time: almost everybody prefers the first over the latter. Economic textbooks give two reasons why this is the case:

• If you receive your money now you can invest it, or put it on your savings account and earn interest;
• People are impatient: they care less about things they need to wait for.

The first reason is what we call the opportunity cost of capital; the second reason is called pure time preference. My objection was not against the idea of discounting as such, but against the fact that both effects are captured by the same formula:

PV(Xt) =	1	Xt
	(1+r)t

where X_t is some amount of money earned in t years' time, r is the discount rate (which captures interest as well as pure time preference), and PV is the present value of X_t. The present value of a future cost or benefit is what it is worth to you now, in other words, how much you are maximally willing to pay now in order to earn X_t in t years. After all, if you earn PV now you can leave it on your bank account, wait for t years, and earn X_t :

Xt = PV(Xt)*(1+r)t

My objection was that we use the same formula to describe both the interest on your bank account and the psychological phenomenon that I don't like to wait for nice things (but I sure like to postpone nasty things). How can we be sure that our brains work the same way as a bank account?

From what I learned later I gather that economists prefer to use a single variable r to capture both effects because it is easy, and because it induces time consistency in the choices based on discounting. If capital markets work well, the market interest rate should give a good reflection of people's pure time preference as well as their expectations of the returns on their investments. As regards consistency, assuming a fixed discount rate for every year fits neatly in the omnipresent assumption that people make rational choices: if you are indifferent between €100 now and €105 next year, you are also indifferent between €100 in 2030 and €105 in 2031.

But this is where things get awry - and where I get my bit of vindication. It turns out our brains don't work as neatly as the formula suggests: we are all, to a greater or lesser extent, time inconsistent. Behavioural experiments have shown that people apply what is called hyperbolic discounting: they apply higher discount rates to the near future than to the distant future. If you tell me you are indifferent between €100 in 2030 and €105 in 2031, and I ask you again in 2030 whether you would rather have your €100 now than to wait a year for an extra €5, it is likely that you will ask to have your money in 2030 (which would by then be the present).

Interestingly, hyperbolic discounting is one of the explanations for addiction in the behavioural psychology literature. Anyone who has been a smoker recognises this: you don't want to be a smoker all your life, so you set a date for your last cigarette. Then when the time comes, you're "not ready for it yet", or "this is not the right time", or you think "aah, just one for the road." So you keep smoking. And years later, when you look back on all those years coughing, smelling, getting your fix in the rain, and spending all that money, you regret not having kicked the habit earlier. If that isn't time inconsistent, I don't know what is.

Stop reading music

No musical instrument illustrates the yearning gap between classical music and traditional music like the four-stringed wooden box I've been playing for the last 13 years. It starts with the name. Ask me what I play, and I would tell you I play the fiddle; ask a classical musician what it is I play and he would say "violin". But really, it's the same instrument. (Admittedly, this only applies to English - the Dutch call it viool, no matter how you play it.) I sometimes meet violinists (that is, classically trained musicians) who approach traditional music as a simple sort of classical music - a subset of classic, to use a mathematical term. If you can play Paganini's works, sure you can play The Maid Behind The Bar, right?

Wrong. They're totally different paradigms. Different worlds. It's almost like you're playing a different instrument. And let me be blunt: a classical training is a serious impediment to playing traditional music.

It starts with the fact that we know the composers of almost all compositions in classical music, but most tunes in traditional music have composer "unknown". The composer of a classical piece still owns it, as it were. Change the notes and it's not the same piece anymore; even worse, it would be disrespectful, like painting a mustache on the Mona Lisa. Yes, classical musicians interpret the music they play in their own way, through the intonation and the dynamic they (or the conductor) choose. But they must stick to the written music. On the other hand, apart from recent compositions, traditional music is public property. In fact, part of the fun of playing traditional music is the freedom of interpretation: let's put in some more syncopation by playing these notes a bit differently... Did you know that this tune sounds great when you play it in a minor scale? If I bind those notes and skip these it sounds really great on the fiddle. Also, there are often many versions around of the same tune.

Second, traditional music was originally developed to accompany dancers, so the most important element of it, high above the rest, is the rhythm. You can be a virtuoso all you like, it don't mean a thing if it ain't got that swing. Classical music, on the other hand, remains a work of art, strongly associated with the composer. So all facets, including melody, harmony, and arrangement, are to be appreciated, and rhythm is usually not the most important part of it.

Third, a classical training starts with reading music, whereas a good workshop in traditional music teaches the tune by ear. Let me be even clearer on this. I know a musician who took classical music lessons as a kid and she told me her father would slap her if she gave only the slightest hint of playing by memory rather than from sheet music. On the other hand, in most fiddle workshops people have recorders with them (mobile phones, nowadays), and the teacher distributes sheet music only at the end of the workshop, if at all.

This will sound mean to you if you are a classical musician, but every now and again I meet violinists who cannot learn a tune by ear, and even if they know the tune they still cannot play it by heart. Like barrel organs, they're lost without their sheet music.

So kids, when you want to learn to play music, stop reading it.

Scenario issues: scenarios versus policies

I usually emphasize in my lectures that you should strictly distinguish policies from scenarios. Policies are what we choose; scenarios simply describe what might happen, regardless of what we choose. In practice it is not as clear-cut as that may seem.

Look at it like this. Suppose we have two policy options. To choose the right policy we also need to know how each policy plays out in the future. But there we have a problem: we don't know what the future will look like. Usually, however, we do have a rough idea of developments that may take place. We could take some of those developments and explore how they might combine. By doing this we develop a number of scenarios that illustrate what the future could look like (not what it will look like). We can then evaluate our policy options in each scenario. For example, with two policy options and two scenarios we could make a table like this:

	Scenario 1	Scenario 2
Policy 1	You win $100	You lose $100
Policy 2	You lose $50	You win $80

In any environmental economics textbook you will find different possible rules to choose between policy options under such uncertainty. Perhaps you want to minimize the possible losses from your policy. By such a maximin rule, as it is called, you would ignore the best outcomes and focus on the worst ones. So you choose Policy 2 because the worst that could happen under Policy 2 is that you lose $50 where under Policy 1 you could lose $100. It is also possible that you want to get as much as possible out of your policy. By following a maximax rule, where you ignore the worst outcomes and focus on the best ones, you would go for Policy 1. After all, Policy 1 could yield $100 where Policy 2 can, at best, yield only $80. And there are more decision rules.

Every year I see students, when asked exam questions like the problem above, give answers like "I would choose Scenario 1". Which is why I keep emphasizing: you don't choose scenarios. Nature chooses the scenario. Or God, or Fate, whatever you want to call it. But not the policy maker.

But now comes the tricky part. Suppose the policy maker cannot choose all possible policies at once. Perhaps she works at some government department that decides on some policies, but there are other policies that are decided by other departments. Or the effect of her policies depend on what other governments do.

We're having discussions about this all the time in VECTORS. For example, an Environment Ministry might want to evaluate a ballast water treatment policy to combat invasive species, but the effects of the policy also depend on international trade policies which are decided by the Ministry of Economic Affairs, or even other countries' policies. The trade policy might then become part of the scenarios as far as the Environment Ministry is concerned. This is very confusing, and I notice that a lot of people are uncomfortable with including policies as part of scenarios. It seems to me that they prefer their scenarios as pure, roll-the-dice, chance events. Their objection to including policies in scenarios is that, eventually, people decide on policies. They are not chance events. My reply would be that we can only decide on a particular domain, like ballast water treatment policy, or fisheries policy, or MPA allocation. What happens outside that domain is something we cannot influence, so it has to be considered a chance event. But I agree it feels uncomfortable, and the line is difficult to draw.