On interdisciplinarity

Check out the really cool cover of Nature's special feature on interdisciplinarity!

Of course, as an economist I especially like their inclusion of "Invisible Hand" as the sole superhero representing the social sciences in their scientific team of Avengers. But it is also symbolic for the fact that economists have, in my view, gone the furthest in integrating their discipline with the natural sciences. This holds particularly for environmental and resource economists, who by definition deal with problems of the natural environment like pollution and overfishing. The reason is pretty geeky: most economic research is quantitative, and quite a lot involves the development of mathematical models. And whaddayaknow: so do climate science, population biology, hydrology, and a host of other natural sciences. Give me your equations and I'll plug them into my CGE model.

It is actually much, much harder to truly integrate qualitative social sciences like sociology or anthropology with quantitative sciences - even with a social science like economics. Models like IMAGE and DICE describe the global climate as well as the economy; the Gordon-Schaefer fisheries model and Colin Clark's work on renewable resource use, which use basic models from population biology like logistic growth, are part of the standard canon of resource economics since decades; when Daniel Pauly criticizes the limited impact of the "social sciences" on fisheries research, he lumps together economics with biology, not sociology. Meanwhile, it has taken until 2009 that the Nobel committee finally recognized anthropologist Elinor Ostrom for her contributions to the economics of common pool resources, and economists and sociologists share little but contempt for each others' fields. The Indian economist Jagdish Bhagwati is said to have joked that good economists reincarnate as physicists; wicked economists reincarnate as sociologists. But Ostrom's Nobel also shows that things are changing, especially in the field of institutional economics. Let's have more of that in the future.

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.

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.

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 (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.

My impressions of the 2013 ICES Annual Science Conference

My impressions after a week of presentations, discussions, and lots of delicious food:

• Of all the interdisciplinary conferences I've been to so far, the ICES meeting was the most scientific (read: least political, notwithstanding ICES's role as advisory body for fisheries policy), and the most constructive in its interaction with social scientists (read: economists). Besides EAERE (which I consider a disciplinary meeting) I was once at an ESEE meeting, and once at the European Congress for Conservation Biology. I had mixed feelings about those for their tendency to bash "mainstream economics" (whatever that may be) and to blur the line between science and activism. Perhaps it's because those communities have the hidden assumption that nature is best left alone by man, whereas fisheries scientists investigate, by definition, a form of interference in nature.
• Is it just me, or is there a major disconnect between textbook fisheries economics and the practice of fisheries management? Concepts we teach (notably maximum economic yield and the role of the discount rate) are nowhere to be seen - in fact, I once heard a fisheries industry representative refer to maximum economic yield as "a plaything for economists". In our teaching we hardly pay attention to the stochastic nature of fish stocks, but these days fisheries science is all about reference points and harvest control rules - which only make sense in a stochastic context.
• Economists can make big contributions to fisheries management by further strengthening how fisheries models describe human behaviour. So far those contributions were largely confined to modelling where fishers fish, but what about investments in gear, or boats? Let alone market structures, global developments (tilapia!), value chains, and policy-makers.
• Iceland is like an extreme version of Norway. Thought the Norwegian landscape was rugged? Iceland has volcanoes, and geysers! And where I thought Norwegians don't give a hoot what the rest of the world thinks of hunting and whaling, only Icelanders can serve raw whale meat and rotten shark to a crowd of foreign scientists. (And it was delicious! The whale, that is.) Neither do Icelandic pubs have qualms with playing the entire Velvet Underground & Nico, including John Cale's ear-piercing viola solo in Heroin.

Wise words from the Bird

Originally I planned to include in my PhD thesis the following quote:

Learn all that stuff and then forget it.

At the time I thought it was Miles Davis who said that, but it might as well have been Charlie Parker (sorry Miles, Bird makes for a better blog post title). I'm not really into jazz: the quote tricked me into looking up some Miles Davis and Charlie Parker on Spotify but after a few songs I always decide to turn on Pelican instead. The closest to jazz that I listen to frequently is the Tom Waits. I absolutely love Tom Waits. Oh, and Ethiopians like Mulatu Astatke or Getatchew Mekuria, but only when I'm in the mood.

But this quote - wow, I could tattoo it on my forehead if I were into that kind of thing (don't worry, I'm not). It defines how I view the theories I work with, as well as the musical traditions I play. I consider myself a mainstream economist, but I do have my question marks regarding the behavioral and ethical models applied in my field. I don't think there is any meaningful way of measuring existence value, if it exists at all. I don't believe economic valuation can capture moral or religious considerations. I appreciate the role that social norms, traditions, or downright stupidity can play in human behavior. But I also think that it is too easy to throw your hands in the air and declare the entire body of neoclassical economics as overly abstract nonsense, or worse, to refuse to learn microeconomics because economists did not predict the latest financial crisis.

The bottom line is that you can only criticize a theory if you fully understand it. By the same token, you can only renew a musical tradition if you master its techniques, its rhythms, its harmonies, and its social context. Miles and Bird could only invent and develop bebop because they understood what came before it. Likewise, if you want better economics, well, make sure that you first understand the orthodoxy.

On the other hand, there is also the "forget it" part. Don't let the tradition hinder your creativity. Dare to break its rules, to explore its boundaries. Dare to question a theory's hidden assumptions, don't accept such excuses as "this is how we have always done it." Know the rules, but don't obey them.

The quote, by the way, never made it into my thesis. My professor thought it cynical, as if I recommended the reader to forget all I wrote. I didn't agree, of course, but I also figured that if he interpreted the quote like that, so would many others. So I left it out. I still regret that decision.