zondag 20 februari 2011

Superfreakonomics and climate engineering

With Freakonomics, Steven Levitt and Stephen Dubner had written a very enjoyable overview of how the standard techniques of economic analysis can be applied to a wide variety of less standard issues (how to detect cheating teachers and sumo wrestlers, how liberalizing abortion laws eventually translates in lower crime rates , why most drug dealers live with their mothers, etc ).
With Superfreakonomics, they do it again. The range of topics is just as wide as in their first book: why walking drunk is more dangerous than driving drunk, why wages of prostitutes have gone down over the last century, why your month of birth is a good predictor of future professional achievement, how to detect from someone’s bank account whether he is likely to be a suicide terrorist, why children (at least in the US) are more likely to visit their parents in retirement homes if they have siblings, etc.
These two unconventional books are the result of a just as unconventional team. Stephen Dubner, who writes for The New York Times and the New Yorker, had joined efforts with Steven Levitt,  a professor of economics at the University of Chicago. In case the subjects listed above would make you doubt, Steven Levitt is no crank: for his original research, he has won the John Bates Clark medal, which is arguably harder to get than a Nobel Prize.
As the authors explain, both books have one grand unifying theme: (a) people respond to incentives (b) they do not necessarily do this in ways that are predictable or manifest. In the first book, the emphasis was on professor Levitt’s own research in this field, while Superfreakonomics  covers more work undertaken by other researchers.
The general appreciation of the book can be relatively short:  just as its predecessor, it is very well written and chockfull of facts and insights that are both amusing and revealing. If you have any interest in human behavior, you should read it.
However, in this review, I would like to elaborate more on one specific chapter that is specifically relevant for the subject of this blog: the discussion on climate engineering.
The chapter can be summarized as follows. The authors do accept the hypothesis that climate is changing, and that these changes are anthropogenic (even though they rightly point out that a lot of processes are still very poorly understood). However, they doubt very much that a binding international agreement to reduce the emissions of greenhouse gasses (GHG) will ever be signed. Moreover, they argue that, even if such an agreement would be reached today, it would probably be too late to prevent significant climate change.  Finally, scenarios that assume that significant climate change mitigation still falls within the realm of the possible, tend to overestimate the potential of technological solutions (for instance, because they do not take into account the GHG emissions during the production of “clean” technologies such as photovoltaic cells).
In a previous post of this blog, I had already discussed one possible approach to plan B – climate change adaptation.  Levitt and Dubner discuss plan C: climate change engineering.
The idea is really quite simple: just as the presence of greenhouse gasses in the atmosphere tends to increase average temperatures,  the presence of sulfur dioxides tends to decrease average temperatures. This phenomenon is well documented and quite well understood. For instance, important volcano eruptions can lead to a marked decrease in average temperatures for several months or even years.
Does this mean that simply putting huge quantities of sulfur dioxides  will be enough to stop climate change?
Actually, it’s not that simple. In case you’ve forgotten, or are simply too young, we have already been through this: before we started imposing environmental regulations in the 1970s, we had already been emitting huge quantities of sulfur dioxides (the big worry about climate change in the beginning of the 1970s was global cooling, not warming). The ensuing decrease in the emissions of sulfur dioxides is actually one of the really big success stories of  environmental policy, leading to significant health benefits.
Again, one may be tempted to jump to conclusions and think that the choice is now between facing intolerable temperature increases or inhaling particles that directly affect our health and life expectancy.
However, this reasoning overlooks one potential way out that Levitt and Dubner discuss: instead of pouring the sulfur dioxides in the atmosphere at ground levels, we could develop tools to release them directly in the stratosphere instead. In their book, Levitt and Dubner report interviews with several scientists who argue that this should be technically possible at an economic cost that would be a fraction of the cost of climate change mitigation.
 Would this work?
I am not a physicist nor an engineer, so I do not feel qualified to comment on this specific point.  However, if it would work, and if its cost would really be so low (that’s admittedly two big ifs) than moving the focus from climate change mitigation to climate engineering looks like a no-brainer.
Maybe surprisingly, this approach faces some stark opposition, and it is important to understand why.
One counter-argument is that climate engineering comes down to tinkering with the climate. I agree completely with Levitt and Dubner that this argument makes no sense: everything we do involves tinkering. There’s just tinkering that involves doing something and tinkering that involves not doing anything. Some moral philosophers may think there is a deep difference between the two, but from a policy point of view, this seems irrelevant to me.
One argument that merits some discussion is that the possibility of climate engineering would just be an excuse for a continuation of “business-as-usual”.  Of course, unless one thinks that emitting green house gasses is a sin in itself, this argument is in the same category as the previous one: symbolism and not substance.  Thus, the relevant question is: is it a sin to emit greenhouse gases if there an antidote to the global warming effect?
The answer is: in some cases, yes. Well, not in the case of CO2, but there are a lot of less widely known gasses that do not only trap heat in the atmosphere but also hurt the environment in other ways. It has been known for some time that several ozone depleting substances are also very potent greenhouse gasses.
A forthcoming report by the United Nations Environmental Programme now confirms that there are other villains out there: methane and black carbon. The negative environmental effects of black carbon (or soot)  , which is emitted massively by primitive stoves and  old diesel engines, are already well known. However, recent research suggests that black carbon is also a potent greenhouse gas. Moreover, it has a relatively short atmospheric life time, implying that  reducing the emissions of black carbon would not only improve air quality (notably in developing countries), it could lead to significant climate benefits in the short term.  The emissions of methane, in turn, lead to increased formation of tropospheric  ozone, which has also well-documented adverse health effects (contrary to stratospheric ozone which blocks ultraviolet rays).
Even though the science of black carbon is far from settled, this insight somehow turns the problem raised by climate engineering on its head. Because black carbon and tropospheric ozone are local pollutants, individual countries have a strong incentive to reduce emissions of soot and methane (well, at least if governments can be held accountable by their people), and this can lead to climate benefits even if we cannot agree on reducing CO2 emissions. I also think no one would dispute that the Conventions on Long Range Transboundary Air Pollution have been far more successful than the Framework Convention on Climate Change: this suggest that it is far easier to sign successful environmental treaties when the benefits occur in the short run and when there is a little scientific uncertainty surrounding these benefits.
So, if you ask me, I think the first priority is now to work on greenhouse gasses that bring strong co-benefits in terms of local air quality. And, in the meanwhile, we should work further on our understanding of climate engineering, as a possibly quick fix in case we run out of other options.
And more people should read what Levitt and Dubner write on the subject.

zondag 13 februari 2011

Is mankind really unique in its propensity to exchange?

One of the central propositions in "The rational optimist" (see my review of December 2010) is that human progress results from our propensity to exchange, which, according to Matt Ridley, is unique to mankind.

Apparently, it is time to reconsider this assumption.

Recent laboratory work by Keith Chen has shown that capucin monkeys do not only understand monetary exchange, but they also understand the basic laws of demand and supply. Moreover, they also appear to act irrationally in exactly the same settings as humans do (to be  more precise, they are risk-averse: they attach more value to losses than to gains of the same amounts). Finally, when they were allowed to barter not just with the experimenters, but also amongst themselves, the first profession that was created was..... indeed, prostitution!

An accessible discussion of these experiments is provided in Levitt's and Dubner's Freakonomics, which I intend to review more at length in the coming days. Who ever said that economics wasn't fun?

maandag 7 februari 2011

Climatopolis and the European Commission's climate change adaptation strategy

I have just taken a look at the European Commission's white paper on climate change adaptation.  Comparing this document with Matthew Kahn's Climatopolis (see one of my previous blogs for a detailed discussion of this book) reveals some interesting points.

First of all, cities are central in Kahn's book, and their resilience is an important source of optimism. In the Commission's view, cities are part of the areas that are especially vulnerable - the impact assessment points specifically to the "urban heat island" effect that will exacerbate the effects of heat waves in urban areas, and to the need for building infrastructure (such as green roofs) that can mitigate this effect.

Second, in Kahn's book, migration is, alongside technological innovation, the main instrument for adaptation. In the Commission's assessment, when migration is mentioned, it is alongside issues such as state failure, social cohesion and security.

Third, Kahn puts a lot of faith in society's spontaneous capacity for adaptation. The Commission does not assume that solutions will emerge and proposes an integrated strategy for adaptation.

These three observations have a clear pattern: where Kahn sees solutions, the Commission sees problems that need to be addressed. Some people may prefer the almost boyish enthusiasm that can be found in Climatopolis. However, the Commission's white paper is not just doom and gloom: it analyses the problem, and then proposes an action plan.

Of course, some will argue that climate change adaptation is just a new excuse for interventionist policies that will affect individual freedoms at high costs and with no clear environmental benefit. As I cannot venture into discussions of individual policies without incurring the risk of future conflicts of interest, I will just point out that one of the recommended actions is further trade liberalization - hardly a communist agenda point!

I intend to come back to the issues of migration (both of humans and of other species) in future posts.

dinsdag 1 februari 2011

Review of Sam Savage's "The flaw of averages"

If you ever thought that probability calculus and statistics are boring, incomprehensible or just irrelevant for real life, then The Flaw of Averages might make you think again.
The book’s author, Sam Savage,  a Consulting Professor at Stanford University, and a Fellow of the Judge Business School at the University of Cambridge, has set himself as task to explain in plain English how people make avoidable mistakes in assessing risk in the face of uncertainty – and, with respect to this specific point, the book is an unmistakable success. (By the way, Savage also happens to be the son of one of the great statisticians of the last century, which is probably why the name is not completely unfamiliar to you if you have taken a course on the subject).
The book is organized in three main sections.
In the first section, Savage lays the foundations of the book.  Savage points out that, when people plan for the future, they often replace uncertain outcomes with single numbers, the averages. He uses several real life examples (some of them hilarious) to illustrate why this approach is, more often than not, wrong, and leads, on average, to negative outcomes.
Savage then goes on to explain that uncertain outcomes are not just described by their averages, but by their whole distribution. He then quickly moves on to discuss the behavior of combinations of uncertain numbers, and the importance of understanding interrelated uncertainties. Subsequently, he discusses decision trees and the value of information (guess what: you should not be willing to pay any price to make better informed decisions!).
In case (a) you have taken a university level course in statistics (b) actually understood the practical implications of what you have been thought (c) remembered how to apply the tools you have learned, then you will probably already have guessed that this section in the book will teach you nothing substantially new – basically, what Savage tells you is that the expected value of a function of several variables is not always the value of the same function applied to the expected value of these variables. However, this is no reason to think you will learn nothing from the book.
Indeed, the originality of this section is different.
First, even if you think you master the principles of probability calculus, the examples provided by Savage will show you that you often fail to apply these principles when confronted with real life applications . To be honest, I made several hugely embarrassing mistakes myself – the price for revealing one (to you in person, not on this site) is a Westmalle Trippel http://en.wikipedia.org/wiki/Westmalle_Brewery .
Second, Savage is a master teacher and storyteller. He really does succeed in explaining all the essential elements of probability theory (including far-from-obvious topics such as Jensen’s inequality) in a very accessible and humorous style. Every teacher of probability and statistics should read this book to understand how his subject can be brought to life – as a result, his student might even become actively interested in the subject.
 In the second section, Savage provides several applications of the theory: financial portfolio theory, the capital asset pricing model, derivative pricing, corporate investment theory, supply chain management, the war against terrorism, health care, gender issues, World War II and climate change. Again, Savage illustrates brilliantly that problems of staggering complexity can be brought to life, and, more importantly, can be explained in such a way that the student actually ends up understanding what the subject is about (want to understand how the boffins at Long Term Capital Management almost blew up the world economy in 1998? –read the book).
Finally, in the third section, Savage presents his own solution to the problem: Probability Management. This review is not the right place to discuss this approach in detail. Essentially, Savage argues that, when faced with uncertainty, decision makers should be running thousands of simulations, showing how random events affect all relevant variables simultaneously, and illustrating the interactions between these variables. The book contains links to websites that offer commercial software that can be used to run simulations on standard spreadsheet packages (the website also contains demo versions).
This part is the weak link of the book. While the two first sections are light-hearted but very informative, this section mostly reads as a big advertisement for the services Savage has on offer. Instead of providing detailed and informative examples on how Probability Management could improve decision making, Savages mostly discusses personal anecdotes on its intellectual conception. It’s still a lot of fun, no doubt about that, but it’s rather disappointing after the brilliant start of the book. But, then, I suppose that the objective is really to make us download the demo versions and find out their usefulness for ourselves.
Let me summarize. There’s an old joke stating that a statistician is someone who drowns in a river that has an average depth of 30 cm. This joke show a complete lack of understanding of what statistics is about: Savage shows that people who drown in these circumstances are precisely people who fail to understand that one should look at the complete distribution of an uncertain variable, and this is precisely what statisticians do. To quote from the book: the best models are the models you no longer need because they have changed the way you think. If this book can change the way a few hundreds of thousands people worldwide think, it will certainly contribute to make the world a better place.