February 2013 Crawford Research News

The latest research news is out, full of information about Crawford publications, working papers, and more.

More on Fusion

I've got a bit of feedback on the item on Lockheed Martin's fusion research. Apparently this is an improved version of the inertial electrostatic confinement technology. Also, apparently this is an active area of research with several research groups looking at it. Including at the University of Sydney.

Crows are Also Averse to Inequality

First evidence in non-mammals of inequality aversion.

Lockheed Promises Commercial Fusion Reactors in Ten Years

This news is on the face of it really exciting. But I can remember being very excited in 1989 about cold fusion. I would think a corporation would be more careful about what they announce than a couple of academic researchers, but you never know. I sent this to a person in the fusion area here at ANU and he said he thought it was pretty exciting too. That actually surprised me, though he is positive on the economics of fusion power, something I was quite skeptical about based on this kind of analysis. Fusion does seem to be technically feasible. The real question is it economically feasible relative to other non-carbon energy technologies.

WG3 SOD Review Opens Soon!

Registration for expert review of the Second Order Draft of Working Group III's contribution to the 5th Assessment opens on 25th February. We will be discussing these comments at the fourth and final lead authors' meeting in July in Addis Ababa.

Australian-German Climate College

Looks like we have a new competitor in Melbourne and... Berlin. Based on the PhD topics available it's stronger on the climate science and less on the economics and policy than what we can offer in Crawford. We also tend not to prescribe topics to this degree.

International Happiness

Just read the survey by Oswald and Blanchflower on the happiness literature. Something that surprised me was that there was very little discussion of the effects of culture on how people respond to surveys. It was mentioned but I thought it would be more important than this. I notice that as someone originally from England that I am much less willing to award high scores on surveys of say hotels or movies or whatever than Americans are and probably this also translates into how I would report on my happiness compared to people from some other cultures. Or is this not really important?

The paper does mention eating fruits and vegetables as being important for well-being. This is investigated in more depth in another of the authors' papers. I wonder if that helps explain why everyone seems to be so miserable in Eastern Europe in all these surveys? :)

Five New Open Access Economics Journals

Springer and IZA launch five new open access economics journals in the labor economics area. For the moment, at least, the journals are free to publish in too. Hopefully, these won't go the way of the BE Press journals which started out as open access journals and are now difficult to access paywalled journals. Given that they are published by Springer, I don't think so. The worst that is likely to happen is that authors will have to pay to publish in them in the future and/or the journals will close some day but still be hosted on Springer's platform.

Chinese State Council Endorses Cap on Total Energy Use

In 2011 I discussed China potentially setting a total energy use cap of 4 billion tonnes of "coal equivalent" by 2015. This target was not, however, in the end included in the 5 year plan. But it seems that the State Council has now endorsed that target. This is really a quite radical target of about 2 tonnes of oil equivalent per capita. All developed countries use more energy per capita than this. The stylised fact is that energy use increases with income though energy intensity declines over time. It remains to be seen how China will attempt to achieve this target and if they try whether they can succeed. I'm more skeptical of this than of their energy intensity and emissions intensity targets.

How Should Benefits and Costs Be Discounted in an Intergenerational Context?

I can see that this paper is going to be important. A paper by Arrow and twelve other authors reporting on a workshop at RFF in 2011 where the EPA asked 12 of the economists how the benefits and costs of regulations should be discounted for projects that affect future generations. This sounds similar to the panel convened in the early 1990s by NOAA on the consensus on contingent valuation that also included Arrow.

The economists all agreed that the Ramsey formula provides a useful framework for thinking about intergenerational discounting. However, they did not agree as to how the parameters of the Ramsey formula might be determined empirically. It seems that they also agree that declining discount rates make more sense than using different rates for projects with different time scales, stating: "Theory provides compelling arguments for a declining certainty-equivalent discount rate." But they think that doing this in the Ramsey framework involves too much uncertainty about parameter values. Therefore, they recommend the approach introduced by Weitzman in "Gamma Discounting". A declining discount rate raises, however, the issue of time inconsistency. They argue that as the discount rate schedule needs to be updated from time to time as new information is available, this updating means that a new decision will need to be made anyway and, therefore, there is no inconsistency. But I think they realise that this is a bit of a stretch.

I've always favored combining sustainability constraints combined with regular discounting to get around these issues. To my mind, anyway, doing a cost-benefit analysis of an issue involving very large changes like global climate change doesn't make economic sense nor moral sense. The problem is better stated as how to stay within the 2 Celsius target (or how to get back within it) at minimum cost (and equitably). And uncertainty should be modeled explicitly rather than built into the discount rate.