Stochastic Trend

Stiglitz on the Great Depression and the Great Recession

2012-01-30T17:08:00.003+11:00

Joseph Stiglitz argues that the Great Depression (1930s in the US) and the Great Recession (now in the US) have a common cause in maladjustment to structural change in the economy. In the 1930s it was an overhang of the shift of employment from farming to manufacturing and today from manufacturing to the service sector. It's an interesting thesis. Odd that he omitted some important sectors - retail/wholesale, transport, & government admin from his list of service sectors. Or are many service employees becoming obsolete in advanced economies?

Scientific Collaboration Networks

2012-01-29T11:48:00.005+11:00

This map is based on 5 years of data from Scopus and maps each joint authorship as a geographical connection. You can see a high resolution image here. This projection onto Google Earth is also pretty cool, though the resolution is no higher.

One thing I found a bit surprising was the prominent position of Brazil on the map. Another interesting thing is how integrated research is in some countries like Turkey where researchers appear to be spread evenly across the country:

Things Scientists Say

2012-01-29T10:42:00.000+11:00

Australian Universities Ranked by Research Income

2012-01-24T11:41:00.003+11:00

The chart shows all sources of direct research grants earned by Australian universities in 2010. This includes government, international, and industry funding. As yesterday's post explained there are also research block grants paid by the government that total about 50% of this direct funding. The graph clearly shows why we talk of the Group of Eight universities, which are the equivalent of the US R1 universities or the UK's Russell Group. ANU, Adelaide, and UWA are a lot smaller than the big 5. So if we adjusted for size, income within this group would probably be more equal.

But there is a steep fall off to University of Newcastle. That Newcastle is the highest ranked outside the Go8 is no surprise.

How Does the Australian Government Use the ERA Results?

2012-01-23T23:08:00.003+11:00

Excellence in Research for Australia (ERA) is the Australian research assessment exercise that is very similar to the British REF. We are currently working on our submission to the 2012 ERA assessment, which is the second assessment following ERA 2010. There has been a lot of discussion of the assessment methods and results but few people seem to know about how these results are being used.

So far the ERA results will be used as part of the method of allocating money in the SRE scheme. Currently SRE is around $150 million of the $1.6 billion of research block grants paid to Australian universities. This number will rise to more than $300 million over the next year. The program is supposed to provide universities with overhead or indirect costs of funded research. Unlike in the US, the Australian Research Council (ARC) and NHMRC doesn't pay universities any overhead payments on grants. These come later through these block grant schemes.

The government released a consultation paper on the method to be used in 2012. Basically, money would be allocated according to the amount of competitive research grants each university earned weighted by some ERA based indicator. They haven't yet released the exact algorithm that will be used.

So by next year about 20% of research block grants will be weighted by ERA derived measures. I expect though that ERA will be used to allocate more of the money in the future.

The Most Rejected Paper?

2012-01-23T19:35:00.003+11:00

Is this the most rejected paper in the history of economics?

Powdthavee, N. I Can't Smile Without You: Spousal Correlation in Life Satisfaction", Journal of Economic Psychology, 30(4), 675-689.

Rejected 15 times. I think 4 is pretty much my record. 4 journals, though, not counting revise and resubmits.

Abstract Deadline for Perth IAEE Conference Extended

2012-01-19T20:26:00.004+11:00

The submission deadline for the IAEE conference in Perth has been extended till after the IAEE meeting in Kyoto. So if you missed the deadline you now still have a chance to send in an abstract. Together with my collaborators, I've submitted a total of three abstracts. Two are on meta-analysis and the other is based on my foundation seminar at ANU.

The conference organizers report:

"We have had a solid abstract submission response by the initial deadline, and we are processing those submissions straight away. However, the program committee has decided that we will be open to additional submissions until the end of the Kyoto conference. This will not delay our decision and notification process for those received by the deadline, it just allows the opportunity for those who may been caught out by the Holiday Season. We look forward to seeing you all in Perth in June!

If you have not yet downloaded the Abstract Template, please visit our website to download it."

Recent Books on Energy

2012-01-19T11:53:00.002+11:00

A former student asked me for suggestions for less academic books that address current energy issues. Here is what I suggested.

First, Vaclav Smil has written a huge number of books on energy. He is maybe a bit pessimistic. I read the global catastrophes book (2008) but he has put out more books since then that look interesting. In particular, this one on energy transitions.

By contrast, Amory Lovins is a huge optimist. We brought him to speak in Australia back in 2000. This looks to be his latest book.

Several recent books are listed in this review in the Chronicle of Higher Education. When I was in the US in October, our taxi driver in Ann Arbor was reading Rifkin's book. We discussed it after he asked me what I do...

How to Write Economics Papers

2012-01-18T15:04:00.004+11:00

Back in 2010 I blogged on John Cochrane's writing tips. Here are the slides from Daniel Hamermesh's presentation on how to publish in a good journal. A lot of it is about how to write papers rather than specifically about getting into good journals. His advice is a bit more traditional than Cochrane's, I think. You can see the full presentation on YouTube.

Crawford School Blogs

2012-01-18T09:20:00.006+11:00

I've just linked a Crawford School blog from the Development Policy Centre to my bloglist. Also from the Crawford School, though they don't describe it as a blog, is the East Asia Forum.

P.S.
As Paul noted in the comments, there is also the Global Water Forum, which is an initiative of of the UNESCO Chair in Water Economics and Transboundary Water Governance at the Crawford School. There are probably more that I don't know about yet. These kinds of blogs and forums are something I am enthusiastic about us using more to complement formal publications and events as well as traditional mentions in the media.

ResearchGate Revisited

2012-01-18T07:47:00.005+11:00

Back in 2010 I blogged briefly about ResearchGate. Today, I saw this article in the New York Times heavily featuring the site. I wonder if they sent a press release to the NYT that triggered this article? Anyway, I decided I should set up a profile on ResearchGate. I only managed to find two of my papers via their search engine - both from 2011. I wasn't impressed. I have a unique academic name (No other academic has both these initials together with my surname: D. I. Stern) so it shouldn't be too hard. I found two economists at ANU on the site already. Searches for "environmental economics" and "energy economics" didn't bring up anyone else I knew. So I'm not impressed and won't visit this site very often.

In a follow up to the NYT article, Krugman discusses how things work in economics and how it's changed. Back in 1993 when I was a post-doc at York part of my job was setting up working papers exchanges with other institutions. We'd mail them our papers if they'd mail us theirs. Soon after that, WoPEc, the predecessor of RePEc, got started and I've been involved with that ever since.

Energy Policy and Climate Mitigation in China: The Ideas Motivating Change

2012-01-15T17:15:00.004+11:00

Based on reading of government documents and the writings of Chinese academics, Olivia Boyd's ANU masters thesis documents the role of three ideas in driving China's current energy and climate policies:

1. The idea of new energy security that stresses domestic, rather than international, sources of energy insecurity.
2. Green development and growing concern over the environmental and resource constraints on economic growth.
3. Low-carbon leadership, which posits a vision of China’s international political and economic influence based on climate leadership and low-carbon markets.

This is roughly what I have argued are China's motivations - for example in my CRWF 8000 lectures on energy and the environment that I gave in October - but I find a lot of resistance to accepting that China is serious about these issues and I based my view largely on conjecture rather than a close reading of the literature. This thesis stands on much more solid foundations.

I saw this paper on academia.edu, which I am finding more and more useful as people are posting interesting papers on it that I otherwise wouldn't see.

Be Known by the Company You Keep: Citations - Quality or Chance?

2012-01-13T19:09:00.007+11:00

I previously blogged about how highly downloaded working papers lead to higher downloads of other papers in the same series. So I was interested to read that having your paper appear in the same issue of a journal as a highly cited article increases your number of citations. The implication is that weak papers can benefit from being in journals with high impact factors. Another interesting point in this paper is that self-citations help increase citations to a paper. I've suspected that this is true. Advertising your paper by citing it gets more people to be aware of it. But we can't really establish causality here. Maybe better authors just tend to cite themselves more and/or get more opportunities to do so.

Interview with Editor of the Quarterly Journal of Economics

2012-01-13T17:08:00.003+11:00

The QJE is currently widely regarded as the top economics journal. It is also well-known for leading the trend towards "desk-rejections", where papers are rejected by the editors without sending them to external referees. This greatly speeds up the process for papers that are obviously not likely to pass the refereeing process. One of my roles at Ecological Economics as associate editor is giving advice about whether to desk reject papers and I think we are desk rejecting more over time.

I found this interview with the editor of the QJE that I thought had some useful tips about submitting papers to top journals. At Ecological Economics, sloppiness won't be an automatic desk reject if the paper looks interesting. We are more likely to throw out papers because the basic thesis makes no sense or the authors do not justify at all what they do. But really bad English that hinders understanding will result in a desk reject too. Unless your English is close to native speaker standard it is worth getting a native English speaker to look over your paper before submission whether for free or for a fee.

Open Access: What's the Big Deal?

2012-01-13T14:27:00.004+11:00

There is currently a lot of discussion about open-access to academic literature. A lot of people seem to be really passionate about the issue. I agree with Gans that the fact that much research is publicly funded does not mean that the public should be able to access it free of charge. Though the major commercial journal publishers do seem to have high rates of profit, the services they provide still do have costs. One could argue that these oligopolists need to be regulated, though I think that their profits will not be maintained forever.

But is access to scientific literature so limited that government should be funding or mandating free access? The fact is that it should usually be possible to get a free copy of any article. In economics and in disciplines such as physics, most papers also exist in preprint form available for free (though the NBER still charges $5 a paper for some reason...). If you check out the information on the SHERPA/RoMEO website you'll find that many publishers including Elsevier, allow authors to put a final version of the paper on their institution's website.* Of course, a lot of authors don't do this. But if you don't and could, it seems hypocritical to complain about the lack of open access. And, of course, an increasing number of open-access journals are being published. Finally, most authors will be happy to e-mail you a copy of their paper.

The main issue, apart from the lack of convenience where direct open-access isn't available, would seem to be the archival literature. A lot is included in JSTOR. Their per article fees are lower than commercial publishers but still $10 a paper.

* A lot of these, plus "illegal" copies are available through Google Scholar. The ARC for example mandates publishing through open access or archiving publications in institutional repositories.

SHERPA/RoMEO

2012-01-12T20:33:00.003+11:00

In economics there is a very strong tradition of working papers and journals do not have a problem with a working paper version of the paper (a "preprint") already having been "published". But this can be a real problem in some other disciplines. Putting up a working paper on the web could preclude publication in a refereed journal. Usually, in biology you can assume that a preprint is not OK. For interdisciplinary researchers working out what they are allowed to do in this regard could be a real problem. Fortunately, there is a really useful website called SHERPA/RoMEO that lists journal's policies on preprints and posting of final versions of papers. Information is missing on some journals, but it does provide a huge amount of information on most.

Becoming a Researcher

2012-01-09T00:50:00.002+11:00

A great post on becoming a researcher. Well, it's actually titled: "How to find problems to work on", which is something I have found sometimes puzzles non-academics. I don't have 55 things I am working on but I do have a list with about twenty things on it which are papers from very sketchy ideas to papers under review. Probably, a smaller number of things makes sense in economics than in paleontology. Most economists publish less papers. How many things are in your list?

Credibility Intervals for Medical Journals

2012-01-06T17:05:00.001+11:00

A paper by Darren Greenwood in BMC Medical Research Methodology estimates confidence intervals for impact factors based on observed fluctuations in the impact factor over time. He comes up with these intervals for journals in research and experimental medicine in 2005:

As you might expect, the credibility intervals * are wider for lower ranked journals. These estimates do not use actual citation data to individual articles, as I did, and Greenwood notes in the article that using such data would further widen the credibility intervals.

It is pretty clear that confidence intervals for impact factors for low ranked journals are high. The providers of these statistics should really provide a measure of precision. I'm surprised that this doesn't seem to be an extensively researched area in bibliometrics.

* Bayesian equivalent to confidence intervals.

Trends in RePEc Downloads and Abstract Views per Paper

2012-01-05T12:01:00.003+11:00

A couple of months ago, I reported on trends in RePEc downloads and abstract views per person. As I was commenting on this issue on the RePEc Blog, I thought I'd do a follow on post here. Here are the same trends per paper:

Both are also on a downward trend over time. In my post in November I suggested a number of reasons that might explain the trends in per person terms. The number of papers per registered member is unchanged over recent years. So that rules out any explanations about there being fewer papers per person to download as RePEc grows. Here are possible explanations for the per paper trends here:

1. The average quality of papers is declining as more working paper series are added from lower quality institutions.

2. Too much supply relative to demand. Economists can only read so many papers.

3. The average paper is getting older and older papers will be downloaded less.

4. People are downloading more papers through services like Google Scholar, bypassing RePEc servers. This might be supported by the recent decline in total downloads and abstract views on RePEc that I mentioned back in November and Christian hinted at today.

I suspect it is a bit of each of these. If you have any ideas about how to test these hypotheses let me know!

5 Year Impact Factor for the Journal of Economic Growth

2012-01-05T10:01:00.005+11:00

Following yesterday's post on the 2 year impact factor for the Journal of Economic Growth I tried to compute the 5 year factor. According to Journal Citation Reports it's 3.467 but I came up with 3.283 with a standard deviation of 0.52. It's not unusual apparently to not be able to reproduce the exact impact factors published in the JCR. Anyway, the 95% confidence interval is from 2.25 to 4.32.

Wayback in 1997

2012-01-04T23:09:00.004+11:00

My homepage from the relatively early days of the World Wide Web. A lot of the links do work. My first web page would have been in 1995 but that is no longer accessible. The current version is here. You'll notice that this page has something in common with the 1997 homepage.

Standard Errors of Impact Factors

2012-01-04T10:05:00.004+11:00

A few times recently I've seen it claimed on the web that there is no correlation between journals ISI impact factors and the number of citations that papers published in them get. On the face of it, this sounds a priori silly. The 2 year impact factor for 2010 is the average number of citations that articles published in a journal in 2008 and 2009 got in 2010 in the Web of Science. The relationship could be weak but it's unlikely to be zero. I've checked this for my own journal articles and the correlation between Article Influence Score and citations per year is 0.20.

A different way to look at this is to ask what is the standard error of the estimated impact factor? I decided to compute this for the Journal of Economic Growth. This journal has a reasonably high impact factor - 2.458 in 2010 - and only publishes twelve articles a year, which makes it easy to compute. Here are the number of citations each paper published in the previous two years got in 2010:

As you can see, half the papers got 1 or 0 citations. This doesn't necessarily mean they are duds, maybe they were published near the end of 2009 or are slow to gain popularity. The top three papers got 13, 10, and 8 citations respectively and the fourth only 4. The standard deviation of the mean is 0.69. That means that a 95% confidence interval stretches from 1.07 to 3.84. Possibly one can be more confident about impact factors for journals with larger numbers of papers or for 5 year impact factors, we'll have to see.

Crawford School Working Papers in December 2011

2012-01-03T11:04:00.002+11:00

Following on from yesterday's post, here are some highlights of our working papers series in December 2011. Across all six series we got 2445 abstract views and 968 downloads. The most downloaded papers in each series were:

Crawford School Research Papers:

David Stern - From Correlation to Granger Causality

Arndt-Corden Department of Economics, Departmental Working Papers:

Pierre van der Eng - Total Factor Productivity and Economic Growth in Indonesia

ASARC Working Papers:

Khondoker Abdul Mottaleb and Kaliappa Kalirajan - Determinants of Foreign Direct Investment in Developing Countries: A Comparative Analysis

Asia Pacific Economics Papers:

Kazuki Onji - TAX CONSOLIDATION AND THE STRUCTURE OF CORPORATE GROUPS: EVIDENCE FROM THE JAPANESE TAX REFORM 2002

CCEP Working Papers:

Mutsuyoshi Nishimura and Akinobu Yasumoto - In Search of a New Effective International Climate Framework for Post-2020: A Proposal for an Upstream Global Carbon Market

Development Policy Centre Discussion Papers:

Matthew Morris - Measuring Poverty in the Pacific

Congratulations to all the authors!

Crawford School Working Papers

2012-01-02T11:56:00.005+11:00

I am taking over the role of research director in the Crawford School. Apart from being responsible for the PhD programs I also deal with a set of research-related issues. Instead of just posting about CCEP working papers I plan to highlight developments across all our publications in future blogposts.

I've put together a page with some links to our publications as they appear in various online services. We have six currently active working paper series that are indexed on RePEc (let me know if I missed something out):

Crawford School Research Papers : This is our new school-wide series, which is cataloged on both RePEc and SSRN and is intended to cover the range of disciplines represented at the school. However, different disciplines have different traditions of working papers. In some disciplines putting out a working paper precludes publication in a journal (in much of biology, for example). By contrast, economics has a very strong working paper tradition. So not all disciplines are likely to be equally represented here.

Arndt-Corden Department of Economics, Departmental Working Papers: This is the long-running working paper series of the Arndt-Corden Department of Economics which is now a department within the Crawford School and was formerly the economics department of the Research School of Pacific and Asian Studies. The series focuses on economic development and trade particularly in Asia and the Pacific.

ASARC Working Papers: This series is put out by the Australia South Asia Research Centre.

Asia Pacific Economics Papers: This series is published by the Australia-Japan Research Centre.

CCEP Working Papers: Readers of this blog will be familar with this series produced by CCEP.

Development Policy Centre Discussion Papers: Another new series from the Development Policy Centre at Crawford.

Most Popular Posts, 2011

2012-01-01T00:15:00.000+11:00

What were the most popular posts on Stochastic Trend in 2011? It was pretty random :)

1. 2009 Journal Citation Report Released (1525 hits). People are very interested in learning what are the top journals. Even if the report is a year out of date.

2. IAmScientist (939 hits). Also they are interested in scientific social networking.

3. Marginal Cost Curve for Crude Oil (606 hits). As oil prices rose again, the cost of oil production remains a popular topic.

4. How Does CSIRO Compare to Australian Universities? (544 hits). This is the most popular post actually written in 2011. Discussion of a paper comparing CSIRO's publication performance with the top Australian universities.

5. ERA Ranked Journal List is Out(368 hits). Even though the ranked journal list was abolished a lot of people are still using it.

6. Energy Mix and Energy Intensity (343 hits). Down from 3rd place last year, this is the most popular post on my own research content.

7. How Does PLoS ONE Have Such a High Impact Factor? (308 hits). This post is only a couple of months old but is already one of the more popular ones.

8. The Ecological Economics Critique (237 hits). Down from 4th place last year. Another part of my serialization of this paper.

8. Synthesizing Diesel Fuel Using Cyanobacteria (220 hits).

9. SD Memory Cards (214 hits).

So, only three posts actually written in 2011. I'll have to take some lessons from this when writing in 2012!

My Year in Review

2011-12-31T10:17:00.007+11:00

I started the year as a "Visiting Fellow" (i.e. unemployed but with an office etc. at the university) and ended as a full professor (appointed 15th August). In between I was an associate professor (from 10th January to 15th August). Of course, until mid 2007 I was a tenured associate professor in the US so this wasn't quite as meteoric a rise as it might seem :) (though it's debatable whether a US associate prof is equivalent to Australian one or to an Australian senior lecturer). I gave a "foundation seminar" for the new position on 1st November. The other major career highlight for the year was getting my first ARC grant.

I went on four international trips in the year. In April I went to Austria to be interviewed for a full professor position at Graz, which I didn't blog about at the time. It was a fun trip though pretty tiring. In the end they hired Martin Wagner, who I think is much more suitable for the position than I would have been. In July, I went to Korea for the IPCC, Working Group III first lead author meeting. I also gave a presentation at KEEI and did some sightseeing. In August, another new country - India - for a workshop on climate change policy. The final trip of the year was in late September and October to Ann Arbor, Michigan for another workshop.

On the publication front there were three papers which were officially published in 2011 - my review of energy and growth in Ecological Economics Reviews, publication finally of my paper on elasticities of substitution, and a paper on malaria and climate change with Simon Hay. The latter two papers were each submitted to four journals I think till we got them accepted... A couple of papers were also accepted, which hopefully will be forthcoming soon: Where in the world is it cheapest to cut carbon emissions? and The role of energy in the industrial revolution and modern economic growth. Both of these were published at the first place we sent them, but after a lot of revision. I also wrote a chapter for the Encyclopedia of Environmetrics on ecological economics.

Between all this I did manage to do some teaching :) I taught an introductory microeconomics course - Economic Way of Thinking I and gave a guest lecture at the Treasury as well as a series of three lectures in our flagship CRWF 8000 course.

That's probably enough of me talking about myself! Tomorrow there'll be a post on the most popular blogposts of 2011.

Job Opportunities at University of Maryland

2011-12-30T09:56:00.002+11:00

University of Maryland, College Park.

The College of Behavioral and Social Sciences is seeking (3) computational social scientists to expand Maryland's strengths in the computational aspects of global environmental change through interdisciplinary joint appointments. Rank will start at associate professor and tenure will be in the department closest to the applicant's background. Applicants should have disciplinary backgrounds in the social sciences and most importantly, have advanced computational skills which include experience integrating social science data into computational models.

One appointment will be in economics/geography. Experience is preferred in sustainability science in combination with one or more of the following: computational economics, economic geography, spatial modeling or data visualization. Individuals selected will lead their own research, including sustaining external funding through grants, but will participate in ongoing and future interdisciplinary, environmental projects within their departments, and across the college. Faculty hired under this search will be expected to develop a college-wide course on computational social science that would fit into a sequence taken by students to cultivate research and computational skills. Student mentoring and service to the university community will be expected.

Each applicant should submit a cover letter specifying the joint position for which they are applying, along with their relevant qualifications, a curriculum vita, names of three references, and one journal article. Material should be submitted electronically (reference position 117853). Review of applications will continue until the positions are filled, however applications received by February 3, 2012 will receive best consideration. Applicants will be notified prior to reference checks. For questions, please contact the search coordinator, Sarah Goff-Tlemsani. The University of Maryland is an affirmative action/equal opportunity employer and is proud of its diverse faculty, staff, and student body. Women, minorities, veterans, disabled veterans, and individuals with disabilities are encouraged to apply.

Shuang's Blog Has a New Name

2011-12-29T11:56:00.005+11:00

It's still at the same URL but has a new title: "Collective decision-making under uncertainty" instead of "Bioinvasion and ecoservices", which reflects the evolution of her research interests over the last 4 years since coming to CSIRO.

Paper Accepted by The Energy Journal

2011-12-28T10:52:00.003+11:00

My paper with Astrid Kander The Role of Energy in the Industrial Revolution and Modern Economic Growth has been accepted for publication in The Energy Journal. I discussed the paper when the working paper was added to RePEc. This is the first building block in the research program which is a large part of our ARC grant - the "past" energy transition. A couple more related papers are already in preparation and much more is planned.

Comparing Author Citation Profile Services

2011-12-26T14:03:00.013+11:00

There are now three leading services that provide author citation profiles online. I recently discussed the most recent entrant, Google Scholar Citations. The other two are Researcher ID (from the Web of Science) and Scopus Author Details. There are considerable differences between these services:

Google Scholar and Researcher ID require you to set up your profile yourself while Scopus does this for everyone automatically. To do this on Researcher ID you need to search for your publications on the Web of Science and so you will only add those that really belong to you. The profile does not update automatically and so there will be no noise from publications that don't belong to you but it will become out of date if you don't update it. Scopus profiles are usually very noisy unless your name is unique and there may be multiple profiles for the same author. You can request changes online but as the profile updates automatically noise is likely to be added again if your name is common. Google Scholar will suggest groups of articles that might be yours and you can search for missing articles and you can then self edit the profile. But because the profile updates automatically noise is likely to be added again. Google allows editing of the details of entries - you can correct titles, dates of publication etc. Scopus and Researcher ID only allow addition or deletion of articles as a whole. Automatic updating is really nice but it is noisy is the bottom line, especially if your name is something like S Liu.

Scopus profiles are not available publicly - only to other Scopus users which is a big downside for you as a researcher but because they are created automatically they are often my first place to look at a profile of someone. Researcher ID and Google Scholar profiles are still both rare in most fields. CSIRO requires staff to have a Researcher ID profile. I've also noted that in dinosaur paleontology several people have been able to list up to ten coauthors on their Google Scholar profile but this won't be common yet in other fields.

All three services allow you to sort the results by date or times cited. Google Scholar and Researcher ID also allow sorting by title.

The other features in the table are functions of the databases themselves. Google Scholar has the widest coverage of different types of publications. Scopus does include citations to books in the journals it covers but the author details does not. Google Scholar is limited by only looking for citations in materials that are online which does tend to favor recent citations. Do you really think that Einstein's citations increased by so much in recent years?* Scopus only has citations from post 1996 documents. The Web of Science has citations from documents going back to 1945 (if your institution subscribes that far back).

Bottom line is that Google is the most user friendly service but quite "noisy" and so far limited in who is covered. Researcher ID has the lowest noise level and is fairly user friendly. Scopus is noisy, non-public, and not very user friendly, but has the broadest coverage of researchers.

* If you think that Einstein has a lot of citations check out Pierre Bourdieu!

Transmission of Infectious Parasites Slows with Rising Temperatures, Researchers Find

2011-12-21T16:54:00.003+11:00

So says a commentary in Nature on an article in Biology Letters*. This result is from a study with rodent malaria rather than human malaria. If this extends to human malaria it could be another factor explaining why we don't find a positive relationship between temperature and malaria.** Our assumption has been that interventions have been successful in overcoming the tendency to more malaria in warmer climates. But maybe that tendency is not so strong in the first place.

* Link to letter in Biology Letters from Nature is broken and I can't find it on their website.
** My coauthor, Simon Hay, is quoted in the Nature piece.

SNIP Doesn't Work (at least not for area studies)

2011-12-16T08:35:00.010+11:00

It has been our practice at the Crawford School to highlight on the website etc. all journal articles that ranked as A or A* (the top 20% of journals) in the ARC's ERA journal ranking list. Unfortunately, the ARC abolished this ranking. We seem to be one of the few groups that were unhappy with that. Most Australian researchers seemed overjoyed.

So we had to look for a replacement listing. One option was Elsevier's SNIP which
I blogged about in May. SNIP is designed to take into account the varying citation practices in different fields. This is very important in an interdisciplinary school like Crawford. If we adopt a common metric like impact factor or article influence score then our colleagues in smaller and book-oriented fields will be disadvantaged relative to those in large journal-oriented fields like economics.

But we found that at least in the case of area studies, rather than ameliorating the problem, SNIP exacerbates it. Using an article influence score of 1 and above, I identified 78 economics journals out of a total of 305 in the Journal Citations Report and only 3 in area studies out of a total of 60 in the JCR. Using a SNIP of 2 or more, I identified 86 economics journals but only one * of the top 15 area studies journals from the JCR had a SNIP of 2 or more. So SNIP was 3 times as discriminatory against area studies than Article Influence Score.

So, reluctantly, we have decided to continue using the ERA journal ranking list for the next year using judgement to decide whether new journals qualify as leading journals. We could use the top 25% of journals in each field in the JCR as an alternative but decided that that would be less transparent. Energy Economics would not be included in the top 25% because it is outside the top 25% in economics but Ecological Economics would be included because it is in the top 25% in environmental studies, though outside the top 25% in economics. This would end up confusing people. Maybe we'll try it in 2013, unless SNIP improves in the meantime.

* This journal - African Affairs - was ranked C by the ARC!

More Musings about Schmith et al.

2011-12-12T00:19:00.002+11:00

I got an e-mail from Søren Johansen about my post about the Schmith et al. paper that he coauthored. In response I thought a bit more about whether there could be a long run relationship between atmospheric temperature, sea level, and radiative forcing. I had said that that didn't make much physical sense to me and proposed a statistical explanation for what they found. But the fact is that atmospheric temperature is in equilibrium with the temperature of the ocean surface or the mixed layer (generally the top few tens of metres of the ocean). But heat is being slowly transmitted to the deep ocean and ocean height reflects the temperature of the entire ocean. So the relation between ocean height and atmospheric temperature might need the forcing variable to complete it over the length of the annual time series available. Also of course the oceans are not simply rising from thermal expansion but due to meltwater from glaciers and ice sheets.

Some Kind of Deal is Agreed in Durban

2011-12-11T18:09:00.004+11:00

So Kyoto will be extended but be restricted to Europe. In the meantime most other countries have their Copenhagen pledges to fulfill. Negotiations will proceed to agree a global treaty with "legal force" (whatever that means) by 2015 to come into force in 2020.

This is good, assuming things stay on track because we know that China needs to peak emissions by at least 2020.

I'm not too concerned about whether countries' commitments would limit climate change to 3.5C or 2C. The main thing is to continue the momentum that will foster the innovation that will solve this problem at a reasonable cost. We are seeing this technological change happening in a significant way.

Economics of the Singularity

2011-12-04T19:50:00.008+11:00

I recently read part of this book: "The Lights in the Tunnel". I don't think it makes a lot of sense in terms of the outcome - the economy collapses from lack of demand as unemployment rises. But the basic idea is intriguing. Up till now machines and computers have taken over many tasks but they have acted as "q-complements" to labor in general and particularly skilled labor.* But could the future be one where all simple tasks are automated and the remaining jobs are too hard for people of ordinary ability to do?** And what happens when/if the "Singularity" occurs - when computers become more intelligent than humans? Does inequality continue to grow beyond anything we see today? Will redistribution increase? Is there a middle way? Is this whole idea totally mistaken? Or will humans be enhanced by genetic manipulation or implanting of non-biological computers?

There are economists and entrepreneurs/technologists who have thought about this. But I don't think anyone has any real answers yet.

* If an increase in an input increases the marginal product of another input then those two inputs are q-complements.
** More precisely the most that anyone is willing to pay for a human to do these automatable tasks is less than the minimum amount needed for subsistence.

Microsoft Academic Search

2011-12-04T16:51:00.009+11:00

It turns out that Microsoft already had my idea of computing H-Indices for Institutions. I've got no idea how they calculate it, though. Probably based on the number of publications from that institution cited h times rather than the number of researchers cited h times as I suggested.

Microsoft Academic Search is another citation service that is apparently little known outside of library science circles. I only just discovered it despite being a citations junkie. According to them I have only 691 citations, which is just a bit above my count on RePEc and less than half my count on the Web of Science. They also think I'm still at RPI. But that is just my main entry. A whole bunch of my publications seem to be listed under separate identities at the University of Michigan and ANU as well as some smaller entries. So, I'm a bit skeptical about this service.

Contrary to some blogs I read, this service still seems to be under development.

CCEP Working Papers in November 2011

2011-12-03T12:00:00.004+11:00

Downloads were still good this month after relaxing from last month's craziness:

The two top papers from last month continued to get a lot of hits. We added one new paper by Paul Burke. There is a second paper dated November that didn't quite squeeze into the sample. More details of the new papers below:

The National-Level Energy Ladder and its Carbon Implications

Paul J. Burke

Abstract: This paper documents an energy ladder that nations ascend as their per capita incomes increase. On average, economic development results in an overall substitution from the use of biomass to fulfill energy needs to energy sourced from fossil fuels, and then toward nuclear power and certain low-carbon modern renewables such as wind power. The results imply an inverse-U shaped relationship between per capita income and the carbon intensity of energy, which is borne out in the data. Fossil fuel-poor countries are more likely to climb to the upper rungs of the national-level energy ladder and experience reductions in the carbon intensity of energy as they develop than fossil fuel-rich countries. Leapfrogging to low-carbon energy sources on the upper rungs of the national-level energy ladder is one route via which developing countries can reduce the magnitudes of their expected upswings in carbon dioxide emissions.

In Search of a New Effective International Climate Framework for Post-2020: A Proposal for an Upstream Global Carbon Market

Mutsuyoshi Nishimura and Akinobu Yasumoto

Abstract: Given the urgency and the magnitude of emission cuts required to arrest the global temperature rise at an acceptable level (like 2 degrees Celsius), it is imperative that action to mitigate climate change is taken at the lowest cost. This can be done if a cost effective set of policy tools with a focus on carbon pricing is applied as broadly as possible across all emission sources. In view of the emerging consensus on the temperature target like 2 degrees Celsius, it is imperative that climate scheme caps global emissions rather than allowing governments to arbitrarily pledge their intended cuts. Global emissions must be contained within the limit of carbon budget that achieves temperature objectives. Emission allowances must be issued in accordance with such limit and be sold to the global demand of emitters. Such sales of carbon budget give rise to both the most accurate carbon pricing as well as new revenue that can be used for much needed climate financing for developing countries. A new climate regime along those lines would stop global warming at an acceptable level, provide a new large climate funding that would integrate developing countries to a global low-carbon growth and transformation and keep all economies thriving, whether they are developing, emerging or developed. The post-2020 climate regime must be nimble and effective, not unwieldy and least burdensome. It must also be durable and fully congruent to the economic realities of the coming decades

Playing with Google Scholar Citations

2011-11-27T00:06:00.003+11:00

Google Scholar Citations has only been public for 10 days but already an analysis has appeared. I hadn't thought of searching by institution myself but this is a good idea. For example:

Australian National University
CSIRO

This means that it is now easy to construct a kind of h-index for institutions: where h is the number of authors cited h times. ANU's h-index is 37: and CSIRO's is 58. Of course, this is very early days and not many people have signed up yet. Harvard scored 141. I suspect based on this that something along the lines of the Wu-index (Wu = n where n is the number of articles cited 10n times) or some other variant is going to be more useful.

Bob Gregory on the Mining Boom

2011-11-23T07:58:00.008+11:00

Over the weekend I attended the 2011 PhD Conference in Economics and Business at the University of Queensland. This is an annual event held at ANU, UWA, and now UQ that has apparently been running for 24 years. Final year PhD students from across Australia present papers each of which has a faculty discussant. I was discussing Marjan Nazifi's paper on convergence (or lack of it) between EUA and CER permit prices on the European carbon exchange. My student Md Shahiduzzaman was also presenting a paper on interfuel substitution in Australia.

There was also a conference keynote given by Bob Gregory based on his paper with Peter Sheehan on the Australian mining boom. The key figure is this one:

which shows the gap that has opened up between Gross Domestic Income and Gross Domestic Product since 2003 due to the increase in the terms of trade. The increase in prices of minerals have boosted nominal mining income but this isn't reflected in the GDP numbers. I am still trying to get my head around the technicalities of this. It seems to be another case of where you need to be very careful about how national accounts are computed.

Debate on Australia's Coal Exports

2011-11-21T21:46:00.003+11:00

I was featured along with Frank Jotzo and others in this blogpost on DotEarth by Andy Revkin. I'm still confused about why people want Australia to go beyond its obligations under the UNFCCC. And it's not as if China isn't doing its part too, though very soon China will need to start reducing emissions rather than just emissions intensity. Wait to be surprised on that count I think.

Daron Acemoglu on Publishing

2011-11-18T08:38:00.002+11:00

Advice from Daron Acemoglu - editor of Econometrica and Clark Medal winner - on how to write papers and get published.

Tom Stanley's Presentation at the Wiley Online Economics Conference

2011-11-17T20:59:00.002+11:00

See Tom Stanley's presentation on meta-analysis. There is also a commentary by Randall Rosenberger and a free "virtual issue" of the Journal of Economic Surveys.

Google Scholar Citations Now Open to All

2011-11-17T19:44:00.006+11:00

Google Scholar Citations is a new academic profile service that is very similar to Researcher ID but using Google Scholar citations instead. The service has been in limited release but now is open to everyone. I found that I didn't need to make too many edits to my profile. The main issue is the entries which are prefaced by "[Citation]" in Google Scholar. These are sources that Google Scholar has found cited in publications but cannot find on the web. Most of these are not included in my profile and I couldn't add all of them. As a result my H-Index in the profile is one point lower than the number I computed direct from Google Scholar. The total citation count is 0.5% lower than what I found with my manual search in Google Scholar. Overall, I think this is a great innovation though I would like to be able to get a bit more access to the numbers of citations per year rather than just having a graph at the top of the profile. Still, I'm sure it is early days at this point.

New Journal: Ecosystem Services

2011-11-17T15:59:00.003+11:00

A new journal from Elsevier with an editorial board with a lot of well-known names from ecological economics. From the homepage:

Ecosystem Services, associated with Ecosystem Services Partnership (ESP), is an international, interdisciplinary journal that deals with the science, policy and practice of Ecosystem Services in the following disciplines: ecology and economics, institutions, planning and decision making, economic sectors such as agriculture, forestry and outdoor recreation, and all types of ecosystems.

The aims of the journal are:
(1) to improve our understanding of the dynamics, benefits and social and economic values of ecosystem services,
(2) to provide insight in the consequences of policies and management for ecosystem services with special attention to sustainability issues,
(3) to create a scientific interface to policymakers in the field of ecosystem services assessment and practice, and
(4) to integrate the fragmented knowledge about ecosystem services, synergies and trade-offs, currently found in a wide field of specialist disciplines and journals.

From Correlation to Granger Causality Added to New Crawford School Research Papers Series

2011-11-17T08:45:00.002+11:00

My paper From Correlation to Granger Causality has been added to the Crawford School Research Papers series on RePEc. I'm now working on revising the paper and doing new tests in collaboration with Kerstin Enflo. This version represents the conference paper I gave in Michigan at the "Annual Institute on Joint Outcomes for Sustainability" (which was not an annual institute but a once off workshop) organized by Arun Agrawal. Both Shuang and myself were invited to the workshop. Shuang's work was more directly relevant looking at decision-making for dealing with invasive species. I was asked to talk about "from correlation to causal inference" in a session of that topic where different econometric methods were discussed. Most relevant in that session to the topic at hand was Paul Ferraro's presentation on the effects of protected areas in Costa Rica on poverty in surrounding districts.

Google Scholar Continues to Improve

2011-11-16T11:06:00.003+11:00

Every few months Google Scholar seems to undergo a rebuild of their database and housekeeping exercise. Before the exercise, lists of references are no longer in exact order of the number of citations they have received. Rather they are in order of the number they received at the last rebuild. Another rebuild has occurred today. In this rebuild they have managed to aggregate together stray citations much better than ever before. All the citations to my two most cited articles (both in World Development) have now been aggregated into single entries in the database rather than being spread across several entries with slightly different bibliographic data. I don't know whether accuracy has similarly improved in terms of number of citations. Previously, there could be some double counting of the same paper in the list of citations to an article. It's likely that that has improved too. There are still some split entries but it is much better than before and should be much more user-friendly for counting h-indices etc.

Schmith, Johansen, and Thejll on Atmospheric Temperature and Sea Level Rise

2011-11-14T19:48:00.008+11:00

Three Danish researchers, including famous time series econometrician Soren Johansen, recently posted a paper on SSRN on a cointegration analysis of atmospheric temperature, sea level, and radiative forcing. The study has some odd results. From their abstract:

"We find a relationship between sea level and temperature and find that temperature causally depends on the sea level, which can be understood as a consequence of the large heat capacity of the ocean."

They find that sea level is an exogenous variable and drives atmospheric temperature. I think this is a plausible explanation for this result given that the data is annual and as they say later in the abstract:

"We hypothesize that this is due to a long adjustment time scale of the ocean and show that the number of years of data needed to build statistical models that have the relationship expected from physics exceeds what is currently available by a factor of almost ten."

The slow adjustment of the ocean to changes in radiative forcing is a major challenge for time series modelling of the global climate system using historical data. I debated Michael Beenstock on this issue last year on this blog and in an e-mail exchange with him. The problem is that as Schmith et al. find here the atmospheric temperature depends on the temperature of the ocean. Directly modelling the effect of radiative forcing on the atmospheric temperature using a short time series can result in biased estimates. My approach was to use ocean heat content as an additional variable that acts as a second transmission path for the effects of radiative forcing changes on atmospheric temperature. Using sea level might work in a similar way though it depends on glacier melt and other factors potentially as well as thermal expansion of the ocean. An advantage of sea level is that a much longer time series is available.

Schmith et al.'s stranger result is:

"In a second step, we use the total radiative forcing as an explanatory variable, but unexpectedly find that the sea level does not depend on the forcing."

I would have expected them to find an effect of radiative forcing on sea level. But using a Monte Carlo analysis they argue that it would take 1000 years of data to get a significant result.

I'm not sure that this is the final word that can be said on this. They find only one long relationship between the three key variables.* This relationship is as follows:

zt = Tt - 1.4 St - 0.3 Ft

zt is the residual in year t, T is atmospheric temperature, S is sea level, and F is radiative forcing. My problem is that this doesn't make sense to me physically as an equilibrium relationship. It could make sense that there are long-run relationships between T and S, between S and F, and between T and F. But, as written, sea level can substitute for forcing in affecting atmospheric temperature and vice versa. I suspect that this result is because the volcanic events render the forcing series relatively stationary and, therefore, cointegration cannot be rejected for this relationship. The forcing series looks like this:

In my work, I instead assumed which variables had long-run relationships based on physical theory and I used a multicointegration type approach. So I'm not surprised that sea level doesn't react to this disequilibrium in their analysis. I would be interested in what results they get if they also test a forcing series without the volcanic effects or disaggregate the stationary (volcanics) and non-stationary (GHGs, aerosols, solar irradiation) forcing components.

Of course, this relationship might actually make sense and I could be totally wrong here. Let me know what you think.

I'm really happy, though, that time series analysis is increasingly being used now to investigate these questions. Robert Kaufmann and I pretty much pioneered this but I gave up as I found it hard to get much positive interest from climate modellers. I never published my final paper on the topic. Robert Kaufmann has continued to work on this with greater success.

* In the paper there is a typo where they say that the p-value for the test of one cointegrating vector against two is 0.01. It is in fact 0.9117 the authors tell me in an e-mail.

Paper Accepted by AJARE

2011-11-14T14:22:00.004+11:00

My paper with Jack Pezzey and Ross Lambie: "Where in the world is it cheapest to cut carbon emissions?" has been accepted for publication by the Australian Journal of Agricultural and Resource Economics. It will be a while till it is available online. In the meantime there is a working paper version available here. The paper arose from the observation that countries like Australia which at first glance seem to use energy wastefully and have abundant opportunities to cut emissions at low costs can have high total costs of addressing climate change because they are so emissions intensive. Where it is cheap to cut emissions depends on whether we rank countries by marginal costs of reducing emissions or by total costs of reducing emissions.

In the paper, we test this idea using the results of the models that participated in the EMF-22 climate policy simulation exercise and the results seem to support this conjecture. This might explain both debates within countries about what to do about climate change and the different stances of countries in the international negotiations. For example environmentalists might look at the cheap ways (in the marginal sense) to cut emissions in countries like Australia and be outraged that they're not happening while business might look at the total costs of meeting a given policy...

Also the paper gives estimates of the marginal abatement cost curve for the 4 main countries/regions based on the consensus of existing models. They show that to get substantial cuts in emissions on the order of the Copenhagen pledges you would need carbon prices a lot above the $23 initial price of the Australian ETS. The models might be over-estimating the cost of abatement. But when you take into account the half of Australian abatement expected to come from offsets and the amount that will be removed by direct action (RET) the amount of remaining domestic abatement required is in the ballpark of this kind of price.

ARC Announces DECRAs and Future Fellows

2011-11-14T11:00:00.004+11:00

Only two Future Fellowships were awarded in economics. Benno Torgler (QUT) got one for "The role of moral sentiments and emotions in human nature: an interdisciplinary empirical approach". Michael Smith at Uni Melbourne got one for an econometric theory project. Obviously, it wasn't the turn of economics...

John Tang at College of Business and Economics got a DECRA to work on "Understanding industrialisation, entrepreneurship, and technology adoption in emerging economies: new evidence from historical Japanese firms". This is the only economics award ANU got in this round of announcements.

Estimating Cointegration Models with Structural Breaks

2011-11-13T22:35:00.006+11:00

The Johansen cointegration procedure is one of the most popular methods of testing for cointegration. The tests and estimation are carried out by restricting a vector autoregression model. One of the key issues is deciding on the types of time trends and constant terms to include in the model. This is important because the distribution of the test statistics is different for each possible combination. The basic versions of the procedure assume that any linear time trend has a constant slope. But in reality the slope of the trend - which might represent a variable such as technological change - might not be constant. Johansen et al., 2000 investigated this issue and derived test distributions for the case where there are known structural breaks that cause the trend to change slope as well as for shifts in the model intercepts too. If you use EViews there seems to be a fairly user friendly way of carrying out these tests and estimating the model provided by David Giles at University of Victoria (Canada). David also has a lengthy blogpost explaining how to carry out this kind of analysis.

Reference:

Johansen, S., Mosconi, R. and B. Nielsen (2000), Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend, Econometrics Journal, 3, 216- 249.

Crawford School Research Papers

2011-11-13T15:08:00.002+11:00

I often post about our CCEP Working Paper series. We also have a new Crawford School Research Paper series that unifies the previous paper series from various Crawford School entities. The series is starting to get a decent amount of downloads and abstract views.

Does Open Access Increase Citations?

2011-11-09T14:30:00.004+11:00

PLoS ONE has a high impact factor despite publishing 70% of submitted papers. It is, of course, the best known open access journal. Does open access increase the rate of citation? The naive answer would be that it must obviously do so. Taking a barrier to access away must result in more people reading and citing a paper. On the other hand most research libraries are going to subscribe to the top journals in each field so this might be more important for lower ranked journals than highly ranked journals. Analysis can also be confounded if higher quality articles are submitted to open access journals as is argued for PLoS ONE due to its publication fee. A 2006 article in PLoS Biology compared open access and non-open access articles in the same journal - PNAS - and concluded that the open access articles were cited more. But more recent research across broader samples of journals seems to be mixed. I haven't done any detailed research on this but need to include something on this in a presentation on Friday. Any feedback would be welcome.

6. The Energy Cost Share Declines Over Time

2011-11-07T18:10:00.002+11:00

This fact is at the moment only supported by the data from Sweden and so isn't much of a fact. In Sweden the share of costs represented by energy use has declined over time:

It seems that this might be a general phenomenon. I have seen references elsewhere to a declining income share for land too. The implication is that the elasticity of substitution between energy and other inputs is different from unity. Stern and Kander show it to be about 0.65 in Sweden.

5. Energy Intensity Declines Over Time

2011-11-06T18:10:00.003+11:00

Though energy use has generally increased over time it has grown more slowly than has GDP. Globally it grew at about half the rate of GDP in the last 30 years. As a result energy intensity (energy per dollar of GDP) has declined globally:

Energy intensity has declined in most key countries. This chart shows the trends from 1971 to 2007:

Note that though China was very energy intensive in the 1970s, India was not. Hence there was not a lot of correlation between income per capita and energy intensity back then either. In fact (as Stephen Howes raised at my seminar on Tuesday) energy intensity has increased in some countries over time. These appear to be mostly in Latin America. We don't see this trend in any developed country. So it is a stylized but not universal fact that energy intensity has declined over time.

When we ignore traditional sources of energy such as biomass and animal power a very different pattern emerges:

As fossil fuel use was once zero in most countries (some countries have used coal for a very long time) energy intensity based on only modern energy sources must also have been zero and then increased. This results in an inverted U shape path as shown in this chart.

4. Energy/Capital is Negatively Correlated with GDP per Capita

2011-11-05T18:10:00.002+11:00

I've blogged about the energy capital ratio before. Here is a snapshot for 85 non-oil producing countries in 2007:

There is a much stronger relationship here than for energy intensity... This suggests that this indicator is maybe closer to a measure of true energy efficiency. Astrid Kander shows that the inverse - capital/energy - it also has risen over long-run:

3. Energy Intensity is not Correlated with GDP per Capita

2011-11-04T18:09:00.004+11:00

As you can see from the chart this claim is only partially true. Energy intensity (energy per dollar of GDP) does seem somewhat higher in the less developed countries. But energy intensity does not seem to vary across middle and high income countries. As GDP per capita is very closely related to output per worker, otherwise known as labor productivity (the productivity number the media is often talking about) it's curious that there is no relationship. This suggests that energy intensity is not a good proxy for energy efficiency in an underlying technological sense. My main environmental economics research hub paper discusses this issue at length. I find that underlying energy efficiency varies much more with GDP per capita than does energy intensity but a bunch of other factors including climate and economic structure also affect energy intensity. Countries like China that use a lot of coal are going to be more energy intensive, for example, because coal is a lower quality - a less productive - fuel than oil or natural gas.

As RePEc Grows Downloads per Person Continue to Decline

2011-11-04T07:28:00.005+11:00

I first reported on this issue a couple of years ago. The trend continues:

As RePEc membership and the number of items online continues to grow, the number of abstract views and downloads per person continues to fall. The chart shows abstract views and downloads each month per RePEc member. The number of downloadable or viewable items per member is actually constant or rising. Possible explanations are:

1. The average quality of papers is declining - assuming better economists joined earlier on average.

2. Too much supply relative to demand. The total community of economists doesn't expand as fast as the number of RePEc members.

3. Of course, the average paper is getting older and older papers will be downloaded less.

4. A lot of people's papers were already on RePEc as journal articles and also working papers but they weren't registered. They are not adding papers as they register and so the number of downloads per person registered is declining.

5. A new phenomenon is that total downloads and abstract views have begun to fall:

Maybe this is attributable to improvements in Google Scholar and other means of finding papers that bypass RePEc?

Whatever the cause, a given number of abstract views or downloads is getting a higher RePEc ranking over time.

2. Energy Use Per Capita Increases With GDP Per Capita

2011-11-03T18:08:00.005+11:00

Because energy is used to transform and transport matter and energy must be extracted from the environment and then returned to it in waste form, energy use can be seen as a rough proxy for environmental impact in general. Of course, some forms of energy use are more environmentally disruptive than others and some things we can do with energy are worse then others. There is a clear linear relationship here between the logs of income and energy use per capita. There is again no sign of an environmental Kuznets curve.

Sovereign Wealth Fund as a Solution to the Dutch Disease?

2011-11-03T12:18:00.003+11:00

Yesterday, Max Corden gave a public lecture on the topic "The Dutch Disease in Australia: Policy Options for a Three-Speed Economy". A working paper is available here. Corden was a pioneer in the analysis of the Dutch Disease. This is where a booming mining sector leads to an appreciation of the exchange rate and a negative impact on other tradables sectors of the economy. "Dutch" refers to the natural gas boom in the Netherlands in the 1950s. Australia is currently suffering from this Dutch Disease.

He laid out three potential policies:

1. Do nothing
2. Protect the suffering industries
3. Sovereign wealth fund invested overseas

The idea of the SWF is that the outflow of capital will put negative pressure on the exchange rate. Of course, he didn't like policy #2. But in the end Corden was ambivalent between options #1 and #3. However, he recognizes that there is a push for option 2 and, therefore, promoting an SWF might help head-off that push.

Only 26 DORA's Were Awarded Australiawide

2011-11-03T08:22:00.002+11:00

It turns out that the ARC only made 26 Discovery Outstanding Researcher Awards in this funding round. The consultation paper that the ARC put out before the changes to the scheme had proposed awarding up to 70 DORA's per year.

CCEP Working Papers in October 2011

2011-11-02T19:05:00.008+11:00

This was a great month for CCEP Working Papers with a large number of downloads and abstract views. In fact, we had the highest number of downloads per paper in the world. And the series is ranked third over the last 12 months.

We also had a new paper from Frank Jotzo and Peter Wood titled: Fulfilling Australia's international climate finance commitments: Which sources of financing are promising and how much could they raise?. This paper was downloaded 202 times and was a major contributor to the month's results. The other big contribution to downloads was the guest blogpost I did on the Oil Drum, which discussed my paper on the role of energy in economic growth. This generated 387 downloads! A recent much discussed paper assesses the impact of blogs on the download of papers. This again shows how being featured on a high traffic blog has an impact.

Video of Foundation Seminar

2011-11-02T18:46:00.000+11:00

There is a video of my "foundation seminar" now available here. Slides are available here.

1. Energy Use Per Capita Increases Over Time

2011-11-02T18:03:00.008+11:00

This is the first of my posts on "Energy and Growth: The Stylized Facts". There is nothing definitive about these facts and eventually I might adopt a different set. Astrid Kander picked seven facts which only partially overlap with mine.

The first fact is true globally:

and within individual countries:

In Sweden per capita energy use has been stable, in fact, for the last few decades, but there is no sign of an environmental Kuznets curve type relationship where energy use per capita falls at high income levels. Of course, energy use might be falling in countries suffering falling income. So this fact might be better combined with the second one (energy use per capita is higher in richer countries) as; "Energy use per capita rises with income per capita both within and across countries". As we see in Sweden the rate of growth of energy use is probably also dependent on the rate of growth of the economy. In slower growing countries improvements in energy intensity might just balance the "scale effect". This isn't so surprising as we see the same thing for carbon and maybe sulfur.

But I stated this fact in terms of time because the assumption of standard growth models that innovation is continuous over time and, therefore, so is economic growth.

ARC Grant

2011-11-01T16:51:00.004+11:00

The Australian Research Council announced Discovery and Linkage grants starting in 2012 today. My team: Astrid Kander, Jack Pezzey, Chunbo Ma, and myself got a grant for our project: Energy transitions: past, present, and future. As is often the case we got much less money than we asked for - about a third. But I had applied for a DORA fellowship which I didn't get so we should be able to do most of what we planned with the money we got with some ingenuity. I'll post some more on our plans when I have more details. Congratulations also to Crawford School colleagues Michael Ward and Quentin Grafton who also got a grant to look at adaptive management of Australia's urban water; to Adrian Kay for: "The making and unmaking of Australian public policy: using Historical Institutionalism theory to understand the path from Medibank to Medicare": and Sango Mahanty for "Project Title: The political ecology of forest carbon: mainland Southeast Asia's new commodity frontier?".

Congratulations also to colleagues at the Research School of Economics John Stachurski and Renée Fry who also got grants. And at the Research School of Social Sciences, Simon Niemeyer. Well there are a lot more ANU people who got grants, these are just a few who I know.

From our Vice-Chancellor:

"ANU scholars won over 10 per cent of all funding.

102 projects from disciplines across the campus won a total of $34 million from a total pool of $310 million.

I particularly note that this year we have built on our traditionally high success rates with a very impressive 37 per cent of ANU applications under the Discovery Projects scheme awarded funding. This will see 90 projects begin in 2012, supported by $31.5 million.

This sets ANU at the top of the national scale for Discovery Project earnings."

Note that ANU is much smaller than most other Go8 universities and that the average success rate of Discovery proposals is just over 20%.

P.S. I've labelled this post with a new category "DP12". All posts about research resulting from this grant will be also labelled DP12.

Foundation Seminar Slides

2011-10-30T17:57:00.005+11:00

As I previously wrote, my "foundation seminar" is this Tuesday, 1st November at Crawford School at 12:30pm (yes, Melbourne Cup Day). There will also be some lunch/drinks before that. The slides are now online. I'm thinking to do a blogpost series on the stylized facts after I give the seminar. Maybe someday this will be a paper too.

Energy and Climate Policy

2011-10-27T12:52:00.007+11:00

The NYT has special section on energy. It's a mixed picture with stories about technological breakthroughs mixed with stories about reduced public support for some alternative energy sources. Meanwhile, Clive Spash has a new paper with Alex Lo on Australian climate policy. As you'd expect they are critical of it as it's not radical enough and is too generous to large polluters in their opinion.

How Does PLoS ONE Have Such a High Impact Factor?

2011-10-23T15:05:00.004+11:00

The journal accepts 70% of papers, so how come it has an ISI impact factor of more than 4? The journal accepts all papers that are technically correct, irrespective of significance. That's why we sent our recent paper on malaria and climate change there after dealing with reviewers who didn't like the work or claimed it not to be important at other journals.

An article from last year says that it is due to the $1350 publication fee. Authors who have the money are probably stronger as they have research grants or work at well-funded universities.* Though as the article points out they will waive the fee for anyone who claims they can't afford to pay. Also impact factors are higher in biomedical areas than others. The typical medical article in an ISI journal gets 6 citations after 2 years, which implies an impact factor of 3. I think another reason is that the journal is open access.

The author, Phil Davis, thinks that PLoS ONE could face a problem if they get a flood of low quality articles chasing the impact factor, which would impose costs on the journal as they would have to reject them and not get paid. At the moment the academic editors are volunteers and so the costs of rejected articles are lower than that of accepted ones. But they could move to a submission fee model in that case and only waive fees for developing country authors or not at all.

In 2010 PLoS ONE's IF increased despite publishing more articles.

(HT: Tom Kompas)

* There is an assumption that an author won't pay the fee from their private funds. We paid the fee using my coauthor's funding from the Wellcome Trust who mandate open access publication.

Greenhouse Gas Emissions from Shale Gas

2011-10-23T08:53:00.005+11:00

"Unconventional" shale gas obtained through hydraulic fracturing or fracking has been very controversial recently. Local residents have claimed that their water has been contaminated in areas of Pennsylvania by the activities of the gas companies. There has also been concern about earthquakes triggered by the process. It turns out according to Robert Howarth (brother of Rich Howarth, editor of Ecological Economics) et al. that due to heightened methane emissions, gas obtained in this way has a higher total warming potential in the short run (of several decades) than does using coal. This is despite the fact that when burnt gas emits around half the CO2 for each joule than does coal and gas combustion is on average more efficient in producing electricity - it is a higher quality fuel. I've long wondered about whether leakage of methane gas negated the benefit of reduced carbon dioxide from natural gas, which is one reason I researched the literature on global emissions of methane. It turns out that emissions from conventional gas production and distribution systems do not negate the greenhouse benefits of gas.* But emissions from fracking might.

* Wigley (2011) argues that in the short-run switching to conventional natural gas from coal increases global warming even without any methane leakage. This depends on the reduction in sulfate aerosols produced by burning coal, which cool the climate. But sulfate aerosols are being reduced anyway even if we stick with coal use. This is taken into account in Wigley's analysis - switching to gas though still results in a faster than BAU reduction in aerosols. OTOH even under a 10% leakage rate switching to gas reduces climate change relative to BAU after 2140.

Economic Logic Links CCEP Paper to Current US Political Debate

2011-10-22T09:19:00.004+11:00

Some republican candidates for president are saying that they would create jobs by cutting regulation, and in particular environmental regulation, as recently discussed by Paul Krugman. The Economic Logic blog links Bruce Chapman's recent CCEP paper to this current US political debate. In the Australian case, the mining industry is growing and predicted job losses are in terms of fewer net jobs being created in the industry rather than absolute losses. And the headline figures ignore the number of jobs being created elsewhere. Bruce also shows how the numbers are small compared to the annual flows of workers in and out of employment. So even if the predictions are true the effects are unlikely to be noticeable to anyone in particular.

2010 Annual Energy Review is Released

2011-10-22T08:58:00.004+11:00

The US Energy Information Administration has released the 2010 Annual Energy Review. It is a great resource. I often use graphics from the AER when teaching. Gregor.us posted a great chart from the report of the cost of addition to oil reserves. But, very disappointingly, they have dropped the chapter on international trends from this year's report. This was the chapter that was most useful for me.

Foundation Seminar

2011-10-20T15:21:00.002+11:00

As I am a new professor and continuing academic staff member in the Crawford School I am scheduled to give what is called a "Foundation Seminar" also known as an "Inaugural Lecture". This will be on Tuesday, 1st November in the Acton Theatre at the Crawford School. There will be drinks from 12pm with the seminar from 12:30-1:30pm. The title and abstract follow:

Energy and Economic Growth: The “Stylized Facts”

In 1961, Nicholas Kaldor highlighted six “stylized’’ facts to summarize the patterns that economists had discovered in national income accounts and to shape the growth models being developed to explain them. Recently Charles Jones and Paul Romer introduced a set of “new Kaldor facts” for growth economics. This lecture will attempt to summarize what we know about energy and economic growth in a similar set of stylized facts and to explain the patterns we see. It will draw on the recent research of the speaker and colleagues in Australia and Europe.

There should be a video available after the event and I'll post the slides too.

Guest Post on the "Oil Drum"

2011-10-20T08:15:00.004+11:00

A guest post written by me appeared today on the blog "The Oil Drum". It's a summary and commentary on my paper "The Role of Energy in Economic Growth" which appeared in Ecological Economics Reviews this year. There are a lot of comments. Go over there to read them. I'll try to respond to some of them soon (it's a crazy day over, today for me (Energy Change Institute open day where I'm presenting, CRWF8000 teaching, and the IPCC WG3 ZOD deadline looming). I've also added "The Oil Drum" to the blogroll.

Special Issue of Climatic Change on RCP Scenarios

2011-10-17T13:11:00.005+11:00

A little while ago I blogged about van Vuuren et al.'s paper that provides an overview of the new emissions scenarios - called RCPs - that will be used in the IPCC's 5th Assessment Report (AR5). You can now access all the papers in the special issue from a summary page. I think that these are all open access papers. There is also a special issue on the way the AR5 will deal with uncertainty. A number of these papers are open access.

Pascual et al. Respond

2011-10-12T12:39:00.002+11:00

Mercedes Pascual and colleagues have written a response to our paper in PLoS ONE. Our paper is largely a response to the Pascual and colleagues criticism of our 2002 papers in Nature, Emerging Infectious Diseases, and Trends in Parasitology.

I won't comment on it further at this stage until my colleagues have had time to read it.

Sims and Sargent Win Nobel Prize in Economics

2011-10-11T18:03:00.005+11:00

Sims and Sargent were announced as winners of the Nobel Prize in economics on Monday. I've been a heavy user of vector autoregression models in my career including this recent paper, which discusses some of the issues that Sims discussed in his 1980 paper "Macroeconomics and Reality". I met Sims once at Princeton. I visited the department for a few days to work with David Bradford. I gave a presentation on applying time series econometrics to climate change, which he attended. That was a bit scary :)

BTW, this is also the 500th post on Stochastic Trend!

Tax Forum Outcome

2011-10-06T08:46:00.002+11:00

Now we know why the low income tax offset wasn't completely abolished on "Carbon Sunday". It was so Wayne Swan could announce some concrete reform after the tax summit...

New CCEP Working Papers

2011-09-28T19:49:00.004+10:00

We have some new working papers from CCEP. The latest is from Zhongxiang Zhang who will be an associate in the CCEP network. It is titled "Who Should Bear the Cost of China's Carbon Emissions Embodied in Goods for Exports?".

Recently we also put up papers by Leo Dobes and Bruce Chapman "Financing Adaptation to Climate-Induced Retreat from Coastal Inundation and Erosion" and Harry Clarke and Robert Waushik: "Australia's Carbon Pricing Strategies in a Global Context".

Do You have Good Examples of the Role of Energy in the Economy?

2011-09-23T14:58:00.003+10:00

A journalist wrote to me for help. They are writing a popular book on the effects of energy scarcities on our economy, wealth and way of living. What good non-academic sources are there that he could use? He is especially looking for strong examples that people can relate to to illustrate two things: our massive reliance on energy in everyday life, and the key that it holds for growth.

Completed a Choice Modeling Survey

2011-09-22T08:15:00.005+10:00

This week, I was a respondent to a choice modeling survey for the first time. The purpose of the survey was to find out about reliability of supply of water, electricity, gas etc. So this was something that I as a consumer have a lot of knowledge about and a lot of interest in and it is a clear private market. So all the criticisms about environmental valuation don't apply here. Choice modeling is often used to obtain environmental valuations and I think it is superior to other approaches in that application.

The online survey gave us eight different scenarios of possible packages with varying prices and utility reliability that we could pick from. Each scenario had three different packages - our current service plus two alternatives. Each alternative had around 10 different characteristics. I've always wondered whether survey respondents could handle that and thought that you just need to give each respondent one choice set and survey more people. I was just overwhelmed with information.

I chose the current package in every case. Partly because of the information overload but also because saving $50-$400 a year on my utility bill is just not worth it to me to suffer from multiple power cuts each year and the like, which is what the trade-offs were about. Even when I lived in East Jerusalem in the 1980s as an undergrad student we didn't have that many power cuts (Troy, NY was almost as bad :)). So I'm thinking the results of this survey will be pretty insensitive to price except for the more extreme scenarios at low incomes. $400 is a big deal to someone on $30,000 a year (Australian full time minimum wage), but $50 isn't for someone on $60,000 (average wages).

Being a social science researcher myself I always feel sympathetic to people carrying out surveys and often do them. But I get really annoyed when a surveyer has me on the phone for more than a quarter of an hour asking endless questions or when an online survey turns out to have tens of pages of questions. Why do people design surveys like this that are going to either have less patient people drop out of or refuse to respond or just give random answers to either from impatience or choice fatigue?

Wiley-JoES Online Conference: Communications with Economists

2011-09-21T08:09:00.003+10:00

The Journal of Economic Surveys will be holding an online conference from 16th to 18th November. Keynote speakers are Tom Stanley, David Hendry, and Charles Nossair and there are other interesting sessions too. Registration is free. There will be live videocast of the key sessions on the web and they will also be viewable after the event. There will be commissioned discussants as well as discussion by partcipants. Sounds like an interesting venture and I plan on participating.

Why Our Malaria and Climate Change Research is Important

2011-09-19T21:30:00.004+10:00

This morning I was interviewed by Clement Paligaru on the Breakfast Show on Radio Australia. This is Australia's international broadcaster. One of the questions that he asked me was why it was important to know that malaria was declining despite climate change rather than thinking that malaria incidence was increasing due to climate change. What I came up with was that if we think that the disease will just become more widespread in the face of climate change regardless of what we do we might be apathetic about doing the things which have reduced the incidence of the disease. I'm not sure how convincing that is. But the rise in cases in the 1990s was probably due to resistance to chloroquine, an older antimalarial drug, and not climate change. That is something that is important to know.

Good Casual Analysis from Bad

2011-09-17T22:16:00.006+10:00

Recently, I wrote about Tatu Westling's paper on "male organ" length and economic growth. I argued that it was likely a case of omitted variables bias and there wasn't real causality here. And certainly this relationship wasn't stable over time. This paper did get a lot of media coverage and hence a lot of downloads. Now Westling has teamed up with a fellow student to analyse the incident. They find that other papers on their website also experienced an increase in downloads which can be attributed to a spillover effect from the interest in Westling's paper. They use differences in differences and regression discontinuity methods. This sounds pretty solid as the interest in the paper in question was a pretty exogenous shock. So having star papers in your working paper series will help increase downloads of other papers. This is similar to the Matthew effect in citations. Authors with lots of citations tend to get more and more citations and publishing a landmark paper will result in your other papers getting cited more too.

Malaria Cases in Kericho, Kenya

2011-09-17T09:35:00.003+10:00

In my IPCC AR5 chapter writing group we have been told to think of "iconic figures" we could use in the chapter. In our paper on malaria and climate change in East Africa, I think this is the iconic figure:

It just shows monthly malaria cases at the tea estate hospital in Kericho, Kenya. The increase in malaria in the 90s was linked by some researchers to climate change. But in this decade, malaria cases have collapsed at this location. In the meantime we find that there does seem to be a significant increase in temperature especially when the most recent years are included in the analysis. The figure is simple and really easy to understand.

Temperature and Malaria Trends in Highland East Africa

2011-09-16T07:00:00.001+10:00

Our article: "Temperature and Malaria Trends in Highland East Africa" is published today in PLoS ONE. I've noted some of the key points already in a series of posts as the article developed. The key points are:

In 2002 we (Hay et al., 2002) could find little evidence of significant increase in temperature or precipitation in the East African highlands in a period of a surge in malaria cases. It, therefore, seemed most likely that the increased malaria was mainly due to other causes such as increased drug resistance.

This was a very controversial finding, which has been discussed by various other researchers who generally find that there has been a significant increase in temperature in these areas and that, therefore the increase in malaria was likely due to this.

We have now tested the more recent versions of the UEA CRU database as well as the temperature series from Kericho in Kenya prepared by Omumbo et al. (2011) using a new robust test for trends in series.

Using the new test, we find that there is no significant trend in the data we originally tested but that there is a significant increase in mean temperature in the newer versions of the CRU database for the same pre 1995 period. This change in data explains the results of several of our critics.

When the post 1995 data is included in our tests the results show an even more significant increase in temperature.

We do not find a significant increase in temperature in the Kericho data for the period up to 1995 but there is a significant trend when post 1995 data is included.

We conclude that there is now clear evidence of increased temperatures in highland East Africa especially in the last 15 years.
The twist is that malaria incidence has now declined. So it's still not clear if climate change was the main cause of the surge in malaria and despite recent warming malaria has radically reduced and, therefore, other factors appear to be more important than climate in malaria incidence.

Press release version.

Launch of the Masters of Energy Change and Public Seminar

2011-09-12T20:55:00.008+10:00

An Energy Change Institute public seminar. Program:

Introduction by Energy Change Institute Director Ken Baldwin

Andrew Blakers, ANU College of Engineering & Computer Science

David Stern, Crawford School

Tom Faunce, ANU College of Law

Monday 26 September 2011 5.30 – 6:30pm, followed by light refreshments.

Tours of ANU energy research facilities at 4:30

Building 131 Finkel Lecture Theatre, John Curtin School of Medical Research, Garran Road.

The official launch of the new ANU Master of Energy Change will follow the event.

Econometrics for Grumblers

2011-09-04T15:20:00.004+10:00

Econometrics for Grumblers is the title of a recent paper in the Journal of Economic Surveys by Markus Eberhardt and Francis Teal (Working paper version). It is a survey of the cross-country economic growth literature with an emphasis on the econometric problems encountered. The biggest problem is that the state of technology or productivity is unobserved - the famous "residual" in the Solow model - and that:

1. The levels of the inputs - human capital and labor etc - which are usually explanatory variables in a growth model are affected by this unobserved variable. This results in a correlation between the error term in the model and the explanatory variables. The explanatory variables are then said to be endogenous.

2. The state of technology is non-stationary and probably has a stochastic trend.

3. The level of technology and rate of change are different in every country.

4. But the level of technology and rate of change are likely correlated across countries.

These aren't the only problems of course :) These issues have lead many to reject the usefulness of doing cross-country economic growth econometrics. Eberhardt and Teal review the literature thoroughly highlighting the underlying assumptions of each study and suggesting a new approach that they have used in their work.

I have been struggling with the issues in 1 to 4 above in a lot of my recent research, particularly on the environmental Kuznets curve and energy efficiency. I've used a variety of econometric techniques to try to deal with the issues but this gives me some new ideas to check out in more depth.

CCEP Working Papers in August 2011

2011-09-02T12:44:00.004+10:00

We put up several new papers and so got quite a lot of downloads this month. Papers tend to get a lot of downloads when they first appear on NEP. We got out highest number of abstract views and second highest number of downloads this month since launching the series. In terms of downloads per item, only two STATA related series rank higher in the world! But new series tend to have a high rate of downloads per item, of course.

Erratum: Elasticities of substitution and complementarity, Journal of Productivity Analysis 36(1): 79-89

2011-09-02T12:26:00.008+10:00

I hate looking at my published papers because there are often typos in them which I didn't catch at the proofs stage... One of our PhD students, Nitin Gupta, found a typo in my paper: Elasticities of substitution and complementarity, Journal of Productivity Analysis 36(1): 79-89. The formula in equation (20) for the Allen Elasticity of Substitution between inputs Xi and Xj, AESij, should be:

The denominator is wrong in the formula in the paper. The formula for AESii is correct. Note that these formulae only make sense if you have normalized the data in some way. If, for example, you have indexed all variables to one in the first year then the formula will give the elasticity in the first year. It makes the most sense when like me you have normalized on the sample mean for each variable and so this elasticity is at some notional mean point. If you want to calculate the elasticity at different points in time or you haven't normalized the data then you can't use this formula. This is because the parameters associated with the first order terms in the translog function depend on the units used.

The good news is that I used the correct formula in all the calculations in the paper. The bigger picture message is don't believe that a formula is correct just because it is printed in a refereed journal!

From Correlation to Granger Causality

2011-08-31T15:30:00.003+10:00

A rough draft of a new paper so don't cite it but comments are welcome. I have posted a couple of sections already on the blog. It's written for a workshop where I meant to present on "From correlation to causality" and I think I need to talk about both major approaches - instrumental variables and Granger causality. Then I do a Granger causality analysis of a bunch of variables with 150 year time series from Sweden to illustrate the points but also to contribute to the literature on energy and growth. The results support causality from energy to output but that relationship appears to have weakened or reversed in the second half of the 20th Century. Or maybe it is just harder to find anything significant in a shorter time series. Energy prices have a more significant impact on GDP than energy quantity in a model of GDP, energy price, and energy quantity, but again the relationship seems to weaken.

Representative Concentration Pathways

2011-08-26T16:14:00.008+10:00

Everyone in the climate policy field is familiar with the SRES - Special Report on Emissions Scenarios developed by the IPCC more than a decade ago. It was time for an update and we now have the new RCP's. The primary focus here is on atmospheric concentrations of greenhouse gases and other radiatively active substances. There are four pathways with radiative forcing of 2.6, 4.5, 6, and 8.5 Wm^-2. The new scenarios are being published as a special (open access) issue of Climatic Change. The overview article is authored by Detlef van Vuuren et al. I'll focus here on the related emissions pathways.

The figures compare the new scenarios to each other, the general literature, and the 4 main SRES pathways. The main thing to note is that the 2.6 RCP has much stronger climate action than any of the SRES scenarios on both CO2 and CH4 emissions. For local air pollutants, the new pathways show much lower levels than any of the SRES pathways, especially for sulfur:

This makes sense and is in-line with new understanding on both historical and likely future sulfur emissions. This will make controlling global warming harder than would have been thought with the old scenarios.

Granger Causality Testing

2011-08-21T22:18:00.008+10:00

More from my paper in progress. It's for an audience that isn't so familiar with econometrics but has a reasonable background in statistics. This is very rough, comments are very welcome!

A variable x is said to Granger cause another variable y if past values of x help predict the current level of y given all other appropriate information. This definition is based on the concept of causal ordering. Two variables may be contemporaneously correlated by chance but it is unlikely that the past values of x will be useful in predicting y, given all the past values of y, unless x does actually cause y in a philosophical sense. Similarly, if y in fact causes x, then given the past history of y it is unlikely that information on x will help predict y. Granger causality is not identical to causation in the classical philosophical sense, but it does demonstrate the likelihood of such causation or the lack of such causation more forcefully than does simple contemporaneous correlation (Geweke, 1984). However, where a third variable, z, drives both x and y, x might still appear to drive y though there is no actual causal mechanism directly linking the variables. The simplest test of Granger causality requires estimating the following two regression equations:

where p is the number of lags that adequately models the dynamic structure so that the coefficients of further lags of variables are not statistically significant and the error terms e are white noise. The error terms may, however, be correlated across equations. If the p parameters are jointly significant then the null that x does not Granger cause y can be rejected. Similarly, if the p parameters are jointly significant then the null that y does not Granger cause x can be rejected. This test is usually refereed to as the Granger causality test. There are several variants including the Sims (1972) causality test and the Toda and Yamamoto (1995) procedure discussed below.

There has been much criticism of Granger causality testing in the econometrics literature. Roberts and Nord (1985) found that the functional form of the time series affected the sensitivity of both Granger's and Sims' tests. Data that had undergone logarithmic transformation showed no sign of causality while the untransformed data yielded significant results. This stands to reason, as logarithmic transformation tends to reduce heteroscedasticity and increase the stationarity of the variables. However Chowdhury (1987) found more disturbing results that give support to those who have doubted whether Granger causality was related to philosophical causality or economic exogeneity in any meaningful way. He found that a Granger test indicated that GNP caused sunspots! A Sims test showed that prices caused sunspots! None of the alternative hypotheses were validated. Prices and income may be exogenous in the sunspot equations, but sunspots are not endogenous in any meaningful philosophical or economic way. But because sunspots are quite predictable prices and income might have anticipated them. The forward-looking behavior of human agents can be an obstacle to Granger causality testing.

Sargent (1979) and Sims (1980) introduced the vector autoregression or VAR modeling approach as a method of carrying out econometric analysis with a minimum of a priori assumptions about economic theory (Qin, 2011). The VAR model generalizes the model given by equations (1) and (2) to a multivariate setting. A multivariate Granger causality test can be identical to that described above but simply with more control variables in the regression but tests can also be constructed to exclude the lags of variables from multiple equations (Sims, 1980). The VAR approach to econometrics has been much criticized, but the critics, such as Epstein (1987) and Darnell and Evans (1990), argue that multivariate Granger causality tests are a (or the only) useful application of VARs. The advantage of multivariate Granger tests over bivariate Granger tests is that they can help avoid spurious correlations and can aid in testing the general validity of the causation test. This is through adding additional variables that may be responsible for causing y or whose effects might obscure the effect of x on y (Lütkepohl, 1982; Stern, 1993). There may also be indirect channels of causation from x to y, which VAR modeling could uncover.

Though a VAR cannot, due to limits on degrees of freedom, include all variables that may be causally related to the principal variable under investigation, some attempt can be made to include as many as possible. Of course, failure to reject the null hypothesis that x does not cause y, does not necessarily mean that there is in fact no causality. A lack of sensitivity could be due to a misspecified lag length, insufficiently frequent observations, too small a sample, or the lack of Granger causality even if philosophical causation occurs.

Engle and Granger (1987) introduced the notion of cointegration and tied it closely to the VAR model. Time series that must be differenced in order to render them stationary are referred to as integrated or stochastically trending series. The simplest case is the classic random walk where the current value of a variable is equal to its previous value plus a white noise error term. Typically, linear combinations of integrated process also are integrated. The residual from a regression of the two variables will be non-stationary. This violates the classical conditions for a linear regression. Such a regression is known as a spurious regression (Granger and Newbold, 1974). However, if a group of integrated variables share a common stochastic trend the linear combination will be non-integrated. This phenomenon - the elimination of a stochastic trend by an appropriate linear function - is known as cointegration (Engle and Granger, 1987). If two variables share a common trend, there will be Granger causality in one or more directions between them (Cuthbertson et al., 1992). Cointegration tests themselves cannot establish the direction of causality but tests can be applied to cointegrating VARs such as those estimated using the Johansen procedure (Johansen and Juselius, 1990).

An advantage of cointegration analysis is that if any integrated variables are omitted from the cointegrating relationship, which should be included in it, then the remaining variables will fail to cointegrate. Thus, if we can reject the null of non-causality in a cointegrated model, we can be more confident that this is not a spurious causality due to omitted variables.

References
Chowdhury, B. 1987. Are causal relationships sensitive to causality tests. Applied Economics 19: 459-465.

Cuthbertson, K., S. G. Hall, and M. P. Taylor. 1992. Applied Econometric Techniques. University of Michigan Press, Ann Arbor MI.

Darnell, A. and J. Evans. 1990. The Limits of Econometrics. Gower, Aldershot, Hampshire.

Engle, R. E. and C. W. J. Granger. 1987. Cointegration and error-correction: representation, estimation, and testing. Econometrica 55: 251-276.

Epstein, R. 1987. A History of Econometrics. North-Holland, Amsterdam.

Geweke, J. 1984. Inference and causality in economic time series models. In: Z. Griliches and M. D. Intriligator (eds.) Handbook of Econometrics. Elsevier Science Publishers, Amsterdam, 1101-1144.

Granger, C. W. J. 1969. Investigating causal relations by econometric models and cross-spectral methods. Econometrica 37: 424-438.

Granger, C. W. J. and P. Newbold. 1974. Spurious regressions in econometrics. Journal of Econometrics 2: 111-120.

Johansen, S. and K. Juselius. 1990. Maximum likelihood estimation and inference on cointegration with application to the demand for money. Oxford Bulletin of Economics and Statistics 52: 169-209.

Lütkepohl, H. 1982. Non-causality due to omitted variables. Journal of Econometrics 19: 367-378.

Qin, D. 2011. Rise of VAR modeling approach. Journal of Economic Surveys 25(1): 156-174.

Roberts D. and S. Nord (1985) Causality tests and functional form sensitivity, Applied Economics 17, 135-141.

Sargent, T. 1979. Estimating vector autoregressions using methods not based on explicit economic theories. Federal Reserve Bank of Minneapolis, Quarterly Review 3(3): 8-15.

Sims, C. A. 1972. Money, income and causality. American Economic Review 62: 540-552.

Sims, C. A. 1980. Macroeconomics and reality. Econometrica 48: 1-48.

Stern, D. I. 1993. Energy use and economic growth in the USA: a multivariate approach. Energy Economics 15: 137-150.

Toda, H, Y. and T. Yamamoto. 1995. Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics 66: 225-250.

Update on Potential Chinese Energy and Climate Policy Developments

2011-08-20T10:05:00.001+10:00

This article clarifies what I referred to a few days ago. Setting an energy cap before an emissions cap would follow the Chinese pattern of setting energy intensity reduction targets before they set emissions intensity reduction targets. Setting an energy consumption cap might seem odd. At the meeting in India it was argued that this might be done for "social" reasons. The level of development in Europe and Japan is seen as desirable and adequate and the Chinese government doesn't want its society to become like the United States. Of course, it might be desirable to limit energy use for environmental reasons. Though some energy production and consumption processes are more environmentally damaging than others, in the end all energy use is used to transform nature in some way.

P.S. 21 August

Actually, none of this is news. I and most other people missed this news item back in March. The target didn't appear in the 5 year plan but it still seems to be under discussion as a potential future policy.

Correlation and Causality

2011-08-19T17:49:00.003+10:00

I'm writing a paper on the topic of "From correlation to causal inference" for a workshop I'm planning to attend next month at the University of Michigan. A couple of recent papers featured on blogs which are nice examples to use in my paper.

Basically, we can only make causal statements based on a simple regression analysis if:

1. We can establish from theory that an explanatory variable is exogenous. In other words, it isn't itself caused to some degree by the variable we are trying to explain.

2. We are sure we haven't omitted any variables from the regression that might be correlated with those that are included in the regression.

Instrumental variables and Granger causality testing are two approaches that go beyond the simple regression model to try to make causal statements.

In some instances, though, exogeneity and causality are obvious. For example, in a joke paper discussed by Andrew Gelman, Bezimeni (2011) claims * to regress individual ages from survey data on responses to a survey question on trust, a factor derived from a factor analysis of various variables, and the percentage of overqualified women in national parliaments’ cafeterias. Clearly, individual age is exogenous and cannot be caused by any of the explanatory variables. Therefore, the supposed regression is nonsense. Instead, age might explain some of the responses. But average age in a location might be an endogenous variable and researchers need to be cautious of using it as an explanatory variable in a regression. For example, if we regressed income per capita in local government areas in Australia on average age, we could not necessarily interpret the results causally as the age composition of a location will depend to some degree on the economic opportunities available and vice versa.

Then there are cases where an explanatory variable is clearly exogenous and appears to have a significant effect on the dependent variable and yet theory suggests that the relationship is spurious and due to omitted variables that happen to be correlated with the explanatory variable in question. In a paper discussed by the blog Economic Logic, Westling (2011) regresses national economic growth rates on average reported penis lengths and other variables and finds that shorter penises are correlated with more rapid economic growth in the period. Penis length would seem to be exogenous but obviously this relationship would not have held in earlier periods when economic growth was more rapid in Europe and its Western offshoots and slower in Asia. So, it seems that the result is likely due to omitted variables bias unless the effect should only have become relevant in recent decades.

* Though regression results are reported, it is obvious from the variables named that no regression analysis was in fact conducted.

Career Update

2011-08-18T13:47:00.004+10:00

Some of you have known about this for a while, but as I just signed the contract it is now official: My position at ANU in the Crawford School is being converted from a one-year fixed term position to a continuing position (the closest we get to tenure in Australia) and I am also being promoted from Associate Professor to Professor. This follows my presentation and interview on 27th June as part of a search in the area of environmental management and environmental economics. Several positions were advertised and, in fact, Crawford will interview for (a) further position(s). Anyway, the bottom line is I'll now be staying at ANU and no longer looking for a job. I thank everyone who helped me out in this job search including writing recommendations, passing on job opportunities, and giving me the opportunity to interview at various places.

Indian Perspective on Climate Change

2011-08-14T11:33:00.009+10:00

I've been at the workshop on Equity, Sustainability, and Climate Change organized by the Centre for Science, Technology and Society at the Tata Institute of Social Sciences in Delhi over the last two days. The meeting was attended by both academics, NGOs, and government officials including a speech by the environment minister. It has been interesting to hear different perspectives on the climate change issue than I usually hear from Australians, Europeans, Americans, and Chinese. Though mentioned by some Chinese, there is a much stronger emphasis on historical responsibility for emissions in the context of a "carbon space" or "carbon budget" model. Developed countries have used up much of the available space in the atmosphere to absorb carbon dioxide and the question is how can the developing countries develop with the little remaining available space in the next few decades if we are to stay within a 2C maximum warming. There is still debate about whether there should be another round of Kyoto commitments or whether the "bottom up" or "pledge and review" framework that emerged from Copenhagen can be accepted. It was pointed out that it was the BASIC countries (Brazil, South Africa, India, and China) that got together with the US at Copenhagen to introduce this regime, so they can hardly complain now. And many seem to accept that Kyoto is dead and at least China has to be in any new agreement in order to have the slightest chance of the getting the Americans on board. Mukul Sanwal stated that China looks like announcing a unilateral cap on per capita emissions, perhaps at the Durban meeting and that this will change the whole game. There was a lot of exasperation with the US and amazement that they could almost default on their debt obligations just because they can't agree with each other internally.

There were also several presentations on the costs of climate mitigation, lead off by my paper on alternative cost measures. We found that the alternative approaches came to the same conclusion - that even a $50 a tonne CO2 tax is very low and would prompt switching to renewable energy on a large scale or substantial abatement in the short-term.

I met a lot of new people. Several, such as , Sivan Kartha, were at the IPCC meeting in Korea but I didn't happen to meet them there.

Bunch of New CCEP Working Papers

2011-08-08T10:45:00.003+10:00

We have added six new working papers to the series, so far in July and August:

How Many Jobs is 23,510, Really? Recasting the Mining Job Loss Debate,
Bruce Chapman and Kiatanantha Lounkaew, July 2011, CCEP Working Paper 1106

It is commonplace in Australian policy debate for groups presumed to be adversely affected by proposed policies to provide estimates of the undesirable consequences of change. A fashionable form relates to predictions of job losses for the group affected, usually accompanied by counter-claims made by the government of the day or other groups in favour of the policy. A highly public example of the above is the claim by the Minerals Council of Australia (MCA), based on work done in 2009 by Concept Economics (2009) that the then-planned Emissions Trading Scheme (ETS) would result in 23,510 fewer jobs in Australian mining than would otherwise be the case. Our research reports on findings using three different data series and methods to put into context the supposed jobs loss figure. Our results should not be taken to mean that economic policy reform is costless to all employees who might be affected by sectoral changes in the labour market, and there remain clear roles for government to minimise the personal costs for those so disadvantaged. As well, the details of this research cannot be translated into precise analyses of the employment effects of the carbon price policy being developed by the current government. But the essential points concerning the size and meaning of mining sector employment effects should not be in dispute; the alleged Òjobs lossesÓ aspect of the climate change policy debate is not in any sense important to the overall discourse.

Nordhaus, Stern, and Garnaut: The Changing Case for Climate Change Mitigation,
Stephen Howes, Frank Jotzo, and Paul Wyrwoll, July 2011, CCEP Working Paper 1107

Today the idea that climate change requires a gradual and moderate response no longer commands consensus support among economists. A more demanding approach is gaining ground. This paper traces the changes in economic thinking concerning the case for action on climate change, through an analysis of the work of three eminent economists: William Nordhaus, Nicholas Stern and Ross Garnaut. It shows how from Nordhaus to Stern to Garnaut the case for more urgent and radical mitigation has been strengthened as temperature targets have been lowered and business-as-usual emissions projections raised. It also shows that Stern and especially Nordhaus, who has been working on this subject the longest, have changed their own views in favour of more urgent and radical mitigation. Some disagreements remain between these three economists, and some other economists have more moderate views, but the old consensus has been shattered.

Challenges in Mitigating Indonesia's CO2 Emission: The Importance of Managing Fossil Fuel Combustion,
Budy P. Resosudarmo, Frank Jotzo, Arief A, Yusuf, and Ditya A. Nurdianto, August 2011, CCEP Working Paper 1108

Indonesia is among the largest 25 carbon dioxide emitting countries when considering only fossil fuels, and among the top three or five when emissions due to deforestation and land use change are included. Emission per capita from fossil fuels are still low in comparison with other countries, but have been growing fast, and are likely to overtake those from deforestation and land use change in the future. This paper argues the importance for Indonesia to start developing strategies to mitigate its emissions from fossil fuel combustion. It analyses the main drivers of the increase in emissions, identifies the options and challenges in reducing the future growth in emissions. Policy options are reviewed that would enable the Indonesian economy to keep on growing, but with a much lower carbon output.

Green Fiscal Policy and Climate Mitigation in Indonesia,
Budy P. Resosudarmo and Abdurohman, August 2011, CCEP Working Paper 1109

In common with other archipelagic countries, Indonesia is vulnerable to such impacts of climate change as prolonged droughts, increased frequency in extreme weather events, and heavy rainfall resulting in floods. These threats, coupled with the fact that Indonesia has been declared one of the three biggest greenhouse gases emitters, has induced the Indonesian government to place a high priority on climate change issues. In particular, the government considers its fiscal policy to be a key instrument in both mitigating against and adapting to climate change. This paper reviews Indonesia's implementation of green fiscal policies and discusses recent Indonesian fiscal policy responses to its commitment to reduce its emissions by 2020. In general, one can conclude that although progress has been made in the area of green fiscal policy in Indonesia, a more vigorous approach is needed to protect Indonesia's environment and to cope with the new challenges of controlling CO2 emission in the era of climate change.

Five Perspectives on an Emerging Market: Challenges with Clean Tech Private Equity,
Eric R. W. Knight, August 2011, CCEP Working Paper 1110

Private equity investment in technologies which deliver low carbon energy has grown as an area of both economic and social performance. This article offers a perspective on some of the challenges in the industry. It relies on case studies drawn from thirty five interviews with leading clean tech investment managers across Silicon Valley, New York and London. The findings suggest that despite the long-term growth opportunities, some investors have struggled to find attractive risk-reward premiums in early stage investments.

Where in the World is it Cheapest to Cut Carbon Emissions? Ranking Countries by Total and Marginal Cost of Abatement,
David I. Stern, John C. V. Pezzey, N. Ross Lambie, August 2011, CCEP Working Paper 1111

Countries with low marginal costs of abating carbon emissions may have high total costs, and vice versa, for a given climate mitigation policy. This may help to explain different countries' policy stances on climate mitigation. We hypothesize that, under a common percentage cut in emissions intensity relative to business as usual (BAU), countries with higher BAU emissions intensities have lower marginal abatement costs, but total costs relative to output will be similar across countries; and under a common carbon price, relative total costs are higher in emissions-intensive countries. Using the results of the 22nd Energy Modeling Forum, we estimate marginal abatement cost curves for the US, EU, China, and India, which we use to estimate marginal and total costs of abatement under a number of policy options currently under international debate. The results of this analysis provide support for our hypotheses.

Handbook of Economic Growth: Working Paper Edition

2011-08-07T13:04:00.004+10:00

I was just looking for a reference to support a point I was making in the revision I'm doing of a paper on economic growth and remembered that all the working paper versions of the chapters in the Handbook of Economic Growth have been helpfully linked to this webpage at Stanford. It's a great resource.

2nd Climate Change Adaptation National Congress

2011-08-04T15:15:00.001+10:00

Readers might be interested in the 2nd Climate Change Adaptation National Congress to be held in Melbourne from Thursday 13th October 2011 to Friday 14th October 2011.

CSTS-TISS Workshop

2011-08-03T22:42:00.004+10:00

I don't think I've mentioned on the blog that I am going to India next week to a workshop on "Equity, Sustainability, and Climate Change" organized by the Centre for Science, Technology and Society at the Tata Institute of Social Sciences. Though TISS is in Mumbai the workshop will be in Delhi at the India International Centre. The workshop focuses on balancing the need for sustainability and hence a limited global carbon emissions budget with the desire for equity in dividing the remaining allowed emissions among developing and developed countries. I have written a couple of papers* relevant to India's climate policy, hence my invitation to participate.

I haven't been to India before, so it will be my second new country this year, though I'm not planning on going anywhere but Delhi.

* We will post a new version of "Where is it Cheapest to Cut Carbon Emissions?" soon. This semester I have also been working with a student (Jack Gregory) on a paper on rural energy use in India and hopefully we'll turn that into a working paper fairly soon too.

Carlos Lopez

2011-07-31T14:17:00.002+10:00

I just heard from Carlos Lopez, who recently got his PhD from Rensselaer in economics. I was his advisor for a year when he started at RPI, before I left for Australia. He is now working at the Instituto Nacional de Ecologia in Mexico doing research on integrated management of water basins. He also runs a blog in Spanish with some friends, which covers issues in environment and economics among other topics. I'm adding to the list of blogs here.