Do Mining Economies Save Too Little?

I'm currently teaching Agricultural and Resource Economics for the first time. This week we started covering non-renewable resources focusing on minerals. One of the topics I covered is the resource curse. One of my sources is van der Ploeg's article "Natural Resources: Curse or Blessing?" published in the Journal of Economic Literature in 2011. In the paper, he reproduces this graph from a 2006 World Bank publication that apparently uses 2003 data from the World Development Indicators:

 

Genuine saving – now known as "adjusted net saving" – is equal to saving minus capital depreciation and various forms of resource depletion with expenditure on education added on. The idea is to measure the net change in all forms of "capital" in an economy. Mineral and energy rents are the pre-tax economic profits of mining. They are supposed to represent the return to the resource stock. The graph tells a clear story: Countries whose GDP depends heavily on mining tend to have negative genuine saving. So, they are not adequately replacing their non-renewable resources with other forms of capital. Van der Ploeg states that this is one of the characteristics of the resource curse.

Preparing for an upcoming tutorial on adjusted net saving and sustainability, I downloaded WDI data for recent years for some mining intensive countries, expecting to show the students how those countries still aren't saving enough. But this wasn't the case. Most of the mining economies had positive adjusted net saving. So, I wondered whether they had improved over time and downloaded the data for all available countries for 2003:

I've added a linear regression line.* There seems to be little relationship between these variables. The correlation coefficient is -0.017. Presumably, this is because of revisions to the data since 2006.

* I dropped countries with zero mining rents from the graph. The three countries at  top right with positive adjusted net saving are Saudi Arabia, Kuwait, and Libya. Oman and then does Democratic Republic of Congo have the next highest levels of mining rents and negative adjusted net savings.

Public Policy Schools in the Asia-Pacific Ranked

I have a new paper with my Crawford School colleague Bjoern Dressel published in Asia & the Pacific Policy Studies (open access). The data and figures for the article are on Figshare. Bjoern has been interested for a while in ranking public policy schools in the Asia-Pacific region.  But a comprehensive ranking seemed hard to achieve. Recently, I came across an article by Ash and Urquiola (2020) that ranks US public policy schools according to their research output and impact. Well, we thought, if they can rank schools just by their research output and not by their education and public policy impact then so can we 😀. Research is the easiest component to evaluate.

We compare the publication output of 45 schools with at least one publication listed in Scopus between 2014 and 2018, based on affiliations listed on the publications rather than current faculty. We compute the 5-Year impact factor for each school. This is identical to the impact factor reported for academic journals, but we compute it for a school rather than a journal. It is the mean number of citations received in 2019 by a publication published between 2014 and 2018. This can be seen as an estimate of research quality. We also report the standard error of the impact factor as in my 2013 article in the Journal of Economic Literature. If we treat the impact factor as an estimate of the research quality of a school then we can construct a confidence interval to express how certain or uncertain we are about that estimate. This graph shows the schools ranked by impact factor with a 90% confidence interval:

Peking and Melbourne are the two top-ranked schools but the point estimates have a very wide confidence interval. This is because their research output is relatively small and the variance of citations is quite large. The third ranked school – SGPP in Indonesia – only had two publications in our target period. After that there are several schools with much narrower confidence intervals. These mostly have more publications.

Here we can see the impact factors on the y-axis and the number of publications of each school on the x-axis. Three schools clearly stand out at the right: Crawford, Lee Kwan Yew, and Tsinghua. These schools are also top-ranked by total citations, which combines the quality and quantity variables. The three top schools account for 54% of publications and 63% of citations from the region.

In general, the elite schools are in China and Australia. Australia has three out of the top ten schools ranked by impact factor and total citations, despite its small population size. China, on the other hand has at least five schools ranked in the top ten across both rankings, which is remarkable given that many of these schools have been established only in the last 15 years (though linked to well-established research universities).

We found more schools that had no publications in Scopus in the target period. Perhaps in some cases they are too new, or faculty use their other affiliations, but clearly there is a lot of variation in research-intensiveness. Somewhat surprising is the low ranking of public policy schools in Japan and India – both countries with a considerable number of public policy schools, but none in the top ten schools when ranked by 5-year citation impact factor or total number of citations. 

One reason for the strong performance of the Chinese schools is that they focus to some degree on environmental issues, and particularly climate change, where citation numbers tend to be higher. We did not adjust for differences in citations across fields in this research, but this is something that future research should address.

Assessing Students during the Pandemic

Last week I was a panelist at an ANU webinar on assessing students during the current pandemic conditions.

You can watch just my part where I talk about reorganizing my course to deal with online exams:

Or the whole discussion here:

Emissions Reduction Survey 2019

I again carried out a contingent valuation study of climate change using my environmental economics class as respondents. The survey was exactly as in 2018. Participants could vote yes or no on proposals to raise the Medicare levy by 0.125% or 0.25% to help fund the Emissions Reduction Fund. I designed the survey to follow the NOAA panel guidelines. I also asked the students to explain why they voted the way they did.

The results differ from 2018. Only 42% voted for a 0.125% increase in the Medicare levy, while 53% voted for a 0.25% increase. Five people voted against the smaller tax and for the larger tax. So there was quite a lot of irrational behavior where the perfect could have been the enemy of the good if one person had voted differently on the higher tax. This kind of thinking is in large part, IMO, why Australia doesn't now have a carbon price...

Of those voting no on both proposals, there were a mix of responses. Only one seemed to be saying that they couldn't afford the tax given the benefit! And that is what such a survey is supposed to measure. Others objected to the payment vehicle, by suggesting that the government should price carbon or reduce the diesel rebate etc. or borrow/print money instead. I agree with the first two of these, but again that leads here to nothing happening on the climate front if that is what you care about. Others worried about the distributional impact. That is a valid criticism of the Medicare levy proposal, which is a tax on all ones income rather than a progressive or marginal tax. One person incorrectly thought the Medicare levy was unethical, as it was a tax on healthcare. Actually, it is just an extra income tax.

Of those voting yes to the lower tax and no to the higher tax, only one mentioned the cost. The others said that the government should find other funding (borrowing?) or polluters should pay – of course in the end it is the consumer who will pay to the degree that polluters can pass on costs…

Those voting yes on both proposals all said the tax increase was affordable, so they did consider actual willingness/ability to pay.

The bottom line, is that there is a lot of behavior going on in the responses to this survey which doesn’t fit with the model of paying for a public good model where people state their honest WTP, even with a supposedly state of the art design. There is some free-riding - other people should pay or the government should borrow – and on the other hand some altruism as well as protest votes about the policy design. There is also irrational behavior represented by voting no, yes, though we probably can assume that some of these didn't understand the potential implication of voting against the lower tax rate.

Buying Emissions Reductions

This semester I am teaching environmental economics, a course I haven't taught since 2006 at RPI. Last week we covered environmental valuation. I gave my class an in-class contingent valuation survey. I tried to construct the survey according to the recommendations of the NOAA panel. Here is the text of the survey:

Emissions Reduction Fund Survey

In order to meet Australia’s international commitments under the Paris Treaty, the government is seeking to significantly expand the Emissions Reduction Fund, which pays bidders such as farmers to reduce carbon emissions. To fully meet Australia’s commitment to reduce emissions by 26-28% below 2005 levels by 2030 the government estimates that the fund needs to be expanded to $2 billion per year. The government proposes to fund this by increasing the Medicare Levy.

1. Considering other things you need to spend money, and other things the government can do with taxes do you agree to a 0.125% increase in the Medicare levy, which is equivalent to $100 per year in extra tax for someone on average wages. This is expected to only meet half of Australia’s commitment, reducing emissions to 13-14% below 2005 levels or by a cumulative 370 million tonnes by 2030.

Yes No

2. Considering other things you need to spend money, and other things the government can do with taxes do you agree to a 0.25% increase in the Medicare levy, which is equivalent to $200 per year in extra tax for someone on average wages. This is expected to meet Australia’s commitment, reducing emissions to 26-28% below 2005 levels or by a cumulative 740 million tonnes by 2030.

Yes No

3. If you said yes to either 1 or 2, why? And how did you decide on whether to agree to the 0.125% or 0.25% tax?

4. If you said no to both 1. and 2. why?

***********************************************************************************


85% voted in favour of the 0.125% Medicare tax option and 54% voted in favour of 0.25% - So both would have passed. A few people voted against 0.125 and for 0.25, so I changed their votes to for 0.125 as well as 0.25.


Reasons for voting for both:


• $200 not much, willing to do more than just pay that tax 
• We should meet the target
 
• Tax is low compared to other taxes - can reduce government spending on health in future
 
• Can improve my health
 
• Benefit is much greater than cost to me
 
• I pay low tax as I'm retired, so can pay more
 
• I'm willing to pay so Australia can meet commitment
 
• Only $17 a month
 
• Tax is small
 
• Because reducing emissions is the most important environmental issue
 
 

Reasons for voting for 0.125 but against 0.25:


• Can afford 0.125 but not 0.25
• Government can cover the rest with other measures like incentives
 
 

Reasons for voting against both:


• There are other ways to reduce emissions - give incentives to firms rather than tax the middle class... 
• Government should tax firms
• Don't believe in emissions reduction fund because it is inefficient

• I prefer to spend my money rather than pay tax and reduction in emissions is not very big for tax paid


Mostly the reasons for voting for both are ones we would want to see if we are really measuring WTP - can afford to pay and it is a big issue. Those thinking it will increase their personal health or reduce health spending were made to think about health by the payment vehicle. I chose the Medicare Levy as the payment vehicle as the Australian government has a track record of increasing the Medicare Levy for all kinds of things, like repairing flood damage in Brisbane!
 I chose the emissions reduction fund because it actually exists and actually buys emissions reductions.

Most people who voted for 0.125% but against 0.25% have valid reasons - they can't afford the higher tax. However, one person said the government should cover the rest by other means. So that person may really be willing to pay 0.25% if the government won't do that.


When we get to the people who voted against both tax rates, most are against the policy vehicle rather than not being willing to pay for climate change mitigation. So, from the point of view of measuring WTP these votes would result in an under estimate. These "protest votes" are a big problem for CVM. Only one person said they weren't willing to pay anything given the bang for the buck.

Political Bias in My Teaching?

I've long been curious about what students in my classes think about my political position. So, I finally decided to ask them. I added a bonus question for 1 point on top of the 100 points available for the final exam in my Energy Economics course. The question read:

Bonus question (1 point): 
This question relates to potential political bias in my presentation of the course material. Based on the content of the course, which political party do you think I voted for in the last Federal senate election?

a. Greens
b. Labor
c. Liberal
d. Liberal Democrats
e. Australian Sex Party
f. Christian Democratic Party

Actually, ten parties ran at the last election for the two available senate seats representing the ACT, but I thought it would be better to keep the list a little more manageable.

The distribution of answers was as follows:

Greens: 2
Labor: 5
Liberal: 5
Liberal Democrats: 5
Australian Sex Party: 0
Christian Democrats: 0

Assuming that everyone who picked Liberal Democrats knows what it is - a libertarian party - there is a perceived rightward bias. But there are a lot of foreign students who might assume it is a more centrist party. Or people might have assumed that if I listed a bunch of parties they hadn't heard of, one of those must be the right answer.

What would no bias look like? Maybe something more like Green 2, Labor 7, Liberal 7, Liberal Democrat 1 or 3,7,6,1, which is closer to the voting pattern. Or maybe even further to the left as most academics including economists in Australia probably vote for Labor, so that would be the default assumption unless they perceived a strong bias in my teaching?

Impact Factors for Public Policy Schools

As part of our self-evaluation for the upcoming review of the Crawford School, I have been doing some bibliometric analysis. One thing I have come up with is calculating an impact factor for the School and some comparator institutions. This is easy to do in Scopus. It's the same idea as computing one for an individual or a journal, of course. I am using a 2016, 5 year impact factor. Just get total citations in 2016 to all articles and reviews published in 2011-2015. Divide by the number of articles. Here are the results with 95% confidence intervals:

The main difficulty I had was retrieving articles for some institutions such as the School of Public Affairs at Sciences Po. Very few articles came back for various variants of the name that I tried. I suspect that faculty are using departmental affiliations. I had a similar problem with IPA at LSE. So, I report the whole of LSE in the graph. It is easy to understand this metric in comparison to journal impact factors. As an individual metric the confidence interval will usually be large, though my 2016 impact factor was 5.9 with a 4.2 to 7.5 confidence interval. That's more precise than the estimate for SIPA.

PhD Applications Again

Three and a half years ago, I wrote a post about PhD applications. Since then, I have received a huge number of enquiries from prospective students. I now have two PhD students (Alrick Campbell and Panittra Ninpanit) and am on the committee/panel of two others (Anil Kavuri and Rohan Best). There are a couple of other good students who have applied but haven't come here because either their English test scores didn't meet our requirement or they couldn't get funding. We don't offer any new internal Crawford School scholarships at this point and I don't have any grant funds for PhD students. So, it is quite unlike applying for a PhD in the US where most students are funded by university sourced money in social sciences like economics. Here it is most likely that you will be funded by the Australian government one way or another, by your own government, or by an intergovernmental organization like the Asian Development Bank.*

As I mentioned in my previous post, also, unlike North America, applying to do a PhD in the social sciences and humanities here in Australia requires lining up a supervisor (=advisor) up front. Therefore, it is more like applying to do a PhD in the natural sciences and engineering in the US. Our formal process here also requires that potential students submit a research proposal, despite the fact that at ANU there is up to a year of coursework required in the economics program, which makes it seem more like a US PhD than most Australian PhD programs where you start doing research more or less straight away.

This is where I have been a bit frustrated by potential students submitting proposals that aren't at all related to the kind of research I do (despite this blog and my research webpage), proposals that are not very good, or being surprised that they need to submit a proposal because that isn't required to apply for a PhD in the US. Some of the latter seem like potentially good students. When I ask them for a proposal, the usual reaction is to write something rather quickly. I can't blame these students - when many programs around the world don't require a proposal, why should they invest a lot in writing one. One of the main reasons I did my PhD in the US rather than Britain was that I didn't know what to write a proposal about at the time. Another downside of a student submitting an upfront proposal is that they might then feel somewhat locked into that subject despite having written the proposal being a sunk cost. Alrick and Panittra were exceptions, having a pretty good proposal up front that was related to my research, which is why I agreed to supervise them.**

So, after receiving another off-the-wall topic from a prospective student this morning, I'm thinking of taking a radically new approach. Maybe, I should require students to submit a completed research paper (like we did when I was at RPI) instead of a  proposal for future research and then discuss this paper with the student to see how they think etc. I would require students to work on one of the broad areas I work on ("economic growth", "meta-analysis" etc.) and develop an actual proposal with them after they arrive here.

Or maybe the process is working exactly as it should? After all, I have had a few good applications and probably as many students as I should have. Any thoughts?

* Australian students can get an APA. Foreign students main option is the Australia Awards program. There are very few scholarships for students not from developing countries that Australia is interested in giving aid to. According to the government's Innovation Package, this will change dramatically.

** Students only need to line up the primary supervisor ahead of time. The other panel members usually join after the student has finished their coursework.

Odds of Becoming a Professor

This graphic is from a 2010 UK report and is based on UK data. Only 0.45% of PhDs eventually become a full professor. I didn't think the odds were quite that low. Of course, as in Australia, full professor is a higher rank than it is in the US as we have 4 rather than 3 academic ranks. Another interesting report I recently saw on Australian PhDs. Apparently in 2011 Australia graduated about 7000 PhDs which is about 1/7 of the US figure, even though Australia has 1/15 of the US population. And the number of students starting PhDs in the year was 11,000.

Interested in Graduate Study at ANU?

Come along to the information evening next week at University House. At 6:30pm in the Common Room, Frank Jotzo, Amanda Smullen, Paul Burke, and Sue Thompson will talk about what you can study and why at the Crawford School.

Global Growth Rate of GDP and Energy Use

Another slide from Wednesday's opening lecture. It shows the tight correlation between the annual global economic growth rate and the growth rate of energy use. In all but one year, energy use grew more slowly than GDP implying a decline in energy intensity. That year was 2010 - the year of strong rebound growth in the global economy and energy use following the Great Recession in the US and Europe. We analysed these movements in our short 2012 paper in Nature Climate Change.

Top Twenty Carbon Emitters, Coal Consumers, and Coal Producers

Some slides from my upcoming introductory lecture for my Energy Economics course:

This slide uses CDIAC data on the top twenty countries by emission of carbon dioxide globally in 2010. Carbon dioxide emissions here include only those from fossil fuel combustion and cement production. I also have summed up the emissions from the European Union and added it as if it was a single country (as the EU negotiates as a bloc) in addition to including all its member countries in the ranking. The three big emitters stand out clearly from all the rest. Emissions are measured by mass of carbon. To get carbon dioxide multiply by 3.66.

 

Of course, coal use is a big driver of CO2. This chart shows how China consumers so much more coal than any other country and after the US and India, the rest look pretty inconsequential.

 

On the whole, coal is consumed where it is produced with two important exceptions - Indonesia and Australia - the two biggest coal exporters. China produces the overwhelming majority of the coal it uses despite large imports. The majority of Australian exports are coal for iron smelting, so-called "metalurgical coal".

Natural Resources and Economic Growth

Carlo Carraro, Marianne Fay, and Marzio Galeotti call for mainstream macroeconomics textbooks to talk about the role of natural resources in economic growth and development. This is something that ecological economists have been calling for 25 years plus. But it is good to see more people getting on board. I wonder though how much consensus there is on what we should teach students about this.

Energy and Climate: A Primer

A new online textbook written by Cutler Cleveland (who was my PhD adviser) published by Trunity. You can request a desk copy just like you can for conventional hard copy textbooks.

The book's theme is that "a stable, predictable climate is an essential life support function of the Earth. Human use of carbon-based fuels such as oil, natural gas, and coal has increased the quantity of greenhouse gases in the atmosphere that warm the planet. The increase in the Earth's temperature since 1850, and the increase that is forecast to occur over the next 100 years, pose grave risk to all nations. The "climate problem" and the "energy problem" thus are are intimately linked, and must be tackled together."

Growth in Oil Reserves 2011-12

 

I'm updating my lecture on fossil fuels for my Energy Economics class. BP released its latest Statistical Review of World Energy about a month ago and I'm taking my first look at it. The graph above shows the ten largest increases in oil reserves by country. I used the reserve data for 2012 in this year's report and the reserve data for 2011 in last year's report to calculate the difference. Some of the changes in reserves have been backdated in the current report. The US comes in third with 4.1 billion barrels. US reserves have increased by 6.6 billion barrels or around 15% since the fracking boom took off. Of course, this doesn't reflect the amount of oil discovered as there is ongoing production. But US reserves remain at around 2% of the world total. In terms of increases in proven reserves this isn't yet revolutionary or game changing, I think.

Global Energy Assessment

The Global Energy Assessment is now available for free online. This is a major international assessment of the prospects for energy transition launched in 2012. Chapter 1 "Energy Primer" is particularly useful, providing an introduction to energy systems. I am using it as a reading in my energy economics course that is starting this week (2nd year I am teaching it). It updates the 1996 energy primer that was included in the 2nd IPCC Assessment Report that I used as a teaching resource up till now.

Australian-German Climate College

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

Information for Prospective PhD Students

In the US, a proposal is not a requirement for applying to do a PhD. Usually, students do one to two years of coursework before writing their proposal and it is enough to confirm that a department has faculty specializing in the general area that a student is interested in, say energy economics or climate change in my case. But, here in Australia, we expect students to submit a detailed proposal, even though in practice this proposal will be extensively revised after they start study. And in our economics program there is a year of coursework before students switch to research only. It makes sense to me for a student to select an area of interest to the potential supervisor and then discuss with the supervisor how to develop the proposal. Of course, a student might have a burning issue that they can't wait to conduct research on. But I doubt there are really many such cases. I certainly didn't know what I wanted to research. This was one of the main reasons I went to study in the US rather than remain in the UK. In the UK I would have needed to submit a proposal with my application.

Jack Pezzey has some good guidelines to help potential PhD students think about the application process in Australia. He recommends developing the proposal in consultation with him. He also has a great summary of his current research interests. That was meant to be one of the purposes of this blog. I used to have a research page on my website. But I scrapped that when I started this blog. I've decided it's time to put up a research page again. I hope this will be useful to give potential PhD students and collaborators an idea of what I am currently working on or would be interested in working.

Some previous thoughts on PhD applications.

$10,000 Top Up Awards for APAs

The College of Asia and the Pacific will pay top up awards of $10,000 per year to the most outstanding, newly commencing, PhD students who received APA awards (Australian government fellowships for domestic PhD students). This is a great opportunity to study for a PhD at the Crawford School and receive a much better than average stipend.

ECI Short Course

I will be presenting in a short-course provided by the Energy Change Institute at ANU: Energy change in a carbon‐trading world. Please pass on the information about the course to anyone you think might be interested.