Innovation Precincts vs. Cooperative Research Centres

I was wondering what the difference was between the "Innovation Precincts" recently announced by the Australian government and the existing Cooperative Research Centres (CRCs) program was. I even wondered if they were a replacement for the CRCs. Turns out they are intended to be two quite different programs. A very helpful government document explains the differences. Then there are the ARC Linkage grants...

Entropy Explained

Entropy and the Second Law of Thermodynamics has always been a very confusing topic in ecological economics. Tom Murphy explains the difference between information entropy and thermodynamic entropy and what the second law really implies for living and economic systems. Apparently, von Neumann is to blame for all the confusion. He also supposedly told Nash that his Nash equilibrium result was "trivial", though it won Nash the Nobel Prize in economics (with a 45 year delay...).

ANZSEE Conference 2013

The 2013 ANZSEE Conference will take place in November at the Crawford School. All abstracts are due by 26th July. There will both be traditional papers and "working groups" that sound something like panel discussions. The last ANZSEE conference went to was the ANZSEE Conference in Darwin in 2009, which I thought was a great conference. The last ANZSEE or ISEE conference in Canberra was the 2000 ISEE Conference.

Stern and Enflo, Energy Economics

My paper with Kerstin Enflo: "Causality between energy and output in the long-run" has been accepted to be published in Energy Economics. In this case, the published paper will only differ slightly from the working paper version, which I have already blogged about. This is mainly because we only put up the working paper after getting a revise and resubmit from the journal. The question of when to post a working paper is something I have discussed on the blog and thought about quite a bit. We just got a revise and resubmit on this working paper. Our plan, is to add some additional analysis to answer the referees concerns. Even if we end up updating the database the final paper will not be radically different. There are other cases where we completely changed the dataset in response to referee comments. So, in that case, our first working paper was a bit premature.

Update...

I haven't blogged much recently as things have been very busy, teaching, admin, service (reviewing things), and lots of research projects in progress  - 5 papers in review or under revision and at least 12 at various stages from basic research to near completed - almost all my current papers now involve coauthorship. This is also the time of the semester when we also start preparing for the next semester's teaching. I'll be teaching my energy economics course for the second time. And I have been planning my travel over the winter break. First, I am going to Guelph to the workshop on econometric applications in climatology. It's all planned and they've posted my paper. I just need to write a presentation and go. Though I've been to Canada, all my visits so far have been to Quebec. I'll also visit a friend in Virginia. I'll be back here just in time for my students' exam and essay grading. Then I'll be off on another trip that will include Addis Ababa, where the 4th Lead Author meeting of the IPCC Working Group 3 will be held. It's in Addis because one of the co-chairs of the working group is from Ethiopia. Another is from Cuba. That would have been interesting too, but I suppose that no Americans would go to the meeting, which would kind of be a problem... I'll go to some other places too, which maybe I'll report on when I get back :)

Growth in a Time of Debt

A 2010 NBER working paper by Reinhart and Rogoff (also published in AER P&P) claimed that countries grow slower when they have high public debt to GDP ratios. Frank Jotzo pointed me to a blog which shows that there seem that the result is heavily influenced by a single year of -7.9% growth in New Zealand when the debt/GDP ratio was above 90% and there are also mistakes in the analysis. These issues are described in this new working paper. Without the New Zealand data point and correcting the mistake, the average growth rate in the 7 countries with debt ratios above 90% is 1.4% and with NZ is 0.3%. Still that is lower than the growth rate at the lower debt ratios and the highest growth rate is at the lowest debt ratio. Still, the negative correlation between debt to GDP ratio and growth rate does look real. But what is needed is probably a fixed effects regression of annual growth rates data on debt ratios or something like that. Also, Figure 2 in Reinhart and Rogoff presents medians as well as means of growth rates, which is more robust way of dealing with this data:

Table 1 in Reinhart and Rogoff shows data from a longer period and NZ now has positive growth at high debt ratios. Here the relationship looks more fragile though still hanging on. They also present similar data for developing countries where the relationship seems to be present too. So, while there are clearly problems with this paper I think the blog linked above is overly negative on the results. Reinhart and Rogoff have also responded to this criticism.

The real question though is about causality. Does high debt cause slow growth or vice versa?

The End of Economic Growth

A few months ago, there was a debate about whether economic growth was coming to an end. Based on this graph it looks like economic growth ends around 2060:

The downtrend in growth rate is fairly linear, but of course it is just wild speculation to project it forward several decades. Trends can change direction. This is based on Congressional Budget Office estimates of potential GDP growth. Also, this is total GDP, not GDP per capita. It is much less controversial to argue that population growth will come to an end this century.

Stochastic Trend Featured in List of Savvy Maths and Stats Websites

You can see the other sites featured by following this link. There are some that I occasionally visit like Andrew Gelman's site and a lot of the others look interesting too.

22 Year Citation Lag

I finally got a citation by someone other than myself to my first full length journal article, published in late 1990 just as I was starting my PhD! That's certainly an outlier in the citation distribution. The title of my "most failed journal article" now needs to pass to this one, which shows the importance of normalization.

Countries Where Crawford Faculty Got Their PhDs

This is just for faculty at level C (senior lecturer) and above. We have a lot of post-docs and junior faculty with ANU PhDs. If we include them, half our faculty have Australian PhDs. We only have 7 faculty (10%) with PhDs from Australian universities other than ANU.

Academic Rank vs. Citations

I updated an analysis I did a couple of years ago of Crawford faculty. It is a lot easier now to include citation data from Google Scholar as more than half our faculty now have profiles on Google Scholar. This chart shows the Google Scholar citations organized by academic rank. Level B is lecturer (equivalent to assistant prof in the US), Level C is senior lecturer (about equal to associate prof in the US), and D and E are associate professor and professor (both are probably equivalent to professor in the US). Though there are overlaps, it is possible to distinguish ranks quite clearly. If we controlled for discipline, the pattern would get even clearer. Economists have more citations than political scientists and perhaps environmental studies people have even more - Bob Costanza, of course, is the highest point on the chart.

ERA Verifies that Research Funding is Going to High Quality Research Groups

Yesterday I went to a presentation by the head of the Australian Research Council, Aidan Byrne. I asked him to comment on the article in the Australian that reported his thoughts that ERA results shouldn't be tied to larger amounts of funding. He said that ERA has already had significant effects without having money tied to it and the problem is that there aren't necessarily significant differences between being ranked a 3 or 4 or a 4 or 5 as scores are rounded up or down to produce the final outcomes. He said that the most valuable use of ERA is to verify that research funding is going to high quality research groups. There is a dramatic difference between the funding received by disciplines at institutions ranked 1 and 2 and those ranked 3,4, and 5 with a smaller difference between the latter three categories. Clearly the vast majority of funding is going to the groups ranked at world standard or above. It would help get this message across if ARC presented funding numbers per full-time-equivalent faculty member in each quality ranking. But they want to avoid doing productivity measures for some reason. The ARC slides I saw just show total dollars for all 5's, all 4's, and all 3's without adjusting for number of institutions or individual researchers. As there are usually fewer institutions ranked 5 this downplays the relationship between quality and funding. Also, it would make sense to then leave funding out as one of the indicators used to assess quality. And none of this information is in the ERA report. I think that would be valuable.

Is There Really Granger Causality between Energy Use and Output?

Finally, we have a revised version of the meta-analysis paper I presented in Perth in September out as a working paper.

So what's it all about? There is a massive literature on Granger causality testing of whether energy use causes economic growth or vice versa. We collected more than 400 papers. Yet the literature is very inconclusive. In fact we found that about 40% of tests for each direction of causation in our sample of 70 or so papers have statistically significant results at the 5% level. 40% is a lot more than 5% so either there must be a real effect or some kind of biases. On the other hand, it's not overwhelming evidence.

A recent paper conducted the first meta-analysis of this field of research. When we noticed this paper, we were initially worried that we had been "scooped". But, it turned out that the analysis in Chen et al. is fairly exploratory. Our paper tries to see if the effects found in the literature are genuine or simply the results of various biases. We do this by exploiting the "statistical power trace" - if an effect is non-zero then the test statistic associated with restricting it to zero should be greater in absolute value the greater the degrees of freedom associated with the model estimate. So we regress the test statistics for the Granger causality tests - after converting them all to normal test statistics - on the square root of the degrees of freedom. The way we have set things up, if we can reject the null that the regression coefficient on the square root of degrees of freedom is non-positive then there is a real Granger causality effect in the underlying literature.

We do this separately for tests of energy causes output and output causes energy. Overall there is no genuine effect in the literature but there do seem to be some genuine effects in subsets of the literature. Specifically, if we control for energy prices then income causes energy use. This is the energy demand function relationship, which Stern and Enflo also found was very strong in the Swedish data. Energy use might cause income but only if we control for employment and the VAR model passes a cointegration test. So, this is pretty tentative. There were some things we would have liked to test but simply had too little data. For example, does adjusting for energy quality make a difference?

There is a whole other story in the paper, which is about dealing with the econometric pitfalls associated with these kind of time series models. Initially, we found that the greater the degrees of freedom the more negative the test statistics were. Significantly so. It turns out that there is a tendency to included too many lags of the variables in small sample sizes. And these over-fitted models result in spurious rejections of the null hypothesis of no Granger causality. We control for this issue by including the number of degrees of freedom lost in fitting the model as an independent variable. This is likely to be important in other meta-analyses of Granger causality tests. We have a further econometric theory paper in preparation on this topic.

In some ways this is a silly question. We know that energy is used to produce things and we know that  in theory income is a determinant in the demand function for energy.  But observing that in the data in a consistent way doesn't seem to be that easy.

Australian Research Assessment Not Heading in UK Direction

That's the message I get from this interview with the head of the ARC, Aidan Byrne (formerly a science dean at ANU) in the Australian. The assumption of many in the sector, myself included is that the Australian research assessment exercise, ERA, and the funding attached to it would evolve in a way that generally followed UK practice with something of a time lag. In the UK, much more money is tied to the REF, the funding ratio associated with the three highest rankings of departments is 9:3:1, and case studies are being used very heavily to assess broader impact. Prof. Byrne argues that case studies should be used sparingly if at all to measure impact, not much money should be tied to ERA outcomes, and the funding ratio should be flatter. On Wednesday, I saw a presentation by Tim Cahill of the ARC on the ERA 2012 process and outcomes. One key finding was that for the citation based disciplines (most STEM disciplines (but not math or computer science) and psychology) there is a weak correlation between the ERA ranks assigned to universities and their citation performance relative to the benchmarks. A lot of subjectivity still seems to come into the ranking by the ERA committees. As they only count the number of citations per paper and not where they were cited, I guess that makes sense. So should Australian universities pay as much attention to ERA as they have been doing? For example, ANU has tied indicators in it strategic plan to the number of disciplines that achieve given ERA rankings by 2020. If I was the minister and looking for budget cuts would I want to continue with ERA on this basis?

Global Anthropogenic Sulfur Emissions Updated to 2011

A new article by Zbigniew Klimont, Steven Smith, and Janusz Cofala updates Smith et al.'s estimates of global sulfur emissions to 2011. The global downward trend that started around 1990 or earlier * continues. The small increase in the early part of the last decade was just a blip:

This chart also shows some previous estimates. In general the trend has been revised down over time. The trend in China is also now heading down:

Another paper by Smith and Bond declares "the end of the age of aerosols". Well not quite yet. We'll have to wait till 2100 for that :)

The downside for me of this new data is that I will now have to redo all the econometrics in a paper I have in preparation (with Robert Kaufmann) that was almost ready for submission :(


* As shown in my 2006 paper, studies prior to Smith et al. 2001 showed emissions continuing to grow strongly through 1990. Smith et al. (2001) showed a flattening of the trend in the 1980s. My paper showed a plateau from the mid-1970s to 1990 and Smith et al. (2011) showed a slow downward trend from 1973 to 1990 and then a steeper decline.

Saltwater vs. Freshwater

An interesting new working paper tries to define whether economics departments are "saltwater" or "freshwater" based on citation networks. They find that the divide is strongest for macroeconomics and econometrics. This makes sense as this divide is about macroeconomics. So, this seems to be a real thing. It's amusing to see where non-US departments fall on the gradient. Looking at places I've studied or worked, ANU is saltwater and Hebrew University is freshwater, which is amusing (there isn't much water at all in Jerusalem and ANU is located next to a lake). LSE is very salty.  More widely, Tel Aviv U. is very freshwater and Cambridge is very saltwater. By comparison, ANU and Hebrew U. are brackish. So it doesn't have anything to do with the water really :)

Lake Burley Griffin - ANU Campus is at lower left

February 2013 Crawford Research News

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

More on Fusion

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

Crows are Also Averse to Inequality

First evidence in non-mammals of inequality aversion.

Lockheed Promises Commercial Fusion Reactors in Ten Years

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

WG3 SOD Review Opens Soon!

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

Australian-German Climate College

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

International Happiness

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

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

Five New Open Access Economics Journals

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

Chinese State Council Endorses Cap on Total Energy Use

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