Joel Mokyr is Very Optimistic on Future Technological Progress

I've made a few posts in the last half year or so on the potential slowing of the rate of technological change and economic growth and the implications of continued technological change for the distribution of income. Economic historian Joel Mokyr discusses some of these issues in a very optimistic piece on the future of technological change and economic growth. He sees no real limits to advances in technology and sees the implications for the future of labor as positive.

U.S. Employment Trends

Some very interesting trends in US employment that I saw in a free newsletter I subscribe to. The data is from the Federal Reserve Bank of St Louis. Total US employment has partially recovered from the Great Recession:

But things look very different when you break the total down into age groups (the first graph is not seasonally adjusted and the others are...). In the main 25-54 age group there has been little recovery:

while in the above 55's there was hardly a recession:

This graph is truly stunning I think. The under 25's seem to follow the pattern of total employment:

It's perhaps understandable that employment in this cheaper to hire group has rebounded strongly (but employment of 16-19 year old's has not), but what explains the almost lack of decline in employment in the over 55's? Usually, you'd expect older workers to be retired early in a recession.

Timur Kuran Calls Islamic Finance a Scam

I get a huge amount of spam from something called "Inayah Group". Most of it is in Arabic or has no content but I noticed this item while deleting the daily influx (I check quickly through my spam folder before deleting because I wouldn't want to delete legit e-mail from some grad student in a developing country etc.): Timur Kuran calls Islamic finance a scam in an interview in the Financial Times. I found this interesting because I had assumed that Islamic finance was based on equity investing rather than debt-based investing but here he says that interest is disguised as fees etc. Of course, Judaism also prohibits the charging of interest  to other Jews (as did Christianity in the past at least). This was got around using the heter iska (permit for business), which it seems is not that far from what Islamic finance does in practice. Another trick is to pay the interest to a third party rather than the lender.

ARC Releases 2014 Schedule

The ARC has released its schedule of important dates for 2014. In the past, funding rules and application dates have only been released close to the actual dates and so it has been hard to plan grant submissions. This was especially the case in 2011 when they announced that the closing date for Future Fellowship applications would be several months earlier than expected. There were relatively few applications that year as a result. That benefitted applicants as the success rate was higher. But then this round there were far more applicants than usual and the success rate will halve from 30% to 16%. So, this is a good move from the ARC to make the whole grant application process a little saner.

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.

Back from IPCC Meeting

I'm finally back in Australia after travelling for almost 4 weeks including a week spent at the IPCC meeting in Addis Ababa. In the meantime Australia changed prime minister and all bets seem to be off about what party will be in power in Australia after the next federal election which should take place later this year. I was also in Spain, Israel, and Kenya, which was especially fascinating. This is one of the best of the many pictures that Shuang took:


Lion, Maasai Mara National Reserve, Kenya

In Addis I confirmed that I am very sensitive to high altitudes (2400m) got altitude sickness and then when I had apparently covered really got ill and am still recovering. So, I only got to about half the meetings I was supposed to be at. This is the fourth and final meeting for regular authors on the Working Group III's contribution to the 5th Assessment Report. We were addressing the comments from government representatives as well as additional comments from academics, NGOs etc. There is also a continued effort to try to make the report an integrated and readable whole which is a real challenge with so many chapter teams working most of the time alone and so many authors in each chapter team. Using the time at the author meetings effectively is important and difficult. The IPCC is seeking comments from member governments on its future. Here are the responses of the UK and Dutch governments. Both suggest the obvious that the IPCC should use the web more effectively and perhaps update its products on more of a rolling basis. The UN structure that the IPCC is embedded in makes this difficult I think. Everything needs to be approved by member governments. The inflexibility of the table of contents of each chapter which was laid out at an IPCC plenary meeting has been quite frustrating for some of us authors but we have had to stick to what was laid down several years ago before the actual subject specialists entered the picture. It's hard to see the governments giving up these powers for a more flexible approach.

ResearchGate Adds Department Statistics

Here is the link for Crawford School of Public Policy.

2012 ISI Impact Factors Released

I'm in Malaga, Spain (above) on a circuitous route to the IPCC Working Group III 4th lead author meeting in Addis Ababa. I just saw that the 2012 Journal Citations Report is out. PLoS ONE's impact factor fell to 3.73 (exactly as a reader recently predicted in the comments on my post from last year). It's five year impact factor for 2012 is 4.244, which is also down a bit from last year.

Also of interest to me is Nature Climate Change, which debuts with an impact factor of 14.472!

Uncertainty in Global Greenhouse Gas Emissions

There is considerable uncertainty about levels of greenhouse gas emissions particularly for those associated with land use change as well as for fugitive emissions associated with oil and gas extraction and coal mining. Estimates of emissions from the combustion of fossil fuels have the least degree of uncertainty, but do vary depending on the data source. In 2007 estimates of emissions from fossil fuel combustion varied by only 2.7% across data sources (Macknick, 2011). Default uncertainty estimates (2 standard deviations) that have been used by the IPCC for emissions coefficients for fossil fuel combustion range from 7.2% for coal use in industry to 1.5% for diesel used in road transport (Olivier et al., 2010). In summary, the uncertainty for fossil fuel based carbon dioxide emissions is ±5% (UNEP, 2012). There is much greater variation in estimates of carbon dioxide emissions from cement production and gas flaring but these are a relatively small fraction of total emissions (Macknick, 2011). Emissions from agriculture and land-use change are much more uncertain (Tubiello et al., 2013). It is estimated that carbon dioxide emissions associated with land use change have an uncertainty of ±50%. However, this means that total anthropogenic CO2 emissions have an uncertainty of only ±10% (UNEP, 2012).

Fugitive emissions of methane in fossil fuel extraction and supply are very uncertain. Between 2-4% of natural gas may be lost globally in transport and US estimates of fugitive methane emissions have an uncertainty of ±40% (Hayhoe et al., 2002). Estimates of N2O emissions are inherently uncertain (Olivier et al., 2010). Estimated uncertainties for global emissions of methane, nitrous oxide, and fluorine based gases are ±25%, ±30%, and ±20% respectively (UNEP, 2012).


References

Hayhoe, K., H. S. Kheshgi, A. K. Jain, and D. J. Wuebbles (2002) Substitution of natural gas for coal: Climatic effects of utility sector emissions, Climatic Change 54: 107–139.

Maknick, J. (2011) Energy and CO2 emission data uncertainties, Carbon Management 2(2): 189-205.

Olivier, J. et al. (2010) Application of the IPCC uncertainty methods to EDGAR 4.1 global greenhouse gas inventories, 3rd International Workshop on Uncertainty in Greenhouse Gas Inventories, Lviv.

Tubiello, F. N. et al. (2013) The FAOSTAT database of greenhouse gas emissions from agriculture, Environ. Res. Lett. 8: 015009.

UNEP (2012) The Emissions Gap Report 2012: A UNEP Synthesis Report, United Nations Environment Programme.

Elsevier Journal Finder

A new tool from Elsevier gives you information on suitable journals for your paper, but more importantly average times to first editorial decision and acceptance rates. You just need to type in your paper title and paste your abstract. Times from acceptance to publication online seem to be over-estimated relative to current practice at Elsevier. The finder did pick the correct journal for my most recently published paper, though the alternatives were a bit odd. I would have expected Energy Policy to be the second choice, but it wasn't even on the list.

First International Workshop on Econometric Applications in Climatology: Report

I spent last week in the US and Canada including attending the First International Workshop on Econometric Applications in Climatology. There was a spectrum of presentations on the scepticism dimension. I don't think anyone convinced anyone else but it was all very civilised. There were also both economists and natural scientists, papers on paleo and recent data etc. The papers are available from the conference website. I thought the most interesting presentation was by Shaun Lovejoy. He expanded more in his presentation along the lines of his recent paper "The climate is not what you expect". Christopher Essex's presentation was also very interesting. He presented long-time exposure (6 months - an example above) photos that show that what is visible on that time scale is different than our everyday experience. Cars on roads disappear but cars in parking lots become like quantum mechanical probability peaks. I got some helpful comments on my paper too.

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?