Wednesday, 11 June 2014

Fairy dust sprinkled from ivory towers

On the basis that the "impact agenda" is important I thought it worth while responding to Paul Krugman, who seems to think I'm a bit of an idiot ("what I assumed was obvious apparently isn’t to everyone").  That might well be true but let me try and justify my statement that
Krugman seems to believe that by sprinkling the fairy dust of incentives over society the emission busting new technologies will emerge.
The "fairy dust" analogy actually comes from the Disney film The Pirate Fairy (released as Tinkerbell and the Pirates in the UK) which I saw as I am blessed with a 3 year old daughter.  After seeing it I tweeted
The plot is an inquisitive fairy, Zarina, causes havoc when an experiment goes wrong and leaves the fairy kingdom and her friends.  She returns and steals the fairy dust having fallen in with a bunch of pirates.  When the pirates have harnessed the power of the stolen dust they lock her up.   Zarina is rescued by her friends, the pirates are defeated (it is a prequel to Peter Pan, and there is a baby crocodile) and the fairies "live happily ever after".  Not expecting much I found an allegory for how science goes wrong when disconnected from society.  This is, no doubt, further evidence that I am an idiot. Alternatively it might be evidence that I am committed to the idea of science in the service of society, not its sovereign.

Because he thinks I am a bit ignorant, Krugman assumes I believe new technologies need to emerge to resolve the problem of carbon emissions.  He argues
I was talking about the fact that at any given time we have a choice of already existing technologies. You can drive a conventional SUV, but you could also drive a hybrid, or for that matter a smaller vehicle that, say, emits half as much carbon as the SUV while providing services that are a lot more than half of what the SUV would provide. You can generate electricity using a coal-fired plant, but you can also use a gas-fired plant, a wind turbine, or solar panels.
In a sense, so was I.

I have been involved in published research on modelling incentive structures to trigger investment in the UK's generation capacity to maintain an acceptable level of security of supply.  The UK energy market was de-regulated in the 1990s in the expectation that the privatised industry would deliver lower retail prices.  This it did, but at two costs.  Firstly UK energy prices are volatile, which is a problem for retail consumers who have a preference for "fixed costs".  More important for the UK's energy supply is that the privatised business has taken rents but is not regenerating generation capacity and there is a real concern that the industry will fail to meet future demand, from whatever sources.  My intuition based on my research is that the liberalised market in the UK has not been a success, and the industry would have been better managed as a state monopoly.  This is the consensus in the EU where ambitious plans to liberalise Europe's energy industry have been quietly dropped.  At the moment the public opinion of the UK energy industry is on a par with their opinion of investment banking, and this morning the news was full of concerns over the industry.

I am currently working on a research project to develop a methodology that can evaluate the effect that different power storage technologies will have on the UKs power system.  These storage technologies are needed because wind power generation is intermittent and cannot  be relied upon to deliver power when and where it is required.  Texas is famous for having installed a lot of wind generation capacity, unfortunately this does not produce power on hot, still, still summer days when the Texan people want their air conditioners on.  Existing technologies to resolve the problem, such as new transmission lines, are costly, as reported by the New York Times as long ago as 2008, and were still an issue in New England last year.  A focus of UK Energy research is to develop storage technologies that enable the integration significant (intermittent) renewables, which is a more robust solution than relying on transmission (the UK has less of an issue with power transmission that the US, a result of the system having been developed by a single state body).  Without these technologies it is unclear how wind-power can significantly replace carbon intensive generation.  Suggesting it is a "done deal" and simply a matter of incentives that renewables can replace conventional generation is a dangerously mis-leading since it creates false expectations; dreams deferred.  I recall hearing of research that identified a  link between the proliferation of reported "cures for cancer" and a decline in trust in medical research, since the public experience is that cancer is not "cured".  The public like scientists but they also want honesty from us.

The impression I wish to convey is that the claim that
You can generate electricity using a coal-fired plant, but you can also use a gas-fired plant, a wind turbine, or solar panels.
is a bit glib.  The technologies exist in theory but do they do so in practice?  This is nothing new, those with access to academic journals could have a look at a special edition of Energy Policy (Volume 38, Issue 7,in particular the editorial and Market protocols in ERCOT and their effect on wind generation). I suggest that there is evidence that my original claim is sound.

Krugman makes things somewhat worse for himself when he argues that
You can drive a conventional SUV, but you could also drive a hybrid, or for that matter a smaller vehicle that, say, emits half as much carbon as the SUV
Just as the UK preceded the US in liberalising its energy markets, it has developed economic incentives to encourage people to switch from high carbon emitting vehicles to low carbon emitting vehicles, principally through two mechanisms, the fuel price escalator (since 1993, a Conservative initiative) and car tax differentials (since 2005).  The fuel price escalator is controversial and anyone who is interested in the details, and why I am sceptical of the "fairy dust", they could read a Parliamentary briefing on the UK debates.  To get a gist of the issue, and why there is broad support for the suspension of the escalator even amongst parties with strong "green" credentials such as the SNP and Liberal Democrats, consider the situation of a low-skilled worker living in rural Britain.  During the down-turn such people were liable to have to travel 50+ miles to work and earn a living  and could only rely on private transport.  If they did not have wealth they typically buy second hand, old,  "dirty" cars; they do not have the resources to "choose" to buy a clean, low cost, hybrid -UK car prices are clever, the price of "workaday" cars often reflects their present value; if a car has low running costs it is usually more expensive to buy.

In reality the poor do not really have choices.  One is reminded of Rousseau's recollection
 of a great princess who was told that the peasants had no bread, and who responded: "Let them eat brioche."
Academics do themselves no favours by offering unworkable solutions.  I am committed to carbon reduction - I spend time researching technical solutions - but I am also committed to helping those in "energy poverty".  If intellectuals spend time telling the public what they out to or ought not do without considering how those commandments affect others with less influence, they will lose the public's confidence.  If science is to maintain its high status I think it should be wary of ascribing criticism to "a toxic mix of ideology and anti-intellectualism".

There is a story that John Dewey's philosophy was inspired by being forced to spend time talking to "regular people" on a broken down train.  Along with the other pragmatists he argued that
The value of any fact or theory as bearing on human activity is, in the long run, determined by practical application - that is by using it for accomplishing some definite purpose. If it works well - if it removes friction, frees activity, economises effort, makes for richer results - it is valuable as contributing to a perfect adjustment of means to end. If it makes no such contribution it is practically useless, no matter what claims may be theoretically urged on its behalf.
I remain to be convinced that the important problem of carbon emissions can be resolved by economic incentives, the story is more complex and should be treated with respect.

11 comments:

  1. My understanding is the the European approach of taxing fuel has been much more effective than the American one of relying on CAFE standards in terms of improving average fuel efficiency. Even the poor using "beaters" will be incentivized to carpool, or even (in a more drastic step) to move. A transfer program for such persons may also be called for.

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  2. Dear Tim:

    I can see why you feel a bit insulted by Krugman’s comment, but I can also understand his frustration, as economists usually find that other professionals do not have much understanding of economic systems, in particular the scope for substitution in production and consumption, which is his point.

    Basically, economists characterize the set of technologies as "on-the-shelf" and "off-the-shelf". The off-the-shelf ones are those we currently use and see. The on-the-shelf ones are those which have been used in the past and those, although developed and tested, are no longer used, or not used as much as they once were. Thus he refers to much more than those technologies which might be developed, although those are included. As I understand your post, your work is more focused on those to be developed.

    Krugman’s fundamental point, which he did not elaborate, is that technology choice in production and consumption is very much endogenous to the economy, very much a function of relative prices and costs. Change those prices and costs, and the mix of technologies used will change.

    A couple of examples: I took a look at the London congestion pricing program at http://en.wikipedia.org/wiki/London_congestion_charge#Traffic_changes . Page down to "Traffic Changes" and see the graphic showing the increase in bicycle use in London. This a good example of what Krugman has in mind. Could this be greatly extended? Sure – look at the Dutch experience.

    Related is the tremendous and costly decentralization of economic activity in American cities, mostly a function of uneconomic expansions of urban freeways. It has devastated American cities and hugely shifted the movement of goods and people away from rail. It can be reversed by stopping urban freeway expansion and tolling these roads. Since about 25% of carbon emissions come from the transport sector, there is scope from large reductions in this sector.

    Another is green roofs on urban buildings. Not only do they reduce stormwater management costs, they also substantially reduce the cooling requirements for the buildings in summer.

    And there are many more such examples that can be cited.

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  3. I take your point that not all incentives are created equal. A program making different kinds of cars more and less expensive according to some "low CO2" criteria is not the same as the effect of a carbon tax, among other reasons because it does not raise any revenues to redistribute to low income people affected by the mildly regressive tax.

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  4. "how science can lead to irresponsible innovation if scientists are alienated from society"
    Got me to thinking: MMMM?, Fariday, Franklin, Edison, Tesla all lead to the need for lots of electricity that required lots of fossil fuels to make which leads to Global Warming. Damn Them Damn Them All To Hell.
    Darn! I forgot all those who made the steam engine which leads to automobiles which leads to the need for lots of oil.

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  5. I think a sign that economists have stopped talking only for each other will be when they realize the endogenous/exogoness distinction is utterly ridiculous.

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  6. Well that was quite a roundabout way of saying that you don't believe that incentives incentivize. Pessimist much?

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  7. "I remain to be convinced that the important problem of carbon emissions can be resolved by economic incentives, the story is more complex and should be treated with respect."

    If you sincerely want respect, you probably shouldn't have aimed a term like "fairy dust" at a Nobel laureate and columnist for the world's most important newspaper. In two consecutive posts now! The fact that he responded at all shows a great deal more decency and consideration toward you than you have shown him.

    If you can't see that Krugman dignified you with a response, you should get used to people concluding you're a bit of an idiot. You're giving them empirical data.

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    Replies
    1. 1) From this post it seems that Tim Johnson knows pretty much what he talks about
      2) "Fairy dust" is here invoked as a metaphor for a pretty complex epistemological issue, and is not disrepectful, it's simply critical
      1+2 is for the unfair feeling TJ is a crackpot that has no place in such debate, and not in such a manner.

      3) Krugman is not a Nobel laureate, there's no such thing in economics.
      4) If I insist, it is because "The prize of the Swedish bank..." is a long time criticized award from many domains (epistemology, mathematics, sociology) and also within economics thinking. Not something like being a member of the IPCC.
      5) NYT, world's most important newspaper? American point of view... check Wikipedia on that matter.
      3+4+5 is for the Authority argument. Man I could be stupid and ask if you have a Ph.D. to post on the blog. Personally, on a climate change issue, between an engineer and an economist, I'd pay more attention to the engineer's point of view : real, pragmatic, on the field, technical, less ideological.

      Additionally, the fact that Krugman responded could as well mean that he felt compelled to in order to protect the grounds that support his ideology. The fact that things look "obvious" to him, but would not to a scientist approaching naively the question, is a form of arrogance. Or maybe not. Let's not make assumptions on his intentions, shall we?

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  8. Armo and/or Pika,

    I hope you'll pardon me if "knowing pretty much what he was talking about" isn't a standard I find consolation in. Neither Pielke nor Johnson is correct. To the extent that Johnson gives credence to Pielke, he too is wrong. For example, this sentence from Pielke's letter is plainly unsound logic: "Because halting economic growth is not an option, in China or anywhere else, and because technological innovation does not occur via fiat, there is in practice no such thing as a carbon cap." He presents two premises which are true, yet claims that they cause the conclusion "there is in practice no such thing as a carbon cap." But there is no evidence of causality here, and the conclusion is a false proposition as well. Pielke then goes on to attack the ETS scheme, apparently under the impression that if one scheme has failed, every other scheme must fail. Any undergraduate logic student (though apparently not every lecturer in mathematics) will realize that an instance does not prove a generalization, it can only disprove one. For example, the US success in eliminating "acid rain" via an SO2 cap and trade disproves Pielke's larger implication that cap and trade systems must always fail. See how what I did there? Pielke's generalization, disproved by an example. Ain't logic something.

    I could continue; there are several more flaws in Pielke's claims, in Johnson's embrace and defense of them beyond the errors he inherits from Pielke, and now in your comments as well. To wit: "fairy dust" as a metaphor was only explicated in Johnson's second post, not in the one Krugman responded to. In the absence of that explication, it's plainly disrespectful. Perhaps English is not your first language? I say this because neither "Armo" nor "Pika" is a common name in anglophonic cultures, so I refer you to the Oxford University Press website for the term, http://www.oxforddictionaries.com/us/definition/american_english/fairy-dust , which identifies it as "another term for pixie dust," which in turn it defines as "A substance or influence with an apparently magical effect that brings great success or luck." The term therefore suggests Krugman engages in magical thinking rather than having empirical understanding; it connotes the very opposite of expertise. Since I was speaking not only to the fact that Johnson had used a flippant, somewhat smug tone regarding Krugman, but also that Johnson did so first, the timing of the explication is important. And in particular, because it happened too late, the eventual presence of an explication doesn't affect my argument.

    While this is not the only logical flaw in your comments, it is your only point which is remotely germane. My argument was that if a person who is unsurpassed in the English-speaking world in the public conversation about economic issues bothers to respond to Johnson's ideas, even if only to correct his misreading (and does not rub Johnson's nose in Johnson's demonstrably faulty logic), then Johnson is receiving quite a bit more "respect" than he realizes. Moreover, he's arguably getting more respect than he deserves, given that his whingeing is both (A) baseless, since Krugman was faultlessly polite (toward Johnson; Krugman called Pielke's claims stupid, which might be accurate but is clearly not polite) and (B) hypocritical, since it was Johnson who brought the disrespectful tone in the first place.

    Everything else you wrote is distraction from my argument or only trivially correct. If you're going to quibble that an economics prizewinner is not a laureate because Alfred himself did not establish the prize, I doubt we'll have a fruitful discussion. A Nobel prize is, for all but the most esoteric and confoundedly abstruse (read: semiotic) purposes, a Nobel prize. You know what I meant, and to split hairs on semantics is, I hope, beneath you.

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  9. The limitations of alternative energies are built into a carbon tax system. You set the tax equal to the magnitude of the negative externality. A carbon tax doesn't inherently harm GDP at all--the revenues of a carbon tax offset the need for taxes elsewhere, so that the public can afford exactly as much as without the carbon tax. But the tax does create incentives--if there really aren't alternative energy options, and if the costs of lower GDP really are larger than the costs of global warming, then the tax won't change anything at all. But to the extent that global warming is worse than the alternatives (either alternative energy or simply producing less), then the tax will lead us to a more efficient outcome.

    The available technologies are not a relevant factor in consideration of a carbon tax (being able to ignore this is the whole point of a Pigou tax!). The relevant limitations to this policy design are things like our ability to accurately monitor carbon emissions, and the quality of our estimate of the costs of global warming (ie, the magnitude of the relevant negative externality).

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