Another green growth report

15/11/2012 § 6 Comments

The industry advocacy group Pure Advantage has released another report. When I tried to download the report or the executive summary, it insisted on an email address. This seemed a bit strange, a bit controlling, frankly.

The report runs to about 300 pages. I have not read it, and doubt that I will. Long reports are generally silly wastes of time. Very few people read them, the key messages get lost in verbiage, and they are difficult to make consistent.

I am, however, a little jealous. My rule of thumb is that it costs $800 to $1,000 per page to do a piece of research. A $40,000 project typically results in a 40-ish-page final report. A 300-page report? You do the math. And who got the assignment? Vivid Economics, a London-based consultancy. Sigh.

I did, however, read the executive summary. Here are a few observations, in no particular order and with no real coherence:

  • They recommend that New Zealand increase its science spending. This has been recommended for years. What isn’t in the exec summ is that the government is basically contributing near the OECD average. The real weakness is business expenditure on R&D (BERD). The businesspeople who are trustees of Pure Advantage should look to the private sector first, rather than lobbying the government for more money.
  • The recommendations for agriculture aren’t all that novel. The CRIs are, in fact, working on the issues of greenhouse gases, energy efficiency, and water efficiency. These are difficult problems. More money would help, yes, but that’s true about everything.
  • The recommendation for aquaculture is similarly too little and too late. The Government is already working on it, and getting assistance from the research sector. The problem — as vividly shown in the NZ King Salmon hearing, in which I was involved — is that economic growth is in conflict with other values. Some people want to live in a tranquil, waterfront property without an aquaculture farm nearby. Should they? What’s it worth to them? What’s it worth to the rest of us? These trade-offs need to be discussed and resolved.
  • They suggest that green growth can be good for the environment and good for business. That argument always takes me to the question, ‘why hasn’t it happened already?’
  • Overall, the idea of the clean, green image (CGI) for New Zealand is highly contested. Opinions differ on whether it is really valuable, how fragile it is, and whether it represents anything ‘true’. When we talk about CGI, we are entering the realm of the symbolic, of semiotics and language, and how it relates to economic decisions. I would love — LOVE — to do that research. Wait, no, I have been trying to get that sort of research funded in New Zealand for close to ten years.

Bottom line: the report seems to be a re-tread of well-known issues with a recommendation to spend more public money to help private businesses. When it comes to really difficult issues — what trade-offs are we willing to make? how do consumers symbolise environmental values through economic transactions? — it seem to fall silent. Maybe somewhere in those 300 pages they grapple with the hard stuff. If so, Pure Advantage will have gotten its money’s worth.

Resisting resilience

06/03/2012 § 7 Comments

In graduate school, many of my classes had a focus on ‘sustainability’. We struggled to determine what the word meant in practice, so it became a banner to march behind. A new word has become au courant: resilience. Now, the goal is to promote resilience in our social and economic systems.

For example, there is a new report from the UN ESCAP, entitled Green Growth, Resources and Resilience. The blurb for the report is:

While regional countries are driving the global “green growth” agenda, policymakers are facing a new economic reality and heightened uncertainty. The challenge of eco-efficient economic growth and inclusive resource use is critical and growing in several countries. Fundamental, rather than incremental changes are needed – Governments must therefore take the lead in re-orienting both the “visible” and the “invisible” economic infrastructure. At the same time the implications of heightened uncertainty and risk for policymaking requires more attention.

This blurb manages to mention ‘heightened uncertainty’ twice in four sentences, but never uses the word ‘resilience’. If anything, the report is focused on change: ‘fundamental…changes are needed’ and ‘re-orienting…economic infrastructure’. But resilience is an ability to resist change or to spring back from change. This is the fundamental contradiction with the new jargon. This blurb implicitly acknowledges the contradiction by its inability to speak of both fundamental changes needed and resilience in the same paragraph.

The Econ4 website explains resilience:

A healthy economy is a resilient economy able to withstand unanticipated shocks. To borrow a metaphor from the physical sciences, resilience is the ability to bounce without breaking. We can build resilience into our economy and its infrastructure by following the design principles of diversity and dispersion. The aim is not to maximize “efficiency” at a single point in time, but rather to minimize economic vulnerability over time.

A common analogy for resilience is a bowl. The economy starts off in equilibrium at the bottom of the bowl. Then, a shock displaces the economy, sending it up the side. A resilient economy can return ‘naturally’ to its starting position at the bottom.

This situation is contrasted with an unstable economy. The notion is that an economy at its maximum is on a pinnacle. It can get knocked off its perch and sent rolling down a slope. It won’t ‘naturally’ return to the maximum, but needs to be pushed back (if it ever can).

The central idea is that we should have an economic and social system that is robust to shocks and returns to its initial position. The central problem is that there is no way to determine whether this position is good or not. For example, the failure of Reconstruction and the rise of Jim Crow in the US South after the Civil War shows that the Southern system of apartheid (avant la lettre) was resilient. Here are other examples of resilient socio-economic systems (dates from Wikipedia):

  • Middle Kingdom of Egypt (2055 BC – 1650 BC)
  • Han Dynasty (206 BC – 220 AD)
  • Roman Empire (27 BC – AD 476 (Western Empire))
  • Capetian Dynasty (987 AD – 1328/1792 AD).

Extremely unequal and repressive systems can be stable. In fact, there is a line of argument in poly-sci that democracy is inherently unstable. Dictatorships can be more stable. By the same token, market economies with entrepreneurship can be less stable than command economies with repressed technological change.

To make the resilience concept work, we are back to usual economic questions. Whose welfare? Whose preferences? Who bears the cost of the movement from equilibrium? Who benefits from equilibrium? Who starts with the resources? How are resources redeployed to new uses?

I don’t see how adding this new concept helps us answer any of these questions.

Is this the best we can do?

02/12/2011 § 4 Comments

Really?! This is the best The Competitiveness Institute could do?

Look, when I started this blog, I promised myself I wouldn’t run down every stupid idea. I would be positive and constructive. Well, it’s my blog and I’ll rant if I want to (rant if I want to). (That, by the way, is a snowclone, a charming term.)

TCI had Prof Enright speak at their conference yesterday. Enright worked with Porter on the 1991 book on New Zealand competitiveness. So far, so good. What did he come all the way from Hong Kong to tell us?

Apparently, NZ is ‘still’ at a crossroads. He laid out two scenarios for the future. In one, NZ is able to use its advantages to its advantage, while in the other, the advantages don’t produce much of an advantage. So, the big take-away message (with chips) is that things could go well unless they don’t. Here, I’ll let the reporter tell us what the professor said:

In essence it’s the ability to develop competitive clusters of companies that can succeed against international competition in the domestic market and can inject themselves globally into those markets in a sustainable way.

If ‘competitive’ = ‘capable of succeeding’, which is all it really means, then he’s just told us that we will succeed when we have companies that can succeed. How is this any help for thinking about the economy of NZ and policies that might promote growth and/or the general welfare?

He is also fuzzy on the details. For example, what is a ‘strong’ government? I can provide examples of ‘strong’ governments I wouldn’t want in charge of the country. How about ‘strong education’? There is some dispute over how ‘strong’ the education is in NZ, and at what levels, and for what portion of the population. What about technical capabilities and Kiwi ingenuity, which he calls our ‘non-traditional advantages’? The innovation literature of the last umpteen years has lauded our capabilities and ingenuity. How, exactly, have they pushed us up the OECD growth table over the last 20 years?

Why am I getting myself in a lather over this? Because improving NZ’s economic growth is hard. It’s economically complex. It involves different people with their own plans and dreams, preferences, ideologies, skills, and resources. Lots of people have been trying to make sense of it for years. We have to get the mix right with workers, skills, business plans, management capabilities, infrastructure, institutions, government policy, international markets, innovations, and that je ne sais quoi that makes it all hum. In general, NZ doesn’t do too badly, just not as well as some other places.

We certainly don’t need someone flying in after 20 years, telling us we are ‘still’ at a crossroads, and offering to write us another report.

Econ4eva

28/11/2011 Comments Off on Econ4eva

Some American economists have put together a group with a website called Econ4. They stand ‘4 people, 4 the planet, 4 the future’. They say:

We need an economics that aims to secure long-run human well-being, not an economics preoccupied with maximizing short-run output and profits. We need an economics that recognizes that we need to safeguard the Earth for our children and generations to come. We need an economics for people, the planet, and the future.

There are several initiatives to reform economics, so it is instructive to think about this one. The goals are laudable: long-run well-being and safeguarding natural resources. These are also central questions in economics. How do we achieve well-being in the long run, and how do we organise the series of short runs to get there? How should we use natural resources, and how much?

Economics has good tools and models for analysing these questions. There is an abundant supply of economic theory for understanding welfare and natural resources. Econ4, in fact, provides a bunch of names from the economics canon: Keynes, Veblen, Robinson, Galbraith, Sen.

That suggests that the ‘problem’, if there is one, is on the demand side. Maybe there isn’t demand for the kind of economics that promotes long-term well-being and safeguarding of the planet. The ideas are there, ready to be deployed. If they aren’t being used then maybe there isn’t interest in them.

I have found this particular disconnect revealing over the last few years. There’s no end of economic theory trying to explain what’s happening in the global economy and what to do about it. And yet, here we stand, 9% official unemployment in the US, the euro straining to stay together, and NZ sputtering along in first gear. Do we really need more ideas, or just a willingness to use the ones we already have?

One could argue that there isn’t effective demand. That is, the demand for theory is controlled by money, not people. With that argument, the demands of the moneyed few outweigh the demands of the democratic many. If that’s the problem, then Econ4 has the wrong analysis. They don’t need supply-side initiatives, they need to sort out demand. I suspect that’s a much harder problem.

MESS-y ideas

22/11/2011 Comments Off on MESS-y ideas

Clive Spash introduced a new acronym in the May 2011 Environmental Values, of which he is editor: merciless economics of scientists and society (MESS). According to the editorial, a environmental scientists are getting behind a narrow economic discourse to produce this MESS. The mess is ‘ecosystem degradation and biodiversity loss’, driven by ‘human population increase, war, corruption and greed, colonialism’.

Spash thinks that the shift from plural ecological values to ‘a monistic pseudo-economic one’ value is the wrong move for environmental scientists. It won’t just be bad for biodiversity, either: ‘Not just species are threatened but social and environmental responsibility itself.’

I started reading the editorial because (a) it had ‘economic discourse’ in the first sentence, and (b) I liked Spash’s work on non-compensatory preferences for economic goods, using contingent valuation. It let me down, though, in two ways.

Spash doesn’t really tell us what this economic discourse is. In fact, he seems to be guilty of that of which he accuses the environmental scientists. He has taken a jargon-y, intelligent-sounding word from another discipline and stuck it in his own economics analysis. He doesn’t describe the discourse, how it operates, what it includes or excludes, who is allowed to speak it, what its inversion might mean, what it glosses over, what its internal contradictions are — any of that. We are told that this discourse is ‘narrow’, ‘monistic’, and post-colonial, but not much more.

We can dig a bit deeper into the editorial and find that the discourse privileges orthodox economists, financiers, major corporations like Rio Tinto and Citigroup, banking concerns, and developers. On the other side, those who are spoken to include the Moabi tree, the politically weak, the poor. These categories are used rhetorically, rather than being categories inhabited by real people (or trees).

The use of ‘monistic’ also alludes to all sorts of work on phallogocentrism, but without really telling us what Spash is trying to say about it. It also alludes to Marcuse’s One Dimensional Man. That book was about productionism narrowing the field of human concerns and endeavours. Maybe that is what Spash is saying: we are placing the environment into the same productionist perspective, rather than considering it using plural values.

The second problem I had with the editiorial was the straw-man of economics that it presented. We aren’t really told what economic theory is causing the trouble. The word ‘neoliberal’ shows up in the last sentence, ‘orthodox’ in the second to last paragraph. ‘Economics’ seems to signify ‘that which I think is wrong about the actions of the rich’.

Those of us trying to work on ecosystem services and resource economics know that there is a lot more to the economics. We know there are limits — the amount of arable land, for example. We can create models using limits — that’s the point of a Lagrangian multiplier. We optimise a system subject to a constraint, and calculate the shadow price of the resource. If, for example, we decide that the atomsphere can sustainably handle no more than 350 ppm of CO2-equivalent, then we can model an economic system with the limit and figure out the shadow price.

Towards the end, Spash notes that the plural approach hasn’t worked: ‘environmental ethicists have seemingly tried every avenue of appeal to inspire their fellow human beings to forbear in the wanton destruction of Nature.’ That really should be a data point in whatever theory he constructs. His failure to grapple with that fact undermines the whole piece.

Greenwashing industrial policy

16/11/2011 § 5 Comments

The Pure Advantage business group had some publicity through stuff.co.nz yesterday, and also had a piece on their website from the NZ Herald. It is wrong on so many levels I don’t know where to start.

The language of this media release is atrocious. The sloppy thinking, the non-sequiturs, the begging the question. The leaders of the group are supposed to be scientists, and this is what they produce? I don’t have time or energy for a Fisking, so I’ll leave it at that.

The nub of the issue is the utter illogic of the argument:

a) we have a comparative advantage in environmentally-intensive products and services

b) the markets for such goods are growing and will be enormous

c) we cannot rely on private industry to see the opportunity and use our comparative advantage.

Wait, wait, wait. So this organisation has spotted a golden business opportunity with potentially huge exports, publicised it on the interwebs, and expects that entrepreneurs won’t be bothered. In fact, even though NZ is the right place to produce these goods — we have the comparative advantage — these enterpreneurs just can’t be fussed with it.

What’s the solution? More money for science! And not just any science — the science that particularly interests the scientists behind the organisation.

In order to get support for this point of view, they have had to go overseas to find willing economists. I guess that’s a point in the favour of my domestic colleagues.

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