Davos, world hunger and Felix Salmon

After a conversation with Dan Barber of Blue Hill Farm (a phenomenal restaurant, by the way), Felix Salmon is convinced that the Davos approach to solving world hunger is broken:
No one talked about creating relatively small and self-sufficient agricultural communities: the model is still very much that you sell your one crop for money, and then use that money to buy whatever other food you might need.
Here’s my comment in response:
Felix, I love that you posted on this, but I don’t think where you’re coming out is specific enough to the rural smallholder farming households who make up most of the world’s hungry. They are food-insecure because they can’t produce enough to feed their families and/or they don’t make enough money from selling their surplus crops to buy enough food to close the deficit. “Creating relatively small and self-sufficient agricultural communities” is a nice goal, but we can’t get there in poor countries without figuring out the “how” of improving smallholder productivity.

Staple crop monocultures for these smallholders aren’t necessarily as dumb as they might seem from afar. Which staple crop often varies according to local growing conditions (e.g., in Ethiopia, some regions grow mainly maize, others mainly wheat, teff, or sorghum). And if you’re struggling to grow enough to feed your family on your single hectare of land, focusing on the most productive staple crop – perhaps with a small plot of a cash crop like tomatoes or onions on the side – makes sense.

Agricultural innovation (like, say, flood-resistant rice or drought-tolerant corn, or yield- and sustainability-enhancing crop rotation techniques for that matter) is critical not so the developed world can produce more to ship to the developing world, but rather so poor farmers in developing world can produce enough food to feed themselves.

Moving stuff efficiently

Morgan Downey:
Today when a consumer on the US east coast buys a Chinese manufactured product it is highly likely it was shipped across the Pacific to Long Beach, California and then trucked using diesel fuel via road or rail across the US.

Bloomberg has an interesting story on the effect the expansion of the Panama Canal could have on US railways. The canal expansion may be among the largest fuel savers for US consumers over the next 15 years.
(The implication is that volume will move away from cross-country rail shipping, which would not be good news for Warren Buffett's latest investment).

American mercantilism, redux

I was sound asleep in Ethiopia for Obama's State of the Union address, and it wasn't pleasant to wake up to this debrief:
Then there was his disappointing discussion of trade, which included a bizarre promise to double U.S. exports in five years. Does this mean he expects the dollar to drop dramatically? He also announced the launching of "a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security" (more on that topic here), and vowed to "seek new markets aggressively, just as our competitors are." Nothing here, other than a cursory, noncommittal mention of the Doha round, indicates that Obama views trade as anything other than a zero-sum game. There's a name for this approach to trade: mercantilism.
Macroeconomics has never been my forte, and I was under impression that mercantilism was essentially a discredited 18th-century pre-economic theory. According to Wikipedia, though, it is not that simple, e.g.:
Paul Samuelson, writing within a Keynesian framework, defended mercantilism, writing: "With employment less than full and Net National Product suboptimal, all the debunked mercantilist arguments turn out to be valid."
I'll have to let others who are more educated in these matters sort this out, but my feeling is not good and my populism radar is blinking.

Obama can't seem to keep anyone happy - he managed to promote the one plank of the liberal/progressive agenda that Paul Krugman doesn't agree with.

The economics of ecosystems and biodiversity

That's the name of a foundation and new report which a colleague recently passed to me (unfortunately I couldn't find a working link to the actual document, but I imagine it's there if you poke around). Led by a (former?) Deutsche Bank banker, the idea is to rigorously assess the (hypothetically undervalued) economic benefits of nature, and to draw out relevant implications for policy-makers. It is a great idea and from my initial perusal, the report looks quite good.

Oil curse in Brazil

Municipalities that receive oil windfalls report significant increases in spending on infrastructure, education, health, and transfers to households. However, the windfalls do not trickle down and much of the money goes missing. Indeed, oil revenues increase the size of municipal workers’ houses but not the size of other residents’ houses.
That is Francesco Caselli and Guy Michaels, via Chris Blattman.

They also mention more media mention of corruption and federal police operations in municipalities with higher oil outputs. On the latter I am skeptical - I used to live in Rio, and I don't think the favelas and their problems have anything to do with the area's substantial resource income - but nevertheless their overall findings ring true to me.

Ethiopian Airlines is safe

Owen Barder stands up for Ethiopian Airlines and inspires me to do the same.
I was very upset to hear of the loss of an Ethiopian Airlines plane from Lebanon to Addis Ababa this morning.

Many Ethiopian and Lebanese families will be grieving.

Ethiopian Airlines has an outstanding safety record. The staff are professional, courteous and efficient. I will be flying from the UK to Addis on Friday on Ethiopian Airlines and, despite today’s tragedy, I am looking forward to it.
I'm flying Ethiopian from Addis to Europe soon and feel the same way.

Update: OK, I need to temper my praise. Flight was two hours late getting off the ground, simply because it took that long to get everyone through security and on to the plane (and not the first time that has happened to me). And second, the flight attendants are astonishingly incapable of not waking you up for breakfast 2.5 hours before landing, despite clear and copious appeals in advance (and also not the first time).

Gini coefficient is falling

Following up on my post and the comments discussion on how successful the last decade has been, I was very impressed to see how far the worldwide Gini coefficient has fallen:

If you assume it does not come at the cost of slower overall economic growth (a very relevant caution when formulating economic policy), I'd argue that higher equality of income is unambiguously good.

There are more charts and analysis here. Hat tip to Marginal Revolution.

Legislative update

Tyler Cowen thinks that:
If there's one lesson from the health care debacle, it is that Waxman-Markey was and is a dead end.
... and...
I believe the health care debacle should cause all of us to rethink our positions on preferred paths, sequences, and strategies. No matter what your opinion of the health care bill, it's not a pretty picture.
I hope he is wrong, but he is a very smart guy.

Also, via Morgan Downey, T. Boone Pickens is bullish on CNG legislation passing in Congress "by Memorial Day." I guess that would be good for the Pickens Plan, especially given that the wind farm leg hasn't been looking too healthy of late.

Wind farm wakes

Via David Mackay; mostly I just love the photo:

(Oh yeah, and being downwind can easily reduce the power generation of a turbine by 20-30%, or even more. One more thing to keep in mind when calculating the magnitude of renewable energy potential.)

Good ideas, but truncated RSS

That's my initial take on the FT's Energy Source blog, which I subscribed to hoping it would fill the big shoes left vacant by the untimely demise of Environmental Capital.

For example, this is a pleasantly non-lazy line of thought:
One of our favourite counter-intuitive ideas on this blog is that China’s massive and growing appetite for fossil fuels might end up being a good thing for the environment, as it could drive big efforts on renewables, electric vehicles, and even energy efficiency.

The rationale is that China takes forward planning much more seriously than many large economies; so unlike other countries that are simply ambling towards some kind of climate/security/supply (choose your favourite) crisis, China will put significant effort into energy alternatives. Of course, the buying up of long-term fossil fuel supply deals with various countries around the world doesn’t necessarily support that.

And if the local press is anything to go on, anxiety over energy security is indeed pretty high in China at the moment.
On the negative side, Energy Source's RSS feeds are truncated. This is not only incredibly annoying for a reader, but as Felix Salmon has described many times, doesn't even make financial sense for the publication!

Update: Unsubscribed. Don't love the style and not worth it with the truncated feeds.

Implications of Massachusetts

A few reactions to the latest election in Massachusetts (which will make no pretense of comprehensiveness).

First, Geoff Styles:
In the course of a single month, from the conclusion of the Copenhagen climate conference to yesterday's special election in Massachusetts, the anticipated global response to climate change has shifted dramatically. What had once seemed a likely scenario of coordinated, mandatory cuts in global greenhouse gas emissions suddenly looks unattainable, at least any time soon, and the whole approach to addressing climate change is in urgent need of a rethink. While much of the attention in last night's election was focused on the prospect of a 41st Senate vote to block pending health care legislation, the same dynamic almost certainly applies to cap & trade, at least along the lines of the Waxman-Markey bill passed last June by the House of Representatives.
I'm probably in a minority of those concerned about climate change who welcome the demise of the Waxman-Markey approach. As I've noted before, it made little sense to adopt a methodology designed to create a level playing field for energy technologies based on their emissions, if it was established on such an intentionally-uneven foundation of excessive free allowances handed out to favored sectors and constituencies.
I've disagreed at length and on the record with Geoff on the efficiency of the Waxman-Markey version of cap-and-trade; suffice it to say here that I'll mourn its demise more than he does, partly because I thought it was a fine bill in practice and partly because the political winds don't seem to favor a robust alternative emerging in 2010. (and I think Geoff would agree with the latter)

The other thing I'll share is the gut reaction of ag/food blogger and Massachusetts resident Parke Wilde:
... it is true the Massachusetts is about 80% liberal by national standards, and only about 20% conservative. That makes Massachusetts much more liberal than most states. But the liberals are deeply divided. One half has working class and pro-union roots in manufacturing, construction, and government service industries, which are all suffering painful economic stresses. The other half is connected to the large higher education, financial service, biomedical, and software industries.

The Democratic candidate, Attorney General Martha Coakley, is a highly educated lawyer who failed to reach out well to liberals with working class roots, who are genuinely fearful about economic conditions.

All conservative voters went to the polls yesterday, while some fraction of liberals stayed home.
As a highly educated former resident of Massachusetts with a great job, I'm probably somewhat victim to this same myopia... so perhaps one good thing that can come of this result is for that short-sightedness to fall away, for me and for others who also suffer from it.

How long to fill up an EV?

Geoff Styles on a potential Achilles heel of the electric vehicle (emphasis is mine):
To understand why recharging EVs is such a tough problem, let's take a look at your last visit to the gas pump in terms that would never occur to most people. Gas pumps in the US are limited by EPA regulations to deliver a maximum of 10 gallons per minute. Half that is probably more typical. But even at 5 gallons per minute, the gas pump is "recharging" your car at the power equivalent of 10 megawatts (MW), effectively delivering the entire daily power consumption of the average US household every 12 seconds. Even if you discount that figure by the lower conversion efficiency of an internal combustion engine, it's still the equivalent of a couple of megawatts. Matching that for an EV would require either stupendous voltages or currents well above most designers' comfort level. For example, a car recharger drawing 100 amps would have to operate at 25,000 Volts--more than ten time the voltage of the electric chair--to deliver a comparable charge in the same interval. At the 240 V of your home's appliance circuit, you'd need about 10,000 amps--similar to what a transit train draws from the "third rail." Almost inevitably, the safe recharging of EV batteries must take longer--hours longer--than refueling your gasoline vehicle, or entail clever-but-costly workarounds such as the battery-swapping scheme of Better Place and other firms.
I wouldn't rule out clever workarounds, but this is a legitimate and substantial barrier to EV adoption until one comes around.

RIP, Environmental Capital

Sorry for my absence of late - the combination of copious work and poor internet connectivity haven't been great for my blog reading, let alone writing.

And sorry to restart things on a sad note, but like every single commenter, I am very disappointed to hear of the demise of the WSJ's outstanding Environmental Capital blog. In my mind there was no one who covered the broad energy and environment space better, and I can't fathom the decision.

As per one commenter's suggestion, I've subscribed to the FT's Energy Source blog as a replacement - I'll let you know how it goes.

Update: Energy source didn't make the cut.

Monsanto's patent expiration dance

Via Parke Wilde at U.S. Food Policy, an interesting NYT article on the dynamics of patent expiration on Monsanto's widely-used Roundup Ready 1 soybeans, which occurs in 2014.
In letters to seed companies and farm groups this week, Monsanto said that it would allow farmers to continue to grow its hugely popular Roundup Ready 1 soybeans even after the patent protecting the technology expires in 2014.

The letter countered a widespread impression in the agriculture business that Monsanto planned to force farmers and seed companies to migrate to a successor product called Roundup Ready 2 Yield, which will remain under patent and is more expensive.
Monsanto is trying to position this as a clarification rather than a retreat:
Gerald A. Steiner, executive vice president for corporate affairs at Monsanto, said Thursday that Monsanto was not changing its policy on how it would handle the soybean patent expiration, but was merely clarifying its intentions.

“What’s different,” he said, “is we have made a very comprehensive communication of what we are going to do.”

But the widespread impression in the seed business was that Monsanto was backing away from a previous policy.
Monsanto appears to have strong legal protections in their existing contracts, but it doesn't look like those will stand up to the weight of public criticism:
Some seed industry executives and academic soybean specialists say that Monsanto was not planning to renew licenses for that Roundup Ready 1 trait that expired before 2014, so that seed companies would have no choice but to move to Roundup Ready 2.

But in its letters this week, Monsanto said it would now extend all contracts for Roundup Ready 1 until the patent’s expiration date. It also said it would not enforce language in some contracts that would have required seed companies to destroy or return Roundup Ready seed when the patent expired.
But Monsanto may have another out a few years down the road:
Still, it is uncertain how long Roundup Ready 1 would survive in generic form. Some nations require licenses for the import of genetically engineered crops to be periodically renewed. Monsanto said it would maintain those licenses through 2017. But if they expired after that, American farmers would not be permitted to export the Roundup Ready 1 generic soybeans to certain countries, which would discourage them from growing those crops.
One final thought - Monsanto is much-demonized as a monopolist and worst, but it is hard to get textbook industry structure and competition in industries which require massive R&D investments. Those investments simply don't get made privately without patent protection, which looks suspiciously like a monopoly after the fact.

Negative abatement costs, explained

Ted Gayer, co-director of economic studies at the Brookings Institution, published a lazily-reasoned and lazily-researched article dwelling on the apparent impossibility of GHG emissions reduction opportunities with negative marginal costs:
But Krugman oversells the affordability claim by linking to a widely cited report by McKinsey & Company. The main point of the McKinsey study is provided in their Exhibit B, which illustrates a rather peculiar finding that there are a significant number of pollution abatement options that can be achieved at “negative cost.” This finding violates the basic principles of economics. If firms (or consumers) could reduce emissions at negative cost, then they would do so. To say otherwise is to say that they are willingly or ignorantly passing up profits...
Gayer's original post has already been picked apart by luminaries such as Avent, DeLong, and Krugman, but in the interest of documenting this information for myself, I'm going to write out the possibilities Gayer acknowledges, followed by the ones he doesn't.

Gayer can think of four reasons why the McKinsey study might find negative costs:
  1. The cost estimates are wrong (i.e. incorrect assumptions)

  2. The cost estimates are incomplete

  3. The private discount rate is incorrectly estimated

  4. Firms are behaving irrationally (which he goes on to say is not realistic)
Thankfully, the relevant McKinsey report is available online, and had Gayer bothered to skim it, he would have found starting on p24 this helpful list of potential explanations for negative marginal costs, without invoking irrational behavior:
  1. Agency issues (e.g. landlord-tenant)

  2. Ownership transfer issues

  3. Pricing distortions (e.g. via electricity price regulation)

  4. Higher hurdle rates (e.g. consumer's cost of capital could be higher than a corporation's)

  5. Constrained access to capital

  6. Adverse bundling (e.g. efficient washing machine has other "gold-plated" features unaffordable to non-premium customers)

  7. Local product and service availability

  8. Improper installation or use
Beyond these, it is not hard to believe that well-documented behavioral biases (risk aversion, lack of awareness, habit) play a role in some cases.

Krugman also helpfully points out the considerable existing economic literature on principal-agent problems in energy efficiency.

Gayer's response is also a textbook example of responding to weaker criticisms, and ignoring the stronger ones.

For what it's worth, Gayer seems to support a market-based mechanism (cap-and-trade or a carbon tax) and fear a centralized, command-and-control approach by the government, which are both eminently reasonable positions (which I share, for what it's worth). But arguing flimsily against the existence of negative-cost GHG abatement opportunities like he does is an ineffective way of making that case.

Gal Luft on crude/carbon

Gal Luft, author of Turning Oil Into Salt (which I reviewed at length in November), has a new column in Foreign Policy whose subtitle speaks for itself:
Since the world can't seem to agree on cutting carbon emissions, maybe it's time to try an easier but equally important target: oil.
Why oil, in the wake of the lack of concrete progress at Copenhagen?
This pushback by the developing world begs for a unified, yet politically feasible, agenda that can be embraced by rich and poor countries alike. One area where such an agenda can emerge is oil. Whereas reaching consensus about significant cuts in the use of fossil fuels in power generation seems to be unlikely, focusing on reducing the use of oil, which powers 95 percent of the global transportation sector, is a goal that offers a real chance of global acceptance (with the exception of certain oil-exporting countries, of course).
His proposals center on the Open Fuel Standard with which readers of his book or my review will be familiar. However, he focuses on flex-fuel vehicles and downplays the plug-in hybrid electric vehicles (PHEVs) which would be central to the electrification of transport. Perhaps this is because the current cost arguments for PHEVs are much weaker, and he doesn't wish to draw attention to that weakness in his overall thesis. In any case, I assert that my previous conclusion holds:
... despite [the authors'] attitude and the optimism it engenders, in the end they do not illuminate a line of sight to the day that PHEVs will be cost-competitive with normal cars. And without that, their OFS story is basically a biofuels (or other hydrocarbon-to-liquids fuels) story... and is that really that revolutionary?

Blood coltan (or not)

Chris Blattman writes:
Blood what? On the heels of the successful (and much needed) blood diamond advocacy, the activist industry has now set its sights on minerals coming out of eastern Congo, including the coltan that fuels your mobile phones. Its sale by unsavoury characters is feared to be fueling war, murder and mass rape.

The problem with the campaign? That pesky little thing called evidence.
Texas in Africa has the full take-down. The moral of the story is don't believe everything 60 Minutes tells you.

Cape Wind

Yet another major renewable energy project is facing siting challenges:
The Wampanoag — the tribe that welcomed the Pilgrims in the 17th century and is known as "the people of the first light" — practice sacred rituals requiring an unblocked view of the sunrise. That view won't exist if the Cape Wind project's 130 turbines, each over 400 feet tall, are built several miles from the Cape Cod shore across a 25-square-mile swath of federal waters. The turbines would be visible to Wampanoag in Mashpee and on Martha's Vineyard.
Without passing judgment on the relative legitimacy of this particular alternate claim to the land, I'll note that there are very few renewables solutions which will make absolutely everyone happy.

Via Geoff Style' 2010 outlook - worth reading.

After Copenhagen? Cochabamba

Depressed about the failure of Copenhagen? Bolivian president Evo Morales isn't:
On Tuesday, Morales called the Copenhagen summit "a triumph of the people" because "the presidents came, proposed and went without hearing, but this time they could not impose their declaration."
It's not that he's not concerned about the earth, he just has an alternate solution in mind:
Bolivian President Evo Morales said Tuesday he's inviting activists, scientists and government officials from around the world to an alternative climate conference following the failure of a summit in Copenhagen to produce binding agreements.

The leftist leader said the April 20-22 meeting in Cochabamba will include indigenous peoples, social movements, environmentalists and scientists as well as governments "who want to work with their people."

Morales said the meeting is meant partly to pressure industrialized nations to accept that they have a "climate debt" to poor countries and will work toward an international court on environmental crimes.

Other topics will include a "universal proposal for the rights of mother earth" and the transfer of technology.

An environmentalist for genetically engineered crops

In his recent interview, thoughtful long-time environmentalist Stewart Brand weighs in on topics from nuclear vs. coal to genetically engineered crops... and on the latter, like on nuclear, he ends up opposing the generic hippy environmentalist point of view:
e360: What has been the reaction to your proposals on genetic engineering and food?

Brand: Well, I’m a little surprised that Michael Pollan hasn’t come over because he has busted the industrialization of organic food.

The local growing of basically artisanal food is absolutely fantastic in a country where the basic nutrition problem is obesity. That’s not the major nutrition problem in much or most of the world. [emphasis mine, as this was central to an argument I recently had with an ardent environmentalist in an organic local bakery and coffeehouse] What they need is volume, which is the very thing the Green Revolution spoke to and answered. The second Green Revolution is the next set of good technology in agriculture. Not only green in the sense the first one was — higher yield, lower cost, cheaper food, better distribution and all that — but also green ecologically, environmentally green in terms of climate.

Kind of working backward to what the world wants and needs, and what the climate wants and needs, and ecology wants and needs, then genetic engineering looks like a very important tool.
The land use point alone makes a strong argument for the yield improvement potential of genetic engineering in agriculture, but I like how he adds the point that it can help address goals of minimizing negative environmental impacts as well.

How to make nuclear economic

Tax the hell out of coal, is in essence the argument of long-time environmentalist Stewart Brand in this interview and his new book.
e360: One of the main arguments against nuclear is economic — it’s not viable in the marketplace. How much should the market play in pushing these technologies, versus the government?

Brand: It’s a strange kind of desperate argument. Probably that question applies most in the developing world where coal really is king, is the cheapest. If the market rules, coal wins almost everywhere. I’ve been saying, and I say in the book, that we have to get used to the idea that there’s a very serious role for the government here, basically to make coal expensive, and let the rest fight it out.
Coal is cheap everywhere, not just in developing countries. His admission that under pure market rules coal is unbeatable is a different tack than those environmentalists who optimistically hope for the advent of renewable power at massive scale... but I think he is being more realistic than they are. After all, renewables are nowhere near being able to satisfy our current demand, let alone the likely future growth:
... the greenest people in the world probably are the squatters in the slums of the world — a billion people. How lucky we are that they’re there, they’re getting out of poverty, they’re green as hell but they would really like electricity 24/7 and fresh water and sanitation and some other things that are going to involve more energy use. That’s either coal or nuclear as far as I can tell.
The whole interview is interesting, and the book looks interesting too – I’ve added it to my (long) reading queue.

Not such a bad decade after all

The Roving Bandit excoriates Paul Krugman for his America-centric pessimism about the last decade:
Via The Monkey Cage, apparently Paul Krugman has been whining about the "naughties" and how nothing good happened in America. This is why I don't read Paul Krugman. He focuses too much on America.


This resonates with the interesting recent writing and forthcoming book by Charles Kenny on "The Success of Development", which argues that aside from growing income (a surprisingly intractable problem), development has succeeded admirably in the last fifty years:
This book explores the bad news and the good news about development. It lays out the evidence on growing income disparities between the global rich and the global poor that are at the heart of a narrative of crisis. And it chronicles the failed search for a silver bullet to overcome economic malaise.

But it also discusses the considerable successes of development. Not least, the evidence for any country being stuck in a Malthusian nightmare is threadbare. The book points to global progress in health, education, civil and political rights, access to infrastructure and even access to beer. This progress is historically unprecedented and has been faster in the developing world than in the developed.
Amartya Sen would of course be proud of this broader conception of what development really means.

See also Tyler Cowen on the "Fruitful Decade for Many in the World" (especially "China, India, Indonesia, Brazil, and much of Africa"), and via his MR blogging partner Alex Tabarrok, this post on and list of African successes:
In recent years, a broad swath of African countries has begun to show a remarkable dynamism. From Mozambique’s impressive growth rate (averaging 8% p.a. for more than a decade) to Kenya’s emergence as a major global supplier of cut flowers, from M-pesa’s mobile phone-based cash transfers to KickStart’s low-cost irrigation technology for small-holder farmers, and from Rwanda’s gorilla tourism to Lagos City’s Bus Rapid Transit system, Africa is seeing a dramatic transformation. This favorable trend is spurred by, among other things, stronger leadership, better governance, an improving business climate, innovation, market-based solutions, a more involved citizenry, and an increasing reliance on home-grown solutions. More and more, Africans are driving African development.

An equal right to pollute?

Happy New Year! I'll kick off 2010 with an interesting idea from Bono, via Owen Barder:
An Equal Right to Pollute (and the Polluter-Pays Principle)
One smart suggestion I’ve heard, sort of a riff on cap-and-trade, is that each person has an equal right to pollute and that there might somehow be a way to monetize this. By this accounting, your average Ethiopian can sell her underpolluting ways (people in Ethiopia emit about 0.1 ton of carbon a year) to the average American (about 20 tons a year) and use the proceeds to deal with the effects of climate change (like drought), educate her kids and send them to university. (Trust in capitalism — we’ll find a way.) As a mild green, I like the idea, though it’s controversial in militant, khaki-green quarters. And yes, real economists would prefer to tax carbon at the source, but so far the political will is not there. If it were me, I’d close the deal before the rising nations want it backdated.
This sounds attractive, but it shares problems with the "carbon intensity" pledges that China has offered. For overall emissions to be reduced (or even levelled), the "average" right to pollute would be quite low (I'm guesstimating 1-4 tons a year based on relative rich/poor populations in the world), so it requires Americans and other rich-world citizens to pay for virtually all of their pollution... except unlike cap-and-trade, where the money goes to their governments (and much of it ends up rebated), all of that money goes to poor countries. Once that math is laid out... how exactly is this more sellable than what failed to be agreed upon in Copenhagen?