#Magic, maths and money - Atom Magic, maths and money - RSS Magic, maths and money - Atom Magic, maths and money Monday, 9 June 2014 Dogmatic Indifference Email This BlogThis! Share to Twitter Share to Facebook Last week Roger Pielke Jr had a letter to the FT published where he questioned the effectiveness of a carbon cap in China. Paul Krugman responded to Pielke's letter with a post where he claims that the letter offers a teachable moment, a chance to explain why claims that we can’t limit emissions without destroying economic growth are nonsense I am neither a climate scientist not an economist, but none the less I will offer my opinion on the debate because I think it offers a "teachable moment" of the perils of dogmatism in policy formulation by relating this discussion to my reflections on a meeting I had attended, hosted by the University of Edinburgh's Institute for Advanced Study in the Humanities, as the debate was going on. Pielke based his argument on the "Kaya identity". What is interesting as a mathematician is Pielke is talking about an "identity" not a "model". For example E=mc^2 is a model (or definition), and identity is a stronger statement, basically what is on the left hand side of the equation is identical to what is on the rhs. The Kaya Identity is a straightforward tautology, the lhs is "CO2" (carbon dioxide emissions) the rhs is P * GDP/P * E/GDP * CO2/E Noting that "P" (population) "GDP" and "E" (energy consumption) are all in the numerator and denominator the rhs can be re-written 1*1*1*CO2. The analytic value of the Kaya Identity is that it decomposes the human impact on the environment into three factors: population, affluence (GDP/P) and technology (CO2/GDP) which is divided into "Energy Intensity" (E/GDP) and "Carbon Intensity" (CO2/E). Pielke's argument is that by fixing "CO2" (the rhs) implies that for GDP/P (affluence) to go up there needs to be reductions caused by technological changes (Carbon and/or Energy Intensity go down). This seems like a sound argument to me, but I am no expert. Krugman's response to Pielke's letter is This is actually kind of wonderful, in a bang-your-head-on-the-table sort of way. Pielke isn’t claiming that it’s hard in practice to limit emissions without halting economic growth, he’s arguing that it’s logically impossible. So let’s talk about why this is stupid. The point to note here is that Pielke is not arguing that it is "logically impossible to limit emissions without halting economic growth" he is arguing that it is "logically impossible to limit without halting economic growth or creating new technologies". Perhaps because Krugman is an economist he is overlooks the need to create technology here, physical things that have tangible effects. Krugman goes on to say Yes, emissions reflect the size of the economy and the available technologies. But they also reflect choices – choices about what to consume and how to produce it, choices about which of a number of energy technologies to use. These choices are, in turn, strongly affected by incentives: change the incentives and you can greatly change the quantity of emissions associated with a given amount of real GDP. and at the end of the piece Let me add, by the way, that Pielke’s fallacy here – the notion that there’s a rigid link between growth and pollution – is shared by some people on the left, who believe that saving the planet means that economic growth must end. What we actually need is a change in the form of growth – and that’s exactly the kind of thing markets are good at, if you get the prices right. What strikes me is that Krugman seems to believe that by sprinkling the fairy dust of incentives over society the emission busting new technologies will emerge. This is a bit too deterministic for me. Furthermore there is a blind faith in the power of markets. This is problematic for a number of reasons, firstly European Cap and Trade policies are widely regarded as a failure, though market advocates would point to a problem of design (Fac me bonum, deus meus, sed noli modo-Give me chastity and self-control, but not just yet). There is a more problematic criticisms of market mechanisms; their morality. Cap and trade enables a polluter to pollute by paying a penalty - they are in effect the indulgences that the Medieval church was criticised for. The problem is that CO2 emissions in Europe, China or America have the potential to impact on the well being of future generations in Africa or Indian or Pacific Islands. It is not clear how the payment of the penalty by the polluter will mitigate the suffering of the people affected by the pollution. The operators of Heathrow airport benefit from the operation of the airport, the people living around the airport do not benefit from it. The question is: are we entitled to buy and sell permits to pollute? in the same sense as are we entitled to buy and sell humans? Krugman might baulk at the comparison, but Michael Northcott, the Professor of Ethics at Edinburgh, might not. Northcott gave a presentation at the IASH meeting where he made a case against capitalism because capitalism insisted on GDP growth at the lowest cost, which resulted in pollution. Northcott builds his argument, in part at least, on Political Theology. Since I base my arguments for seeing markets as centre of communicative action on rejections on two key components of Political Theory, Schmitt's views on sovereignty and Adorno's criticism of modernity, it is unlikely that Northcott and I will agree. It is not peculiar for Northcott, as a minister of the church, to be attracted to Schmitt's neo-Hobbesian attitudes that the sovereign's authority has precedence over the (liberal) law, since he will believe in the sovereignty of a god. My work on the nature of the markets rests heavily on Cheryl Misak's Truth, Politics and Morality, which is an explicit rejection of Schmitt in favour of liberal pluralism. Another basis of my work is Habermas' rejection of the negativity towards modernity in the Dialetic of the Enligthenment. Krugman and Northcott agree on the policy: that carbon emissions should be capped, but they do so from very different ideological positions. Northcott from the theological dogma of "thou shalt not because I speak with the authority of a transcendental god", Krugman from the economic dogma "thou shalt not because the market will deliver us from evil", but both dogmas are in opposition to each other. This dissonance, I believe, enables those who oppose climate change mitigation policies to focus on the ideology underpinning the justification for carbon caps rather than the factuality of the dangers of carbon emissions. Another speaker at the IASH conference, and the person who invited me to attend, was Paolo Quattrone. Paolo shares, from the perspective of accounting, my view (ideology, if you like) that financial markets are, and should be treated as, centres of communicative action with the purpose of achieving a consensus on the ‘just’ price of assets in an uncertain world. In this framework, markets should operate on the basis of norms of discourse, such as reciprocity, sincerity and charity. My argument focuses on a discussion of how the norm of reciprocity is deeply embedded in the Fundamental Theorem of Asset Pricing, the foundational theory of mathematicians working in finance. A key conclusion is that, in this framework, mathematics provides the discursive language, rather than being a truth-bearer. Paolo has researched Jesuit accounting practices where the financial accounts were a tool for reflection, rather than a statement of fact. This approach was a feature of Italian accounting practices (GAAP) until there was global standardisation of GAAP and meant that in the 1960s Italian accounts involved facts, based on market prices, and less certain valuations based on judgement. The emphasis of the accountant was to reflect on the less certain aspects of the accounts. Today there is an emphasis on "objective" market prices, and where these are unavailable "model" prices. Paolo also highlighted a feature of Jesuitical practice; that the Jesuit must be "indifferent". The immediate interpretation of this is that the Jesuit does not care, but Paolo explained it meant that the Jesuit had to be "rational" "in difference". That is, the Jesuit had to be concious of the different ideologies around them and come to a judgement on the basis of this conciousness. I think this "in-difference" concept is important for scientists in the climate debate. It is not the same as "apolitical", since arguing for climate change mitigation actions is arguing for policy, which is political. The role of the scientist should be that of the "indifferent" questioner who challenges the claim, irrespective of its ideological basis. In this respect Pielke, in challenging the assumption that a carbon cap would work, is playing the correct role of a scientist. This is important because in a liberal democracy policy decisions need to be justified. This is not the same as a majority needs to accept a policy, my understanding is that around 60% of the population of western democracies accept the need for climate mitigation policies, but a small minority challenge them. For the policies to be "democratically valid" they need to be justified to the minority not accepted by the majority. The opening quote to Karl Popper's The Open Society and Its Enemies is from Pericles Although only a few may originate a policy, we are all able to judge it. It is against the Open Society to condemn challenges to policy. Cheryl Misak's justification for liberal democracy is because it is through deliberation that the best decisions are arrived at. Pielke is challenging the claim that carbon caps will lead to a better society because it demands the policy is justified (deliberatively). In challenging it, those who advocate the cap must respond to the criticism, not reject the criticism on the basis of divine or economic authority. If they do not respond the public cannot be sure that the policy is the "best" policy and doubt will prevail. I note that Krugman appears to have stepped back from his position last week. Interestingly, he, like me, identifies the issue as being "ideological", but I suspect he sees himself as being a "scientist" and above ideology. What makes rational action on climate so hard is something else – a toxic mix of ideology and anti-intellectualism. and then at the end of the piece The fact that climate concerns rest on scientific consensus makes things even worse, because it plays into the anti-intellectualism that has always been a powerful force in American life, mainly on the right. It’s not really surprising that so many right-wing politicians and pundits quickly turned to conspiracy theories, to accusations that thousands of researchers around the world were colluding in a gigantic hoax whose real purpose was to justify a big-government power grab. After all, right-wingers never liked or trusted scientists in the first place. So the real obstacle, as we try to confront global warming, is economic ideology [I take this to be market libertarianism] reinforced by hostility to science. In some ways this makes the task easier: we do not, in fact, have to force people to accept large monetary losses. But we do have to overcome pride and willful ignorance, which is hard indeed. On the one hand Krugman be-moans the anti-intellectualism of America, but I see America's scepticism towards academic (and theocratic, plutocratic, aristocratic) authority as part of the bed-rock upon which its democracy is built. The vast majority of the public respect and admire science and scientists, but there is also a legitimate concern that cloistered and wealthy academics are imposing un-justified policies on the public. The evangelical right might ask "What would Jesus do?", maybe the academic left could similarly ask "What would Pierce/James/Dewey do?" when faced with a doubtful public minority. Posted by Tim Johnson 30 comments: 1. [David_Avatar.jpg] David Eisner10 June 2014 at 10:00 Krugman responds: "There has been a lot of theorizing about induced innovation, but it’s not solidly grounded in empirical evidence and was not at all what I was talking about. 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. None of these are technologies that need developing; they’re already here and in fairly widespread use. And do you really want to deny that which technology people choose is affected by incentives?" http://krugman.blogs.nytimes.com/2014/06/10/incentives-and-technolo gy ReplyDelete 2. [Leo.jpg] JamTheCat10 June 2014 at 10:24 Krugman's point was that using EXISTING technologies can make a difference in the lowering of emissions. We already have solar and wind technology available for creating electricity, and Hybrid and electric vehicles for transport, which emit fewer carbons, to name a couple aspects. Shifting to greater reliance on them would incur minimal costs that would be nowhere near a one-to-one basis. That was his point. It was obvious that's what he meant, to me, and I'm neither an economist nor scientist. Which makes one wonder -- why do you think he means new technology needs to be brought forth, or that Pielke is being anything but disingenuous...at best? ReplyDelete 3. [b36-rounded.png] jefscott10 June 2014 at 11:03 "The vast majority of the public respect and admire science and scientists" Do you have any data on this? When it comes to climate change, for instance, you very often hear refutation of the science based on denigration of the scientist, or a questioning of the scientists' motives. It seems like the right's respect" for science is present only when the conclusions don't contradict some other ideology. So science is "respected" outside areas like age of the earth, evolution, climate change, etc. We see this on the left too - like with their refutation of GMOs - though generally less extreme. We know from quite a few polls that huge portions of the US believe in patently anti-scientific ideas. 40-45% don't believe in evolution, for instance. Or look at numbers on what people believe the age of the earth is. So again, there's a lot of good reasons to think statements like "the vast majority of the public respect and admire science and scientists" should be supported with evidence because we see so much disrespect for basic science from the right these days. ReplyDelete 4. [3.jpg] Jim Harrison10 June 2014 at 11:46 I think you're looking at technological innovation in the wrong way. Many steps lie between somebody having a bright idea and a technology becoming a standard feature of the economy. To improve the bang for the buck we get from energy doesn't require absolute innovation. Mostly it requires the adequate implementation of existing technologies. The largest barrier is often not ignorance but sheer inertia, and overcoming that is very hard work. As Heraclitus said long ago, "Every cow is driven to pasture by a blow," a rule which is all the more relevant when you recall that industry is largely run by business majors. Enormously important example: traditional electric motors waste a huge amount of power because they operate at a single, fixed speed. Replacing the old equipment with variable speed motors (VARs) saves very significant amounts of energy with no loss of function, but it has been a terrific struggle to get industry to adopt 'em even though improved efficiency shows up in a bigger bottom line. It isn't a matter of being a good corporate citizen. It's about not being an idiot. Unfortunately, we're a long way from the general adoption of VARs even though the utilities (among others) have been trying to spread the message for decades now. ReplyDelete 5. [openid36-rounded.png] bseconomist10 June 2014 at 13:34 You are not an economist and it shows. Krugman's point did not in the least depend on the magic of the market, but only on the fact that you can't possibly make such strong claims reasoning from an identity. The precise problem here is dealt with by some other commenters, but the basic issue of confusion here is that "technology" in economics doesn't mean precisely what it means in common usage. A "technology" is anything that transforms one set of resources into another. That means that the "technology" that produces CO2, for example, is one of a menu of possible choices. For example you can use coal plant to produce electricity or you can use natural gas. The latter would reduce emisions without any loss of output. In fact, that very thing just happened in the US. It happened because natural gas was cheaper than coal in the US. There was no other "magic of the market" involved and I assure you that the US grew at a healthy clip while that was going on. One more thing, because it's something that everyone who dips a toe into economic issues should remember: Never reason from an identity! ReplyDelete 6. [b36-rounded.png] tetchmagikos10 June 2014 at 13:56 I think there may be a semantic confusion in assigning special significance to the term "identity" in this context. From the IPCC: "While the Kaya identity above can be used to organize discussion of the primary driving forces of CO2 emissions and, by extension, emissions of other GHGs, there are important caveats. Most important, the four terms on the right-hand side of equation (3.2) should be considered neither as fundamental driving forces in themselves, nor as generally independent from each other." http://www.ipcc.ch/ipccreports/sres/emission/index.php?idp=50 So I think (since this is also not my field) that Pielke may be pushing the "identity" past its' intended use; it's a convenient data analyzer, not a mathematical certainty. Indeed this layman is led to believe the Kaya identity is as close to a mathematical certainty as Moore's law is to a law of physics. ReplyDelete 7. [b36-rounded.png] bibletoenail10 June 2014 at 14:09 Here is another climate change identity, the Berry Identity: CO2 = P * (C/P) * (E/C) * (CO2/E), where: P is population C is Cake (slices) E is energy CO2 is CO2 As you can see from this identity, in order to reduce CO2 emissions, obviously we cannot change the amount of cake that we eat each year (C/P), and we cannot change the recipe for cake to bake them at a lower temperature (E/C). Since technology cannot be improved by fiat (see Pielke), I have proven that reduction in CO2 emissions is impossible. This identity is ONE HUNDRED PERCENT TRUE! It is therefore IMPOSSIBLE TO LOWER CO2 EMISSIONS. THIS IS MATHEMATICALLY UNDENIABLE. ReplyDelete Replies 1. [b36-rounded.png] Armo and Pika11 June 2014 at 04:37 Wrong interpretation of your own equations. If CO2 is all atmosphere CO2 generated in a unit of time, P total population, E total energy consumption in the unit of time and C all cakes consumed in the unit of time, then the identity holds, but tells nothing as (E/C) means nothing really. Baking thermic energy here is not total energy. Or if you want it to be, then (CO2/E) means nothing, as total CO2 upon energy consumed only for baking is irrelevant. On data, you'll just have 2 of your ratios being almost inverse to each others, canceling in the product. The meaning of the identity, to be above the simple tautology, remains in the meaningful ratios obtained. These ratios follow trends (or better, are constant) which have clear interpretation: - P is the demographic dimension - GDP/P is GDP per capita, meaning the comfort of life for each and everyone. - E/GDP is energy needed for output, which is fundamental (see the works for example of R.U. Ayres, R. Kümmel and D. Lindenberger in the economic litterature). - CO2/E is basically smoke out of a gallon, something that almost never changed.. Delete 2. [b36-rounded.png] Jeff Young11 June 2014 at 04:47 The fallacy is in your last line. "Gallon" presumes fossil fuel. Presuming a total "oil" economy is fallacious in an argument about the economics of alternative existing energy sources. (Hydroelectric and photoelectric come to mind immediately. Also geothermal and nuclear.) Delete 3. [b36-rounded.png] Armo and Pika11 June 2014 at 05:59 I agree with you that oil does not represent all economic production. But it represents a main factor, and if we add coal as GHG emiting energy source, then fossil energy sources are even more the great component. 40% of all World electricity production is from coal. And coming to the source of the debate, it is the main source for China's electricity (75%