Sunday, April 27, 2014


A research paper by experts at Leeds University highlights how simple problems such as a shortage of seating in streets are deterring older people...
The Telegraph

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Now monetize the ideas. Seats and lavatories to be charged to National Health Service on a per user basis, then paying the elderly to use them.

The more the elderly get out and about, the better for communities and businesses, not to speak of the health benefits.

Let's induct both Bhagwati and Sen into this campaign.
A FB friend shares
"Nada en este mundo sucede por casualidad." (Veronika Decides to Die)

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Tell that to statisticians.

Everything is by chance. Except that there are well-defined distributions.

Paolo got popular by chance. He happened to hit upon ideas that appeal to a distribution with small standard deviation.

If only anybody knew what that distribution is and what the s.d. is/are.

A FB friend asks, "Why is the support of upper castes for the BJP secular, but that of Muslims for any party communal? " http://m.timesofindia.com/home/stoi/deep-focus/What-Johnny-wont-see-Upper-caste-votebank/articleshow/34269634.cms

Because many Muslims are from lower Hindu castes and BJP or the upper Hindu castes (no matter what the party) have never seen them as equals or even as heterogeneous and competitive, conflicted as themselves.

Secular is a bad phrase in the Indian context. Most people who think of themselves as secular also consider themselves deeply attached to the religious practices of their particular castes.

Muslims from formerly upper caste backgrounds also consider themselves non-communal, even secular. Same muddled thinking.

I don't mind muddled thinking. Principle are signs of weak minds. I also consider a common human weakness to think of "Us v. Them", one requirement of which is stereotyping "them" and considering "them" to be all the same, a united enemy, incapable of human weaknesses and conflicts. All that serves to call upon "us" to be united, creating a stereotype of "us", requiring ideological purity of "all of us".

Stupid, in plain terms. And hence powerful.

Thursday, October 31, 2013

Money makes the world go around... fast or slow

Someone complained about miserable treatment by AirFrance-KLM, and I had a Facebook exchange:

www.firstpost.com
  • Me: And these are the companies in competitive environment that EU imposes carbon penalties on.

    Customers suffer in the end for bureaucrats' follies and airline management's stupidity.

    Response: Customers also suffer because of the insatiable greed of the companies who think of nothing but maximizing their profits - customer service and humanity be damned....

    Me:  "Insatiable greed" is moronic term. Nobody can tell how the profits are maximized, or even whether there are any profits. This is claptrap from economic theory, and sophomoric ideologues of both the left and the right believe in it as reality.

    Yeah. Applied to the airline industry as a whole which, someone claimed a few years ago, has never made profits, just a series of bankruptcies and mergers.

    Of course, in theory it's always "profit maximization subject to constraints", but nobody really knows what those constraints are in the short term or the long term. Otherwise there would be no need for managers and banks, bond markets and regulators (for safety, environmental protection, labor standards, utility service obligations).

    I am all in favor of insatiable greed, knowing that no greed is ever satiated.

    I am also in favor of maximizing profits, because at the end of the quarter or the year, only when the accountants have done all their work, the management knows whether the company made a profit and if so, how much. Yes, they do announce their hopes and targets, and are sharply punished if the results are different from those expected by the stock market analysts.

    Privately owned and entirely unregulated businesses are another story - e.g., your village bania, landlord. Even they are vulnerable to variations in input and output prices.

    For the sake of humanity, please stop berating greed.

    Money DOES make the world go around. Sometimes too slow and sometimes too fast. Which is why we need love and friendships.

A woman's empowerment - Henning Mankell on Rahel Kassahun


Chronicle Rahel Kassahun has not waited

One evening I walk down to the hotel bar to eat something. The air condition seems to have freaked out. It is so cold in the bar that I do not know whether I should stay or not.
I walk around in the bar for a couple of minutes, trying to find a table where the cold air is not too disturbing. Suddenly I discover that a woman sitting at another table are following my efforts with an intrigued and somewhat amused look in her eyes. I notice that she wears the same badge as I do. Without it you will get nowhere at the World Economic Forum in Cape Town.
Finally I find a table and sit down. The woman at the other table asks me if the oasis that I have found is “warm enough”.
We start to talk. After a while we move our two separate tables and make them into one. When we break up from each other’s company an hour later, I think that this has been one of those surprising and rewarding meetings you have in life.
Her name is Rahel Kassahun, she’s from Ethiopia, got a PhD in economics from the University of California. Before she left the US, moved back to Ethiopia and started Africa Unbound Inc, she worked for the World Bank.
– I did not want to make only a career in general, she says. I wanted to do something more with my life. So I went back home and founded this organization.
I cannot say how old she is. Sometimes I think she is 25, as often I think she is over 40.
But that is not important. What is striking is that she belongs to a new generation of young African entrepreneurs. With intelligence, knowledge and an inviolable belief that everything is possible on the African continent. She has no gloomy premonition that she will fail. Nor does she say a word about international aid as a precondition for her business.
Her curious questions are remarkable. She has no polite attitude. She really wants to know what I think about different topics. I find myself thinking: How often in mass media do we get a chance to meet an African intellectual who can discuss the continent’s problems and possibilities with insight and sharpness. And who also has important things to say about Europe and the rest of the world.
Rahel Kassahun is about to build an organization that will help young people on the African continent to fulfill their creativity and their ideas in different ways. She started in Ethiopia in 2008. Already her organization has set up offices in Ghana, Kenya, Nigeria, Sierra Leone and Uganda.
For her this is only the beginning. Her enthusiasm is palpable and genuine. Africa is an old continent with a young population. They are the future. Their creativity will decisive. And it is them that she wants to help.
But she is realistic. When I ask her a decisive question she does not hesitate to answer.
– If you walked out of here and were run over by a car and died, I ask. Would your organization survive?
– No, she answers. Not yet. If I died today it would disappear. But in a couple of years I will have created the stability that my organization needs.
She goes to her room to collect a scarf. The chill in the bar spreads. When she comes back it strikes me that she is very beautiful. And dressed with great personal integrity. But most important is that she is so willing to discuss. What do I think about her ideas? Is there something I think she should do? And I can ask her questions. Her answers are well informed and sometimes, unexpected.
Around 11 pm we head for the elevator where we split up. I think to myself that Rahel is an example of a new Africa, which is growing at a tremendous speed.
– Nothing is too late. Everything is still possible, she says.
The day after we see each other at the congress. I am on my way to listen to a discussion about the development of telecommunications in Africa. We exchange a few words. Rahel has just listened to an African president who has talked about Africa’s future. I can see that she was not pleased with what she heard.  Then she heads off in another direction.
I think: One of Africa’s greatest challenges is to empower the women.
Rahel Kassahun has not waited. She has empowered herself.
Henning Mankell

Nick Stern and the poverty of economics (for wealth of some economists)



Economists who have no sense of engineering and systems are pitiable. They end up doing econometrics, which I think is the first refuge of intellectual scoundrels.

Today I found a delightful review piece by Nick Stern in JEL September 2013 issue.

His abstract says, "A new generation of models is needed in all three of climate science, impact and economics with a still stronger focus on lives and livelihoods, including the risks of large-scale migration and conflicts."

Yes, but the uncertainty about the quality of models and the risk of getting wrong policy prescriptions are high. :-)

In the Introduction to his book "The Global Deal", he goes on to admit that he uses "risk" and "uncertainty" interchangeably, which to me is an unpardonable confusion. 

Anyway, here he says, 

"Where do we go from here? Essentially we need a new generation of models in all three of climate science, impact and economics.  I think the scientists are moving purposefully in that direction and that some of this will be reflected in the forthcoming IPCC Fifth Assessment Report. I am less convinced that one sees this within economics. We have to embrace many models, each with its own insights. They should be capable of speaking greater judgment in using the models. As the late Frank Hahn used to say, “a model is just a sentence in an argument.” We need more and better sentences that embody more of the risks that are at the heart of the problem. And, in exercising the judgment necessary in putting the sentences together, one should remember Amartya Sen’s remark, “it is better to be roughly right than precisely wrong.” In particular, it is time for our profession to think much more carefully about processes of damage and destruction. We have considered theories of growth and have produced valuable insights. We should combine these insights with an examination and modeling of ways in which disruption and decline can occur."

I agree completely. I also remember Bob Solow's caution: "We economists are quite good at finding juicy plums in the puddings we have baked, especially the plums we have put in ourselves." (I remember this from a Finance and Development issue some 15 years ago, but couldn't find it online. I did find this, though: "The idea of endogenous growth so captures the imagination that growth theorists often just insert favorable assumptions in an unearned way; and then when they put in their thumb and pull out the very plum they have inserted, there is a tendency to think that something has been proved." (A JEP 1994 article "Perspectives on growth theory" available at http://teaching.fec.anu.edu.au/ECON2102/2007/REFERENCES/SolowJEP94.pdf

Stern is a master chef of baking plum puddings with most surprises. 

Stern concludes: 

"We know that models leave out much that is important—that is what makes them models. But we must also assess how they may mislead. Many scientists are telling us that our models are, grossly, underestimating the risks. In these circumstances, it is irresponsible to act as if the economic models currently dominating policy analysis represent a sensible central case. Put simply, the “consensus” of the IAMs is in the wrong place, from the point of view of the science, the economics, and the ethics.

Presenting the problem as risk-management is likely to point strongly towards a policy for a rapid transition to a low-carbon economy. As in past waves of technical change this could involve a few decades of discovery, innovation, investment, and growth. Further, we shall probably find, if we manage the transition well, that such growth can be cleaner, quieter, safer, more energy-secure and more bio-diverse. But that is another story."

Or another dream. Depends on who pays the production costs of the fantasy. 

He says now, 

"Economic modelers should abandon the assumption of damages being focused on current output and should incorporate lasting damage in the models. They should embrace a real possibility of creating an environment so hostile that physical, social, and organizational capital are destroyed, production processes are radically disrupted, future generations will be much poorer and hundreds of millions will have to move."

Please, sir, have you no humility? Do you not realize that all economic forecasts marketed around have some basic assumptions about population (no mass migration), radical disruption of production and transport, destruction of social and organizational capital (including, say, loss of computers and inability to organize conferences and publish nonsense)?

But I suppose Stern is a good marketer. This is just advance marketing for his next book. And for new economic models that people who know will dismiss but people who don't and can't know will lap up with the thirst of a rabid dog? (I know the contradiction, but with Stern, why bother?)

I remember Solow again - his 1974 (AEA Presidential lecture, I think) piece - "The economics of resources, and the resources of economics." He or Apurva Sanghi should now do a paper: "The economics of poverty, and the poverty of economics."

Tipping points

Mumbai, Chennai may reach climate tipping point by 2034: Study - The Economic Times
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  • Daniel Taghioff Nikhil, you still haven't compared the historical data to current conditions. You remember calculus? How change and rates of change are not the same thing? Climate may be variable, but climate change affects the rate and intensity of the variability, and that makes a difference to vulnerability, as do social conditions, as you rightly point out. Stop thinking you have to choose one side of the argument, this is a systemic problem.
  • Nikhil Desai I agree this is a systemic problem. I just don't think our intellectual tools are up to the challenge, and a lot is lost in the polarization of political arguments, fed by simplistic economics.

    Nick Stern's Global Deal is Unreal Zeal of a crusader or 
    a jihadi. Read the three pieces in current JEL by him, Bob Pindyck, and Marty Weitzman.

    Wailing and screaming, and selling snake oil, is not thoughtful scholarship. Since I happen to pursue similar subjects and methods as Stern, I criticise him rather than coal companies (who, I believe, deliver greater value than the hysteria industry of the western whites).
  • Daniel C. Summers-Minette I have a question for you Nikhil. Given the inherently dirty nature of even "clean coal", why shouldn't countries that have access to shale gas replace coal with natural gas as the fossil fuel of choice. Why shouldn't they convert cars and trucks to natural gas. For the latter, we'd find costs drop tremendously, as well as cutting CO2 output. I'm not sure what coal contributes except campaign donations. Coal jobs lost are oil patch jobs gained.

    Nikhil Desai I agree. Gas can also be imported. 

  • I have a bias toward electricity for small vehicles but for no reason other than improving load factors. 


    Indian cities switched to gas for buses, autorickshaws years ago, and gas/LPG cars are coming in. 

    Switching small industry from coal or wood to gas is a big headache.

    Coal in and/or from Australia and South Africa, Colombia and Indonesia will maintain the edge in power generation, just as in the US. For the next 50 years at least.
  • Daniel C. Summers-Minette For the US, that's not likely to be true. About 8 years ago, the BTU measured use of natural gas and coal were equal. In 2012, natural gas was used about 50% more. With the advances in drilling and fracking, including a new directional gamma (I hope) that will allow for cheap, accurate geosteering, we should have cheap abundant natural gas for a century in the US. Gas can be exported/imported, but nothing is as cheap as pipelines for gas.
  • Nikhil Desai True. What I meant is that the coal plant retirements so far are older units that would have been subject to costlier compliance (with non-CO2 regulations). There will be some more retirements still, but large units of the post-1971 (NSPS) variety will continue operating because their variable costs will be lower than those of new gas-fired units. 

    I haven't looked at the geography of coal unit retirements recently, but if I remember correctly, there were quite a lot of gas units built in the 2001-3 period of actual or feared power shortages. I vaguely recall as much as 200 GW of capacity was ordered during that time, some for backup generation by large users perhaps, and some on purely merchant basis. That excess will also continue to put pressure on new coal orders. Then there's renewables. Still, existing coal as of 2015 will continue. 

    So, I don't know how it would turn out. 

    Just checked EIA projections. Proved my hunch. Coal generation will increase, even as new capacity will be mostly gas and renewables. 

    http://www.eia.gov/.../archive/aeo11/MT_electric.cfm....

    I have a couple of nice memories - how i 1990 my optimism about nuclear power and another colleague's optimism for natural gas altered the long-term fuel forecasts enough to save the acid rain bill. (This was a routine exercise to update assumptions and extend the modeling horizon to 2010 or something. I was mostly away from the office those days and didn't know what was going on in Washington. Nobody challenged a confirmed nuclear cynic on his new assumptions.) Another was looking through all the major climate economics models for the US in 1998 with common assumptions, INCLUDING gas price forecasts, but with varying results for emissions and implications of carbon cap. Nobody could understand or explain. I tore up some technological assumptions, but otherwise the dispatch rules made the difference. So, grid operations and the detailed distribution of demand - down to 1 GW level at different times of the day and year - also makes an impact.

    Going back to your earlier question about gas in transport. I think gas pipelines in west, east, and south Africa should be expanded, as also the Central Asia to Eastern and South Asia. Still, bad roads and traffic congestion are the main contributors to inefficient energy use and unnecessarily high emissions from the transport sectors of many of these countries. Combined with heavy reliance on solid fuels for cooking and heating, the burden of air pollution gets increasingly severe (not to speak of toxic chemicals pollution from unregulated industries, and from landfills, stagnant and dirty water bodies). 

    From Beijing to Ulan Bataar to Kathmandu to Delhi to Lahore to Tehran, the burden of air pollution has been increasing due to these two factors - solid fuels for cooking and heating, and inefficient transport system. Add to it the drivers and the victims of air pollution - people and economic activity. 

    And Africa is in for it as well, even though heating is not a significant demand. 

    All across these countries, unreliable power systems (outages leading to generators) are made worse by middle/upper income and commercial use of electricity for cooking, heating and hot water. Gas and renewables could make a drastic difference. But the planning and financing capacities are limited, and the aid industry is into reducing CO2 emissions, not the real health pollutants (CO, ozone, PM, NMHCs) even if they happen to be GHGs. 

    Any wonder that I find Nick Stern and Ted Cruz similar? 
    www.eia.gov
    Energy Information Administration - EIA - Official Energy Statistics from the U.S. Government