Peter Gallagher

“F**k” and the OED

2008-05-11T04:11:43Z

Climate models do not justify even precautionary action

2008-05-11T02:13:01Z

"…those who advocate extreme policies to reduce carbon dioxide emissions inevitably base their case on GCM projections, which somehow become real predictions in publicity releases. But even if these advocates admitted the uncertainty of their predictions, they might still invoke the Precautionary Principle and call for extreme reductions ‘just to be safe.’ This principle says, 'Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.' That is, even if we don’t fully know that CO2 is dangerously warming Earth climate, we should curtail its emission anyway, just in case.

However, if the present uncertainty limit in General Circulation Models is at least ±100 degrees per century, we are left in total ignorance about the temperature effect of increasing CO2. It’s not that we, 'lack…full scientific certainty,' it’s that we lack any scientific certainty. We literally don’t know whether doubling atmospheric CO2 will have any discernible effect on climate at all." Skeptic Magazine—Patrick Frank

Frank's article is well-written, well-documented and brim-full of insight into the limits of GCM modeling. He writes without jargon and with no more algebra than is absolutely necessary: remarkably little as it turns out—for reasons that are illuminating in themselves.

Unfortunately, the companion article published by Sceptic Magazine, in support of the AGW propositions offers little more than a repetition of well-known IPCC assertions.

More trade horrors from the US campaign trail

2008-05-11T02:07:43Z

The proposal from the electrical workers' union is explained in this NY Times article.

What EC Trade Commissioner Peter Mandelson means by the proposal being a "probable breach" of WTO trade rules is that unilateral measures must be both necessary and non-discriminatory under the GATT's rules on "environmental" non-tariff import barriers. In the 1990's, the USA twice failed these tests of its laws on turtle-exluding purse-seiner nets for shrimp boats and (probably—the case was never decided) of its laws concerning the protection of dolphins by tuna boats. As I argue here, the most plausible necessity-test is one that shows a barrier has been imposed to comply with an internationally-agreed obligation in an environmental treaty, such as the Kyoto Protocol.

Of course, the reason that the Obama camp is proposing this unilateral action is precisely because such international agreement on trade sanctions is entirely unlikely. Here, Peter Mandelson's second point is relevant. The Obama proposal is 'bad politics' because unilateral action by the USA or Europe to impose sanctions would make the prospect of international agreement on any collaborative action on climate change—let alone on sanctions for non-compliance with emissions controls—more remote, defeating his whole purpose.

Obama's advisors, at least, could take a few lessons in leadership from Mandelson.

Does trade with China help the poor?

2008-04-27T07:57:01Z

Australia’s export performance—should we be worried?

2008-04-19T09:18:01Z

Since the 1980s, when Asia economies surged ahead in trade and growth and Australia languished with apparently unaccountable low trade performance, Australians have been susceptible to a sort of moral panic about trade and external debt. Our then Treasurer (Paul Keating) fulminated in 1986 about 'banana republic status' if we didn't bury the public-debt mountain. In fact, trade performance picked up in the late 1980s. It was only the wallowing exchange rate, and its impact on debt-service, during the 1990-92 recession that for a while seemed to bear-out Keating's warning. The psychic impact was more lasting. Privately, it appears, many Australians really are afraid of becoming 'white trash' in Asia, condemned to a commodity-linked spiral of immiserizing growth.

It is pretty clear that net exports have been a small (~1%) drag on the value of output measured as final domestic consumption. It also seems that the recent trend, since 2001 has been monotonously negative. The trend looks different in current prices, but the 'chain volume' measures are a more robust illustration of what's going on because they abstract from the substitution effects of changes in the relative prices of goods and services year-year.

There are several likely contributors to the negative trend in net-exports:

The exchange rate—dominated by the trend versus the US dollar—is probably one explanation, as the chart illustrates. The Australian dollar has been backed by higher interest rates than comparably stable currencies in the past few years. Of course, this means exports are more expensive for our customers and imports less expensive than they would otherwise be.
The strong pace of recent economic growth is another part of the explanation. The high levels of capacity utilization—indicated by historically low levels of unemployment—combined with the export- and domestic-supply impacts of a decade-long drought, have seen consumers satisfying more of their demand from imports (a good thingsince the alternative would, certainly, have been higher levels of inflation).
The deterioration of net export performance during a period of high prices and demand for minerals exports points to serious shortfalls in export supply capacity especially in transport infrastructure, planning, investment, and regulation that need to be addressed.

For more on these contributors to recent trends, see the Decembe 2007 record of the IMF's Article IV consultations with Australia and the RBA's Assistant Governor's address on the Australian Economic Outlook in March, 2008.

Should we be worried by the net-export trend? If there were a reason to think that it will persist for decades, certainly. But the explanations for the trend are cyclical or stochastic (drought) and therefore unlikely to persist. Chances are very good that the current trend will turn around again. Admittedly, the deficit does not look cyclical when viewed in chain-value terms, but seen in current dollars the cyclical character is more obvious.

Is there a good prospect that changes in export policies and programs will contribute much to a turn-around in the recent negative trend in net exports? No. There is some plausible evidence that export promotion agencies, for example, have a positive impact, up to a point. But there is no reason to think that they can improve performance on the order of one-percent of GDP. At least, not without switching demand in ways that are bound to have even more negative impacts on growth and productivity (like import barriers, for example, or exchange manipulation). Most of the factors identified above are not, in any case, very susceptible to policy settings. The important exception is the need for action on infrastructure. There is also a strong case to return to the micro-economic reform agenda that has lain all-but-abandoned since the mid-1990's to improve productivity incentives in services and to remove hidden protection in goods sectors.

There are two further observations to be made about the outlook for future trade performance:

First: Australia's terms-of-trade have improved dramatically and may stay strong for some time. A survey of Australia's long-term TOT shows they have not, on the whole, been unfavorable—much less immiserizing—despite the historical composition of our exports (commodities) and imports (manufactures). There has been a much larger degree of diversification in export composition than the popular imagination allows. Recently, too, there has been a dramatic improvement in our TOT—by about 40% since 2003—due, mostly, to the China effect (the chart is from the IMF Article IV consultations referenced above).

An improvement in our terms of trade, even if it deteriorates over time, is equivalent to unilateral liberalization by our trading partners. In other words, we get more bang for the export buck. It lifts the exchange value of our exports, increasing our income in the short run. But it does not contribute directly to our productivity growth in the sense of raising output per hour of manpower employed.

Second: Our export performance—indeed, our trade performance generally—is unlikely ever to match that of our regional trading partners. It is undeniable that Australia's trade-to-output ratio is low by comparison with, for example, OECD economies of the same economic size. With a trade share of GDP of less than 0.5%, we rank near the bottom of the OECD line-up with the giant economies of USA and Japan. But the explanation for this phenomenon probably has less to do with the composition of trade or the moral-fibre of Australians than with geography. Australia (and New Zealand) are further from the centers of world production and consumption than any economies of the OECD economies or the emerging trade giants of the BRICs. Until 1990s, our trade-distance from centers of global production was increasing.

"Accounting for the factors in the gravity trade equation suggests that Australia’s comparative trade performance is actually quite strong. These factors, which are ordinarily outside the control of policy, plainly have a role in determining many economic outcomes in a country. In Australia’s case, geographic remoteness increases the costs of trading, which in turn lowers the extent of international trade and provides varying degrees of natural protection for Australian industries."(Battersby & Ewing)

A Reserve Bank staff paper looking at the general question of 'openness' (export/GDP ratio) reached similar conclusions about Australia's distance-limited performance: it's at least as strong as would be expected given our geographic isolation. Indeed, it's a little stronger than would be expected, possibly because of geographic size (diverse land-based endowments) and a liberal trade policy. Finally, gravity models also suggest that Australia's productivity gap to the United States, for example—we struggle to reach and rarely exceed 80% of USA productivity levels—may be explained by the distance effect.

A ‘magic’ recipe for global food shortages

2008-04-16T23:10:01Z

Victor Mallet in the Financial Times has accurately identified the problem:

"…The immediate cause of this crisis is not – perhaps surprisingly – a shortage of food. The problem is the sudden reluctance of traditional exporters to sell their surpluses. As with credit providers in the seized-up credit markets, each producer is hoarding its own supply in case of hard times at home, because it suspects its trading partners will do the same. Trust in the efficiency and liquidity of the market has collapsed… The current seizures in the markets are therefore a cause for general alarm. Singapore, one of the world’s wealthiest nations, depends on food imports as much as Eritrea, one of the poorest.

…Like international trade, domestic trade in farm produce is often highly distorted. While developed nations tend to support their farmers at the expense of consumers, developing countries typically subsidise city-dwellers at the expense of rural smallholders, who receive low prices and have no incentive to increase their output.

As the Financial Times reported two weeks ago, Asian countries are among the worst offenders. Farming productivity growth has slowed drastically in the current decade…Asian governments could do much to boost food output by liberalising their domestic markets, helping to provide farmers with credit and giving them access to the sort of modern technology and advice they once received as a public service. "(Financial Times")

Prices for grains and livestock products on world markets are at record highs at present partly because of a coincidence of bad growing-seasons. But governments have made the situation much worse—as Victor Mallet argues—by banning exports to keep local prices below market prices and by subsidizing non-food uses of grains. Here is an excerpt from the latest USDA market outlook for grains that describes the problem graphcially. Chances are, however, these critical food shortages will be overcome because they are mostly the result of 'frictions' in supply and demand, made worse by knee-jerk reactions.

There is a much more serious underlying problem that ensures these frictions will return. Trade protection for farmers and food processors in developing countries is higher on average than it is even in protected industrialized countries (click the column-graph, below). This wide-spread trade protection taxes food supplies world wide, depressing market prices and discouraging competitive producers who live with the market price.

But these lower prices on world markets do not flow through to poor people who live in countries where governments slug imports with high taxes. The result is a double-whammy of misery: poor people face higher prices and smaller supplies than they should and production falls because market-facing farmers get lower prices than people are willing to pay.

The "magic" solution has been known for many years. Opening food markets to trade will lead to two apparently contrary results that solve the problem. There will be higher prices for producers world wide and lower prices (and more stable supply) for poor consumers.

The Center for Agricultural and Rural Development (CARD) at Iowa State University has a decades-long reputation for analysis of global food markets. In a study published for CARD this month, Jacinto Fabiosa nicely demonstrates this "magic" effect with a straightforward analysis that uses data from 158 developing countries. Here is the abstract of the study describing the results:

First, agricultural trade liberalization is estimated to raise economic growth by 0.43% and 0.46% in developing and industrialized countries, respectively. Since food consumption of households with lower income are more responsive to changes in income, their food consumption increases more under a trade liberalization regime.

Second, trade liberalization is expected to raise world commodity prices in the range of 3% to 34%. Since, in general, border protection is much higher in developing countries and the level of their tariff rates are likely to exceed the rate of price increases, 87% to 99% of the 83 to 98 countries examined would have lower domestic prices under liberalization. Again, given that low-income countries are more responsive to changes in prices, food consumption in these countries would increase more.

Finally, empirical evidence shows that if there is any harm on small net selling producers in a net importing country, it is neither large in scale nor widespread because the substitution effect dominates the net income effect from the lower domestic prices. (CARD: Fabiosa)

New Zealand copyright reform

2008-04-10T21:41:42Z

A foolish overreaction

2008-04-07T10:06:24Z

Would ‘critical mass’ agreements in WTO be ‘fissile’ or ‘fusional’?

2008-04-07T08:03:00Z

Obama would have opposed NAFTA, CAFTA and China’s membership of WTO

2008-04-05T22:40:01Z

"Now, if we're honest with ourselves, we'll acknowledge that we can't stop globalization in its tracks and that opening new markets to our goods can help strengthen our economy. But what I refuse to accept is that we have to sign trade deals like the South Korea Agreement that are bad for American workers. What I oppose - and what I have always opposed - are trade deals that put the interests of multinational corporations ahead of the interests of Americans workers - like NAFTA, and CAFTA, and permanent normal trade relations with China."(Remarks to the AFL-CIO)

China eventually joined WTO because the US Congress agreed that the USA, like all other countries, should extend WTO's 'most favored nation' treatment (called 'permanent normal trade relations' in the US law) to China. It was the only choice that made sense, then or now, in economic or foreign policy terms. It was a massive, direct and immediate benefit to US consumers (and a win for poor people in China, too).

But Barack Obama promises that he would not have taken that decision—a promise I find difficult to believe—because it was made in 'the interests of multinational corporations': a proposition that deserves no credit whatever.

I found a reference to Obama's speech containing this awful idea on Ben Muse's site: The Customs House.

Solar-cycle link to cloud cover questioned

2008-04-03T21:09:26Z

Statistical analysis of Rhamstorf et al

2008-03-28T11:01:00Z

Symposium: Future of the Multilateral Trade System

2008-03-26T23:34:43Z

Up-to-date information on the symposium is here, or you can consult the (nearly) final program.

My talk will be entitled: What makes 'critical mass agreements' fissile or fusional?

Two reasons for caution in climate mitigation

2008-03-23T02:50:01Z

Ross Garnaut says that he now believes climate change to be 'a worse and more urgent problem' than he believed before he began his enquiry. Although his Interim Report (Section 2.1) accepts the IPCC projections only 'on the balance of probabilities', it seems clear that Professor Garnaut is personally convinced that the outlook for Australia is at least as bad as the IPCC's extreme A1F1 Scenario; that is, a warming of more than 0.2c/decade for the first few decades of this century. He is especially concerned by the high levels of carbon emissions that have been produced by spectacular growth rates in emerging economies such as China. Accordingly, his Review's Interim Report concludes that the evidence "suggests that it would be in Australia’s interests to seek international agreement on the most ambitious feasible global mitigation target" (Section 3.2 of the Interim Report).

I am disappointed that the Garnaut Review has so far accepted, without substantial critical analysis of its own, the most extreme scenarios developed by the IPCC's modelers. A model is an abstraction that necessarily leaves out many features of the world (that's its value as a model) . But simplification qualifies the predictive power of a model's projections. I am surprised that economists such as Garnaut (or Stern or Nordhaus, for that matter) who are familiar with the frailty of complex models of the economy seem inclined to accept the projections of climate models without carefully checking them against current observations. There are strong reasons, I believe, for questioning both the reliability of the IPCC's model-based projections of temperature trends and the carbon-forcing theory that supplies the IPCC's mechanism of man-made climate change.

Reasons for questioning the temperature projections

The Garnaut Review's Interim Report confines its tests of the credibility of the A1F1 scenario, for example, to a couple of paragraphs and a couple of low-resolution graphics that it takes from a 1-page report by Rahmstorf et. al. published in the journal Science in May 2007 that now appears to have been mistaken. Rahmstorf and others claim that the observed temperature trends over the period 1990-2006 were "the upper end" of the range of IPCC temperature projections for the 1990-2006 period—a conclusion that the Garnaut Interim Review adopts at Section 2.4. But the data on emissions and temperatures in the IPCC reports for the period 1990-2000 were fixed parameters built into the SRES scenarios and not projections. In the IPCC Assessment Reports, only the trends projected beyond 2000 derive from the IPCC models, which means that Rahmstorf's assessments are based on 5 years of actual projections (2000-2006), not 16 years (1990-2006) and therefore subject, at a minimum, to much greater degrees of uncertainty (see the discussion of Rahmstorf et al. here).

The IPCC's SRES scenarios have not changed since their publication in 2000. They were not updated (deliberately) for the 2007 Fourth Assessment Report in order to preserve their capacity to show variations in outcomes due to differences in the scenario parameters. Accordingly, data used to determine parameters for the scenarios such the A1F1 Scenario refer to the period before 2000. The projections of the models reflecting each scenario begin from 2000. The former Australian Statistician, Ian Castles, has confirmed this fixation of the data from records of the preparations for the 2007 IPCC report.

The science of climate change must provide test-able, that is falsifyable, propositions to be science. Those propositions are found in the projections of the IPCC models of temperature trends after 2000. Now Lucia Liljegren has succeeded in showing that those projections are wrong for the period 2001-2008, denting the credibility of the IPCC models and, a fortiori, the Rahmstorf conclusion (adopted by the Garnaut Interim Report) that observed temperatures are "at the upper end" of the A1F1 projected range.

Using statistical methods that ensure robust regression analysis of the temperature data time-series, Liljegren has shown that trends in the observed temperature data from 2001 to 2008 diverge significantly from the IPCC projected trends, revealing a decline in temperatures at a rate of -1.1c/Century (as opposed to the IPCC's 'mid-range' projections of more than 2.0c/Century). Her careful analysis does not, as Liljegren observes, show that the global warming has gone away (she is convinced that anthropogenic warming is happening). Rather, they show that the IPCC projections don't come even close to projecting the temperature trends for the last seven years: that is for the period since 2001 when IPCC projections began. If there is another upturn in temperature trends following this recent period of shallow decline, then concerns about warming trends will look more credible again. But the IPCC projections won't be repaired by an upturn in temperature. Whatever happens next, the IPCC's projections—and hence, their models—seem to need revision.

Liljegren is not the only statistician recently to fault the IPCC/SRES projections. David Stockwell, an ecosystem modeler, has shown that a simple linear regression of the temperature data over the past decade provides sufficient reason to consider the IPCC projections 'highly unlikely'

"[T]he trend in temperatures for the last 10 years is so low, that an increase of 0.2C per decade could be rejected in 3 out of 4 indices [That is, temperature series. PWG]with some level of confidence. In one case, using the IPCC terminology, these results suggest IPCC projection of global warming this century are very unlikely (1-10% chance) to be correct. This is a controversial result contradicting the IPCC ‘consensus’ position." Niche Modeling

Reasons to question the carbon-forcing thesis

Although the Garnaut Review makes no attempt seriously to consider question the evidence for this theory, there is very little evidence (or none) of any correlation between the monotonous growth in the CO₂ concentrations in the atmosphere and the variations in global temperature anomalies. It doesn't take much skill to discover this as shown by the graphic (click the thumbnail to see it full-size) that I created from publicly available data. CO₂ concentrations as measured by the Scripps Oceanographic Institute at Mauna Loa, Observatory, Hawaii, have increase steadily with pronounced but regular seasonal variations since they were first measured in the 1960s. It is evident that the CO₂ trends look nothing like the lower-troposphere (i.e. surface) temperature anomaly trends (from RSS satellite data). Five minutes with Excel (or a statistical package such as R) shows that the correlation (r²) between the two series is non-existent (see also this article by J D'Aleo).

This is only amateur observation. Not proof of anything but ample reason to question the evidence for a theory that leads Professor Garnaut to recommend a dramatic re-pricing of carbon-based energy production in Australia. There is, also, more damning recent data that seems to falsify the predictions of the CO₂ thesis

One of the key predictions of the CO₂-water-vapor feeback-loop that drives the greenhouse effect dominating IPCC thinking is that temperatures in the troposphere (between 450 hPA and 750 hPA of atmospheric pressure) In the tropics should rise faster than surface temperatures as vertical convection currents drive heat distribution. This effect has been called the 'characteristic emission layer' demonstrating the water-vapor feedback cycle that the CO₂ emissions initiate.

Now a paper in the International Journal of Climatology by Douglass et al. appears to demonstrate that this "characteristic" effect does not exist.

"Models are very consistent, as this article demonstrates, in showing a signiﬁcant difference between surface and tropospheric trends, with tropospheric temperature trends warming faster than the surface. What is new in this article is the determination of a very robust estimate of the magnitude of the model trends at each atmospheric layer. These are compared with several equally robust updated estimates of trends from observations which disagree with trends from the models. The last 25 years constitute a period of more complete and accurate observations and more realistic modelling efforts. Yet the models are seen to disagree with the observations. We suggest, therefore, that projections of future climate based on these models be viewed with much caution. "

Update :The data sets used in the Dougalass et. al. paper have been challenged by the contributors to Real Climate (26 March, 08)

Obama’s policies called “protectionist and silly”

2008-02-26T23:26:40Z