Yearly Archives: 2014

276 – MOOC

A MOOC is a “Massive Open Online Course”. They are free to enrol in, and they are very popular, often attracting thousands of participants. I’ve prepared a MOOC on “Agriculture, Economics and Nature”, for which registrations are now open. 

About a year ago I was introduced to the CEO of Yara Pilbara, the Western Australian arm of a major international fertilizer company headquartered in Norway. He was keen to establish a partnership with the University of Western Australia and to contribute financially to a venture that would benefit the University and would be consistent with Yara’s values and interests.

After discussing some options, I agreed to lead the development and delivery of a MOOC on the economics of agriculture and the environment. Preparation of the course is now almost complete, and it will be offered for the first time starting on February 2, running for six weeks. I’m hoping that you’ll consider signing up to do the course, or perhaps recommending it to others. You can join the 1000 people from about 50 countries who have already registered.

Here are some more details so that you know what you’d be getting into if you did the course.

It doesn’t require any prior knowledge of agriculture or of economics, and is pitched at about the level of upper high school or first year university. I’m hoping that it will be of wide interest.

Each week has a different theme:

  1. Agricultural production and prices, and agriculture’s reliance on natural resources
  2. Resource and environmental challenges facing agriculture
  3. The economics of agricultural inputs
  4. The economics of land conservation
  5. The economics of agri-environmental projects
  6. Government policies in agriculture

There are 8-10 brief videos to watch each week, mostly 5 to 7 minutes long. There are two or three recommended readings each week, each of them brief and non-technical. There will be a brief online quiz each week so that you can check that you’ve understood the material, and a multiple choice exam at the end. Pass the exam and you’ll receive a certificate. The course is stand-alone and doesn’t give you credit for any other course at the University of Western Australia.

There will be opportunities to interact with other students from around the world in forums on the course web site. My assistant and I will also participate in these forums to help people with their problems and questions.

A very basic ability with maths is needed. You’ll need to be able to read and interpret a line graph, and there are a couple of optional spreadsheet exercises that you can choose to do.

I’m estimating that the work load for students will be about 2 hours per week, although you can obviously spend more time reading more deeply on each of the topics if you choose to.

For me, the aim in presenting the course is to raise awareness of the School of Agricultural and Resource Economics at UWA. Perhaps it will lead to students enrolling in our other courses.

Yara is involved to make a contribution to the community and to generate positive publicity and public relations. Yara assured me that they would not try to influence the content of the course, and they certainly have stuck to that.

For students, the potential benefits include learning interesting information about the economics of agriculture and the environment, assessing whether you might be interested in doing further study in this area, and interacting with others online as part of the course.

The financial support allowed us to pay for professional-quality production, design and editing for the videos that make up the core of the course. I’m confident this will improve the experience of students compared to some of the very cheaply produced MOOCs that are available.

For more information, or to register for the course, go to this page, or take a look at the promo video below.

If you watch the promo above, I hope you like the theme music. I recorded three different version of it in my studio (my backyard shed, actually), and they’ll be used in different weeks of the course.

275 – Grammar tip: hyphens

Many people, perhaps most, don’t know how to use hyphens with compound adjectives. It’s worth learning because use or non-use of hyphens can make a difference to how people interpret your meaning.

I remember learning about various rules of grammar in school, but I don’t think my teachers ever mentioned the use of hyphens with compound adjectives. I suspect my teachers weren’t the only ones leaving this out, because it’s so common to see writing where hyphens are needed but absent.

Perhaps it sounds like a nit-picky grammar-nerd sort of issue that people don’t really need to worry about, but in my view it is worth paying attention to. At the very least, good use of hyphens is a skill that can help make your text more readable. And in certain cases the omission of hyphens can change your meaning in serious ways.

Here are some examples where hyphens avoid ambiguity, misinterpretation, confusion or just nonsense.

A violent-weather conference is a conference about violent weather.
A violent weather conference is a conference about weather, and the conference is violent.

A small-state senator is a senator from a small state.
A small state senator is a state senator who is small.

Built-in cupboards are cupboards that are fixed into the house.
Built in cupboards describes something that was constructed within cupboards.

A first-aid post is a post that provides first aid.
A first aid post is an aid post that is, in some sense, ranked first.

What is going on? The hyphen is binding together the two words that precede the noun. When they are bound together, they apply jointly to the noun. First-aid is one thing. A small-state is one thing. These bound-together things are adjectives because they describe the following noun. (What type of senator is she? A small-state senator.) They are compound adjectives because they consist of two or more words.

grammarIf we leave the hyphen out, the two words are not bound together and the last word in the pair moves over and belongs to the noun instead. The first word in the pair remains an adjective, but it’s now on its own, describing the next two words. (What type of weather conference was it? A violent one.)

In most cases, omitting the hyphen(s) from a compound adjective doesn’t cause as much ambiguity as the above examples. However, it often does affect the reading process, as the reader has to spend at least a little bit of time working out from the context whether or not the first two words in the phrase are linked together or not. With hyphens in place, a reader can just whiz along without having to puzzle about how to interpret the words. I think it makes the process of reading more relaxing and enjoyable.

Here are some examples from academic research papers where there should have been hyphens but they were originally omitted:

diffuse-source pollution
water-use efficiency
water-quality benefits
information-collection activities
cause-and-effect relationships
land-use change
land-use policy
water-sensitive cities
policy-relevant questions
spur-of-the-moment decision
long-term planning
short-term effect
systems-level interactions
low-impact option
short-term solution
long-term projects

If you’re excited by this stuff, you might like to know about some ifs and buts related to the use of hyphens in this way.

A compound adjective occurring after the noun don’t require a hyphen.

I have a water-proof jacket (hyphen).
My jacket is water proof (no hyphen).

Sometimes a particular pair of words can be a compound adjective in one situation (requiring a hyphen) and a noun in another situation (requiring no hyphen).

This is a long-run trend (with hyphen).
This trend will continue in the long run (no hyphen).

Multiple adjectives don’t need hyphens, only compound adjectives. In “an articulate intelligent person”, articulate and intelligent are two separate adjectives, so they don’t need a hyphen.

If the first word in the compound adjective is an adverb (skilfully, happily, stupidly), don’t use a hyphen because it’s obviously linked to the next word.

A skilfully negotiated result.
A happily married man.
A stupidly designed policy.

Finally, note that hyphens are not the only way to indicate that a set of words is a compound adjective. Here are some alternatives that you might prefer in some situations.

Quotation marks: The politician flashed his “trust me” smile.
Title Case: I found the Perth City Council building. (Often used for titles.)
Italics: It was an ad hoc decision. (Often used for foreign phrases.)

In these cases, you don’t also need to include hyphens because it is obvious that the words in quotes, title case or italics belong together.

274 – Tokenistic policies

Many government actions are tokenistic. They are too small to really make a difference, but they are pursued anyway. Why do governments do this, and how do they get away with it without provoking public anger?

Listening to ABC Radio National’s breakfast program this week, I heard an interesting interview with Professor Hugh White from the Strategic and Defence Studies Centre at the Australian National University. He was arguing that the current response to the IS threat in Syria and Iraq is too small and constrained to achieve any significant impact on the progress of IS.

“If you find yourself, as I think we do today, undertaking military operations without making them big enough to give yourself a reasonable chance of success, you’re just going through the motions and you’re better off not doing it.”

“Going through the motions doesn’t make strategic sense and I don’t think it makes moral sense either.”

jetWhat struck me about this argument was its similarity to my own argument about some environmental investments by governments. Starting with dryland salinity, I argued that our investment was spread too thinly across too many investments for any of them to be successful. Reinforcing this, the Australian National Audit office concluded that the level of change in land management in well-monitored cases was about one percent of the level needed to achieve stated targets.

More recently, I’ve been researching other aspects of water quality (nutrients and sediment) and there too governments tend to hugely under-fund projects. For example, funding to protect the Gippsland Lakes in Victoria from nutrient and sediment pollution is around 2% of the level that would be needed to achieve the official target of a 40% reduction. (See PD210)

One question is, why do governments do this? The reasons probably vary from case to case, but I think there are two main factors. The first is, to be seen to be doing something. At least in some cases, the government realises that the funding allocated is woefully inadequate, but they proceed with the policy anyway because they think there is electoral advantage in being seen to be doing something, rather than nothing. So this is a cynical political motive.

In other cases, I think the reason is ignorance, combined with a lack of evidence and analysis in the policy-development phase, combined with a tendency towards excessive optimism about the effectiveness of a proposed policy (PD213). That was the problem with the salinity policy. Lots of people thought it was a good idea to have a policy to combat such a prominent national problem, but very few people had enough knowledge of the science and economics of salinity to recognise that the policy was badly misconceived and would achieve little. The policy approach adopted was an evolution of earlier programs (the National Landcare Program and the Natural Heritage Trust) rather than one designed after careful analysis of what it would really take to substantially reduce the impacts of salinity.

This second reason is, perhaps, less offensive than raw cynical politics, but it’s still terrible.

Another interesting question is, how do they get away with it? Why is there not more public anger directed at these politically motivated or ill-conceived policies? Here are some possibilities.

Complexity. The issues I’ve talked about are complex and multi-faceted. It can be difficult even for experts to work out what policy response would be most effective. Most people lack the expertise to judge whether any particular policy response will be effective. They don’t have the time or inclination to learn enough to make those judgements. They therefore trust governments to do what they say they are doing.

Time lags. For some of these issues, the effects of current management would not be felt for some time – years or even decades in the future. By then, it’s hard to make the connection back to policies that were put in place previously, and judge whether they made a positive difference.

Intractability. Some of these problems could be solved but only at exorbitant expense, while others can’t be solved at all in any practical sense. I suspect that governments sometimes recognise this and then implement the least costly policy they think they can get away with politically.

Communication challenges. I was interested that, in her interview with Hugh White, the program’s host Fran Kelly did not pursue questions about the tokenistic nature of the policy, focusing instead on other issues. Perhaps she felt the argument was too complex or subtle to be comprehended by people eating their Weet Bix. Or perhaps she herself didn’t recognise its significance.

Sometimes an underfunded policy does explode into political controversy because of its ineffectiveness, but usually they don’t. Normally, they drift along, spending money and going nowhere much. They might receive an adverse review from some government committee or inquiry, but governments tend not to respond substantively to those sorts of reviews if they think they can get away with it.

Overall, policy tokenism is an understandable but regrettable aspect of our system of democratic government. It is hard to combat, but sometimes can be changed by outside pressure, either from the public or from vocal expert commentators.

Further reading

Pannell, D.J. and Roberts, A.M. (2010). The National Action Plan for Salinity and Water Quality: A retrospective assessment, Australian Journal of Agricultural and Resource Economics 54(4): 437-456. Journal web site here ♦ IDEAS page for this paper

Roberts, A.M. Pannell, D.J. Doole, G. and Vigiak, O. (2012). Agricultural land management strategies to reduce phosphorus loads in the Gippsland Lakes, Australia, Agricultural Systems 106(1): 11-22.    Journal web site here ♦ IDEAS page for this paper

273 – Behaviour change comes in pairs

Some key factors that drive adoption of new practices come in pairs: one aspect related to the performance of the new practice, and one aspect related to how much people care about that performance. Many models of adoption miss this, including famous ones.

Whatever work or hobbies we do, there are regularly new practices coming along that we are encouraged to adopt: new technologies (e.g. a new iPhone, an auto-steer crop harvester), or different behaviours (e.g. reducing our usage of energy or water, changing the allocation of land to different crops).

The agricultural examples above reflect that some of my research is on adoption of new practices by farmers, but the issue I’m talking about today is relevant in all spheres where people adopt new practices.

It is well recognised that people vary in the personal goals that drive their choices about whether to adopt new practices that are promoted to them. Amongst commercial farmers, for example, there are differences in the emphases they give to profit, risk and environmental outcomes.

Any attempt to understand or model adoption of new practices needs to recognise the potential importance of these different goals. Many studies do include variables representing these three goals, and sometimes others.

However, it is less often recognised that there are two aspects to each of these goals when looking at a new practice:

  1. The extent to which the new practice would deliver the outcome measured by that goal: more profit, less risk, or better environmental outcomes.
  2. How much the decision maker cares about those particular outcomes.

These two aspects are closely linked. They interact to determine how attractive a new practice is, but they are distinctly different. One is not a proxy for the other.

extension 1For example, suppose a farmer is considering two potential new practices for weed control. The farmer judges that new practice A is much riskier (less reliable) than new practice B.

How much will this affect the farmer’s decision making? That depends on the farmer’s attitude to risk. For a farmer who has a strong aversion to risk, practice B will be strongly favoured, at least from the risk perspective. (Other goals will probably also come into play as well.) For a farmer who doesn’t care about risk one way or the other, the difference in riskiness between practices A and B is of no consequence. Some farmers (a minority) have been found to be risk-seeking, so they would prefer practice A.

The same sort of pattern occurs with other goals as well. The attractiveness of a new practice depends on how much difference it makes to profit and on how strongly the farmer is motivated by profit. Or how much it affects the environment and how strongly the farmer cares about the environment.

Amongst the thousands of research studies of farmer adoption of new practices, most represent only one goal-related variable where two are needed. For example, they include a measure of risk aversion, but ignore differences in the level of riskiness of the new practice amongst different adopters. Or they represent differences in the profitability of the new practice, but not differences in how much the adopters care about profit.

It doesn’t help that the issue is not recognised in common conceptual frameworks used by social scientists studying adoption behaviour, such as the Theory of Reasoned Action (Fishbein and Ajzen 1975) and the Theory of Planned Behaviour (Ajzen 1991).

It should be recognised in a sound economics framework (e.g. Abadi Ghadim and Pannell 1999 do so for risk), but it often isn’t included in the actual numerical model that is estimated.

The only framework I’ve seen that really captures this issue properly is our framework for ADOPT – the Adoption and Diffusion Outcome Prediction Tool. Hopefully this insight can diffuse to other researchers over time.

Further reading

Abadi Ghadim, A.K. and Pannell, D.J. (1999). A conceptual framework of adoption of an agricultural innovation, Agricultural Economics 21, 145-154. Journal web page ◊ IDEAS page

Ajzen, I. (1991). The theory of planned behavior, Organizational Behavior and Human Decision Processes 50, 179-211.

Fishbein, M. and Ajzen, I. (1975). Belief, Attitude, Intention and Behavior: An Introduction to Theory and Research. Reading, MA: Addison-Wesley.

272 – Additionality

Additionality is an important criterion to consider when a funding agency is selecting which projects to support. It is relevant to many different types of projects, including, for example, those related to the environment, agricultural production, natural resources and health promotion.

Suppose that your employer was planning to provide you with a new iPhone 6 the next week. You weren’t aware of this, and bought yourself an iPhone, only to find out later that you could have avoided the cost if only you’d asked them.

Additionality is like that. It’s about asking, what will happen if we don’t fund this project?  (… if you don’t buy the iPhone.) To what extent will the goals for this project be achieved anyway even if we don’t fund it? (You’ll get an iPhone anyway.) And how large will the additional benefits be as a result of the project if we do fund it? (Zero!)

A lot of systems for evaluating and selecting projects don’t ask these questions. They implicitly assume that all of the benefits generated will be additional, but this can be way off the mark.

For example, Claassen and Duquette note that, prior to their new study, the additionality of tens of billions of dollars spent by the US Department of Agriculture on conservation programs had never previously been assessed. The practices they looked at were soil conservation structures, buffer strips, conservation tillage, and nutrient management.

conservation_tillageThey present data for these practices showing that, of those farmers adopting them in 2009-2011, the great majority did not receive funding. This raises a rather pointed question about additionality for those who did receive funding – how many of them would have adopted anyway, even without the funding? A practice like conservation tillage is so beneficial for most farmers that the idea of paying them to do it is, frankly, ridiculous. And yet the USDA has spent many millions of dollars doing exactly that – money that would have been better spent promoting conservation practices that would not otherwise have been adopted.

Additionality is built into Benefit: Cost Analysis (BCA), although it is usually given a different name: the “with versus without” principle (see PD237). This says that the benefit of a project should be estimated as the difference in value between the outcomes that occur with the project versus without the project. It’s identical to the idea of additionality, and it is just about the first thing one is taught when learning about BCA.

It’s common sense, really, and no economist worthy of the name would ever get this wrong. But it is remarkable how many project evaluation systems made up by non-economists do get it wrong. Maron et al. (2013) checked out 16 different systems from around the world for estimating conservation benefits from investments. Of the 16, 15 got the with-versus-without comparison wrong in one way or another.

I’ve been focusing above on cases where a new practice is highly attractive to people, and so will be adopted without incentive payments. Clearly, the additionality of such payments would be low, so they are not good investments.

At the other extreme are practices that are highly unattractive to the people who would have to adopt them. They would be additional if we could pay people enough to get them adopted, but the amount we’d have to pay is really high. These are additional, but not good investments because of their high cost.

The best projects for funding support are those that promote practices that are viewed as neutral or a little bit attractive, so that some additional pushing from a program can make a big difference to their uptake (Pannell 2008).

p.s. 5 October 2014. “Market failure” is another economic concept that relates to additionality. The idea is that one should examine whether a new policy or project would do better than the free market before committing to it. If people have good information, and there are no externalities or public goods, the starting point should be that the new project or policy is not going to generate more benefits in aggregate than would have been generated as a result of people pursuing rational self interest. In other words, there would not be substantial additional benefits.

Further reading

Claassen, R. and Duquette, E. (2014). Additionality in agricultural conservation programs, Amber Waves, September.

Maron, M., Rhodes, J.R. and Gibbons, P. (2013). Calculating the benefits of conservation actions, Conservation Letters 6(5), 359-367. Journal web site

Pannell, D.J. (2008). Public benefits, private benefits, and policy intervention for land-use change for environmental benefits, Land Economics 84(2): 225-240. Full paper (140K) ◊ IDEAS page

Pannell, D.J. (2013). Ranking environmental projects, Working Paper 1312, School of Agricultural and Resource Economics, University of Western Australia. IDEAS page ◊ Blog series