Yearly Archives: 2014

271 – 10 years of blogging

I just noticed (a few months late) that it’s been 10 years since I started writing Pannell Discussions. Time for some reflections on the benefits and costs of doing so.

In 2004 I decided I wanted to increase my outreach to non-economists and to people outside academia. I wanted to put out material that would be interesting and engaging, and would increase people’s understanding of economic issues in agriculture and natural resource management.

I decided to write brief articles on a range of topics, and put them on my web site. Initially I didn’t think of this as being a blog, but eventually I accepted that this is what it is.

I adopted a few rules for myself. Firstly, I had to enjoy it. If it became a burden I would stop, or if other work was too demanding I would give it a rest. (Work has been demanding this year, hence the relatively low frequency of posts.) Secondly, each post had to be a manageable amount of work. I originally set myself a target of one hour per week. Eventually, it worked out that I was spending about two hours per post (including managing the web site), and doing one post about every second week, so the one-hour rule worked out. Thirdly, I decided only to write about things I know about or am interested in, to avoid having to do a lot of extra work to prepare each post.

I started with signing up some friends and colleagues as subscribers and let the subscription base grow fairly organically. It is now up to almost 700 subscribers, plus a lot of non-scribers look at the posts. The more popular posts get around 1000 readers.

blogOverall, the benefits of doing the blog have been much greater than I expected or imagined. As well as it being enjoyable to spend some time regularly writing something for a general audience, the benefits have included the following.

I’ve partly used the blog to raise awareness about my research and its implications. Some of the posts are based on one of my published research papers, and many posts include one or more of my papers as further reading. This has meant that more potential users of the research find out about it, and sometimes it’s led to actual usage of the research.

Some of my readers are other researchers, some of whom end up citing one of my papers in their research publications, as a result of having seen it on the blog.

In some cases, I’ve used the process of writing the blog as a mechanism to work out my thoughts on an issue, or to force myself to focus on the practical implications of a piece of research I’ve done. Occasionally, feedback from commenters helps with this, but mostly it’s just the fact that I know there is an audience of general readers who are going to look at it that makes me think about it more clearly from a practical perspective. A number of published papers have benefited from this prior public scrutiny of aspects of them.

There has even been one case where a blog post (PD175) generated ideas that led to research and a journal publication that wouldn’t otherwise exist (Rogers et al., 2014), which was then described in another blog post (PD256).

Beyond the more research-oriented posts, the blog posts take a number of different approaches, from time to time, including:

  • Getting stuff out of my system (split infinitives PD177, grammar PD215)
  • Sharing interesting stuff (fossil fuel subsidies PD265; economics and violence PD269 and PD270)
  • Self-indulgent sharing of my passions (The Beatles PD10, PD225 and PD264; long jump PD19 and PD109)
  • Travelogues (China PD198, PD199; Estonia and Latvia PD84) and
  • Explaining stuff that many people get confused about (discounting PD33, PD34, PD224, PD242, double counting benefits PD15)

Doing the blog has definitely meant that more people know about me and my work. I sometimes meet people who read my blog but otherwise wouldn’t know I existed and may never have heard of environmental or agricultural economics. Or my wife meets someone who asks whether she’s related to Pannell Discussions. Some people seem to think I’ve got more expertise than I really have, because they’ve seen a blog post I wrote about something.

Other random nice stuff that’s happened includes:

  • A friend sending one of my posts (PD139) to Nobel Prize winner Eleanor Ostrom and getting feedback that she really liked it.
  • Getting invited to join the Scientific Committee of a large European project on the strength of them seeing my blog.
  • A national prize for Quality of Research Communication from the Australian Agricultural and Resource Economics Society (PD206)
  • Getting a cheque for $500 from the copyright agency resulting from people making copies of Pannell Discussions for use in their teaching.

The main cost has been time but, as I said earlier, that hasn’t been excessive.

I haven’t found it difficult to identify enough topics to keep it going. If I don’t have a topic, that’s fine, I don’t write a post. But usually there are one or two topics in the queue.

Overall, it’s been a great thing to do, and I’ll keep on doing it when time allows.

Further reading

Rogers, A.A., Kragt, M.E., Gibson, F.L., Burton, M.P., Petersen, E.H. and Pannell, D.J. (2014). Non-market valuation: usage and impacts in environmental policy and management in Australia, Australian Journal of Agricultural and Resource Economics (forthcoming). Journal web page ◊ IDEAS page for this paper

270 – Violence and economics 2

Last time I talked about the way that economic trade has contributed to reductions in certain types of violence. Another economics-related influence was the establishment of powerful centralised governments, which claimed a monopoly in the rights to apply violence within the community. The links to economics are various.

Steven Pinker (2011) refers to this influence on violence as “The Leviathan”, meaning a state that claims a monopoly on violent force and uses that monopoly to protect its citizens from each other.

This reminded me of the economic concept of a natural monopoly – a situation where a monopoly can deliver an outcome more efficiently and cheaply than can multiple players in a competitive market. Normally this is thought to apply to services like trains, roads or domestic water, but the discerning use of violent force to reduce general violence does seem like a good candidate for a natural monopoly. Imagine what would happen if there was more than one provider of this “service”!

violence1The Leviathan idea also relates to the economic theory of public goods, which have either or both of two characteristics: the provider cannot exclude people from benefiting from the goods in question (and so cannot charge a voluntary fee in exchange for their consumption) and/or consumption of the good by one person does not diminish its availability to other people (see PD22). Violence-reduction services would have both of these characteristics, and so economists would consider them to be prime candidates for being provided by a centralised government, rather than by multiple firms in a free market.

Next, there would be positive externalities (PD35) resulting from individual decisions not to apply violence to others in their community. A positive externality is where somebody gets a spill-over benefit from someone else’s activities. Pinker showed that the violence-reduction benefits of a benevolent central government diffuse throughout the society. One way is through growth of culture and technology, as people have more time and resources to devote to these things rather than to self-defence. Fostering of positive externalities is another classic economists’ rationale for government getting involved in an issue, rather than leaving it to solely to the market.

We heard about the violence-reducing benefits of trade (PD269), but this too depends on a strong centralised government to provide the conditions and institutions for trade to occur. A benevolent Leviathan helps us all by defining and enforcing property rights, providing the rule of law, creating a system of contracts, and punishing violators of these systems. Without these things, trading would be much more expensive and therefore less common. In other words, the strong centralised government, by providing these systems and institutions, reduces our “transaction costs” (see PD192), making trade practically possible. Transaction costs have been a growing area of study in economics, recognised with recent Nobel prizes.

One of the mechanisms for reducing transaction costs is increasing trust. It’s easy to see how the systems and institutions put in place by a benevolent Leviathan would lead to increased trust between people. Social scientists, including economists, have studied trust as a key element of “social capital” (see PD170), looking at how it contributes to making economies and societies work effectively, for the benefit of all.

So there are at least three or four ways that economic theories can add richness to Pinker’s Leviathan idea.

Overall, it is striking how many connections there are between economics and the long-term reduction in violence outlined by Pinker. He doesn’t talk about these connections (apart from the “gentle commerce” one), but it seems there could be scope to explore them further.

Further reading

Pinker, S. (2011) The Better Angels of Our Nature: The Decline of Violence in History and its Causes, Allen Lane, Penguin, London.

269 – Violence and economics 1

There is clear evidence that violence within and between human societies has decreased dramatically through the course of human history. What are the links between economics and this most-welcome development?

I remember thinking that I was very lucky when I was about 11 or 12 years old, because I felt that the world was on a pathway to improvement. I was glad to be living now, rather than earlier in history, because medicine and technology were clearly advancing, but also because I felt that people were generally getting better – kinder, more inclined to offer international aid, more opposed to war.

The idea that people are getting better might seem like childish wishful thinking, but it turns out there was something to it. So says Steven Pinker in his extraordinary 2011 book, The Better Angels of Our Nature: The Decline of Violence in History and its Causes.

Pinker was already one of my favourite authors (How The Mind Works is wonderful), but this book is really special. I can’t recommend it highly enough. It is enthralling, surprising, entertaining and even inspiring, over the course of a weighty but highly readable 800 pages.

Reductions in violence have been documented on every time scale, from millennia to recent decades. Pinker documents how every form of violence you can imagine has declined: murder, violent punishments, torture, mutilation, slavery, rape, genocide, war and more. Beneficiaries have included women, children, family members, neighbours, strangers, homosexuals, prisoners, slaves, animals … everybody, really.

violence3As Pinker observes, “It is easy to forget how dangerous life used to be, how deeply brutality was woven into the fabric of daily existence”. The good old days were, in fact, shockingly violent.

The declines in violence have been huge in magnitude. Acts of violence that we would consider unthinkable were once commonplace and unremarkable. To quote a few of the many statistics provided, in pre-state societies, around 15% of people were killed by other people; in early city states this had dropped to 5%; and the current value in Europe is around 0.001% per year.

Many different factors have contributed to this outcome, some rather surprising. I was interested that some of the reasons identified by Pinker relate directly to economics.

He argues that one of the biggest contributing factors has been “gentle commerce” – voluntary trade between willing buyers and sellers. If your way of acquiring goods is to take them from your neighbours by force, then the system is a zero-sum game, meaning that there is a fixed amount of good stuff available, and if someone gets more of it, someone else must get less. If in the course of taking your neighbours’ goods you also kill them, the system is very much a negative-sum game. But if you trade, it becomes a positive sum game, with everybody better off.

The gains from trade make it more likely that people will choose to leave their neighbours alone to produce good stuff for trade, rather than choosing to raid and perhaps kill them.

Trade brings you into direct contact with a broader range of people, and you can learn that they are not the ogres you’ve been led to believe. The process of negotiating particular trades encourages each player to take the other’s perspective. It may lead to respectful consideration of the other’s interests, if only because it becomes in your interest to do so.

This virtuous spin-off from trade, including from “globalisation”, is something that very few people seem to be aware of. No doubt there are some negative aspects of globalisation, but this perspective on violence adds a huge positive to the more obvious positive of increasing general prosperity.

The evidence for reduced violence resulting from trade is strong. For example, statistics show that countries that trade with each other are much less likely to go to war. Countries that have relatively high levels of trade have experienced less genocide and less civil war.

Interestingly, it appears that increased wealth per se (which would result from the trade) may not be the main factor driving reductions in violence. Pinker shows that the evidence about the effect of wealth is mixed; its correlation with violence tends to be low. For example, the number of lynchings in southern US states declined exponentially in the first half of the 20th century, without deviations downwards for the roaring 20s or upwards for the depressed 30s.

So if it’s not wealth, it must be the act of trading itself. That’s a remarkable and important insight. Given that trade has this unintended positive consequence that benefits us all so much, it’s ironic that some people see commerce and trade as undesirable, or even immoral.

Further reading

Pinker, S. (2011) The Better Angels of Our Nature: The Decline of Violence in History and its Causes, Allen Lane, Penguin, London.

268 – Conservation agriculture in developing countries

Is “Conservation Agriculture” really a win-win for farmers and the environment? It reduces the losses of soil and nutrients from agricultural land, but are farmers who adopt it better off or worse off? In asking this, my focus is on developing countries, where soil erosion remains a serious problem.

Soil erosion reduces farmers’ livelihoods, but also causes off-farm damage, particularly to rivers, lakes and dams, and “Conservation Agriculture” has been promoted as a solution. A particular Conservation Agriculture (CA) package of three farming practices has been widely promoted in developing countries as a win-win option for farmers and the environment. It consists of zero tillage, retention of crop residues for soil cover (mulching), and rotation of cereal crops with legumes, which fix nitrogen and so increase soil fertility.

Something close to this package has been widely adopted in North America, South America and Australia, but its adoption by poor farmers in Africa and South Asia has generally been disappointing, despite years of active promotion by international organisations.

Does this mean that poor farmers can’t recognise a good thing when they see it, or is the problem that benefits of Conservation Agriculture to these farmers are not sufficient to outweigh the costs? Given the massive differences between small subsistence farms in southern Africa and large commercial farms in North America, we should be open to the possibility that a practice could be very attractive to one group of farmers but not the other.

Photo: Marc Corbeels

Photo: Marc Corbeels

In 2012 I was invited to review the evidence on the economics of Conservation Agriculture in Africa and South Asia, and to present my findings as part of a workshop on Conservation Agriculture held in Lincoln Nebraska that year.

Part of the motivation for the workshop was to try to address issues of controversy about Conservation Agriculture in developing countries. Some people had been critical of what they saw as promotion of CA as a silver bullet solution without sufficient consideration of circumstances where it did and didn’t work for farmers. Others hit back at these criticisms and defended CA as the best available option.

The workshop marshaled the evidence on various facets of CA. The results have recently been published in a special issue of the journal Agriculture, Ecosystems and Environment. All the papers can be accessed for free here.

Looking at past literature on the economics of CA for poor farmers, my co-authors and I found that there wasn’t all that much literature, but what there was tended to indicate that CA (or its components) should be economically attractive to small farmers. However, looking critically, little of this evidence was based on sophisticated analysis. Many of the economic models used seemed too simplistic to be reliable. 

So we set out to build a model of our own and apply it to a case study in northern Zimbabwe. Marc Corbeels from CIRAD joined the team, providing his data and extensive experience for the case study.

A key finding is that the farm-level economics of CA are highly case-specific. In some situations it is competitive with traditional agriculture, but in others it falls far behind. Organisations promoting CA need to be quite careful and discriminating about where it is actually a viable strategy if they are not to waste their own and farmers’ resources.

We didn’t find any scenarios where CA was substantially better than traditional agriculture. Where it was better, it was only slightly better, but where it was worse, it was sometimes dramatically worse. This would be important to farmers who are worried about risk.

CA tends to be more attractive for larger, wealthier farmers and to be much less profitable for the smallest, poorest farmers. No wonder many of them have been reluctant to adopt it.

There are several elements that can reduce the benefits of CA for small farmers. One is that zero tillage can increase the number of weeds in the crop. This either reduces crop yield or requires additional effort for weed control. A second factor is that some of the benefits take about a decade to kick in (increased yields from zero tillage combined with mulching). The poorest farmers might not be able to afford to look that far ahead when they make their farming decisions. Thirdly, crop residues may not be available for mulching. They may be harvested to feed to livestock, or in some cases farmers cannot keep other people’s cattle off their crop residues even if they want to. (The community doesn’t allow it, and there are no fences anyway.) Fourthly, legume crops may or may not be profitable enough to be worth including in the rotation. It depends on their yields and sale prices.

Some extension programs have emphasised the importance of farmers adopting all elements of the CA package. This is quite naive, as full adoption of farming packages rarely happens anywhere. Farmers almost always pick and choose the elements that they think will work for them, and leave the rest. We found that the economics tend to favour this approach in the case of CA – partial adoption tended to be more attractive than full adoption.

So, overall, this is one of those cases where the farm-level economics pose a barrier to changes that people would like to see, at least in some cases. There are good and bad ways to respond to this information. The bad ways include ignoring the information and continuing to promote CA in an untargeted way, or thinking that the adverse economics could be overcome by better or more intensive efforts to promote CA. The good ways include using the information to target CA promotion to situations where it is likely to be adoptable, and redoubling efforts to develop more appropriate soil conservation practices for situations where it is not. In some cases it might be feasible to subsidise CA to increase its uptake, but this won’t overcome adverse economics unless the subsidies can be maintained indefinitely. If they are to be maintained indefinitely, we would want to have confidence that the system will result in large enough reductions in the off-farm costs of soil erosion. 

Further reading

Pannell, D.J., Llewellyn, R.S. and Corbeels, M. (2014). The farm-level economics of conservation agriculture for resource-poor farmers, Agriculture, Ecosystems and Environment 187(1), 52-64. Journal web site (access to the paper is free) ◊ On-line video presentation ◊ IDEAS page for this paper

267 – Budget 2014 and the environment

Last week’s budget included funding cuts to many areas of government, and the environment certainly was one of the areas to suffer. There were some new initiatives, but they were outweighed by what was taken away. 

The most substantial environmental initiative in the budget is the Emissions Reduction Fund (ERF), a key part of the government’s election promise of a Direct Action climate policy. The headline commitment is A$2.55 billion, although spending in the next three years will be only A$300 million, A$355 million and A$417 million – 30% less than the amounts announced by Environment Minister Greg Hunt as recently as November last year.

The ERF is intended to replace the carbon tax, which is expected to raise more than A$7 billion in 2013-14. It is no secret that economists generally don’t support this policy change, viewing it as a move from a relatively efficient to a relatively inefficient mechanism that will worsen the deficit.

volunteersAnother of the key initiatives also amounts to give and take. There is A$525 million over four years for the Green Army (another election promise), which will undertake a range of environmental work. But this is almost fully offset by cuts of A$484 million over five years to the Caring for our Country programme and Landcare, now merged into a new National Landcare Programme.

Of the A$1 billion over four years that remains in the merged programme, some is tied to other election commitments, such as a nature corridor in Western Sydney (A$7.5 million), a Whale and Dolphin Protection Plan (A$2 million), and the 20 Million Trees programme (A$50 million).

These changes amount to a substantial cut in funding to Australia’s 50 regional natural resource management bodies – a fate they also suffered after the last change of government in 2007.

On the face of it, the budget looks to have delivered on an election promise to safeguard Australia’s most iconic environmental asset, the Great Barrier Reef, with a new Reef Trust set to provide A$40 million over four years.

But while this sounds respectable, it is a very small percentage of the amount needed to achieve existing targets for the reef. It is also partly offset by a A$2.8 million cut (over four years) to the Great Barrier Reef Marine Park Authority.

There are lots more cuts too. The 4900 staff employed in the environment portfolio will be reduced by 300, although that is fewer than might have been feared.

Then there are numerous cuts to existing programs. The most affected areas, predictably, are those related to climate change, including carbon storage, renewable energy and alternative fuels. The Australian Renewable Energy Agency is to be wound up, saving A$1.3 billion over five years starting in 2017-18. Funding of A$1 billion remains to support existing projects. 

Another large saving is a A$459 million cut to the Carbon Capture and Storage Flagship Programme, also commencing in 2017-18.

Climate Spectator has confirmed that an earlier promise of A$500 million for a One Million Solar Roofs program has been quietly dropped. Similarly, there is no sign of the promised A$50 million for Solar Schools, and the promised Solar Towns program has been dramatically scaled down, from A$50 million to A$2.1 million.

Biodiesel and ethanol will both be subject to increasing excise rates, growing to 50% of the “energy content equivalent tax rate” (the scale by which fuels are taxed according to how much energy they contain) by 2021. This will reduce the incentive for people to prioritise these fuels over fossil fuels.

Meanwhile, there are various cuts to fuel efficiency and green technology measures, including:

  • The National Low Emissions Coal Initiative (A$17 million)
  • The Clean Technology Programme (A$45 million)
  • The National Greenhouse and Energy Reporting Scheme (A$2 million)
  • The Ethanol Production Grants program (A$120 million over six years)
  • Grants to support algal synthesis and biofuels (A$5 million)
  • The Cleaner Fuels Grants Scheme
  • Water and science

Water is also a target for cuts, with the abolition of the National Water Commission (A$21 million over four years) and savings of A$408 million in the Sustainable Rural Water Use and Infrastructure progam, leaving that program with A$4.5 billion over 10 years.

These savings include reduced funding for water buyback, with the government prioritising water recovery through infrastructure projects. In this, the government has chosen to prioritise a highly inefficient method to generate water, in response to political pressure from the agriculture sector. As with the changes to climate policy, this policy conflicts with the government’s aim to be seen as a sound economic manager.

Environmental research funding will probably be affected by cuts to CSIRO (A$111 million), the Cooperative Research Centre program (A$80 million) and the Australian Research Council (A$75 million). It will definitely be affected by cuts to the National Environmental Research Program (A$21 million), the Office of Water Science (A$10 million) and the Australian Institute of Marine Science (A$8 million).

Finally, the decision to resume indexation of the fuel excise will have an incidental effect on the environment. One cannot help being struck by the irony of this measure being introduced by a government that was so highly critical of the carbon tax and the burden it places on the community.

The initial cost of this change will be relatively minor (A$280 million in 2014-15), but it will grow rapidly year by year (to A$1.85 billion by 2017-18). Before long, its annual cost may exceed that of Australia’s carbon pricing arrangements, depending on how prices change in Europe’s carbon market, which the previous government had signed up to.

Not that I’m being critical of the decision to index the fuel excise. As well as generating revenue, it will reintroduce at least some of the incentive to reduce fossil fuel consumption that will be lost if the Senate approves the government’s plan to dismantle the carbon pricing system.

That point aside, it is not a good budget for the environment – but then that was expected. In relative terms, the environment probably hasn’t been hit any harder than other areas like health and education.

A version of this article was first published in The Conversation on 14 May 2014.

I did an interview on ABC Radio National (Bush Telegraph program) on 16 May 2014 about Landcare and the Budget. You can listen to it here. (My bit starts about half way through the item.)