Yearly Archives: 2016

301 – Inequality in the USA

Following the catastrophic result of the US unpopularity contest last week, one of the many suggested explanations was the level of economic inequality in the country. This made me think of the graph below, which I saw last year. It shows that, when it comes to inequality, the US is truly exceptional.

The graph shows the Gini coefficient (a measure of inequality) for 115 countries, plotted against their GDP per capita (a measure of their average income). There is a very clear pattern. Above a certain level of inequality (Gini coefficient of about 37), almost all countries have really low average income levels, while above a certain level of average income (GDP per capita of $12,000), almost all countries have fairly low inequality.

 

gini

Source: http://visualizingeconomics.com/blog/2006/01/04/gdp-per-capital-vs-gini-index

 

The exception is the US, which has both high average income and high inequality. There is a lot of wealth in the US but it is concentrated into a minority of hands. As one illustration, between 2009 and 2012, 95% of income gains in the US accrued to the top 1% of income earners. Other data seems to show that their inability to share around the wealth has become worse over time. Other countries with a similar level of inequality have about one eighth as much average income.

If it is true that inequality is behind this incredible electoral result, we can perhaps draw some solace from the fact that inequality is so much less in all other wealthy countries.

On the other hand, inequality was clearly not the only factor. Already, like-minded politicians around the world are feeling empowered and emboldened to spread their noxious views throughout their societies. We can see that happening in Australia, France and The Netherlands, for example.

And there seems plenty to worry about from what could now happen in the US. The world’s most powerful country will soon be led by a deeply ignorant man of appalling values and character. Even by the low standards of politicians, he tells obvious lies to an extraordinary extent. I feel angry that so many Americans were taken in by this conman, and now the whole world will have to suffer the consequences.

The other thing I can’t stop thinking about is a certain historical parallel. Can you think of another prominent national leader from the 20th century who was elected on a promise of making his country great again? This other leader also used an ethnic minority group as a scapegoat for his society’s problems, and found a sympathetic ear from countrymen who felt they had been badly treated. He had notable authoritarian tendencies, fomented hatred and resentment, was not averse to jailing his political opponents, did not respect the rule of law or democratic institutions, and was unable ever to admit that he had made an error. He excited mobs with messages that were simple and bold but facile and dangerous. He was friendly with other authoritarian leaders (although that didn’t last). And he had a distinctive hair style.

I’m not expecting that the US will now proceed to annex Alberta as a prelude to invading all of the countries they can practically get to, but I do think there is a serious risk that voices of reason, balance, kindness and openness within the country will be repressed and perhaps even persecuted. We have to hope that good Americans will be able to moderate or even prevent the barrage of stupid and repugnant policies that will now come forth.

300 – MOOC feedback

Last week I checked out the comments that people have left about the free online course (MOOC) that I offer, called “Agriculture, Economics and Nature”. Some of the comments were so heart-warming that I thought they were worth sharing.

They highlight what an amazing thing it is to provide things to the world on an open-access basis. Thanks to the internet, you can connect with, influence and help hundreds or thousands of people who you will never meet. The diversity of commenters, and their circumstances, is just amazing.

My motives in preparing the MOOC were selfish (to attract students to our courses at UWA, to raise our School’s profile), but reading these comments gave me such a warm glow that it makes me hardly care about that aspect (although it clearly has been somewhat successful in delivering those selfish aims as well).

It may seem like I’ve cherry picked the comments, but I promise that these are quite average in their enthusiasm. I’ve only tried to select the more interesting ones. I’ve edited out names and tidied some up a little, but not changed content at all.

I am a 52 year old single mother, from Barbados. It is my intention to operate a herbal production and agricultural business. I took the course as I needed the knowledge, since the area of agriculture would be a new and unknown area of business for me, This course has started me on the road to gaining all the knowledge I need going forward, it has exceeded my expectations, since I did not realising how intense it would be. It was a real pleasure and great learning experience for me. I am truly encouraged. Based on what I have learnt, I can now understand how to apply all of it to my pending operation, it’s invaluable. I loved the structure of the course, the intensity, interest, delivery and concise method of explanation and teaching.

I’m from Nepal. I recently completed my Masters in Plant Biology and Plant Biotechnology from India. I took this online course since I was idle at home, and also because I was curious about the title. I was pleasantly surprised by the richness of the content, and I appreciate your efforts profusely. I enjoyed ‘Pannell Discussions’. There, for the first time in my life, I came across the expression- “bang for the buck” (fascinating and crisp indeed!). I’ve been throwing that that expression around for sometimes.

mooc1Thanks for this great opportunity to learn and gain insight about these complex but relevant interactions between economy, agriculture, and environment. I have learnt about a lot of complex theoretical models dealing with sustainable development, but written by bureaucrats or academics and usually not applicable on the field. This course was refreshingly down to earth, assuming realistic scenarios of limited funding, farmer’s basically economic orientation, and scepticism to change.

Thanks for the course. I enjoyed it a lot – some new content, some refreshing old information, and an agriculture/farmer focus which was what I wanted and was new to me. It was well structured in bite-sized parts perfect for this type of learning. I also enjoyed the excel components, and in fact I have found some published studies I want to apply some of this mathematics to. I currently work in a freelance capacity, recently relocated to Vietnam, but from the UK where I previously worked for the Overseas Development Institute. I focus on the economic and policy challenges to achieving better climate and development outcomes. I have had many insights from your course.

Wow. I have never really been an academic but have always tried and tried and tried again until I finish it. I am from South Africa and have moved here for my partner who is a country lad. I fell in love with the farming here and now I work for a fruit and veg company and I loved your course. I had to retake a lot but I have finally done it. Thank you!

I very much enjoyed your course, which provided me a comfortable introduction to the wide spectrum of agro-eco issues, and dovetailed nicely with a microeconomics Coursera offering that I happened to be taking concurrently. I am a geographer at University of California Santa Barbara.

I am an Agriculture and development economics, doctoral student from University of Agricultural Sciences, Raichur. I have learnt a lot of new things in the course. I thank you for giving such an amazing enriching inspiring lecture. The references taken in the course were precise, perfect and appropriate and very useful links and pictures. Thank you once again.

mooc2I work for an environmental NGO in California where we engage farmers to adopt more sustainable/resource conservation practices (e.g., habitat restoration, strategic water use) that are compatible with sustained levels of production. The course already sparked some questions that I have brought to my job, such as what do we actually know about the economic payoff of landscape-scale conservation. Thank you so much for the course. This was my first-ever MOOC and I’m glad I took it!

I am much pleased to learn from your experience and knowledge. I am a BSc undergraduate (biochemistry) student of the Kwame Nkrumah University of Science and technology in Ghana. I am planning of venturing into Msc. Agriculture as graduate studies and that triggered in partaking this course because of how poor our agricultural system is gradually heading way into abyss and if measures are not put in place by right expertise, failure will eventually embrace us.

Greetings from Rwanda! I would like to express my deepest gratitude for the ”Agriculture, Economics and Nature” course offered by the University of Western Australia on Coursera. I am now happy to have passed all the quizzes on the 4th of September with 79.4%, and received my Certificate. I will use the skills gained in my daily work.

I am got the BSC degree in the field of soil science from the college of agriculture and forestry, Mousel University in 1979 and the MSC degree from the college of agriculture, Baghdad University in the field of soil chemistry (Salinity) in 1985. This help me in my job (Project director).I love the proposal of all subjects in this course. Finally I thanks professor david pannell so much. excuse me about the language.

I really enjoyed the program. I wish I had a chance to say a proper thank you in person to you for the way you lectured. It was simple, precise and very resourceful. I am an agribusiness postgraduate student in NZ, originally from Cameroon. Worked in the bank as farm loan manager and then operation manager.

I will be going off to King’s College London this September to study international development. I would like to say a big thank you for putting together such an interesting and informative course!! I learned a lot about current problems facing the agricultural industry and different agri-environmental projects both in a global and an Australian contexts (which is really cool since I have always wanted to live in Australia at some point in life!). I will definitely recommend this course to my friends!

Hi, i am from Ghana. I am a young lady who wants to venture into the field of Agriculture. This six-week course has enlightened me on all resource available to farmers and how policies are put in place to help and motivate farmers. Every section was educative and self-explanatory.

I am from Zimbabwe but currently staying in the US. I would like to take this opportunity to express my gratitude for your service. It was an interesting course and I really enjoyed all your lectures. I am an animal scientist, I have a passion for animals and agriculture as a whole. I wish to start my own agriculture enterprise because I can feel I am now well equipped with all the knowledge needed. Once again, thank you very much for such a rich and life transforming course.

The course structure made participation an unforgettable experience; Professor Pannell expertly delivered lessons and the interview sections with stakeholders further underpinned everything taught. To Professor Pannell, I want to say learning with you has been a memorable one.

First of all, I would like to thank you for giving me a great opportunity to learn more about economics in agriculture. I’m an agronomist, and I’m currently the Food Security Advisor for World Vision Niger. I’m so excited about the opportunity to explore the scope and nature of relationship between Environmental Governance and Disaster Risk Reduction.

Thanks for going through the trouble of delivering this course online. I am just finishing my PhD in environmental sciences at the moment and felt like I needed some perspective if I were to undertake research for agriculture in the future. A lot I learnt in this course, thank you.

I work in the Agribusiness department of a commercial bank, and i took the course as one of the preliminaries to a Master degree in Agribusiness since my background is not in Economics. Prof Pannell made the teaching so easy to follow and understand especially the calculations and the graphs. i was so excited when i learnt how to calculate the discounting factor. This is my first experience in certificate online course and i find it very inetersting and a bit challenging too.

cornThank you so much for providing this course. I had learned a lot I had never known before. I’m an Au pair living in Virginia U.S. currently. I spent my free time after babysitting to finish the online course. I had an Agriculture bachelor degree which related to crop protection, and I had been working in a Fungicides company for two years before I came to the US. Meanwhile, I’m seeking the opportunity to work on some organic farms here. I will be working on a local organic farm from this month to next month. Thanks for laying out plenty of online resource about agriculture and this fantastic course.

Thank you so much for the methodology used in this course. The questions and answer are very good they make you think very well. Even though I had problems with my internet during the course but I still got through. Thank to other contributors of the the program. Am looking to work on Food and Nutrition Security Using Urban and Peri-Urban Agriculture for a better livelihood for my PhD work.

I hold a Masters Degree in Physical Geography from Free University of Berlin in Germany and specialized in Natural Resource Management. Many thanks for this really great course. I liked every section of the course, I really enjoyed all the relevant material and advice and those tremendous valuable tools! Thank you so much. Returning to Germany it will certainly help me in my new career here at ADRA Germany coordinating the department for Climate Change Adaptation and Renewable Energies.

Many thanks for a really interesting and well-paced course, it was fantastic. I’m going to miss those slides and the music!

Maybe this collection of stories and feedback has inspired you to check out the course yourself, joining the 7000 people who have already enrolled. You can do so at: https://www.coursera.org/learn/agriculture-economics-nature

For more information about the course, you could check out this video.

 

 

299 – Are higher house prices a benefit or a problem?

In the research reported in PD298, we used the impact on house prices as an indicator of the benefits of an investment in a public amenity. This is a well-established approach, but twice in recent times I’ve encountered an attitude that higher house prices are more of a cost than a benefit. Could that be right?

The issue that people have in mind when they raise this concern is housing affordability. This certainly is something that is worthy of attention. House prices in many parts of Australia (and other developed countries) are often so high that they place great financial stress on buyers with relatively low incomes or they result in too many people being excluded from the housing market.

However, talking to a former government minister last year, she said that measuring improved local amenity by the resulting rise in house prices was not acceptable because rising house prices are a problem for housing affordability.

housingAlthough I applaud her concerns for the welfare of low-income groups, her rejection of rising house prices as a measure of community benefits is not sound at all.

For one thing, it implies that rising house prices are a bad thing regardless of the cause of the rise. The logical extension of that thinking is that we would prefer completely impoverished suburbs with no amenities or services for residents. Let’s encourage crime, leave road potholes unrepaired, remove all street trees and encourage toxic industries to set up in urban areas. That would certainly result in affordable housing! This is obviously not the solution to the housing-affordability problem.

The second flaw in the politician’s logic was that it confused measurement with objectives. Improving the amenity of a suburb does result in benefits for the residents, and these benefits are reflected in the prices that people are willing to pay to become residents in that area. So the change in house prices that is attributable to the improved amenity is a sound quantitative measure of the benefits. There may also be spillover effects that are viewed as being negative, but the requirement then is to measure those negatives as well, not to reject the valid measurement of the benefits.

Thirdly, the politician is implicitly suggesting we should aim to achieve two different policy objectives (affordable housing and improved urban amenity) using only one policy mechanism, the decision about whether to invest in urban amenity. An important economic insight, known at Tinbergen’s Rule, says that you need at least one policy mechanism for each policy objective – in this case, one related to urban amenity (e.g. investment in drain restoration) and a different one related to affordable housing (e.g. increased land releases). If you try to achieve two objectives with only one mechanism, the community will end up worse off overall than it might have been.

I was completely unprepared for the ex-minister’s comment at the time, and so dazzled by its many problems that I wasn’t able to quickly provide a very coherent counter-argument. I’ll be better prepared if it comes up again.

Further reading

Borrowman, L. Kazakevitch, G. and Frost, L. (2014). Measuring Housing Affordability: What Types of Australian Households are in Stress? Discussion Paper 42/14, Department of Economics, Monash University. Full paper ♦ IDEAS page

Polyakov, M., Fogarty, J., Zhang, F., Pandit, R. and Pannell, D. (2016). The value of restoring urban drains to living streams, Water Resources and Economics Journal web site ♦ IDEAS page

298 – Potential value from restoring urban drains

I remember as a child playing in the stormwater drains near my home in suburban Perth. The drains were straight, steep-sided, fenced off (to keep us out) and the banks were bare grass, but the water contained little fish, called gambusia, that we loved to catch, not caring that they were actually feral pests.

These days, there is growing interest in restoring urban drains to something approaching a natural stream, including natural vegetation on the surrounding land. In a study funded by the CRC for Water Sensitive Cities, we set out to measure the benefits from restoring a particular drain in Perth.

gambusiaThe drain in question was Bannister Creek, which is really close to my childhood home and those other drains I played in.

In 1979 the creek was straightened, deepened, and made into a traditional drain. During the 1980s and 1990s, the area was urbanised, leading to loss of the wetland system and riparian vegetation, nutrient-rich runoff from lawns and gardens, runoff from industry, and increased erosion and pollution problems in the catchment. Additionally, during high-rainfall events, the increase in the volume and speed of water surging through the now straightened and steeply-banked Banister Creek main drain had become a public-safety risk.

In response, a volunteer group formed (the Bannister Creek Catchment Group), with the aim of improving the creek/drain, including a project to rehabilitate a section of it to a “living stream”. The aim was that this would provide flood-mitigation, local amenity benefits, improved water quality, and slower flow velocity.

The restoration project, from 2000 to 2002, involved giving the creek a more natural shape, with meanders, riffles, fringing sedges, gentle sloping banks, and thick vegetation on the banks.

The transformation from drain to living stream can be seen in Figure 1, which tracks the evolution of the area through time.

living1

Figure 1. Drain restoration over time.

Figure 2 shows the changes at ground level. They were pretty dramatic.

living2

Figure 2. Before and after drain restoration.

To estimate the impact of these changes we examined changes in house prices in the area. We used a statistical model to separate out the various influences on house prices, so that we could isolate the influence of the drain restoration.

This approach means that we are capturing the benefits to local residents, but not possible benefits to others, and not ecological benefits that local residents are unaware of. We expect that the measured benefits would include aspects of amenity, recreation and environmental values.

The results were really interesting, and somewhat surprising in their magnitudes. We found that the restoration project had an influence on property prices over a distance of about 200 metres from the creek. Given that the restored section of the creek was about 320 metres long, quite a large number of property values were affected.

In the first few years after project commencement, property values in the area actually fell, probably reflecting a negative attitude to the substantial earthworks that were required.

However, by 2007 the impact had become very positive. On average, the sale prices of houses in the area rose eventually by an average of 3.9 to 4.7% due directly to the restoration project. Considering only these benefits, the costs of the project were only about 25 to 50% of the benefits.

Overall, the results were very encouraging about the prospects for this type of project to deliver worthwhile benefits to the community.

Further reading

Polyakov, M., Fogarty, J., Zhang, F., Pandit, R. and Pannell, D. (2016). The value of restoring urban drains to living streams, Water Resources and Economics Journal web site ♦ IDEAS page

297 – You can own a critically endangered species

Here’s another quick follow up to my post on Monday about the value of a threatened species. Ross Allen contacted me to say that he had received a present of a Wollemi Pine in a pot. The interesting thing is that the Wollemi Pine is one of Australia’s 148 critically endangered plants.

It turns out that you can buy a Wollemi Pine pot plant online. Here’s the short blurb from www.wollemipine.com.

The Wollemi Pine is one of the world’s oldest and rarest plants dating back to the time of the dinosaurs. With less than 100 adult trees known to exist in the wild, the Wollemi Pine is now the focus of extensive research to safeguard its survival. 

And here is why they are doing it:

wollemi

Photo: Akerbeltz

Assist in the conservation effort by growing your own Wollemi Pine and becoming part of one of the most dramatic comebacks in natural history.

The mission of Wollemi Australia Pty Ltd is to distribute the Wollemi Pine worldwide ensuring the longevity of the plant for future generations and returning royalties to fund conservation of the Wollemi Pine in the wild and assist other threatened and endangered species.

The Botanic Gardens Trust (Sydney) has licensed Wollemi Australia Pty Ltd to propagate and market the Wollemi Pine in Australia and internationally. 

That’s a pretty interesting use of the market economy to help preserve a species. It looks like they are even selling them into Europe and soon Japan. I hope they don’t become a feral species over there!

Obviously, this strategy wouldn’t work for all threatened species. Luckily for Wollemi Pines, they’re interesting looking, apparently can be successfully propagated, and it’s not the end of the world if Ross doesn’t have a green thumb. I don’t think I’ll be allowed to buy a Western Swamp Tortoise any time soon.