Earlier this week, Martin Wolf of the Financial Times announced that the "climate skeptics have won." His comments echo those of former Nasa scientist James Hansen who told an audience in Edinburgh last year that the skeptics "have been winning the public debate with the help of tremendous resources." The action needed in response to this situation was spelt out by Lord Stern – the eponymous author of the well-known 2007 report on the economics of climate change – who once called skeptics "forces of darkness" who had to be "driven back."

The energy and climate challenge of the 21^st century is easy enough to describe. For a world of 9 or 10 billion people to live at the per capita wealth and (highly efficient) energy consumption equivalent of present-day Germany, we will need three to four times as much energy as we consume today. If carbon dioxide levels in the atmosphere are to stop increasing, then nearly all of that future energy consumption must come from technologies that produce zero emissions.

After the European Parliament voted down a proposal to prop up its flagship emissions trading scheme (ETS), most observers finally admitted what has been obvious for a while: the program is contributing little to accelerating the decarbonization of the European economy. However, a few eternal but confused optimists see the program as working just fine. Here are a few thoughts in response to that bit of pushback.

Writing at the Huffington Post UK, Melissa Leach, director of the STEPS Centre at Sussex University, asks a provocative question:

When the cover of the Economist famously announced 'Welcome to the anthropocene' a couple of years ago, was it welcoming us to a new geological epoch, or a dangerous new world of undisputed scientific authority and anti-democratic politics?

The occasion for raising this question was Leach's participation last month in a United Nations meeting of experts on the development of new sustainable development goals. Leach describes a meeting in which scientific authority was invoked as the basis for closing down debates over policy and asserting the preeminent roles of experts in charting a course for future global development.

In a refreshing break from the polarizing debates of recent years, President Obama’s science and technology advisors have released a new set of recommendations on climate policy that are indicative of a growing consensus around pragmatic, commonsense actions that may offer great prospects for implementing effective policies.

The recommendations mark a sharp departure from many of the divisive and politically toxic proposals that often characterize climate policy discussions and a repudiation of the most divisive approaches, such as found in the misguided campaign against Keystone XL.

Over the past few years I've given the New York Times’s Justin Gillis a (deserved) hard time for some of his reporting. I'm now happy to given him some well-earned praise on the occasion of his first monthly column at the Times on climate change. Gillis wisely chose to write his first column on energy innovation, with a focus on nuclear power and China:

We have to supply power and transportation to an eventual population of 10 billion people who deserve decent lives, and we have to do it while limiting the emissions that threaten our collective future. 
 

In the early 1920s, when my grandparents were just small children, only about 40% of Americans had access to electricity. Over the course of a generation that number reached close to 100%. Today, inexpensive, reliable and plentiful access to electricity is something that most people in OECD countries take for granted. I was reminded about this when I attended the recent annual meeting of the Colorado Rural Electric Association, a group that decidedly does not take electricity for granted. The meeting was opened by appealing to core shared values: “The greatest thing on earth is to have the love of God in your heart, and the next greatest thing is to have electricity in your house."

Last week at my son’s elementary school the teachers gathered the students for an important meeting. It seems that during the moments before the school’s doors open in the morning chaos and bickering were breaking out on the playground. The kids were trying to play the game of foursquare, but no one agreed on the rules of the game so the teachers intervened.

In The Geek Manifesto, British journalist Mark Henderson makes a passionate case for why science and scientists deserve a greater role in politics. He argues that political views ought to be measured beyond two axes representing economics and social policies. “Politics,” Henderson explains, “has a third axis, too. It measures rationalism, skepticism and scientific thinking.”

The champions of this third axis are the “geeks” — those “people with a passion for science and the critical thinking on which it is founded.” Science, Henderson explains, “is not a noun but a verb.” He continues, explaining that science “is provisional, always open to revision … comfortable with your changing your mind … anti-authoritarian: anybody can contribute, and anybody can be wrong … [tries] to prove the most elegant ideas wrong … [and] is comfortable with uncertainty.”

Writing in the New York Times last week, Erik Brynjolfsson and Andrew McAfee argue that “a wonderful ride” began to unravel in the late 1990s when employment growth became “decoupled” from productivity growth.

Their contention is that something fundamental has changed in the economy over the past decade, illustrated in the following graph by the increasing gap between gains in productivity and employment, described ominously as the “jaws of the snake.”

A closer look at the data shows, however, that the “jaws of the snake” have been open for more than 30 years. More fundamentally, rather than a “great decoupling” between trends in employment and productivity, it is clear that productivity and employment have been diverging for a very long time as the composition of the economy has changed.

Access to energy is one of the big global issues that has hovered around the fringes of international policy discussions such as the Millennium Development Goals or climate policy, but which has been getting more attention in recent years. In my frequent lectures on climate policy I point out to people that 1.3 billion people worldwide lack any access to electricity and an 2.6 billion more cook with wood, charcoal, tree leaves, crop residues and animal waste (an additional 400 million cook with coal).

Twenty five years ago, the Montreal Protocol on Substances that Deplete the Ozone Layer was introduced for signature by nations around the world. Since that time, the treaty has become arguably the most successful international environmental success story in history. It may also be the one which historians and policy analysts have argued about the most in an effort to draw lessons relevant to the climate debate.

Conventional wisdom holds that action on ozone depletion followed the following sequence: science was made certain, then the public expressed a desire for action, an international protocol was negotiated and this political action led to the invention of technological substitutes for chlorofluorocarbons.

Actually, each chain in this sequence is not well supported by the historical record.

It is a claim that you hear often in discussions of the role of research and development in the economy: “Federal investments in R&D have fueled half of the nation’s economic growth since World War II.” This particular claim appeared in a recent Washington Post op-ed co-authored by a member of the US Congress and the chief executive of the American Association for the Advancement of Science. It would be remarkable if true. Unfortunately, it is not.

Let’s take a look at some numbers to illustrate what follows from the claim. From 1953 to 2007 (the period of available data from the AAAS) the United States invested a total of $3.9 trillion in federal R&D. Over the same period US GDP grew from about $2.4 trillion to $13.9 trillion, representing an annual growth rate of 3.3% (data in 2007$ and available here in XLS). If we attribute half of that growth to federal R&D, or 1.65% of that 3.3% annual GDP growth rate, then that would imply a 2007 GDP of about $6 trillion in the absence of such federal investments. In other words, from 1953 to 2007 the economy grew by a cumulative $153 trillion more than it would have otherwise, representing an implausibly staggering 40 to 1 return on the federal R&D investment.

Unfortunately, such claims and the economics that follow are part of an overly simplistic story that we tell ourselves over and over. In 2007, Leo Sveikauskas of the Bureau of Economic Analysis surveyed the economy-wide returns on R&D (here in PDF) and found far more sober results: “Returns to many forms of publicly financed R&D are near zero . . . Many elements of university and government research have very low returns, overwhelmingly contribute to economic growth only indirectly, if at all, and do not belong in investment.” The exceptions that he cites include federal R&D in health, agriculture and defense.

Many would reject the idea that the contributions to economic growth of federal R&D are “close to zero” as being as improbable as R&D accounting for half of all economic growth. Whatever the actual rate-of-return, the existence of such diverse, even incommensurate, claims illustrates that the role of federal R&D in economic growth is very poorly understood. More fundamentally, the mistaken focus on federal R&D as a sort of control knob that might be used to modulate economic growth masks the fact that the broader mechanisms of economic growth remain poorly understood.

Making discussion of these issues more difficult is a persistent post-World War II mythology that has married the political self-interests of the federal science lobby with a convenient misreading of economic theory.

In my column last week at The Breakthrough Institute on Robert Gordon's analysis of US per capita economic growth, I identified what I believe to be an error in his calculation of post-1950 growth rates. Such an error matters because Gordon's recent discussion paper has been called “the summer’s most talked about working paper in economics” and argues a data-based case for US decline. My view is that such discussions should at least start with a solid empirical basis and re-checking assertions grounded in data claims is fair game (not all agree, however).

Over that past month there has been much discussion of a new paper by Robert Gordon, a prominent economist at Northwestern University, which carried the provocative title: Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds.” (See for instance, Annie Lowrey here, the Economist here and David Keohane here).

In what Tim Harford called “the summer’s most talked about working paper in economics,” Gordon argues that the economic growth of the past century may represent an aberration from the normal state of society, which experiences little economic growth. Look far enough back in time Gordon says and the world had minimal, if any economic growth, and looking ahead, we may be returning to that dismal state. Gordon explains that he is raising “the audacious idea that economic growth was a one-time-only event."

Nate Silver is a Wunderkind. Not yet 35, Silver has already developed the leading statistical tool for assessing prospective professional baseball players, been consulted by the 2008 Obama presidential campaign to help assess the implications of opinion polls for the election’s outcome, writes a widely read New York Times blog and in 2009 was named by Time magazine as one of the 100 most influential people in the world. Along the way, and apparently in his spare time, Silver made more than $400,000 playing professional poker (before losing about a third of it and moving on). Silver’s initial foray into professional poker turned a $100 initial stake into $15,000, which was apparently enough to convince Silver to quit his day job, which has been to the benefit of the rest of us. Silver adds to this impressive list of accomplishments with the publication next week of his first book The Signal and the Noise: Why Most Predictions Fail – But Some Don't (Penguin USA).

This generally well-researched and ambitious book covers a lot of ground. It describes Silver’s evolution as a Fox (to use Philip Tetlock’s terminology favored by Silver) who is “tolerant of nuance, uncertainty, complexity, and dissenting opinion.” Silver discusses prediction in sports, geosciences, economics, politics and health. He clearly has done lots of reading in the academic literature. In most of these chapters he has tracked down and spoken to the characters that show up in the book -- a nice touch for a work that combines analysis with a bit of reporting. I’m not one of those characters, but I did engage in a long phone conversation with Silver while he was researching the book to discuss various aspects of prediction. In our discussion, I was impressed by his thoroughness and attention to detail, and have been looking forward to the final product.

Silver’s book is at its best when he writes about the things he knows best. That is to say, when he is writing about sports, political predictions and poker, Silver’s book is original and insightful. However, when he writes about weather, climate, earthquakes, the stock market and terrorism, the book doesn’t quite reach this high standard, and sometimes the discussion of these complex topics seems a bit cursory or hurried, which is decidedly contrary to Silver’s approach to analysis for which he has become well known.

Consequently, there is a brilliant book here, but it is a subset of the volume that was produced. The brilliant book shares Silver’s personal experiences in building the PECOTA system to evaluate baseball prospects a la Moneyball, his remarkable successes (and lessons learned) as a professional poker player and his experiences developing the FiveThirtyEight election forecasting system now hosted at the New York Times. I got my PhD in political science, and have long been a critic of the silly election forecasting methods proposed by academics. Silver’s work is much more solid than that of the academics, and probably the best of its kind. Silver also writes insightfully about chess, conditional probabilities (and the importance of Bayes theorem) and the difficulty of distinguishing predictive skill from pure chance.

The book’s thirteen chapters appear to have been written such that with few edits each might appear as stand-alone essays in places like the New York Times magazine (indeed, the chapter on weather forecasting recently was the basis for exactly such an essay). This makes the book easy to read but also makes it difficult for Silver to sustain a consistent argument throughout. For instance, after introducing the reader early on to Frank Knight’s definitions of “risk” (where you can readily quantify probabilities, such as in the roll of a die) and “uncertainty” (where you can’t readily quantify probabilities, such as the expected price of copper in 2057), Silver then leaves this distinction behind and subsequently throughout the book uses the word “uncertainty” to mean what Knight called “risk.”

US unemployment rates remain high and a major issue in the US presidential campaign. This post seeks to explain with simple math where the jobs went as a first step in understanding how unemployment might be reduced. The math is simple, and it helps to show how most debate over economy and employment miss what actually matters most – and that is innovation policy. 

In December, 2007 the US economy employed about 138 million people. In February, 2012 that number had shrunk to about 133 million (data). Where did those jobs go? Two recent studies provide some important insight to this question.

 Last month, Georgetown University's Center on Education and the Workforce published a study looking at job losses from 12/2007 to 2/2012 (hence my use of those dates) by economic sector and educational attainment (here in PDF).  The Figure below shows their overall results.

The graph shows that for those who attended some college, or with more post-secondary education, employment had recovered to December 2007 levels by February 2012. The balance of “lost” jobs was among those with secondary (i.e., high school) education or less.

A longer view, beyond the time frame of the recent recession, shows that all job growth in the US since 1989 has come from those with some post-secondary education, with a 14% drop in those employed with a secondary degree or less. Thus, the recent recession amplified trends that were already in place and part of the ongoing structural change in the composition of the economy.

The Georgetown report also looked at job losses by economic sector by educational attainment. This is shown in the figure below, which shows the dramatic loss of jobs by those with the least education in construction, IT, manufacturing and financial services. Together, these four sectors account for the loss of 5.6 million jobs from December 2007 to February 2012. Within those sectors 3.7 million, about two thirds, of the job losses were among those with the least education, secondary or less.

A big part of the loss of jobs of course is the nature of the recession itself, originating in the finance industry and the housing bubble – hence the large loss of jobs in construction and financial services and the bubble burst.

The loss of low-skill jobs in manufacturing and IT (and other sectors in the economy) is arguably the consequence of industries in these sectors trying to maintain productivity growth to remain competitive by shedding the lowest skilled jobs at a rate faster (slower) than the decline (subsequent rebound) in output. These numbers are borne out by looking at productivity data.

Germany’s environment minister Sigmar Gabriel (Social Democratic Party) is pushing for the construction of new coal-fired power plants in Germany. “We need eight to twelve new coal plants if we want to get out of nuclear energy,” Gabriel said on Friday at a meeting of the Mainz-Wiesbaden AG (KMW) in Mainz. With regard to the opponents of the planned coal-fired power in Mainz, the minister said: “Those who demonstrate against coal-fired power will get nuclear power plants instead.” Gabriel said, the decision about which power plants are built is the responsibility of companies and not politics. He added that new coal power plants would not increase carbon dioxide emissions.
 

First of all, old plants would be closed. In additon, the emissions trading scheme would limit the level of emissions. “You can build 100 coal-fired power plants and don’t have to have higher CO2 emissions,” said the environment minister.

Renewable energies would not be able to close the gap in energy supply that will arise due to the shutdown of nuclear power plants by 2020, said Gabriel. Even gas-fired power plants are not a real alternative because their power generation is expensive and thus not competitive for the energy supply of industrial production.