Dance with Chance.

I’m currently reading a book with the above title, as I’m profoundly interested in trying to figure out the interplay of luck/chance and the amount of control we do really have in life. It’s not much I think.

While reading it I came across an interesting statistic, which appears very timely seeing the politicians are interested in factors like prediction and control at present.

Japan has the highest rate of cigarette consumption in the Western world (big countries). In fact the place just billows so much cigarette smoke that one day the IPCC may well suggest an ETS of Japanese smoking obsession. ☺

Japan has also close to the highest if not the highest big western country longevity rates in the world too.

Statisticians find it awfully hard to find an answer to this glaring anomaly. Of course the possible answer could be diet related. However if that’s the case then smoking may not necessarily be the leading cause of death in the West that we’re often told it is. I’m just throwing this up, as I don’t really know and it is in no way a suggestion that anyone should take up the habit. This is particularly so since big stats doesn’t necessarily lead to individual fortune

Japan’s longevity and very high per capita smoking offers an interesting insight that lots of things are really non-linear. This is possibly food for thought as a large number of politicians try to peddle a huge government redistribution money grab under the pretext of saving the planet.

Things are usually not so simple.

Ken Henry discusses road congestion pricing and appears to also get it wrong like Harry Clarke

Henry says

Most of the time, most cars impose minimal costs on other road users. However, when vehicles drive on a congested road they impose costs on other drivers. Each driver thinks of their own need to get to their destination, not considering how, by taking up space on the road, they impinge on the ability of other drivers to do so.

We’ve seen this argument before, from Harry Clarke, which is where Ken Henry may have got it, perhaps.

He’s wrong. Both John Humpheys and I demonstrated the logic/arithmetic error in this argument in a thread some time ago and Harry never came back to defend it. It appears to be wrong because they/he doesn’t appear to be counting correctly, which seems a pretty surprising error for a Treasury Secretory head to be making although i forgive Harry of course as I’m eternally gracious that way.

Here’s Harry saying pretty much the same thing in the thread by giving an example like Henry’s.

John suppose I enter a crowded road and work out that the time and petrol cost of getting to my destination is $15 (that’s the personal marginal cost of me entering traffic) but that by doing this I get a benefit of $25 so off I go.

I head off to this particular destination (’The Honey Motel’) along with 1000 other motorists who go to about the same place. I increase their travel times by 1 second per car so I cost them 1000 seconds or by about 17 minutes. If the value of their time is $50/hour I have increased their travel costs by about $14-20. That’s the larger social marginal cost of me entering traffic. It’s bigger than my personal marginal cost.

The $14-20 is the charge that should be levied on me if there was efficient tolling. So now my total travel costs would go to $29-20 (my new personal marginal cost of making the journey) so I forego the trip.

Its sad. In this deal I lose consumer surplus of $10 as a consequence of the charging since I now don’t go. But society saves $14-20 providing a $4-20 social gain. That is the basis for congestion pricing.

Without it I would have got my $10 surplus but other motorists would have lost $14-20.

Meanwhile back at ‘The Honey Motel’ my irrepressively sensuous adoring fan growls with annoyance into her mobile phone that ‘this is absolutely the last straw’. But I don’t believe her. I know that I project a well-worn, animal magnetism and that she will still come to offer me new invitations even though I valued an afternoon with her at a mere $25.

Here’s John response

The 1000 motorists lost 1 second each because of you.

And you lost 1 second because of each of the 1000 motorists.

So the cost to you of the congestion was 1000 seconds (or $14 assuming $50/hr). And the cost by your contribution to the congestion was 1000 seconds (also $14).

The problem with your example is that you shouldn’t have started with a cost to you which included the congestion cost. Start with your personal non-congestion costs… then add in the congestion cost to find the optimal decision. To work it out for society you should add $14 to the cost. To work it out for yourself you should also add $14 to the cost. So the incentives are already correct. Continue reading

AGW, Immigration and Aid.

I’ve been thinking about the gaping inconsistencies of lowering-emissions policies and the whole gab bag of all the other government policies that contribute to AGW.

If the government was really serious about lowering emissions because high carbon emissions are dangerous to the planet’s future then why are they also promoting or rather maintaining a high level of immigration from poor countries that are obviously low carbon intensive? I’m not for a moment suggesting we should close down immigration as I normally range from open borders (if matched by low welfare) type to low restrictions but choosey from which countries we select from.

Pushing this barrow a step further, if warmers were also sincere about following their intellectual argument to it’s natural progression shouldn’t we also be following a zero aid policy to the poor countries and pulling out, or rather closing down/withdrawing financial support aid agencies like the World Bank and preventing the IMF from lending money to the poor (and obviously low emissions countries)?

The point I’m making is that if AGW is the “moral dilemma of this generation” and our success at cutting emissions is imperative to ensure the survival of the planet and the species etc. then there should also be a quick and total retreat in such areas of aid and lending to the poor countries as well as total moratorium on immigration from the poor countries as new immigrants would invariably raise their carbon foot print to our present average levels.

Now , I don’t advocate these policies of course , although aid is problematic from another perspective, however I would think that intellectual consistency from the doomsayers would eventually have to lead them to these sorts of policies.

Was the Garnaut Report based on a statistically dubious science paper?

Here’s an eye opener………

I read a paper linked  by which describes a finding by a statistician, David Stockwell about a widely circulated paper suggesting AGW was getting worse. Stockwell strongly asserts that the paper applied “wrong” statistical smoothing in a non linear data series.

What’s the problem with that?

Well, Garnaut used that paper called Rahmstorf  et al (2007) to basically anchor  his entire economic analysis. So it could very well be that Garnaut’s advice to the government was actually premised on wrong statistical evidence that AGW was getting worse than originally thought, particularly as it compares to what the IPCC said.

Abstract from the Stockwell paper says:

The non-linear trend in Rahmstorf et al. [2007] is updated with recent global temperature data.  The evidence does not support the basis for their claim that the sensitivity of the climate system has been underestimated.

And here is what Stockwell says about Garnaut.

Despite the lapse in statistical rigor, Rahmstorf et al. [2007] has been widely cited in support of more urgent action on emission controls [e.g. Garnaut 2008].

So from what I can gather Garnaut moved away from the science applied in the IPCC report to a much more gloomier report and based his economic study on a paper, which has now been possibly found to be of dubious quality and reliability. Further, if is found to be dubious is there a legitimate claim for a refund?

See here for the paper. Sourced from ClimateAudit.

Here’s my question: are we going to see Garnaut and the Government come back and revise their strategy and economic analysis if the paper is found to be a unreliable?

Who is David Stockwell?

After receiving his Ph.D. degree in Ecosystem Dynamics from the Australian National University in 1992, Dr Stockwell worked as a consultant until moving to the San Diego Supercomputer Center at University of California San Diego in 1997.

[Formatting edited 06/07/09]

The Government in action perhaps, or the velocity of money equation.

I read this on a trading blog  which I thought was really amusing. Some parts seem wrong but it does get the essence of what’s going on, particularly in the bailout and other government actions.

It is a slow day in the East Texas town of Madisonville. It is raining, and the little town looks totally deserted. Times are tough, everybody is in debt and everybody lives on credit. On this particular day a rich tourist from the East is driving through town. He enters the only hotel in the sleepy town and lays a hundred dollar bill on the desk stating he wants to inspect the rooms upstairs in order to pick one to spend the night. As soon as the man walks up the stairs, the hotel proprietor takes the hundred-dollar bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to pay his debt to the pig farmer. The pig farmer then takes the $100 and heads off to pay his debt to the supplier of feed and fuel.

The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has lately had to offer her “services” on credit.The hooker runs to the hotel and pays off her debt with the $100 to the hotel proprietor, paying for the rooms that she had rented when she brought clients to that establishment.

The hotel proprietor then lays the $100 bill back on the counter so the rich traveler will not suspect anything.

At that moment the traveler from the East walks back down the stairs, after inspecting the rooms. He picks up the $100 bill and states that the rooms are not satisfactory…… Pockets the money and walks out the door and leaves town.

No one earned anything. However the whole town is now out of debt, and looks to the future with a lot of optimism.

That, ladies and gentlemen, is how the United States Government is conducting business today. If that doesn’t scare the hell out of you, then I don’t know what will.

Smoot Hawley in disguise?

Is the ETS/cap & trade going to end up being a version of Smoot Hawley?

I didn’t think this until recently when I was speaking to friend involved in mining. He explained that the ETS will have the effect of taxing exports and despite industry groups pointing this out at numerous meetings the government feels it can’t back down from the election commitment it made otherwise it would incur scorn from the Green groups.

Incredibly this push towards fewer emissions through the ETS could end up encouraging marginal mining to become competitive elsewhere in the world perversely having ZERO effect on global emissions.

Meanwhile the Congressional reps have passed a bill containing provisions to tax imports declared to be carbon intensive from countries deemed lax in taxing carbon emissions under the various provisions of the act.  Everyone’s antennae should be raised as this could be a cover for protectionism under the guise of eco-taxes and we end up with the big players beginning to tax each others exports and we end up in Dante’s  Inferno. The Congressional Reps are not exactly known as big free trade supporters even in boom times.

The recent US/China discussions in preparation for the Copenhagen round went as well as you’d expect. It didn’t. They were so wide apart it isn’t funny and unless this was just political posturing on their part the chances of reaching some sort of workable agreement in December is zero.

I guess our resolve to set an example to the rest of the world doesn’t appear to have been a resounding success at this meeting. I tried and tried but I couldn’t imagine either of the two sides at the bi-lateral meeting saying “ look we have to reach an agreement because Australia is putting forward an ETS”. Somehow I couldn’t see it happening☺ Next time someone says we need to do the ETS  in order to set an example we should ask them how Europe’s “ example” has been fairing in turning heads as they have been busily appearing to set movable targets for about a decade now. How’s that “ example been working out?

Cap and trade could really end up being Smoot Hawley in drag?