11.30.2010

Urban ecology doesn't care about your locavore agenda


I'm not sure how well this comes through on the blog, but Sol and I (and, I think it's safe to say, many if not most of the people in our program) have fairly nuanced views on the subjects that people normally associate with "sustainability." Green architecture, recycling, organic foods, hybrid cars, and a host of other topics that spring to mind when someone mentions sustainability tend to be partial solutions to complex problems, and the ways in which they interrelate and sometimes even interfere with each other can be very difficult to disentangle. A really lovely example of this comes from today's NY Times article about urban beekeepers' honey turning red:
Where there should have been a touch of gentle amber showing through the membrane of their honey stomachs was instead a garish bright red. The honeycombs, too, were an alarming shade of Robitussin.

“I thought maybe it was coming from some kind of weird tree, maybe a sumac,” said Ms. Mayo, who tends seven hives for Added Value, an education nonprofit in Red Hook. “We were at a loss.”

An acquaintance, only joking, suggested the unthinkable: Maybe the bees were hitting the juice — maraschino cherry juice, that sweet, sticky stuff sloshing around vats at Dell’s Maraschino Cherries Company over on Dikeman Street in Red Hook.**
I think this a really lovely illustration of how the ways in which we like to conceptualize "doing the right thing" and "acting sustainably" are often based on very tenuous understandings of how science and complex systems actually work. Proponents of eating locally make many claims about its benefits that are often unproven, or difficult to test, or sometimes even known ex-ante to be false. That's not to say that eating locally is not a good thing; it's to say that the answer to that question is complicated and depends on factors that vary with geography, the food in question, what you consider to be 'local,' etc.

Which is why this is such an interesting little article. Urban apiculture has become very popular of late and, I'd say, is probably on bar a pretty good thing; the value from having more pollinators around alone is probably fairly high, and if people are getting good honey out of it all the better. But pursuing local food as a sort of monolithic good is bound to fail, sometimes in predictable ways like the disconnect between local net primary productive potential and local demand, and sometimes in unpredictable ways such as having your honey turn up shades of Red Dye No. 40. Food production is inextricably and definably a part of the local ecology, and when your local ecology is urban that means you're going to end up with different outcomes than out in farmland.

So, if this post were to have a moral (and not to pick on these beekeepers because, like I said, I think urban apiaries are pretty net beneficial), it's this: don't take as received wisdom what those around you claim is "sustainable"; don't claim that the solution to a sustainability problem you've currently settled on is fool-proof or even the right one; and internalize the fact that the world is a complex place and thus anyone who claims they've figured out an answer to a major problem and are "trying to do their part" to advance sustainability should be able to robustly prove that that's true or else humbly say that they don't know.

* Note: Photo copyright New York Times 2010.
** I'd just like to say that, as a native New Yorker, I'm not very surprised that Red Hook was causing trouble.

11.24.2010

Complexity and rent-seeking in the non-productive industry

The New Yorker has an Annals of Economics article this week on finance's role in the American economy titled "What good is Wall Street?" Lest you have any doubt about the author's answer to that question, the subheading is "Much of what investment bankers do is socially worthless." Some brief thoughts, preceded by what I think is the necessary admission that I was an investment banker (doing albeit nonstandard work) for two years:
  1. I'm glad that the concept of financial work as a fundamentally rent-seeking activity is getting more mainstream. I'd be happier if this were running in USA Today instead of The New Yorker, but still.
  2. I strongly suspect that most people who haven't explicitly had to think about it (by which I mean: most people) still don't understand what finance as an industry 'does'. I think the simple model of what banks do (deposits in, loans out, earn the spread) is pretty widely understood, but how the rest of finance operates, or even what makes up the rest of the financial services industry, not so much. That is a bad thing for a lot of reasons.
  3. LSE has a Centre for the Study of Capital Market Dysfunctionality? Seriously? I know several people who would probably love to post-doc there.
  4. Sol and I were recently talking about Russia since the Soviet collapse (we're required by contract to spend most of our time trying to distract each other from actual productive work) and he mentioned that it was the epitome of elite capture. Every time I hear stats on the perpetually (even during the crisis) increasing gap between top 1% earners and the median, I think about that process.
  5. From my own experience and those of some friends I'd say fresh college graduates' decisions to work in finance are driven by two things. The first is the low option value of a year or two of your early twenties versus the salary proffered; how many people do I know took the hipster / slacker / failed artist route for those years and have little to show for it aside from going to a few more parties? The second is the relative attractiveness of job choice coming out of finance. A first job in finance doesn't drastically reduce one's set of possible careers the way a lot of other fields do because it signals that you're at least passably smart (though probably not brilliant) and you're willing to work like a dog. If we're worried about our best and brightest going to work in finance, which I honestly think is a distraction from more serious concerns like under-regulation, we need to do something about the attractiveness of those two drivers. Since salaries won't likely change soon, I suspect that ultimately means changes in social norms and the social acceptability of going to work in what has largely become a parasitic industry.
  6. The author touches on but doesn't really delve into what I think is the heart of the problem: finance has enormous returns to complexity. Firms don't generate huge returns by focusing on banking; they get it by being early-actors in markets that haven't become efficient yet. If the hot new derivative your firm has developed is either sufficiently new that other firms aren't familiar with it or sufficiently complex that other firms can't muster the expertise to price and trade them, then you can escape the margin-killing slide towards efficiency, at least for a few years, and make bank. That finance's ability to support million-dollar-a-year salaries derives mostly from the exploitation of market inefficiencies is something that I think is lost in most discussions, especially when there's so much rhetoric claiming finance makes markets more efficient.
  7. The complexity rents argument alone is, I think, sufficient to strongly argue in favor of much heavier regulation and reinstating the separation of normal and investment banks. If we add in a political economy / returns to political contributions element to the model it becomes even more pressing.

11.17.2010

Official Stata Blog Now Up!

Our colleague Reed Walker points out that there's now an official Stata blog, "Not Elsewhere Classified":
Here we will try to keep you up-to-date about all things related to Stata Statistical Software. That includes not only product announcements from StataCorp and others, but timely tips (and sometimes comments) on other news related to the use of Stata.

Many entries will be signed by members of the StataCorp staff.

If you have any tips or comments for us, email blogteam@stata.com
Fun topics they've covered thus far include which are the most powerful commercially available computers and the advantages of running Stata-MP.

11.05.2010

Regression coefficient stability over time (in Stata)

If you're estimating a regression model with time series or panel data, you often would like to know if the coefficient you're interested in is changing over time or if its stable for subsamples of the time series or panel.

Here's my simple but handy script that let's you see if your coefficient is stable or changing with a single command.  You specify your multiple regression model (for OLS, but you can change it easily to run a different estimator), which coefficient to examine.  It does a sequence of regressions for a moving window of specified length and stores the changing coefficient, SE and CI (t-test).

For example, the figure at right shows the coefficient from the model

GDP_it = B * cereal_yields_it + e_it

for a panel of all countries estimated for a moving window that covers 3 years at a time.

The description of the code is just commented out in the script and pasted below the fold.

[7/14/2011: A small but important error in the code was fixed. Thanks to Kyle for catching it.]

11.04.2010

AGU Climate Q&A Service for Journalists


Last year the American Geophysical Union (of the superlatively massive AGU Fall Meeting held every December in San Francisco) piloted something they called The Climate Q&A Service for Journalists during their fall meeting. The idea was to set up a website where journalists could submit questions they had about climate science and climate scientists could sign up for slots where they'd monitor questions coming in and answer them.

Apparently it was sufficiently successful that they're doing it again this year, here, except that it's been expanded to run from Oct 24th - Jan 21st. If you're a climate scientist looking to do a good deed and help people understand how the climate works, hop on over and sign up for a time slot. Or if you're a reporter looking to get some questions about climate science asked, go on over and submit a question.

11.01.2010

Photoessay on the African Middle Class


I stumbled across a great photo essay on the African middle class over at classesmoyennes-afrique.org. It's in French but there's an English version here.

Nothing terribly deep on the analytical takedown here aside from the fact that it's nice to be reminded that African countries aren't entirely populated by desperately poor farmers and kleptocrat dictators.

Plus the pictures are great.