Comments on the National Accounts of Well-Being

Well-designed measures of human, social, and natural capital captured in genuine progress indicators and properly put to work on the front lines of education, health care, social services, human and environmental resource management, etc. will harness the profit motive as a driver of growth in human potential, community trust, and environmental quality. But it is a tragic shame that so many well-meaning efforts ignore the decisive advantages of readily available measurement methods. For instance, consider the National Accounts of Well-Being (available at http://www.nationalaccountsofwellbeing.org/learn/download-report.html).

This report’s authors admirably say that “Advances in the measurement of well-being mean that now we can reclaim the true purpose of national accounts as initially conceived and shift towards more meaningful measures of progress and policy effectiveness which capture the real wealth of people’s lived experience” (p. 2).

Of course, I couldn’t agree more!

But look at p. 61, where the authors say “we acknowledge that we need to be careful about interpreting the distribution of transformed scores. The curvilinear transformation results in scores at one end of the distribution being stretched more than those at the other end. This means that standard deviations, for example, of countries with higher scores, are likely to be distorted upwards. As the results section shows, however, this pattern was not in fact found in our data, so it appears that this distortion does not have too much effect. Furthermore, being overly concerned with the distortion would imply absolute faith that the original scales used in the questions are linear. Such faith would be ill-founded. For example, it is not necessarily the case that the difference between ‘all or almost all of the time’ (a response scored as ‘4’ for some questions) and ‘most of the time’ (scored as ‘3’), is the same as the difference between ‘most of the time’ (‘3’) and ‘some of the time’ (‘2’).”

This is just incredible, that the authors admit so baldly that their numbers don’t add up at the same time that they offer those very same numbers in voluminous masses to a global audience that largely takes them at face value. What exactly does it mean to most people “to be careful about interpreting the distribution of transformed scores”?

More to the point, what does it mean that faith in the linearity of the scales is ill-founded? They are doing arithmetic with those scores! There is no way a constant difference between each number on the scale cannot be assumed!

That is, adding up the ratings into a sum, and dividing by the number of ratings included in that sum to produce an average, demands the assumption of a common unit of measurement. Different numbers that add up to the same sum have to mean the same thing: 1+3+4=8=2+3+3, etc. There is no way to do arithmetic and compute statistics on ordinal rating data without making that assumption. Either unrealistic demands are being made on people’s cognitive abilities to stretch and shrink numeric units, or the value of the numbers as a basis for action is seriously and unnecessarily compromised.

A lot can be done to construct linear units of measurement that provide the meaningfulness desired by the developers of the National Accounts of Well-Being.

For explanations and illustrations of why scores and percentages are not measures, see http://livingcapitalmetrics.wordpress.com/2009/07/01/graphic-illustrations-of-why-scores-ratings-and-percentages-are-not-measures-part-one/.

The numerous advantages real measures have over raw ratings are listed at http://livingcapitalmetrics.wordpress.com/2009/07/06/table-comparing-scores-ratings-and-percentages-with-rasch-measures/.

To understand the contrast between dead and living capital as it applies to measures based in ordinal data from tests and rating scales, see http://www.rasch.org/rmt/rmt154j.htm.

For a peer-reviewed scientific paper on the theory and research supporting the viability of a metric system for human, social, and natural capital, see http://dx.doi.org/doi:10.1016/j.measurement.2009.03.014.

Global Warming Thoughts

One of the things that puzzles me in America is the politicization of global warming.  Ultimately, this isn’t about politics; it’s about science, and the interpretation of data.  I guess that’s what’s so interesting to me: how the way we interpret data, really, is along party lines.

I think there are some things we should all agree on, though:

1. We are in a state of warming around the globe.  The extent of that warming is somewhere between “cause for concern” and “alarming.”  I don’t think it matters which point on that axis you choose.  It’s pretty amazing, really: click here for an animation of the last hundred years or so from NASA.  Blue means a cooler-than normal stage, yellow means hotter, and red means much hotter.  See what I mean?  Note that I’m not saying that today is hotter than normal where you live: that’s not the frickin’ point.  I heard Glenn Beck (my current punching bag, I admit) pooh-poohing global warming by telling his listeners that it was freezing in New York in August.  See, this is why I wish Mr. Beck had attended college: then he might have taken a stats class or something, and he’d know that to select a specific day on one point on the map, or even a season or a year in a region, means nothing in a discussion about global warming.  Sheesh.  Anyway: without for the time being examining why, can we just all agree that the data suggests that we’re in a fairly severe warming stage for the earth?
2. We don’t know exactly why the earth has been warming, but greenhouse gas emissions are a pretty darn good bet.  Another decent bet might be that the earth is just in a cycle.  But we should agree to this as strategy: if we’re in a cycle and we cut emissions of greenhouse gases unnecessarily, we’ll have done some short-term economic harm (although, at least for America, probably long-term economic good — as we’d reduce dependence on the unstable middle east); but if the cause is human-controlled emissions and we ignore it, there are potentially disastrous long-term consequences.  So, just as a matter of strategy, it makes a lot of sense to try to cut greenhouse gases.  It’s sort of a Russian roulette argument: Someone offers you $50,000 to pull the trigger of a gun loaded with, let’s say, two bullets.  Even though most of the chambers are empty, smart people just don’t take that bet, since the consequence of being wrong is so high, and the missed financial opportunity just doesn’t make up for it.
3. Long-term, using less oil is really good strategy for America anyway, even if you don’t take ecology into account.  Picture a future America where we use, let’s say, 30% of the oil we use today (through a combination of fuel efficiency, hybrids, batteries, more efficient ships and trucks, wind power, solar power, etc.  All of it.).  Our dependence on the nutjob Middle East is reduced to near-zero.  We can essentially ignore all of their nonsense, since instability in that region has no economic consequence for us anymore.  (Israel, of course, is still an important question.  But otherwise we don’t have to care.)  We’ve created jobs in an energy economy that is controlled within our borders, and that economy is sustainable.  As an important aside, our air is cleaner — whether or not that cleanliness is a factor in global warming.  How is this anything but good long-term strategy for America?

I think #3 above is why I had such a problem with the whole “drill, baby, drill” chant during the GOP convention: I was thinking to myself, “In what world is that good strategy for America, independent of any particular party affiliation?  How is that smart?”

It’s not, I think.  And I don’t see how our party affiliations should keep us from agreeing on that.  None of the above (aside from the Beck commentary) requires a liberal worldview to agree with it…right?

Moral Cannibalism

Another update from the Wall Street Journal on the fate of Bank of America CEO Ken Lewis:

The political class has finally got its man, which is to say that Bank of America CEO Ken Lewis has announced he will retire at the end of the year. Don’t you feel better already? Someone had to be sacrificed as expiation for the financial panic and bailout, and the politicians are determined to convince voters that the bankers did it all. So heave-ho, Mr. Lewis had to go.

His alleged offense—investigated by the SEC, a House oversight committee and New York Attorney General Andrew Cuomo—is that his bank failed to adequately disclose to shareholders potential losses and employee bonuses at Merrill Lynch prior to their December vote to approve the BofA takeover of Merrill.

Thus the same government that told Mr. Lewis to keep his mouth shut and close the Merrill transaction now says he should have been more candid with shareholders. The same government that also threatened his job if Mr. Lewis didn’t accept Merrill’s mounting losses along with new federal money—while refusing to provide an agreement in writing because it didn’t want to inform taxpayers—now questions the disclosures he made to investors. Too bad the same investigative resources will never be used to find out how financial “systemic risk” was supposed to be reduced by forcing Mr. Lewis to merge the country’s largest deposit-taking bank with a failing Wall Street trading firm.

On the weekend that Lehman Brothers failed in September 2008, could Mr. Lewis have bought a teetering Merrill Lynch for less than he agreed to pay? Probably. Could he have killed the deal or negotiated a better price before the January closing if Treasury Secretary Hank Paulson hadn’t pressured him not to make an issue of Merrill’s rising trading losses? Perhaps.

But his real, and ultimately fatal, mistake was to believe the feds when they urged him to buy Merrill—and, before that, Countrywide Financial—in the name of saving the financial system. He forgot the oldest lesson about the second oldest profession: Never trust a politician.

Does the majority of the population believe that wealth is a natural occurring phenomenon? Do they believe that innovation and prosperity are spontaneously generated? Though businessmen and corporations are often branded as blackguards by populist politicians, they are largely responsible for the high standard in the U.S. For years, production has been penalized by regulation, taxes, and a plethora of government actions designed to distribute wealth. With each new measure, however, our society further discourages achievement and rewards mediocrity.

Shares in renewables soar

Economics today -sorry! But it is quite interesting to see that a combination of factors have put fresh wind into the fortunes of companies involved in renewable energy. The Wilder Hill New Global Innovation Index has reported a rise of 39% in a basket of shares spanning global wind, solar, fuel cell and biomass renewable energy sectors – comfortably ahead of the UK FTSE’s 17% gain. This is good news and is on top of an estimated $25.9 billion worth of investments into renewables in the second quarter of 2009 in the clean energy sector.

Why has this happened? Well, large scale renewable energy projects require massive capital investment and at a very basic level,  the simple fact that banks have started lending again has opened up credit lines and capital markets and this has allowed companies to begin to develop projects again. Alongside this has been substantial injections of public finance from governments around the world - both the US and UK have announced ‘green’ investments as have France, Spain and Japan amongst many others. Added to this is the threat of carbon reduction targets post the forthcoming Copenhagen summit and the need to create ‘green jobs’ and one can see an immediate economic attraction in green energy. Finally, the cost of fossil fuels, particularly oil, is on the rise again from a low of $30 a barrel in the middle of the global credit crunch to something like $70 a barrel now – again making energy from clean and renewable sources far more attractive – both from an economic viewpoint and from the viewpoint of our badly deteriorating environment.

See: the Times October 3rd 2009 p63

When Incentives Go Too Far

Geoffrey Styles at Energy Outlook yet again has an incredibly insightful analysis on how policy affects energy production. In a recent blog post, he analyzes how feed-in tariffs (FIT – basically a price floor support) that Germany implemented to spur growth in its solar panel producers has gone too far, and caused them to be complacent in the international solar market (due to the generous policy support at home). Styles summarizes:

… the subsidy remains extravagantly generous, even after having been significantly reduced in recent years. It currently stands at a range of 34-43 €cent/kWh, depending on the kind of installation involved. At current exchange rates, that equates to $0.50-0.635/kWh. A recent study comparing levelized power costs for a variety of power technologies puts the cost of unsubsidized solar power between $0.26-.32 for the crystalline silicon photovoltaic cells that most German solar firms produce, based on an average capacity factor above 20%. After adjusting for Germany’s much poorer solar intensity, the cost of solar power might rise to as much as $0.40/kWh, still well below the level of the FIT.

His blog post goes into quite a bit more detail, and summarizes the situation as follows:

At the end of the day, German politicians appear to have spent billions of Euros of German consumers’ and businesses’ money to build a solar industry that has thrived on the installation of high-costs solar panels in one of the least suitable countries for solar power imaginable, and that may not be able to compete internationally without drastic restructuring. This initiative has also failed dismally as climate policy, purchasing less than 5% of the emissions reductions that could have been bought had this money been spent on other, more cost-effective power technologies or on energy efficiency.

I think the lesson of the German FIT-subsidized solar industry is government should create policy it order to solve a specific problem. Upon creating the policy, they should create metrics through which the success of the policy is judged. When the policy is successful, it should be fazed out. In regards to the German solar industry, you have to ask yourself what was the intent of the original policy? To spur growth within an emerging sector of the economy? To decrease Germany’s dependence on nuclear power (which it is planning on phasing out)? To decrease the country’s carbon footprint? It seems like in this case it was meant to do a whole variety of things at once, which while obviously successful at first, now seems to causing complacency and waste. This reminds me of Harvard Economist Robert Stavins’ contentious claim that you cannot take a shower and eat at the same time — in other words, one piece of policy should address one problem and not try to be all things to all people. He was arguing against the Waxman Markey Bill trying to address both climate change issues and energy issues at the same time. While I still think that there may be a way, it is interesting to draw lessons from Germany’s experience with the FIT-subsidized solar industry.

Colorado State University’s Institute for Livestock and the Environment Welcomes Noted Author Lester Brown to 2nd Annual Stakeholder Summit

Lester Brown, president of Earth Policy Institute, will deliver the keynote address to the ILE's 2nd Annual Stakeholder Summit on November 19.

Fort Collins, Colorado–Colorado State University’s Institute for Livestock and the Environment (ILE) presents Lester Brown, renowned author and expert on agricultural sustainability and environmental issues, as the keynote speaker at the ILE’s 2nd Annual Stakeholder Summit on November 19th at the Fort Collins Hilton. Brown will also be giving a free public lecture on his new book at CSU’s Lory Student Center at 7:00 p.m. that evening.

Brown is the president of Earth Policy Institute, an organization dedicated to building an economically and environmentally sustainable future for the planet. He has received scores of awards and honorary degrees and written several books, including Plan B 4.0: Mobilizing to Save Civilization, published in 2009. Brown has spent much of his career working on issues at the intersection of agriculture and the environment, including research focused on food, population, water, climate change, and renewable energy.

The ILE’s 2nd Annual Stakeholder Summit is a forum for disseminating information about research conducted by ILE faculty members, and for exchanging ideas with stakeholders from both livestock and environmental groups. This year’s conference theme, “working together to solve environmental problems,” reflects the core mission and purpose of the Institute—solving real-world environmental problems facing the livestock industry and communities in the Great Plains and Intermountain West.

The ILE is currently accepting abstracts for both oral and poster presentations. Stakeholders, graduate students, and faculty are encouraged to submit their work. The abstract submission deadline is October 15, 2009. Abstracts will be reviewed by the program committee, and authors will be notified of their abstract’s status by October 30, 2009. For questions about the Stakeholder Summit,  visit www.livestockandenvironment.info.

In 2008, the Stakeholder Summit served as a kick-off event for the recently established Institute, giving the 70 stakeholders in attendance a chance to voice their concerns and ideas about the most pressing environmental issues facing the livestock industry—issues that ILE members could address through collaborative research. This year, ILE is focused on communicating the results of recent and on-going projects, and continuing a dialog with stakeholders to ensure that ILE is addressing relevant topics.

Keuangan : Anggaran 2010 Mengantisipasi Badai

SET Sri Mulyani Indrawati

ANGGARAN 2010 Mengantisipasi Badai Keuangan

Kamis, 1 Oktober 2009 | 04:11 WIB

Jakarta, Kompas – Di hari terakhir masa jabatannya, DPR periode 2004-2009 mengesahkan Rancangan Anggaran Pendapatan dan Belanja Negara 2010 menjadi Undang-Undang APBN 2010.

Anggaran tahun 2010 itu disusun dengan fokus mengantisipasi terjadinya tekanan pasar keuangan global, yang bisa membuat Indonesia kesulitan memperoleh dana segar.

Oleh karena itu, menurut Menteri Keuangan sekaligus Pelaksana Jabatan Menko Perekonomian Sri Mulyani Indrawati, target penerbitan surat berharga negara neto ditetapkan Rp 104,43 triliun, naik tipis dari target tahun 2009, yakni Rp 102,1 triliun.

”Penerbitan surat utang oleh negara maju untuk membiayai stimulus fiskal dan perbaikan sektor perbankan pascakrisis ekonomi global tahun 2008 dan 2009 akan menyebabkan terjadinya crowding out, atau kompetisi memperebutkan sumber pembiayaan defisit,” ujar Sri Mulyani, seusai Sidang Paripurna DPR di Jakarta, Rabu (30/9).

Ekspansi moneter di seluruh dunia, lanjut dia, dapat menyebabkan ancaman berupa pembengkakan inflasi pada tahun 2010. ”Itu menyebabkan kecenderungan meningkatnya suku bunga internasional, yang akan menekan biaya penerbitan surat berharga,” kata Menkeu.

Pengalaman Indonesia tahun 2009 menunjukkan, kompetisi mendapatkan sumber dana global membuat pemerintah harus melakukan kesepakatan dengan empat lembaga keuangan dan negara asing, untuk mendapatkan pinjaman siaga 5,5 miliar dollar AS. Sumber dana itu berasal dari Jepang, Bank Dunia, Bank Pembangunan Asia (ADB), dan Australia.

Namun, hingga kini pinjaman siaga yang terpakai baru 35 miliar yen, atau setara 379,28 juta dollar AS. Sisa pinjaman siaga yang sudah masuk dalam komitmen itu akan disiagakan pada 2010 dan diperpanjang hingga tahun 2011.

Alihkan

Guna mengantisipasi situasi global, Wakil Ketua Komisi XI DPR Endin AJ Soefihara menyarankan pemerintah agar memikirkan kemungkinan mengalihkan kecenderungan berutang di pasar obligasi ke pinjaman reguler, yang bisa didapat dari lembaga keuangan internasional, antara lain Bank Dunia atau ADB.

Menurut Endin, pinjaman yang berasal dari lembaga keuangan internasional menjanjikan suku bunga yang lebih rendah dan persyaratan yang semakin ringan. Selain itu, pemerintah akan dimudahkan saat mengajukan proposal restrukturisasi karena hanya berurusan dengan lembaga keuangan yang jelas statusnya. ”Kalau sekarang difokuskan pembiayaan dari surat utang, pemerintah direpotkan urusan dengan pelaku pasar yang banyak jumlahnya,” ujar Endin.

Tahun 2010, pemerintah berencana melunasi utang Rp 115,594 triliun, yaitu bunga utang dalam negeri Rp 77,436 triliun dan Rp 38,157 triliun untuk membayar bunga utang luar negeri, termasuk bunga pinjaman Bank Dunia dan ADB.

Data Ditjen Pengelolaan Utang Departemen Keuangan hingga Juli 2009 menunjukkan total utang pemerintah pusat Rp 1.585 triliun, terdiri dari pinjaman luar negeri 62,99 miliar dollar AS dan penerbitan surat berharga negara 96,87 miliar dollar AS. (OIN)

PERUBAHAN IKLIM Keuangan Negara Berkembang Bisa Terkuras

KOMPAS, Kamis, 1 Oktober 2009 | 03:37 WIB

Bangkok, Rabu – Negara- negara berkembang bakal menghabiskan 100 miliar dollar AS (Rp 1.000 triliun) per tahun selama 40 tahun untuk bisa beradaptasi terhadap perubahan cuaca yang ekstrem dan berat. Pada tahun 2050, suhu bumi diperkirakan naik di atas 2 derajat celsius.

Hal itu terungkap dari hasil studi Bank Dunia yang dirilis, Rabu (30/9). Studi tersebut mengatakan, negara-negara miskin bakal berinvestasi besar-besaran pada semua proyek infrastruktur untuk mengatasi banjir, kekeringan, gelombang panas, lebih sering hujan seiring bakal naiknya suhu bumi 2 derajat celsius pada tahun 2050.

”Menghadapi prospek besar tambahan biaya infrastruktur, mengatasi kekeringan, penyakit, dan penurunan dramatis dalam produktivitas pertanian, semua negara berkembang harus bersiap menghadapi sejumlah konsekuensi potensial dari perubahan iklim,” kata Katherine Sierra, Wakil Presiden Bank Dunia yang membidangi pembangunan berkelanjutan.

Prakiraan biaya adaptasi dari kelompok lain sebelumnya dari 9 miliar dollar AS jadi 104 miliar dollar AS. Bank Dunia mengatakan, proyeksi biaya terbaru yang paling mendalam analisisnya justru terhadap waktu terjadinya dampak perubahan iklim.

Laporan Bank Dunia, yang memberikan kisaran biaya dari 75 miliar dollar AS menjadi 100 miliar dollar AS didasarkan pada dua skenario berbeda. Pertama, dunia yang lebih kering akan memerlukan investasi lebih rendah ketimbang dunia pada musim hujan. Kedua, dunia pada musim hujan memerlukan berbagai upaya ekstra, seperti membangun tanggul laut dan drainase lebih dalam.

Paling terpukul

Asia Timur dan Pasifik, yang mengalami pertumbuhan ekonomi sangat cepat, akan menjadi yang paling terpukul secara finansial, menghabiskan setidaknya seperempat dari total anggaran. ”Sebagian besar karena meningkatnya urbanisasi, terutama di daerah pesisir,” kata Direktur Keuangan Bank Dunia Warren Evans.

Menurut penelitian, biaya beradaptasi terhadap dunia yang lebih panas adalah berada pada skala yang sama dengan jumlah bantuan yang diterima negara berkembang saat ini. Badan bantuan mengatakan, penting uang bantuan tidak dipotong untuk mendanai upaya atau inisiatif menghadapi perubahan iklim.

Penasihat Oxfam’s, Antonio Hill, menuturkan, setiap pembiayaan harus mendapat suntikan dana tambahan. WWF mengatakan, tidak cukup didasarkan pada asumsi bahwa dunia akan bekerja sama untuk membatasi kenaikan suhu bumi 2 derajat celsius itu. (REUTERS/CAL)