I also contacted Penny Goldberg, a professor of economics at Yale University and editor of the American Economic Review, to ask if she could think of any joke, any tiny moment of amusement, one solitary witticism that has passed across her desk. Anything, even if it was rejected.
Ms. Goldberg, confirming the reputation of the dismal science in six sad words, wrote back: "I’m afraid nothing comes to mind."
We collect contingent valuation data from 524 student survey respondents over a 3-day, 72-hour period. Data analysis of a hypothetical campus referendum focuses on time-of-day effects on willingness to pay for a renewable energy project. We find that subjects responding to the survey during the night-time hours (i.e., between 12 a.m. and 6 a.m.) do not display the law of demand, offering theoretically invalid responses to questions with important policy implications. Results from this research may have serious implications for the contingent valuation method (CVM). In short, just like your father said, nothing good happens after midnight when using the CVM. (JEL Q51)
A guiding principle, consistent with the work of the CVM critics, is that a hypothetical valuation question, especially one used for major policy issues and natural resource damage assessments, should pass the most important theoretical validity test no matter what time of day the survey is administered.
I'll point out the funny parts if, like the folks we passed it around to for a quick read and the journal referees, you can't spot the humor (here's one: footnote 1 drops "cromulent" for the first time, I think, in the economics literature). And thanks to the editor for accepting the paper even when a referee said it should be rewritten as a real paper (and submitted where?). That was the original intention but we could never get motivated to do so. It was only during the hopeless to curious phase of my life that inspiration stuck.
*Dickinson, D. L. and Whitehead, J. C. (2014), DUBIOUS AND DUBIOUSER: CONTINGENT VALUATION AND THE TIME OF DAY. Economic Inquiry. doi: 10.1111/ecin.12161
The New York Times sure is making blogging difficult. Highlighting text and hitting the Typepad "Blog It" button doesn't work (in Chrome) or sends me to another NYTimes story (in Firefox) [or vice versa]. Yet, I persevere (save the webpage to desktop, printscreen for images, etc) when it is worth it.
Water is far too cheap across most American cities and towns. But what’s worse is the way the United States quenches the thirst of farmers, who account for 80 percent of the nation’s water consumption and for whom water costs virtually nothing.
Adding to the challenges are the obstacles placed in the way of water trading. “Markets are essential to ensuring that water, when it’s scarce, can go to the most valuable uses,” said Barton H. Thompson, an expert on environmental resources at Stanford Law School. Without them, “the allocation of water is certainly arbitrary.” ...
The price of water going into Americans’ homes often does not even cover the cost of delivering it, let alone the depreciation of utilities’ infrastructure or their R&D. It certainly doesn’t account for other costs imposed by water use — on, say, fisheries or the environment — caused by taking water out of rivers or lakes.
Consumers have little incentive to conserve. Despite California’s distress, about half of the homes in the capital, Sacramento, still don’t have water meters, paying a flat fee no matter how much water they consume.
Some utilities do worse: charging decreasing rates the more water is consumed. Utilities, of course, have little incentive to discourage consumption: The more they did that the more their revenues would decline.
Rates have little relation to water’s replacement cost. In Fresno, which gets less than 11 inches of rain a year, a family of four using 400 gallons a day faces a monthly water bill of $28.26. In Boston, where rainfall exceeds 40 inches, the same family would pay $77.73.
While this may seem a mess, it is nothing compared to the incentives facing American farms. ...
Last week I mentioned I mentioned that I would be presenting (yesterday) to The Ohio State University Environmental Professionals Network Breakfast Club on the topic of "Ohio's Water Resources and Citizens at Risk - Ag-related Practices and Policies to Prevent Harmful Algal Blooms, Post-Toledo." I (along with each of two other panel members) was given 5 minutes to give opening remarks before moderator driven Q&A. Rather than my normal rambling unstructured style of presentation, I decided to give a speech--which means actually writing a speech. So here is the speech I gave (speech I read is probably a better way of putting it) to a audience of 230 representatives of ag and non ag sectors. I'm told there will be video at some point. I will let you know if video emerges--provided it doesn't make me look like a complete bungling idiot.
We’ve heard a lot today about solutions for high phosphorous loads in Lake Erie and the resulting harmful algal blooms. As an environmental economist, I’m told my role in this discussion is to provide a balanced look at the potential costs of reducing phosphorous loadings into Lake Erie, the benefits of those reductions to society, and the burden of the costs of phosphorous reductions.
Some of you may be wondering, what is an environmental economist? An environmental economist is an economist who applies the science of economics to environmental issues. I am not an environmentalist. Don’t get me wrong, I care about the environment. But I am realistic about the role that incentives, trade-offs, and profits play in finding solutions to environmental issues that lead to sustainable human well-being. I recognize the reality that the economy and the natural environment are inextricably linked and attempting to separate the study of each creates a situation in which neither is sustainable. Economic, social and environmental sustainability requires the realization that no single solution exists.
So what then, from my perspective as an environmental economist, is the fundamental issue surrounding harmful algal blooms? Excess nutrient loads into Lake Erie are the result of misalignment of incentives. The profit incentives of the on-farm sector fail to fully capture the costs of nutrient application decisions to the non-agricultural sectors. The cost-savings incentives of industrial and municipal sources of run-off fail to fully capture the downstream costs of urban run-off. The consume-now incentive of today’s consumers fails to fully capture the cost of today’s decisions on future generations.
None of these statements are judgments on the intent of individual farmers, or municipal decision makers or society today in making decisions that impose excess costs on others. In fact, in my experience, most people want to do the right thing. Farmers care about environmental issues. Municipalities care about water quality. Today’s generation cares about the future. Yet when consumption and production decisions are made, reality differs from intent.
For example, when I drove here this morning, I gave no thought to the cost my car exhaust imposes on others. I know that my exhaust contributes to increased atmospheric pollution. I know that by driving I increase the likelihood of health issues for those with breathing issues. I know that my driving contributes to long-term climate change. Yet, other than being a genuinely nice person, I have no incentive to incorporate those external costs into my driving decisions. The price of driving does not fully reflect the external costs.
Prices are the economy’s rationing mechanism. It is prices that drive economic decisions. Prices provide signals. It’s prices that serve as a market’s way of reflecting the value of something. And if prices fail to fully reflect the current and future costs and benefits of production and consumption, markets will misallocate society’s scarce resources.
In political and social discussions we hear a lot of talk about the need for less government regulation, the need for free markets. In general I agree with free market advocates. But in order for a market to do its job of allocating society’s scarce resources today and into the future, that market must capture ALL costs and benefits. Otherwise a market is not truly a free market.
In the case of the environment, we can think of the problem as one of the failure of markets to properly price the services the environment supplies. In effect, the environment is treated as a free input in production and consumption. It is only natural that if something is free we will use more than we would if it were priced at its true value. If gas were free, I would use a lot more of it.
Because the cost of environmental degradation is not captured in markets, we use more of it than we would otherwise. It might be tempting then to conclude that markets are the problem. I agree to a certain extent. Markets are failing to properly account for costs and benefits. But markets are also the solution.
To solve the harmful algal bloom problem, we need to find ways to better capture the external costs of using nitrogen and phosphorous in the markets in which they are used—and then allow the resulting incentives to work to solve the problem. To do so, we can focus on the quantity of phosphorous, or we can focus on the price. Quantity restrictions are effective if monitored effectively, but effective monitoring is difficult. Effective quantity restrictions will reflect in market prices. However, ill-designed quantity restrictions can result in regulatory costs that are higher than needed.
Regulating prices, on the other hand, allow the users to make decisions that reduce their own costs. By allowing the freedom to choose how to adapt to higher prices, price-based policies can achieve the same outcomes as quantity restrictions at lower cost. Prices also provide incentives for innovation. As prices rise to reflect the full costs, users will have the incentive to find lower cost alternatives. New investments in research and development will lead to new lower-cost technologies. Market-based price regulations allow the market to allocate society’s scarce resources efficiently.
However, many price-based solutions have a negative reputation. As I mention each of these, I’m sure each will garner some sort of negative reaction: taxes, subsidies, cap and trade, user fees. But as an environmental economist, I recognize that solutions that build environmental costs into market decisions allow individuals to make the decisions that are in their own best interest. The result is what’s best for society.
Unfortunately, we are talking about a problem of magnitude that hoping people will do the right thing is not an option. While voluntary programs are attractive politically, achieving a 40% reduction in Lake Erie phosphorous loadings, if that is indeed the goal, is going to require more than reliance on goodwill. Real, sustainable, solutions are going to require a recognition that prices need to capture the full social costs of nitrogen and phosphorous use. Anything short of that will lead right back here in the future, hoping the problem solves itself.
I served four years, the first year as a tryout and then a regular three year term. At the end of the fourth year (2013) I was offered another term but indicated that I was worn out by the process. I haven't received any new manuscripts in 2014 but have continued editing revise and resubmits. Last night I finished reading (and accepting) a paper that cleaned out my to do list. Here is the proof:
Based on the numbers at the bottom, I handled 270 papers over four years (doing the math, that is more than one paper each week). I'm not quite finished. I still might see some of those 11 papers "with decision" (revise and resubmits). But, only a few are recent so it feels like I'm done.
This is the least funny part of the show (but maybe the most important):
The next minute he's pitching you his idea about environmental tax reform. In addition to being a comedian and an economist, Bauman has committed his life to "using the tools of economics and the power of capitalism to protect the environment."
In fact, Bauman works with a group, Carbon Washington, that has a measure on the ballot in 2016 to implement a carbon tax in Washington state.
"If we had higher taxes on carbon and other types of pollution, we could afford to have lower taxes on things like income and investment," he says backstage. "Higher taxes on bads, lower taxes on goods. When I first saw that idea as an undergrad, I thought it was intellectually beautiful. Now, I'm spending my life working on it."
Even if you don't quite understand environmental tax reform (shame on you!), you find yourself nodding along and agreeing like it's a cheesy infomercial: I do want lower taxes on income! I don't want the Earth to burn!
I'm probably coming in late on this one (since the paper first came out in 2009!), but I recently read this paper from Phil Graves. I got the chance to ask a few questions about it online and was intrigued by the consequences. I'm curious to see what other people who are regularly estimating WTP/WTA think about these consequences - namely that you're estimating at the wrong income level for some of your survey respondents (likely a greater number of your respondents than representative given response rates for "those who care"). Has anyone tried the idea that Graves mentions in the LinkedIn questions where you scale your response to the private goods-equivalent gap?
Ivory Coast, the world’s largest producer of cacao, the raw ingredient in M&M’s, Butterfingers and Snickers Bars, has shut down its borders with Liberia and Guinea, putting a major crimp on the workforce needed to pick the beans that end up in chocolate bars and other treats just as the harvest season begins. The West African nation of about 20 million — also known as Côte D’Ivoire — has yet to experience a single case of Ebola, but the outbreak already could raise prices.
Decreasing the supply of inputs (workers) will raise the price of inputs. Raising the price of inputs decreases the supply of another input (cacao). Raising the price of cacao will decrease the supply of chocolate. The price of chocolate rises.
This has just been published in the journal Economics and Business Letters: Special Issue on Cultural Industries:
Criterion and predictive validity of revealed and stated preference data: the case of “Mountain Home Music” concert demand
John C. Whitehead, Douglas Simpson Noonan, Elizabeth Marquardt
Despite a robust literature on nonmarket valuation of cultural assets, serious validity concerns remain. We address this by estimating a demand model for a regional concert series. We survey concertgoers during and then again after the concert season to gather ex ante and ex post stated and revealed preference data. Comparing ex ante stated preference data to ex post revealed preference data we find respondents overstate their concert attendance behavior. An ex ante revealed-stated preference demand model with a stated preference adjustment helps calibrate the results and avoid bias from using solely hypothetical, stated preference data. The results demonstrate how to improve predictive accuracy in contingent behavior models and improve our understanding of demand for live music performances.
Despite its popularity in cultural economics, Hausman (2012) condemns SP data for hypothetical bias. Relative to contingent valuation there are very few contingent behavior studies where tests for hypothetical bias are even possible because of context and data limitations. We conduct a unique in-season and postseason survey to test the predictive validity of SP survey responses. This is a rare opportunity to apply it, and a novel opportunity in the cultural field. We find that SP concert attendance data lack criterion validity. Respondents tend to overstate their concert attendance behavior. Respondents are generally accurate, however, when predicting their own behavior after a statistical adjustment for hypothetical bias.
The sample size is only 38 so don't get too excited.
In 1987, Lawrence Livermore National Lab physicist William G. Hoover had a paper on molecular dynamics rejected by two journals the Journal of Statistical Physics. So he added Stronzo Bestiale to the list of co-authors, changed the name, and resubmitted the paper. The Journal of Statistical Physics accepted it.
27 years later, Bestiale is still listed as co-author on several papers. He also has a Scopus profile that lists him as an active researcher at the Institute of Experimental Physics, University of Vienna. ...
Hilarious as these examples are, it does prove a point that’s a little less fun: The scientific community needs to be on its toes about who (or what) is writing the papers they publish, to help keep merde out of the literature.
I'm on the 'Policy' panel along with a representative from the Ohio Farm Bureau Federation and a representative of the Ohio Environmental Council. I'm guessing I'm there to serve the Mills Lane role between the farmers and the environmentalists?
They are expecting close to 200 guests including multiple memebrs of the Ohio legislature. So somehow I have to figure out a way to diplomatically say that phosphorous prices should be higher, renewable fuel standards ethanol mandates should be removed, residential use of phosphorous should be reduced (most residential fertilizer companies no longer include phosporous in their N-P-K formulations, which is why most store labels for fertilizer now read # - 0 - # ), municipal run-off needs to be better managed, water treatment needs to be addressed, and while good intentions make me feel all warm and fuzzy, voluntary compliance mechanisms are unlikely to come close to the 40% reduction in Lake Erie phosphorous levels being called for. Throw on top of that issues of stored phosphorous sinks in soils combined with increased severe Spring rainfall events (should I even bring up Climate Change?) that serve to flush the proverbial phosphorous toilet (I think that was one of Jesus' first proverbs), and an amazing collective aversion to the word 'tax' in Ohio and I'm unlikely to make very many people in the room happy.
But I haven't really decided what I'm going to say in my 5 minutes of opening remarks yet, so feel free to make suggestions in the comments.
*"I can't have an F, I can't have it and I know my parents can't have it. Even if I aced the rest of the semester, I'm still only a B. And everything's ruined for me."
Many Texans have long held the oil and gas industry as dear to their hearts as a prairie range full of feeding cattle. Now suddenly that love is being tested here in a local election, where a grass-roots campaign against gas producers has pushed the industry into a corner.
The battle is over a proposed city ban on hydraulic fracturing — the technique of blasting shale rock with water, sand and chemicals to dislodge oil and gas, often called fracking — in a referendum on Nov. 4. No city in Texas has ever come close to passing such a measure.
But in this college town of 130,000 outside Dallas, the producers find themselves in an uphill battle against a diverse band of doorbell ringers and lawn-sign distributors who are working day and night.
The debate in Denton echoes themes heard in communities around the country, pitting economic arguments like job creation and school funding against quality-of-life and environmental concerns like noise, traffic, fumes and fears that fracking might endanger local water supplies.
Environmental valuation is the branch of environmental economics in which researchers estimate the economic value of environmental goods and services. Environmental valuation has been practiced for decades. However, there are some ideas in the field of environmental valuation held by many environmental economists and nonenvironmental economists that appear to be outdated. This article discusses three such ideas: 1) that it is better to estimate willingness-to-pay values than willingness-to-accept values; 2) that stated preference valuation methods are questionable because they are based on hypothetical choices rather than real choices; and 3) that it is better to use a repeated-choice question format than a single choice format in choice experiments. We discuss the origins of each idea and why the idea became prevalent in the first place.We then review recent literature, which casts doubt on the idea. We conclude with a reminder for researchers—in environmental economics and in other economic fields—to periodically reassess ideas they currently hold in light of recent research developments and in light of the context in which they are used.
Adam in the comments says: "You agree that the three points are valid critisms, or you agree that they are outdated?" So, here is some explanation:
If there are reasons why WTA is theoretically preferred, and WTP and WTA are expected to differ, then one should attempt to estimate WTA for the loss (in addition to WTP to avoid the loss)
Hypothetical choices contain too much information, some of it unobtainable with revealed preference data, to dismiss it out of hand.
I'm being a bit disingenuous with my agreement on this one. I don't think the implications of repeated questions in choice experiments has been explored enough to blindly accept the practice. In contrast, repeated questions in CVM studies are frowned upon (sometimes for good reason). I just had a revise and resubmit rejected at JEEM (grrr) and repeated questioning was one of the reasons given, even though the variation across questions was similar to choice experiments (i.e., the bid amount didn't change). My hunch is that many choice experiment studies won't pass a scope test if only the first question is used, which is the standard upon which CVM studies are judged. That said, I think it would be a shame if we go to all the trouble to develop a hypothetical choice scenario, ask one question and move on to the next section of the survey.
The SEA meetings are just around the corner. I just sent this email:
AERE/SEA session participants,
By now you have probably received one or more emails from the SEA explaining your duties. I apologize that I have not made this clear earlier but the AERE sessions at the SEA meetings run without discussants. We usually have a pretty good discussion in the Q&A session after each paper. Over the years I've only received positive feedback from paper presenters and audience members. Authors may wish to circulate their papers ahead of time but even this is not required.
Several years ago, at some point during the AERE/SEA cocktail hour, I had a discussion with several leading* economists where we were complaining about the practice of paper discussants at regional economics conferences. Here are the key points:
When paper discussants are well-matched with a paper and are motivated they give great feedback. This is wonderful for the presenter and the audience.
Paper discussants are often ill-matched to the paper, unmotivated or receive the paper with insufficient time to prepare (I've received a paper right before a session and the presenter "looked forward to my comments").
When ill-matched they run through the regression user's handbook, suggesting tests for multicollinearity and heteroskedasticity. Sometimes the discussant mutters gibberish.
Being assigned as a discussant is considered a burden. The same people would much rather attend a session and spontaneously ask a question.
Audience members are often frustrated because they don't have time for Q&A.
So, we dropped discussants at the AERE sessions several years ago. The experiment was successful in that crowd-sourcing the discussant time worked well. Of course, not having discussants requires attendance at sessions by an engaged audience. Lack of attendance is not a problem at the AERE sessions where 15-20 participants is the norm. Engagement is not a problem either.
I just previewed Stated Preference Methods Using R by Aizaki, Nakatani and Sato.The A-P Sounds data that Tim, Ju-Chin Huang and myself used to get to know each other better is provided with the book and used as an example. Here is the double bounded Turnbull:
Here is the endorsement I wrote for the book:
There are a number of very expensive statistical packages that can be used to analyze stated preference data. R is free so it is wonderful for teaching undergraduate students and others who don’t have access to expensive packages. Aizaki, Nakatani and Sato have provided a valuable reference book for stated preference researchers and teachers who want to use R. I used the book to install R and the contingent valuation package in a few minutes. I was estimating CVM models soon afterwards. I’m especially excited that the package contains an easy to use nonparametric willingness to pay estimator that is superior to the spreadsheet methods I’ve been using for years. The package includes very well known (Exxon Valdez) and less well known (Albemarle-Pamlico) contingent valuation data. These data allow the user to play around with the package and compare results to what has been published in the literature. This book is an ideal reference for advanced undergraduate and graduate courses in environmental valuation.
I am predicting William J. Baumol, possibly with William G. Bowen, for work on the cost-disease. As you probably know, this hypothesis suggested that the costs of education and health care would continue to rise in relative terms, thereby creating significant economic problems. Not a bad prediction for 1966, and of course it has become a truly important issue. ...
... Baumol has numerous other contributions, including contestability, operations research and economics, entrepreneurship, externalities and Pigouvian taxes ...
Baumol, William J. "On the increasing role of economic research in management of resources and protection of the environment." Annu. Rev. Resour. Econ. 2, no. 1 (2010): 1-11.
Abstract: This paper follows precedent in mixing substantive matters related to resource and environmental economics with an autobiographical framework. Unavoidably, this pushes the contents toward my own contributions to the field—especially those that, in my belief, have not received the attention they merit. After following precedent and beginning with some words on my origins and my subsequent affiliations, I focus on several examples showing how economic analysis has helped to illuminate this subject that is so critical for the general welfare. I begin with the origins of our understanding of externalities and their increasing role in the literature on the subjects under discussion here. Second, I turn to the issue of effective policy measures and the political obstacles that impede their adoption. As part of this, I discuss markets in emission permits as a way to make the Pigouvian taxation approach more palatable. I show that these two are basically equivalent, but the same is not true of the carrot and the stick approaches—i.e., taxes on emissions and subsidy rewards for reducing such environmental damage. Third, I use a Leontief approach to show how the benefits of the use of substitutes for scarce resources are commonly exaggerated and can inadvertently hasten depletion of a scarce resource, despite appearing to contribute to preservation. Finally, I turn to as-yet-unpublished material, which shows that the cost disease model I have used to account for the persistent, cumulative, and rapid rise in the real cost of activities such as health care, education, and the performing arts also describes and explains the pecuniary source of much of the threat that currently besets the environment—paradoxically doing so through the decreasing real costs of other products that are an inescapable companion to the rising costs that beset other economic activities.
1. Popular music: The Everly Brothers, I recommend this song. There is also Loretta Lynn and Dwight Yoakum and Merle Travis, I like this video. In jazz there is Lionel Hampton.
2. Visual artist: Edgar Tolson, that image is not fully safe for work. John James Audobon worked in the state quite a bit.
3. Movie, set in: Goldfinger, though of course immobilizing that stock would not affect the world price of gold very much. And keep in mind the nominal price of gold was pegged back then under Bretton Woods — should we really have expected a lot of goods and services deflation, just because some nutcase set off a bomb? I don’t think so.
4. Monk: Thomas Merton. He was an excellent writer, as a monk I cannot judge.
5. Author: Hmm…I don’t really like either Robert Penn Warren or Hunter S. Thompson. So Thomas Merton wins a second category, try The Seven Storey Mountain.
7. Movie director: I believe John Carpenter grew up there, he has several excellent films, including The Thing, Starman, Dark Star, and Escape from New York. I don’t actually enjoy the D.W. Griffith movies.
6. NBA player: Darrell Griffith (I was never a fan of King Rex). I was in high school when UofL, led by “Dr. Dunkenstein,” won their first NCAA championship. The next year they had one of their scrimmages at our high school gym.
7. Movie director: According to Wikipedia John Carpenter was born in Bowling Green and went to WKU. But should this even be a category? I would have made it movie stars and gone with Jennifer Lawrence (Katniss Everdeen! Duh). Even inflation adjusted, she is the highest grossing action heroine.
8. Poet and impresario: I also can't quibble with Muhammad Ali.
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
Don't believe what they're saying
And allow me a quick moment to gush: ... The env-econ.net blog was more or less a lifeline in that period of my life, as it was one of the few ways I stayed plugged into the env. econ scene. -- Anonymous
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous