Environmental Economics

Water, water, nowhere?

Growing up on the east coast, and now living in the mid-west, water quantity has never been an issue for me or my work (water quality is an issue, but quantity, less so). APPARENTLY* water quantity is an issue in the western U.S. So how do you solve the common resource problem when the water sources flow/pass through at least seven states? By ignoring the elephant (California) in the room:

The seven states that depend on the Colorado River have missed a Jan. 31 federal deadline for reaching a regionwide consensus on how to sharply reduce water use, raising the likelihood of more friction as the West grapples with how to take less supplies from the shrinking river.

In a bid to sway the process after contentious negotiations reached an impasse, six of the seven states gave the federal government a last-minute proposal outlining possible water cuts to help prevent reservoirs from falling to dangerously low levels, presenting a unified front while leaving out California, which uses the single largest share of the river.

The proposed pact between the other six states (Arizona, Colorado, Nevada, New Mexico, Utah, and Wyoming) lays out a plan to preserve water in Lake Mead (Nevada) and Lake Powell (Arizona):

The Consensus-Based Modeling Alternative includes, but is not limited to, the following modeling criteria for [Bureau of Reclamation] to consider and analyze:

• Adjustments to the existing ‘07 Guidelines, including reduced releases from Lake Powell and Lake Mead to ensure the deliverability of water downstream and power production.
• Adjustments to Lower Basin contributions required under Drought Contingency Plan.
• Accounting for more than 1.5 million acre-feet of losses within the Lower Basin that are necessary to protect infrastructure.
• Additional combined reductions of 250,000 acre-feet to Arizona, California and Nevada at Lake Mead elevation 1,030 feet and below.
• Additional combined reductions of 200,000 acre-feet to Arizona, California and Nevada at Lake Mead elevation 1,020 feet and below, as well as additional reductions  necessary  to protect Lake Mead elevation 1,000 feet.
• Actions outlined within the Upper Basin State’s Drought Response Operations Agreement.
• Additional voluntary conservation measures that take into account hydrologic shortage in the Upper Division States.

It's going to be interesting to water whether the group of six can hold together their coalition against the influence of California:

“While our goal remains achieving a seven-state agreement, developing and submitting this consensus based alternative is a positive step forward in a multi-phased environmental review process critical to protecting the Colorado River system.” said John Entsminger, Southern Nevada Water Authority General Manager.

*Facetious

Does this mean we'll have to start posting Thursday Beer Posts?

Friday Beer Posts have been a long and inconsistent tradition at Env-Econ. Right now I'm in Maryland for a quick visit with family and I saw this story:

A new Maryland House bill proposes to say goodbye to ‘Happy Friday’ as the traditional end of the week with a four-day workweek instead. The bill had its first reading in the House of Delegates this week.

Workers in Maryland we might soon say ‘Happy Thursday’ instead as the General Assembly takes a look at the Four–Day Workweek Act of 2023

Sounds like a plan to me. Time for Thursday Happy Hour.

*Unless there are external costs or benefits not captured in the market transaction

I think I cringe that I wrote this:

While it is tempting to think of a market transaction resulting in winners and losers, it turns of that this is not the case.  A market transaction is not a competition between buyers and sellers, but rather a mutually beneficial exchange that result in both sides being better off than before the transaction. 

*See the title.

Sanchayan Banerjee: How @JEEM_tweets titles have evolved over the last 6 decades!

How @JEEM_tweets titles have evolved over last 6 decades! Clearly #environmentaleconomists care about the environment, and recently evidence too! @AereOrg @EAERE_envecon https://t.co/Yl9Rdovoor pic.twitter.com/XZw7BKbX9g

— Sanchayan Banerjee (@SanchayanBanerj) January 24, 2023

Here is a link to the image (reading from left to right at the top we have the 1970s,1980s, 1990s and on the bottom we have the 2000s, 2010s, 2020s). 

We've been back for a week and we're already influencing the news!

John kindly pointed out that the scumbags (technical term) at this high quality (sarcasm) 'news' aggregation site  stole my post from last week with no attribution. Funnily enough when I just went to the site to find the url, the lead story is John's post from three hours ago! 

AND...if you go to their News page, almost all of the content is from me and John.

So I sent a message to their general enquiries email address ([email protected]):

    "Please stop copying our content without attribution. If this continues you are going to make me mad. And you wouldn’t like me when I’m mad."

                                                                                                                                                                                            --David Banner (The Hulk)

Feel free to spam them yourself.

An example of a negative externality from Murphy, NC #crypto

From CNN (How the blare of a crypto mine woke up this Blue Ridge Mountain town): 

When Judy Stines first heard about cryptocurrency, “I always thought it was smoke and mirrors,” she said. “But if that’s what you want to invest in, you do you.”

But then she heard the sound of crypto, a noise that neighbor Mike Lugiewicz describes as “a small jet that never leaves” and her ambivalence turned into activism. The racket was coming from stacks and stacks of computer servers and cooling fans, mysteriously set up in a few acres of open farm field down on Harshaw Road.

Once they fired up and the noise started bouncing around their Blue Ridge Mountain homes, sound meters in the Lugiewicz yard showed readings from 55-85 decibels depending on the weather, but more disturbing than the volume is the fact that the noise never stopped. ...

Back on Harshaw Road, Mike Lugiewicz pointed to the For Sale sign in front of his house. “September of 2021, I think, is when they turned this on and my wife and I just shook our heads, said, ‘No, we’re out of here.’” He hopes to stay in the area and keep fighting alongside neighbors like Judy Stines until the quiet comes back.

I don't want to be the guy that always brings the bad news but this house is going to sell at a discount. 

The dog ate my code and glass houses

Retraction Watch: Influential paper linking recessions and left-wing voting patterns retracted)

A highly cited economics paper that suggested people raised during recessions were more likely to vote for left-leaning political parties has been retracted, apparently due to a coding error that rendered the results invalid.

The retraction marks a rarity among economics papers, which research has shown are infrequently retracted compared to papers on other subjects. The article appears to be the first in The Review of Economic Studies to have been retracted for a reason other than publisher error.

The study’s authors, Paola Giuliano and Antonio Spilimbergo, are economists at the Anderson School of Management at the University of California, Los Angeles and the International Monetary Fund, respectively. Giuliano is also the Chauncey J. Medberry Chair in Management at UCLA.

The paper, “Growing up in a Recession,” was published in November 2013. It has been cited 222 times, according to Clarivate’s Web of Science. Working papers from the World Bank and the Organisation for Economic Co-operation and Development have also cited the article.

The paper was retracted on January 11. ... 

Neither the paper’s authors nor the editors of the journal responded to a request for comment from Retraction Watch.

Here is how it went down on twitter:

I don't really understand the reason: "While the original codes and data sets are no longer available, new analysis with a markedly similar data set does not support the original results." Did their dogs eat the code?

— Tim Martens / @econ_martens@econt witter.net (@econ_martens) January 11, 2023

The thread goes on about how this often happens but back in those days not everyone kept everything. So I wondered, could I replicate old papers? I went to check some results from 2013 articles but there wasn't anything empirical published. I went back to 2012 and yes, here is everything for Johnson et al. (2012): 

While my co-authors finished the models in the other two empirical papers from 2012, I have the data and SAS files so could recreate the analysis if I had too. For example, if someone thought those articles should be retracted. So, I "liked" the dog ate my code tweet. 

By pure coincidence, I am the Founding President and Grand Poobah of the newly established National Center for the Valuation of Natural Capital at THE(tm) Ohio State University*

Thirty years ago, I proposed a dissertation topic to establish a set of national income accounts for Green National Income. It was rejected as too grand (and honestly, I had no idea what I was talking about at the time). Fast forward to news out of Davos yesterday:

President Joe Biden’s administration will launch an effort to more accurately count the nation’s natural resources in official economic statistics, saying the data are needed to give a true picture of US output.

This is the next big step in the evolution of the field environmental valuation, and a potential boon for recruiting PhD students to Universities that specialize in valuation (ahem).

*Not true, but I often (once?) tell people that TOSU has the largest collection of experts in environmental valuation at any University. I have no idea if that is true, but I've yet to be proven wrong. 

 

An example for your classes: All of those economists @Amazon and they still got "burned" by loss aversion (or did they?)

From the WSJ ( Alexa, That Isn’t Elvis! New Music Shuffle Irks Amazon Prime Users):

Dustin Bingham loves to play music when he cooks. Recently, he asked one of his eight Amazon Echo smart speakers to play Michael Bublé while he prepared some pasta.

Sure enough, sounds of the Canadian crooner filled the kitchen, courtesy of his Amazon Prime music account. But what was that next tune? Not Mr. Bublé, and not anything Mr. Bingham had ever heard before. Was something broken?

Irritated, he asked his smart speaker to play Luke Combs, and the same thing happened: first a song from the country singer, then something else entirely.

Before long, he was yelling at Alexa, Amazon’s virtual voice assistant. “There was a lot of cussing going on,” said Mr. Bingham, 44 years old. The pasta, he said, burned.

First, do you really "burn" pasta or do you overcook it into a sloppy mess? I checked Google and here is the answer from Quora:

Assuming that you don't let the pot run dry, you can still burn parts of the pasta if you heat strongly and don't stir it. Parts of the pasta stick to the bottom and get burnt by the heat from the stove. One of many reasons to stir constantly when cooking pasta.

OK, so don't let "burning" pasta derail you from the article:

Like many other customers, Mr. Bingham has discovered the hard way that Amazon had changed its options for streaming music. Customers of Amazon Prime, its broad perk service, no longer can play on demand most of the songs in the company’s catalog. That feature is now limited to customers willing to pay more for Amazon’s “Unlimited” music tier.

Nice! You pay $139 for Amazon Prime, up $20 from 2018 to 2021, and they take something away and then offer to give it back (along with other features) for $8.99/month. This is a good example of loss aversion: 

Mr. Bingham, who lives near Folsom, Calif., wasn’t a fan, and he didn’t want to pay another $8.99 a month for an Unlimited subscription (the price is going up in February). He gathered all but one of his Echo speakers, he said, and moved them to the garage. He replaced them with two Google Nest devices and subscribed to YouTube Music Premium.

This makes me think this behavior, and there are more examples from the WSJ article, is an example of loss averson. From the Decision Lab: 

Loss aversion is a cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. The loss felt from money, or any other valuable object, can feel worse than gaining that same thing.

Here is the short run outcome (from the WSJ):

Amazon Music has been the fastest-growing competitor to Spotify and Apple Music. But its share of the music subscription market decreased from 21% in January 2022 to 17% in November, the month that Amazon introduced the updates, according to data tracker Antenna.

Amazon is famous for hiring a bunch of economists who, apparently, do stuff that increases Amazon's profits:

In the past few years, Amazon has hired more than 150 PhD economists, making it probably the largest employer in the field behind institutions like the Federal Reserve, which has hundreds of economists on staff. It was the only company with a recruiting booth at the American Economics Association’s annual conference in January, handing out free pens and logoed stress balls.

...

Amazon’s economists game out real estate decisions, set the lowest prices that will deliver a profit, precisely determine what customers care about and whether advertisements are working — all using machine-learning algorithms that automate decisionmaking on a massive scale. It’s the kind of asset that smaller companies can’t always pay for, allowing Amazon to pull further and further away from the competition.

I attended parts of the Causal Inference Methods and Applications in Tech session at the AEA and heard this paper ("The Science of Pricing Experimentation at Amazon"): 

In order to improve prices at Amazon, we created Pricing Labs, a price experimentation platform. Since we do not price discriminate, we must run product-randomized experiments. In this presentation, I will discuss how we randomize to prevent spillovers, run different experimental designs (i.e. crossovers) to improve precision, and control for demand trends and differences in treatment groups to get more precise treatment effect estimates.

The speaker said that they do a lot of cool stuff but couldn't tell us the results because they were proprietary (yawn). Someone, maybe it was a panelist, said that all of these randomized experiments were very expensive.

 

Here is an alternative. Write a short survey with some stated preference questions and present it to 500 marketing panelists and I bet you could find that consumers don't like when something that they were paying for is being taken away. The problem is that it's not as cool as an A/B test (but it is cheaper).

 

But, maybe I don't know enough (or anything) about how this all (i.e, the private sector) works. There is a good chance that the revenue from Amazon Music more than offsets whatever losses may be felt because something has been taken away from Amazon Prime (from the WSJ): 

Amazon appears to be trying to push its music streamers to the higher-cost Unlimited tier. When users click on a song they no longer can listen to on demand in the Prime tier, an ad for its Unlimited service pops up.

In fact, my bet is that it was all market tested and Amazon is making more money. Amazon Prime Music (which doesn't cost anything extra) has lost market share (so there is no lost revenue unless people drop Prime) but I wonder how many new subsribers there are for Amazon Unlimited Music? Someone remind me to check the 4Q earnings report (here is the 3Q).  

Playing For Change: When The Levee Breaks #EnvironmentalJustice

Here is what they say at Playing for Change: 

Built on the belief that music has the power to break down boundaries and overcome the differences that divide us, Playing For Change inspires and unites people through song. Over the past 20 years, Playing For Change has discovered unique talent, breathtaking performances, and amazing stories from all parts of the world.