Category Archives: Economics

China Economic Impact Study Distorts Reality

This study is an exercise in statistical manipulation that distorts reality. Many factors affect productivity such that any correlation between TFP and atmospheric temperature is inconclusive. A correlation even if present is not indicative of causation or even that one is the “primary driver” of the other.

Peng Zhang, Olivier Deschenes, Kyle Meng, Junjie Zhang. Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants. Journal of Environmental Economics and Management Volume 88, March 2018, Pages 1-17

This paper uses detailed production data from a half million Chinese manufacturing plants over 1998–2007 to estimate the effects of temperature on firm-level total factor productivity (TFP), factor inputs, and output. We detect an inverted U-shaped relationship between temperature and TFP and show that it primarily drives the temperature-output effect. Both labor- and capital- intensive firms exhibit sensitivity to high temperatures. By mid 21st century, if no additional adaptation were to occur, we project that climate change will reduce Chinese manufacturing output annually by 12%, equivalent to a loss of $39.5 billion in 2007 dollars. This implies substantial local and global economic consequences as the Chinese manufacturing sector produces 32% of national GDP and supplies 12% of global exports.

Empirical Economics Research Results are Biased

J. P. A. Ioannidis, T. D. Stanley and H. Doucouliagos The Power of  Bias in Economics  Research.  The Economic Journal, 127 (October), F236–F265. Doi: 10.1111/ecoj.12461

We investigate two critical dimensions of the credibility of empirical economics research: statistical power and bias. We survey 159 empirical economics literatures that draw upon 64,076 estimates of economic parameters reported in more than 6,700 empirical studies. Half of the research areas have nearly 90% of their results under-powered. The median statistical power is 18%, or less. A simple weighted average of those reported results that are adequately powered (power ≥ 80%) reveals that nearly 80% of the reported effects in these empirical economics literatures are exaggerated; typically, by a factor of two and with one-third inflated by a factor of four or more.

California Republicans Stray over to the Dark Side


California’s cap and trade approach is simply not sustainable. It’s like shooting yourself in the foot.  

“A small group of California Republican legislators are reversing their opposition to AB 32 — the “Global Warming Solutions Act” — and embracing California’s controversial climate change policies.” click here

Life Cycle Assessment-Based Optimization of Drinking Water Treatment

Capitanescu F, Rege S, Marvuglia A, Benetto E, Ahmadi A, Gutiérrez TN, Tiruta-Barna L. Cost versus life cycle assessment-based environmental impact optimization of drinking water production plants. Journal of environmental management 2016 Apr 21;177:278-287. doi: 10.1016/j.jenvman.2016.04.027.

Empowering decision makers with cost-effective solutions for reducing industrial processes environmental burden, at both design and operation stages, is nowadays a major worldwide concern. The paper addresses this issue for the sector of drinking water production plants (DWPPs), seeking for optimal solutions trading-off operation cost and life cycle assessment (LCA)-based environmental impact while satisfying outlet water quality criteria. This leads to a challenging bi-objective constrained optimization problem, which relies on a computationally expensive intricate process-modelling simulator of the DWPP and has to be solved with limited computational budget. Since mathematical programming methods are unusable in this case, the paper examines the performances in tackling these challenges of six off-the-shelf state-of-the-art global meta-heuristic optimization algorithms, suitable for such simulation-based optimization, namely Strength Pareto Evolutionary Algorithm (SPEA2), Non-dominated Sorting Genetic Algorithm (NSGA-II), Indicator-based Evolutionary Algorithm (IBEA), Multi-Objective Evolutionary Algorithm based on Decomposition (MOEA/D), Differential Evolution (DE), and Particle Swarm Optimization (PSO). The results of optimization reveal that good reduction in both operating cost and environmental impact of the DWPP can be obtained. Furthermore, NSGA-II outperforms the other competing algorithms while MOEA/D and DE perform unexpectedly poorly.

China-Led Infrastructure Investment Bank Support Growing

“American diplomats are upset that dozens of countries — including Nepal, Cambodia and Bangladesh — have flocked to join China’s new infrastructure investment bank, a potential rival to the World Bank and other financial institutions backed by the United States.” click here

“Health Impacts” of Climate Change Study is Sickening

This type of study has very little to do with climate or health. It’s primary purpose is to prop-up big government regulations and control on “climate change”. In the end, the findings simply reflect what was already assumed at the beginning. It completely ignores the more relevant question by using hand-waving arguments,  providing misguided “insight” that eventually leads nowhere.

“What is the cost and health impact NOW as a result of the unnecessary ideological fixation and massive government spending to control the uncontrollable — future “climate change?”

Hutton G, Menne B. Economic Evidence on the Health Impacts of Climate Change in Europe. Environ Health Insights. 2014 Nov 3;8:43-52.

BACKGROUND: In responding to the health impacts of climate change, economic evidence and tools inform decision makers of the efficiency of alternative health policies and interventions. In a time when sweeping budget cuts are affecting all tiers of government, economic evidence on health protection from climate change spending enables comparison with other public spending.

METHODS: The review included 53 countries of the World Health Organization (WHO) European Region. Literature was obtained using a Medline and Internet search of key terms in published reports and peer-reviewed literature, and from institutions working on health and climate change. Articles were included if they provided economic estimation of the health impacts of climate change or adaptation measures to protect health from climate change in the WHO European Region. Economic studies are classified under health impact cost, health adaptation cost, and health economic evaluation (comparing both costs and impacts).

RESULTS: A total of 40 relevant studies from Europe were identified, covering the health damage or adaptation costs related to the health effects of climate change and response measures to climate-sensitive diseases. No economic evaluation studies were identified of response measures specific to the impacts of climate change. Existing studies vary in terms of the economic outcomes measured and the methods for evaluation of health benefits. The lack of robust health impact data underlying economic studies significantly affects the availability and precision of economic studies.

CONCLUSIONS: Economic evidence in European countries on the costs of and response to climate-sensitive diseases is extremely limited and fragmented. Further studies are urgently needed that examine health impacts and the costs and efficiency of alternative responses to climate-sensitive health conditions, in particular extreme weather events (other than heat) and potential emerging diseases and other conditions threatening Europe.

Willingness to Pay for a New Gravity-Driven Membrane Filter, Kenya

Brouwer R, Job FC, van der Kroon B, Johnston R. Comparing Willingness to Pay for Improved Drinking-Water Quality Using Stated Preference Methods in Rural and Urban Kenya. Applied Health Economics and Health Policy. 2014 Nov 8.

BACKGROUND: Access to safe drinking water has been on the global agenda for decades. The key to safe drinking water is found in household water treatment and safe storage systems.

OBJECTIVE: In this study, we assessed rural and urban household demand for a new gravity-driven membrane (GDM)drinking-water filter.

METHODS: A choice experiment (CE) was used to assess the value attached to the characteristics of a new GDM filter before marketing in urban and rural Kenya. The CE was followed by a contingent valuation (CV) question. Differences in willingness to pay (WTP) for the same filter design were tested between methods, as well as urban and rural samples.

RESULTS: The CV follow-up approach produces more conservative and statistically more efficient WTP values than the CE, with only limited indications of anchoring. The effect of the new filter technology on children with diarrhea is among the most important drivers behind choice behavior and WTP in both areas. The urban sample is willing to pay more in absolute terms than the rural sample irrespective of the valuation method. Rural households are more price sensitive, and willing to pay more in relative terms compared with disposable household income.

CONCLUSION: A differentiated marketing strategy across rural and urban areas is expected to increase uptake and diffusion of the new filter technology.

Click here for full paper (fee).