30 July 2012

Evidence-Based Policy: Which Side are You On?

We'd all like to think that policy makers consider evidence from experts in how they make decisions. Of course they do, but in case after case, such consideration takes a form far from that which might be considered ideal by most experts. Typically, a decision is made based on considerations that have little or nothing to do with evidence, and only then is evidence sought out to support that decision. Science in all of its glorious bountifulness is almost always compliant.

Consider these two cases from opposite sides of the US political spectrum, the first having to do with abortion and the second climate change (surprise, surprise in both cases). These cases illustrate important dynamics associated with what I call "science arbitration" in The Honest Broker, a process focused on proffering advice on claims that can be resolved empirically, using the tools of science. Most people just call this "science advice." Science arbitration is distinct from Issue Advocacy and Honest Brokering of Policy Alternatives, both of which are focused on policy action, and are typically called "policy advice."

The first case comes from South Dakota where a US Appeals Court has ruled that doctors must inform women seeking an abortion that the procedure leads to an increased risk of suicide.  The Minnesote Star-Tribune reports:
South Dakota can require doctors to warn women seeking abortions that they face an increased risk of suicide if they go through with the procedure, a federal appeals court ruled Tuesday.

The 8th Circuit Court of Appeals upheld the portion of the 2005 South Dakota law dealing with the suicide advisory 7-4.

"On its face, the suicide advisory presents neither an undue burden on abortion rights nor a violation of physicians' free speech rights," the court wrote in its majority opinion.

In September, a three-judge panel upheld U.S. District Judge Karen Schreier's decision to overturn the requirement following a lawsuit brought by Planned Parenthood. The decision Tuesday by the full 11-member court grants judgment to the state and vacates the permanent injunction against enforcing the provision.
What is wrong with such a requirement you might ask?
Well, for one thing, the evidence does not support a relationship between abortion and suicide. Like most such debates, this one hinges on competing scientific studies, interpretations of evidence and scientists with deeply vested political interests.

In the UK in 2011, the government funded an expert assessment by the Academy of Medical Colleges to survey the state of the science of abortions and mental health, which concluded:
The rates of mental health problems for women with an unwanted pregnancy were the same whether they had an abortion or gave birth.
Such "science arbitration" is difficult to do well, as I've often noted, but doing it well is essential to using expertise effectively in decision making. I find the process used by the UK to be trustworthy and its results compelling. (The fact that the most cited research showing a relationship is being considered for retraction should be noted as well.)

Regardless where one comes out on the state of the science, the strongest position that the South Dakota Court could justifiably take is that the evidence is equivocal. By mandating what doctors must tell patients the court is requiring them to lie. Not good.

Now to the other side of the US political spectrum. Here environmental activists are petitioning the US Secretary of Agriculture to lie to farmers and the public about the state of the science of human-caused climate change and the current US drought:
Environmental activists want top federal officials to directly address the possible connections between climate change and the current drought that’s crushing the life out of U.S. heartland, with potential implications for global food supplies.

Specifically, Forecast the Facts and FoodDemocracyNow! want Secretary of Agriculture Tom Vilsack to directly address the massive implications of manmade climate change for our entire farming sector. Scientists are clear that climate change is already leading to more extreme weather, such as longer and more severe droughts, according to Daniel Souweine, campaign director for Forecast the Facts.

Souweine said that, in multiple press appearances last week, Secretary Vilsack dodged questions about what drought-stricken farmers need to know about climate change, saying that he’s “not a scientist,” and that the department is focused on the “near term.”

The groups say they’re trying to pin Vilsack down with a petition that reads, in part:

“Please tell farmers and the American public about the connections between climate change and the current drought, as well as the massive implications that climate change has for the future of American farming.”
Just like in the case of abortion and mental health the link between human-caused climate change and the current drought is tenuous (to be polite). The IPCC, an international expert assessment body, recently released a report on extreme events that is squarely in my area of expertise, and which I have noted overall did an excellent job.

On drought the IPCC concluded:
... in some regions droughts have become less frequent, less intense, or shorter, for example, central North America ...
If this conclusion is solid, then these activists are asking the US government to lie to farmers and the public. Not good. Just like the abortion case described above, the strongest position that the environmental activists can legitimately take is that the science is equivocal and likely to remain that way for a very long time.
So where does this leave us if we'd like to secure effective evidence-based policy?

In a nutshell, for those who care about the integrity of science in decision making it is OK to divide the world into two camps -- Finally, a Manichean debate I can support!

However, doing such a dividing according to macro-political perspectives (left-right) are contributing to the problem, as are those who, at the micro-perspective are do the dividing according to specific policy preferences (e.g., restrict abortion, secure action on climate change).

If political perspectives, whether ideological or policy-specific, could dictate which science was most sound, we wouldn't need science, politics could substitute.

The best way to divide the world into two camps are to segregate those who seek science to confirm political prejudices and those who support effective and trustworthy science arbitration, wherever it may lead. The scientific community has at times lost perspective in all of this complexity and found itself in the former category rather than the latter, siding with political advocates whose interests in the integrity of science come second to whatever issue of the day they are championing.

Securing evidence-based policy with integrity requires a ruthless adherence to the ideals of effective science arbitration, even when uncomfortable and inconvenient. Perhaps most uncomfortable of all is the realization that those who would champion the political causes supported by most scientists themselves would not champion the integrity of science itself when its results do not conform to their prejudices. The championing of scientific integrity is a cause unto itself.

26 July 2012

Comparing 2012 Drought Costs to 1980 and 1988

The enormous drought scorching the central USA will almost certainly cost at least $12 billion, making it the costliest since 1988, experts said Wednesday.

"There does seem to be near-unanimous agreement from industry experts that this year's drought losses will surpass the $12 billion recorded in 2011," says meteorologist Steve Bowen of Aon Benfield, a global reinsurance firm. . .

About 64% of the contiguous USA is in a drought, according to today's U.S. Drought Monitor, a federal website.

"Right now, it is difficult to say whether we end up reaching the loss levels of 1988 ($40 billion) and 1980 ($20 billion), given that it will be several months for agricultural industries to fully assess the total extent of their losses," Bowen says.
As readers here well know, comparing aggregate loss numbers over time requires understanding that context changes. It is not enough to simply adjust for inflation.

The graph at the top of this post shows the 1980, 1988 and 2012 (to date) estimates for drought damages, scaled to GDP (data from BEA), with 1980 scaled to 100. The graph shows that the 1988 drought was about 10% more costly than the 1980 drought, using the estimates reported by USA Today (which apparently derive from NCDC), even though it cost twice as much in current dollars.

At $12 billion the 2012 drought would be about 10% of the cost of the 1980 drought and less than that when compared to 1988. The costs of the 2012 drought are sure to rise in coming weeks and months, but they have a long way to go to exceed the standards set in 1980 and 1988.

So if you think 2012 is bad, you should know that it could be much, much worse.

UPDATE: I've been asked to show the actual values as a percentage of GDP. Here they are:

1980 = 0.72%
1988 = 0.78%
2012 = 0.08% (at $12 billion and counting)

23 July 2012

Krugman vs. Research, Who You Gonna Believe?

In yesterday's NYT Paul Krugman writes:
[R]eally extreme high temperatures, the kind of thing that used to happen very rarely in the past, have now become fairly common. Think of it as rolling two sixes, which happens less than 3 percent of the time with fair dice, but more often when the dice are loaded. And this rising incidence of extreme events, reflecting the same variability of weather that can obscure the reality of climate change, means that the costs of climate change aren’t a distant prospect, decades in the future. On the contrary, they’re already here, even though so far global temperatures are only about 1 degree Fahrenheit above their historical norms, a small fraction of their eventual rise if we don’t act.

The great Midwestern drought is a case in point. This drought has already sent corn prices to their highest level ever. If it continues, it could cause a global food crisis, because the U.S. heartland is still the world’s breadbasket. And yes, the drought is linked to climate change: such events have happened before, but they’re much more likely now than they used to be.

Now, maybe this drought will break in time to avoid the worst. But there will be more events like this. Joseph Romm, the influential climate blogger, has coined the term “Dust-Bowlification” for the prospect of extended periods of extreme drought in formerly productive agricultural areas. He has been arguing for some time that this phenomenon, with its disastrous effects on food security, is likely to be the leading edge of damage from climate change, taking place over the next few decades; the drowning of Florida by rising sea levels and all that will come later.

And here it comes.
Krugman's claims raise an obvious question: Have US droughts actually become more common on climate time scales? Especially US Midwest droughts?

Instead of looking at the musings of a "climate blogger" (as entertaining as that may be) like Krugman does, let's instead look at scientific research that has examined trends in US droughts. A crazy idea, I know. Fortunately, scientists have examined empirical data on the frequency and severity of drought on climate time scales.

Here is Andreadis and Lettenmaier (2006) in GRL (PDF):
[D]roughts have, for the most part, become shorter, less frequent, less severe, and cover a smaller portion of the country over the last century.
A longer excerpt:
We used a constructed time series of soil moisture and runoff over the continental U.S. to examine trends in soil moisture and runoff, and drought characteristics related to these variables for the period 1925–2003. Over much of the country, there has been a wetting trend, reflected in a predominance of upward trends in both model-derived soil moisture and runoff. These trends are generally consistent with increases in precipitation during the latter half of the 20th century observed over most of the U.S. [Groisman et al., 2004], and are in general agreement with results from other studies [Dai et al., 2004; Milly et al., 2005]. Furthermore, trends in the simulated runoff are similar to those in observed records of streamflow at a set of index stations that have been minimally affected by anthropogenic activities. Trends in most drought characteristics are similar to those in soil moisture and runoff, that is, droughts have, for the most part, become shorter, less frequent, less severe, and cover a smaller portion of the country over the last century. The main exception is the Southwest and parts of the interior of the West ...
About that recent breathless NOAA press release and subsequent media frenzy ... Have a look at comments by John Neilsen-Gammon and also Cliff Mass, both of whom pushed the button.

PS. Here is the necessary disclaimer to ward off those, like Krugman, who use the notion of "deniers" to shout down inconvenient voices: Climate change is real, humans have a significant impact on the planet, and mitigation and adaptation policies both make sense, as I argue in The Climate Fix. None of that justifies treating climate science like astrology.

19 July 2012

Manufacturing: Lessons from the Olympic Apparel Debate

Over the past week a debate has erupted over the sourcing of apparel to be worn by US Olympic athletes in the upcoming Olympic games. The Washington Post explains:
With their bright white pants, double-breasted blazers and bizarre berets, the uniforms designed for the United States Olympic athletes to wear at the opening ceremonies in London won’t be making anyone’s summer fashion list.

But days after Ralph Lauren released images of its 2012 outfits, U.S. lawmakers responded with a surprisingly visceral reaction to the news that the red, white and blue uniforms were made in... China.

“I am so upset. I think the Olympic committee should be ashamed of themselves. I think they should be embarrassed. I think they should take all the uniforms, put them in a big pile and burn them and start all over again,” Senate Majority Leader Harry Reid (D-Nev.), told reporters Thursday. “If they have to wear nothing but a singlet that says USA on it, painted by hand, then that’s what they should wear.”
 Rep. Steve Israel (D-N.Y.): “It’s not just a label, it’s an economic solution. Today there are 600,000 vacant manufacturing jobs in this country and the Olympic committee is outsourcing the manufacturing of uniforms to China? That is not just outrageous, it’s just plain dumb. It is self-defeating.”
The issue cuts to the core of ongoing debate over manufacturing in the United States and what, if anything, policy makers should be doing about this particular sector of the economy. Here we have an issue where Republicans and Democrats have found common ground.

The Olympic uniform kerfuffle provides an opportunity to discuss what is wrong with policies focused on protecting certain sectors of the economy from the inexorable forces of globalization and productivity gains, which if well managed, can benefit everyone. These lessons are more broadly applicable to the larger debate over US manufacturing.

To appreciate these lessons, let's dig a little deeper into the Olympic apparel debate.

New York Senator Chuck Schumer (D) has an idea about what should be done:
U.S. Senator Charles E. Schumer today called on the U.S. Olympic Committee to abandon their current uniforms that were made in China and replace them with uniforms made in the United States, and suggested Rochester-based suit maker Hickey Freeman to do the job. This week, ABC News revealed that the U.S. Olympic Committee decided to outfit the American athletes at the opening ceremonies of the Olympics in uniforms made in China, instead of enlisting American workers and companies to support their national team. In the wake of this report, Schumer secured a commitment from President Mike Cohen of Rochester-based suit maker Hickey Freeman to produce the sport coats and dress trousers for the Olympic team’s uniforms for the opening ceremonies. Today, Schumer called on the Olympic Committee to scrap their current uniforms, have them made in the United States, and consider hiring Hickey Freeman to lead the charge in producing the uniforms in the United States.
The company that Schumer is promoting is of course located in his home state.It is also the same Hickey Freeman that was sold to an Indian company to avoid bankruptcy back in 2010. That is right, Schumer is arguing for Americans to be outfitted by an Indian company.

For his part Schumer argues:
“It’s far better to have foreign capital come here and create American jobs than American capital go there and create foreign jobs.”
But this is not correct at all.

The reason that Hickey Freeman has any jobs at all in New York is arguably not because of foreign capital investments, but because the NY and US governments have repeatedly propped up the industry and the company with subsidies.
For instance, in 2004 the state of NY and city of Rochester put together a $5 million package to help the company modernize its factory in an effort to remain competitive. In addition, the US Congress has repeatedly supported the industry via tariffs and industry assistance through the "Wool Fabric Trust Fund"  created in 2000 and repeatedly reauthorized, most recently in 2010 (see this Congressional description in PDF, at p. 11).

At the time Senator Schumer explained the significance of the legislation to the fate of Hickey Freeman, arguing that that eliminating the Wool Trust Fund, which
provides Rochester’s iconic Hickey Freeman with substantial import tax relief, could lead to the closure of the Rochester facility, leading to the loss of 400 good paying jobs. Schumer said that to eliminate this program to pay for a jobs bill would be a bitter irony. Schumer today announced that the Wool Trust Fund program is safe and the Hickey Freeman employees could breathe a sigh of relief.
Louise Slaughter (D-NY) also takes credit for helping to save the company as well, "She was also instrumental working with Hickey Freeman’s former parent company Hartmax, their creditors and the Chairman of the House Financial Services Committee Barney Frank to avoid liquidation of the company."

Let's take a look at the bigger picture. Shown in the graph below are data on US jobs in the "apparel" sector and its sub-sector "mens and boys clothing" (under which Hinkley Freeman would be found), both of which are sub-categories of "manufacturing."
Since 1990 employment in the apparel sector has declined by 83% and in mens and boys clothing by 87% (data from BLS). Of note, almost all policy attention has been paid to efforts focused on preserving the (now) ~15% of remaining jobs rather than the fortunes of the ~85% of jobs which have been lost (e.g., skill development, job retraining, etc.). More generally, have a look at the graph and ask yourself, how well have the protectionist policies implemented since 1990 worked in any case?

Why have jobs in this industry sector declined? Because low-skilled, low-paying textile jobs are better sourced from outside the US, where "better" means at lower cost to production. Securing lower cost inputs is a key factor in sustaining productivity, which means getting more output for less input, a key factor in how we collectively become wealthier.

Back in 2009, the Indian company (SKNL) that acquired the parent company (HMX) of Hinckley Freeman explained (PDF) the logic of their investment and the strategies that they would employ to return the business to profitability:
At the onset, the first leg of value-creation opportunity is a backend-frontend integration synergy that will boost gross margins significantly. A 30% gross margin is extremely low for a business the size of HMX and operating in the market segment that HMX brands operate in. We believe we will be able to boost gross margin up significantly by backward integration of production through our Indian manufacturing operations and also through opportunistic sourcing from the Far East and Central America. . .
As per our investment plan, we envision outsourcing part of HMX’s manufacturing to our plants in India. SKNL is adept at manufacturing products currently manufactured and sold by Hartmarx, including suits, shirts and slacks. SKNL will be able to supply fabrics from Reid & Taylor and Belmonte to HMX and finished garments from our suits and shirt factory in Bangalore which will be operational within a year. This would facilitate diverting export production of factories to better value-added products from our fabric division and also provide immediate capacity for the new shirt and suit factory. By conservative estimates, it is anticipated that the back-end synergy will provide substantial additional profitable business to us within the next 3 years.
The globalization of the apparel industry is a good thing. Resources are used more efficiently. Profits are increased. The economy grows. More jobs are ultimately created. There is downside, as well, such as in jobs lost and skills that have become obsolete or uncompetitive. Policy should focus on effectively managing the downside rather than trying to stop change from occurring in the first place.

Writing at Blomberg Businessweek, Larry Popelka explains clearly why politicians from both parties have things wrong on this issue:
Garment manufacturing is a low-cost commodity business. Most of the value in the apparel industry comes from design, technology, sales, marketing, and distribution—not manufacturing. The successful players in apparel, such as Ralph Lauren and Nike (NKE), figured this out long ago.
Because the economics are bad, most U.S. apparel manufacturing operations folded decades ago. Only 97,000 Americans still have jobs in apparel production, according to the U.S. Department of Labor, and most of them are making highly specialized products like DuPont (DD) Kevlar uniforms that cannot be made elsewhere.

But just because America doesn’t manufacture apparel anymore doesn’t mean we can’t lead the industry. In fact, the world’s largest apparel companies are almost all U.S.-based, including Nike, VF (VFC), PVH (PVH), and Ralph Lauren, to name a few. These companies have grown a combined 146 percent during the past 10 years, adding more than $27 billion in revenue. Nike has created more than 15,000 new jobs in the U.S. during this time, Ralph Lauren almost 10,000. And unlike the low-paying production jobs next to sewing machines, these are well-paying jobs in marketing, accounting, design, and management.

These companies are winning globally by out-designing, out-innovating, and out-marketing the competition. Nike, for example, is unveiling a new TurboSpeed running suit at the London Olympic Games that it claims can reduce 100-meter sprint times by .023 seconds. Nike’s gear will be used by teams from many countries, including Russia, China, and of course, the U.S.

What Nike and Ralph Lauren don’t do is make their own products, in the U.S. or elsewhere—and this has become their competitive advantage.
But maybe the solution here is not to be found in policy debate. Maybe the athletes should just go back to the original uniforms worn in ancient Greece ...

18 July 2012

Science, Sex and the Olympics

My latest column at Bridges:
Early in the 19th century, the English poet Robert Southey explained that little girls are "sugar and spice, and all things nice" while little boys are "snips and snails and puppy dog tails." Such descriptions are apparently not rigorous enough to determine who gets to participate in women's events in the Olympics, so last month the International Olympic Committee (IOC) issued new regulations on the eligibility of athletes to participate in women's events in the upcoming London Games.

The new regulations seek to head off controversies such as erupted at the Track and Field World Championships in 2009, when South African runner Caster Semenya's victory in the 800 meters was followed by accusations that she had competed unfairly in a women's event. The response to the accusations focused on applying a "gender test," which was embarrassing for the body that governs track and field and demeaning to Semenya, and ultimately did little to clarify things.

The issues here are much broader than just competition categories at the Olympics and go to the heart of the challenges in using science in decision making. . .
 Read the rest here, comments welcomed.

16 July 2012

Corn Crop 1988 vs. 2012

Updated above: 30 July 2012.
Courtesy Gavin Macguire (@RtrsAgAnalyst)

2012 not as bad as 1988, but heading that way.

Fahrenheit vs. Celsius

You have to admit, it's got a point!

Follow Up to Keynote Lecture at CUAHSI

UPDATE: Video of my talk appears below (my talk begins at minute 9:15).

I gave the keynote lecture earlier today at the CUAHSI 3rd Biennial Colloquium on Hydrologic Science and Engineering. I promised the audience I'd follow up on my blog with references to papers et.c that duscuuss further some the claims I made in the talk.  The CUAHSI folks tell me that the talk will be on YouTube shortly.

Here are a few items of follow up:
If there are any questions or requests for additional items of follow up, please let me know in the comments.  Thanks @CUAHSI for the opportunity!

12 July 2012

A Closer Look at Gobal Food Supply

According to the Food and Agricultural Organization, "On average, a person needs about 1800 kcal per day as a minimum energy intake." (A kcal - kilocalorie - is a measure of food energy, also known as the Calorie).  For comparison, the US government recommends 2,500 per day, on average (a recommendation that is certainly exceeded by most people, but I digress).

The unit of kcal/person/day provides a useful basis for evaluating total food supply as compared to population. The graph at the top of this post shows such an evaluation, based on data downloaded from FAOSTAT (thanks RTC!).

The data show that from 1961 to 2007, when the dataset begins and ends, global food supply in kcal/person/day has steadily and consistently increased such that it has been for many decades comfortably above the level deemed necessary to meet individual nutritional needs.

In fact, if food supply distribution were perfectly efficient (which of course it is not) the world could feed an additional 1-3 billion people with the food produced in 2007 (depending on your view of nutritional requirements). This can be hard to reconcile with the fact that in 2007 the UN found about 1 billion people globally to be "undernourished." So there is considerable "headroom" for progress even without increasing global food supply, and UN data show progress in recent years.

It is such simple math that leads the OECD and FAO to conclude:
Food production has not only kept pace with population growth, it has outstripped it. The world now produces more food than ever, and even countries that were once practically synonymous with famine have achieved self-sufficiency in staple foods... hunger is a problem of poverty, not scarcity.
And also:
[W]hen you look at the facts, there is no “agricultural” reason for hunger today. Global food production has increased more quickly than population over the past half century, and the EU and USA even had to bring in policies to get rid of “mountains” and “lakes” of food and drink.

If people are hungry, it’s because they can’t afford to buy food, not that there is no food to buy. There are many reasons for this. Politics, policies and poverty all intertwine, and as Nobel-prize winning economist Amartya Sen said “There is no such thing as an apolitical food problem.”
Let's dig a little deeper into the numbers.
The graph above shows the annual rate of change in kcal/person/day for the 20 years ending in 2007. The red line shows the linear trend in kcal/person/day, and shows that the annual rate of growth has just about doubled over that time period. The data illustrate that food supply has been growing faster than population, and this trend has been accelerating (which probably owes to a slowdown in population growth rates in addition to effects from agricultural intensification).

What does this data mean from the standpoint of discussing agricultural policies? I can think of several things.

1) It can be misleading to talk of a global "food supply" problem. Certainly, sustained improvement in agricultural productivity will continue to be important, but at present does not appear to be a limiting factor in meeting global nutrition goals. Talk of the need for a "second green revolution" not only fails to accurately reflect the so-called "first green revolution" (more on this to come) but also distracts from the fact that supply is presently not a limiting factor in meeting global nutritional goals.

2) Over many decades the global agricultural system has shown itself to be very robust to a range of shocks, including the widespread pattern of climate anomalies of the early 1970s, financial crises, and rapidly changing prices of inputs (notably energy). However, there could be unforeseen major shocks yet to come, including disease (e.g., wheat rust) and rapid climate changes (e.g., from a massive volcanic eruption). Policy should focus on the robustness of agricultural systems to such shocks.

3) The issue of global food is ultimately as much (if not more) a problem of distribution, poverty and governments as it is an issue of technological innovation. From where I sit it seems that far more attention it paid to the latter than the former. Every call for a "second green revolution" should be met with a reply focused on the social and political factors that affect meeting nutritional goals.

Finally, in my explorations of issues of food (the subject of several papers in the works and a chapter in my coming-into-focus new book), it seems that a focus on yield, productivity and total production (all important, of course) can obscure the larger focus on the ultimate goals of food policy -- feeding people. This post argues that an important but underutilized (in policy discussions, that is, perhaps not among specialists) metric of kcal/person/day can help to keep our attention on that larger focus.

09 July 2012

Overcomplicating Debates Over Jobs

Writing in the NY Times, Thomas Edsall has an essay exploring whether technological innovation is leading us to a permanent era of declining employment possibilities:
The issue of the disappearing middle is not new, but credible economists have added a more threatening twist to the argument: the possibility that a well-functioning, efficient modern market economy, driven by exponential growth in the rate of technological innovation, can simultaneously produce economic growth and eliminate millions of middle-class jobs.
Support for this argument in Edsall's piece comes from Andrew McAfee at MIT who provides this graph.
McAfee explains the graph in ominous terms, focusing in on the red curve in the graph, which shows a ratio of employment to population (you can click on the graph to embiggen it):
Since the Great Recession officially ended in June of 2009 G.D.P., equipment investment, and total corporate profits have rebounded, and are now at their all-time highs. The employment ratio, meanwhile, has only shrunk and is now at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers. So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers. As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on, I expect that this decoupling will continue, and maybe even accelerate.
McAfee tells Edsall:
“In my dystopian vision of the future, that red line (in the chart) keeps falling down – or suddenly drops off a cliff”
Sounds scary. But what is it that the red curve is actually showing?

The graph below shows the annual change in unemployment and the annual change in the employment/population ratio, using the same data presented by McAfee and over the same time period.
The graph shows that the complicated metric of employment/population is virtually identical to the more conventional metric of unemployment. Thus, the debate we should be having is not about a "red curve falling off a cliff" but rather, where do jobs come from?

Now, my revealing that the red curve in the McAfee graph is just a fancy way to convey unemployment does not tell us whether or not we are entering a dystopian era of machines run amok. But being clear in what we are talking about is a helpful first step.

08 July 2012

Where Do Jobs Come From?

I find it remarkable -- and telling -- that neither candidate for president in the United States has articulated a good, substantive answer to this question. Platitudes and exhortation are not a coherent economic policy.

According to the McKinsey Global Institute the world created 1.1 billion non-farm jobs from 1980 to 2010. Think about that. 1.1 billion, and 164 million of those in so-called "advanced economies." How did that happen? Where did those jobs come from? How will we make the additional 600 million jobs expected to be needed globally by 2030?

These questions have very clear answers, at least conceptually, which can be delivered in an elevator speech. Why can't our presidential candidates provide such an answer? 

Talking heads on TV don't do any better. I just saw Lou Dobbs on Fox News rattling on about entrepreneurs and small businesses, which was pretty weak stuff. The excerpt below from a debate on Fareed Zakaria GPS on CNN today also illustrates the poverty of this discussion.

Where do jobs come from?

Jobs come from an expansion of economic activity, which is called economic growth. Where does economic growth come from? There are only a finite number of places. Any answer to the question about where jobs come from that does not invoke resources and innovation (but also effort and luck) is incomplete.

Any policies put in place to try to increase employment needs to explain how economic growth will increase, but also how the consequences of growth will be managed and sustained. Specifically, because the economy is in constant flux as we seek productivity gains through constant innovation -- which is necessary to expand economic activity -- there is a constant need to train and retrain the workforce to elevate skills. Under current trends, the world (and the US) will have an excess of low-skilled workers and a shortage of high-skilled workers. How will our leaders manage this churn? Someone should ask them. More "college" is not the answer.

Pop Quiz

What did I miss while away?

Here is one item: In an opinion piece in the NYT I read on the plane today, Timonthy Egan writes:
In March, the Intergovernmental Panel on Climate Change warned in a special report of “unprecedented extreme weather and climate events” to come. The events are here . . .
Which leads to a pop quiz: If the IPCC predicts events to occur in the 2070s and beyond, and such events are observed in 2012, then this combination of prediction/events makes the IPCC:

A) Wrong
B) Right
C) Even more right

*Extra credit points to anyone who can point to any predictions made by the IPCC SREX report on extremes (the one referred to by Egan) for a period that includes 2012.

**Double extra credit to anyone who can point to any climate scientist who has called out Egan and the NYT for such nonsense.

It is reassuring to see that one can go unplugged for a week and the world remains as it was;-) I had a wonderful holiday, normal service soon to return.