Electricity might be important, but not uniformly so

Sinclair Davidson has been playing around with World Bank Development Indicators data on electricity consumption, access and fossil fuel consumption, as well as the Human Development Index, to have a look at the impact of having access to and consumption of electricity and fossil fuels on development.

His point is that electricity—access and consumption—and, by implication, fossil fuels, is important for development. I don’t necessarily disagree, but I think his scatterplots are maybe a little bit crude, so I thought I’d run some non-parametric fits through the data to look a bit closer at the relationship between electricity metrics and development.

It’s also worth pointing out the usual caveats. Simple bivariate analysis can not only be incomplete—in this case, neither Sinclair nor I are trying to disentangle the ‘true’ impact of electricity measures on development—but also misleading. For now, bear in mind the problem of reverse causality—higher HDI scores might lead people to consume more electricity—and omitted variable bias—there might be something causing both HDI scores and electricity consumption or access. Here, since we know what goes into HDI, it’s worth pointing out that one metric used to create is is Gross National Income. A higher GNI leads to a higher HDI, but it also gives governments higher potential tax revenues that they might spend on expanding electricity access.

The other major problem is missing data. Many countries do not report electricity data every year, or at all. This propensity not to collect or report data may itself be linked with HDI and bias our estimates one way or another. If a country reported at all from 2009, I used the most recent figure in my graphs, and excluded countries that haven’t reported since then. I then ran local regressions (loess) to see the relationship between measures of electricity access and consumption and the HDI index.

Looking at per capita consumption and HDI, I find roughly the same scatterplot as the BREE report Davidson reported on; however, as the loess smooth makes clear, this relationship, very strong for low levels of electricity consumption, becomes much more muted as per capita consumption increases.

electricity consumption and hdi

 

When it comes to access to electricity, there does seem to be a strong relationship that appears to become stronger as access to electricity is expanded.

access to electricityThere’s a lot of data bunched up at the end of the graph, but restricting the analysis to just the countries with very high access to electricity doesn’t seem to change the story much:

access to electricity

Subject to the caveats above, there seems to be a fairly strong relationship between access to electricity and HDI, although this doesn’t necessarily mean of course that higher electricity access causes HDI to increase, although it wouldn’t surprise me if it did.

As for the use of fossil fuels in consumption, there seems to be a positive relationship that becomes negative at very high proportions of fossil fuel consumption. The data is also very noisy.fossil fuel use and hdi

 

Part of the noisiness of the data might obscure other interesting relationships among different subsets of the data.

For example, let’s restrict the dataset to countries at a medium or low level of development (HDI<0.7). We get a somewhat more unambiguous linear relationship:

fossil fuels and hdi low

But consider what happens when we narrow our dataset to very highly developed countries (HDI>0.8) we get something of a different story:

high income

To me, the story this suggests is a fairly banal one: the electricity and fossil fuel needs of developed countries aren’t as important for as they are for developing countries. It also reflects, by the way, prior development strategies and experience: it doesn’t necessarily mean that there’s no way for a poor country to become a developed one using renewable sources, particularly since the cost of these (especially solar) is declining rapidly.

Anyway, since Professor Davidson’s argument was a fairly tentative and vague one I’m not attempting a rebuttal, but I think looking more formally at the relationship between electricity usage and consumption with nonparametric fits might give a better, and slightly more nuanced, view of the link between energy and development.

 

 

 

 

 


Things you may have missed #2

Captains of industry: the history of an authoritarian phrase

The accomplished Australian economist Robert Dixon, known mostly I would think for his work on the economics of regions, has developed a sideline in work on the linguistic impact of Thomas Carlyle on the language of popular economic writings. I recently had cause to read his paper on the origins of the ‘dismal science’ (not an attack on Malthus; an attack on anti-slavery), and in so doing came across this: Dixon’s JEP paper of a decade or so ago that explains the phrase ‘captains of industry’ (which may be a calque of Saint-Simon’s chefs de l’industrie):

Carlyle coined the phrase “captains of industry” in his book Past and Present, published in 1843.3 Having described the chaos and godlessness that beset the world, Carlyle declares that the “Ultimate genuine Aristocracy of this Universe” are the “Captains of Industry” (p. 192) because they are “warriors in the one true war [against chaos]” (p.275). He says to these Captains of Industry (pp. 275 and beyond): “All human interests, combined human endeavours, and social growths in this world, have, at a certain stage of their development, required organising: and Work, the grandest of human interests, does now require it.” The Captains of Industry are needed to “reduce [the Working Class] to order, to just subordination” because it is only “as a firm regimented mass, with real captains over them, will these men march.”

Karl Miller, 1931–2014

Karl Miller founded the London Review of Books, but that achievement must fight for space in his obituary in The Guardian. Among them, of special interest to me, is Miller’s biography of the—can I say proto-modernist?—Scottish writer James Hogg (a distant but apparently direct ancestor of mine):

In 1951 he went to Cambridge to read English at Downing College, under the fearsome FR Leavis. Miller was a “Scottish scholarship boy” and unpolished. At one sherry party, asked by a Sitwellian don which public school he had attended, he replied “none”. Later he overheard the comment “remarkable fellow, that Miller, entirely self-educated”

Edward Hugh says it’s time for Madrid to start worrying about Catalonia

In the wake of Scotland, Europe needs to start paying more attention to other huddled nations yearning to break free, says Catalonian-by-adoption Edward Hugh:

So although the world will not change on November 10, and even if there are elections instead of a vote on independence the outcome could well produce a definitive sea change about how Catalans view their relations with Spain. They may well mark a “point of no return”. So to go back to where we started. Right now global markets and most of the international press are being pretty sanguine about the situation, when – as President Obama suggested in the case of the US government crisis – perhaps they shouldn’t be. Perhaps they should be worried about the complacency in Madrid, and remember that one of the principal ways of letting something unexpected happen is to assume it won’t.

Karl Whelan on how to think about monetary policy, fiscal policy and structural reform:

In a very wise briefing paper on how the European Central Bank should go about trying to bring back sustained and moderate inflation and growth in the Eurozone, Karl Whelan explains the difference between monetary policy and fiscal policy (which can help an economy reach its potential) and structural reform (which can help an economy increase its potential). The lack of inflation in the Eurozone is a pretty good indication that, however good the structural reforms governments may be able to devise, what’s lacking in Europe at the moment is expansionary fiscal and monetary policy:

A final word is perhaps appropriate on the topic of structural reforms. As the ECB takes a more active role in battling the ongoing slump, Mario Draghi has intensified his rhetoric  about structural reforms. The transcript of his September press conferences shows fifteen uses of this phrase. Draghi now says he has “concluded that there is no fiscal or monetary stimulus that will produce any effect without ambitious and important, strong, structural reforms.” It is hard to find a logic (at least one based on macroeconomic theory as we know it) for this argument. It is certainly the case that potential output growth in the euro area is currently low and can be improved by various policy reforms. However, it is also true that there is currently a very large shortfall between aggregate demand and the current supply potential of the euro area economy, a shortfall summarised in an unemployment rate of
over 11 percent. So there is room for fiscal and monetary stimulus to boost the economy, even without structural reforms. In addition, to the extent that we are worried about deflation, the initial impact of structural reforms that boosted the supply capacity of the euro area would be to further depress inflation. My point here is not to argue against structural reforms. There are many such reforms that can have an important positive effect over the medium- and longer-run (though we know little about the magnitude of their potential impact). But it is important for the ECB to take responsibility for its crucial role in the shorter-term macroeconomic management of the euro area and ECB officials continually placing structural reforms at the heart of discussions of this issue is unhelpful.

 


How long does it take to conclude a multilateral trade agreement in the WTO?

The answer, it seems, is an exponential function:

gatt wto

 

Partly this reflects the growing membership of the WTO. But it also, I think, is a function of the over-ambitious nature of the Doha Round. Trying to force open sensitive sectors may be worthwhile in the sense that it would lead to higher trade and net welfare. But if it impedes the world from plucking the fruit a little lower down on the tree, then it’s potentially quite dangerous.

 

 


On the unbendable convictions of Craig Laundy, MP

Craig Laundy has a knotty sort of problem.

Time was when he believed that question of marriage equality—or same-sex marriage, or gay marriage, or whatever you’d like to call it—could be settled entre gentilshommes, with a free vote on the floor of Parliament. Not that Laundy had any notion himself of voting for extending marriage rights to homosexuals, of course. But he saw no point in forcing his opinions on his colleagues, and so approved of a conscience vote on the topic—that odd phenomenon according to which politicians consult their own beliefs before they vote, rather than as they write their memoirs. The liberals of the Liberal Party could in this scenario make common cause with both the bien pensants on the Opposition benches and such small government types as Senator Leyonhjelm, while the reactionaries of the Labor Party could join hands with their counterparts in the government, and it would all somehow come out in the wash. That, at least, was the patrician dream of Milord Laundy.

Alas, no longer. Judith Ireland reports that our man has had second (perhaps, depending on when you start counting, third) thoughts on this point:

But after a year in Parliament, the member for Reid has reviewed the situation. Mr Laundy said his experience as a politician had taught him that if the Liberal Party allowed a free vote on the matter, MPs would become the victims of vigorous lobbying to make them “vote against what they believe”.

Well spotted. Give a politician the chance to cast a free vote and she may very well discover that some of her constituents would prefer she voted one way or another, which I think is very impertinent of them. Who do these voters think they are?

It would certainly be less than desirable for members of parliament to be made the ‘victims’ of the opinions of the people who have voted them in. It must be difficult enough to get through a term of Parliament in constant fear of being cashiered on account of the votes one has taken at somebody else’s order. How infinitely more unjust would it be to find yourself without a seat in the next Parliament because the vote was one you made of your own choice?

Some misguided criticism of Mr Laundy’s position is inevitable. It might be pointed out that, since the desire for a free vote presupposes the existence of a number of MPs who would like to vote against the majority opinion of their fellow party members (Malcolm Turnbull, Kelly O’Dwyer and Simon Birmingham are named in this respect by Ireland) then the imposition of a party line could very well also result in MPs voting ‘against what they believe’. But what a silly objection! The inconvenience of being forced by party bosses to vote against a proposition with which you secretly agree is nothing compared to the terrible damage to our democracy that might be occasioned by members of parliament being asked to withstand an energetic letter-writing campaign that tried to persuade them one way or the other.

You might also say that the absence of free votes on other issues has scarcely discouraged other ‘vigorous lobbying’. Some years ago the Rudd government’s Resources Super Profits Tax, you may remember, had to be modified slightly to suit the purposes of a group of mining companies who had understandable objections to paying more tax than they thought was convenient. There may have been a little lobbying. There may have been some inconsequential multimillion dollar advertising campaigns. But this quite unlike this marriage equality business, you understand. The mining tax had merely large fiscal consequencesI trust I don’t have to explain to the difference between a mining company effectively choosing its own tax rate and a nuptially-inclined homosexual or a socially conservative Pentecostal writing a letter to their MP, or why the latter is so much more offensive to the democratic taste than the former. Do you understand how difficult it is to hold your nerve in the face of a ‘vigorous’ street parade, petition or coordinated telephoning operation?

Having dispensed with the need to think about the votes they are casting, MPs will have much more time for more noble pursuits, better suited to the high office they hold. (Jacqui Lambie, for example, has already found a hobby: she is apparently communing with the dead, with some success.) Mr Laundy might—this is just a suggestion—profitably use the time he would otherwise have spent examining his conscience to search for a campaign director for his re-election. The last one doesn’t really seem fit for purpose any more, having been a lobbyist with a firm whose owner had been promising that he could ‘achieve results’ for his clients because he was also on the state executive of the Liberal Party. Of course, this lobbyist declared that he was only a “part-time, occasional consultant” to the firm, so perhaps he does not qualify in the strict sense as a ‘vigorous’ lobbyist. Thank heavens the firm was only lobbying for property developers and not people in favour of or opposed to marriage equality!

On the contrary, Laundy’s campaign manager was only a casual or recreational lobbyist: hence why Craig Laundy MP thought it appropriate to engage his services in order to get elected to parliament in the first place.