Month: December 2012

Everyone knows that Americans are a mobile society, moving toward opportunity and jobs, right? Not according to the data from the U.S. Census Bureau, which shows that of geographic mobility in 2011 were at their all-time low since the start of the data in 1948, and were only a tad higher in 2012. Here\’s the figure just released by the U.S. Census Bureau. The blue bars show the absolute number of moves, as measured on the left-hand axis. The black line shows the rate of mobility, as measured by the percentage of U.S. households that moved.

Another chart gives a sense of how far the move are. Most moves are within a given county, or between nearby counties, while relatively few involve moves to another state or abroad.

Why is the mobility rate down? One potential set of explanations focuses on the Great Recession: with jobs scarce, and declining home values in many areas, people stayed in place either because of a lack of jobs to move to, or by the unexpectedly low price of their home, or both. But this explanation is at best a very partial one.The downward trend in U.S. mobility goes back well before the start of the recession. People who are unemployed are often more likely to move, not less likely, as a report accompanying these charts pointed out.  And if the issue is declining home values, it\’s hard to explain why mobility rates are down for both renters and for homeowners. 

The Census Bureau puts out the data, but often sidesteps much discussion of underlying causes. However, in the Spring 2011 issue of my own Journal of Economic Perspectives, Raven Molloy, Christopher L. Smith, and Abigail Wozniak fill this gap with a discussion of \”Internal Migration in the United States.\” Like all articles in JEP back to the first issue in 1987, the article is freely available compliments of the American Economic Association. 

Molloy, Smith, and Wozniak consider possible long-term explanations for a declining rate of mobility, like the possibility that an aging population less likely to move. As they put it: \”However, these differences across groups are not useful in explaining why migration has fallen in recent decades. The decrease in migration does not seem to be driven by demographic or socioeconomic trends, because migration rates have fallen for nearly every subpopulation …\”

They freely admit that there is not yet an answer in the economic research as to why geographic mobility has been declining, but they offer some hypotheses.

For example, one argument is that migration was high in the post WWII years as part of a significant population shift to the South, a shift which has been diminishing every since. But this factor doesn\’t seem to be significant enough, given the observed data on interregional migration.

Another hypothesis is that there are more two-earner families, and so when one person loses a job the household may be more reluctant to relocate. But this argument faces the problem that \”the percentage of households with two earners has been quite stable over the last 30 years.\”

Yet another possibility \”is that technological advances have allowed for an expansion of telecommuting and flexible work schedules, reducing the need for workers to move for a job.\” However, the data on telecommuting doesn\’t show that it is a large enough factor to explain the decline in mobility.

And yet another possibility \”is that locations have become less specialized in the types of goods and services produced, making the types of available jobs more similar across space. … A related idea is that the distribution of amenities has become more homogeneous across locations, making residence in any particular city less attractive.\” This explanation may have some truth in it, but it\’s proven difficult to gather data that would allow it to be tested in any definitive way.

Finally, it may just be that many Americans are shifting their preferences away from being willing to move. Molloy, Smith and Wozniak present evidence that \”the secular decline in geographic mobility appears to be specific to the U.S. experience, since internal mobility has neither fallen in most other European economies nor in Canada—with the United Kingdom as a notable exception.\”

Whatever the reason behind the decline in geographic mobility, there are implications for the economy if the workforce becomes less flexible and less willing to move from areas where the economy is weaker to where it is stronger. In addition, lower mobility has broad implications for what its like to live in America.  People find it  harder to envision their lives as involving a big move.  Social networks are reshaped. When mobility drops, we become a country where you are less likely to end up living and working with people from other states, other counties, or even other parts of your own county.

After washing your hands with anti-microbial soap, is it better to dry them with a paper towel or with an air dryer? Like many economists, I\’m always on the lookout for persuasive analysis of the benefits, costs, and tradeoffs of life\’s difficult questions. Thus, I was delighted to run across  \”The Hygienic Efficacy of Different Hand-Drying Methods: A Review of the Evidence,\” by Cunrui Huang, Wenjun Ma, and Susan Stack, which appeared in the August 2012 issue of the Mayo Clinic Proceedings
(87: 8, pp. 791-798).

Basically, paper towels win out over regular air dryers, jet air dryers, and cloth rollers, at least in settings like health care provision where hygiene is especially important. But here\’s a sketch of the arguments,based on a review of 12 studies on hand-drying since 1970. Summary statements are mine: quotations are from the study. As usual, footnotes and citations are omitted for readability.

Removing water from hands after hand-washing is an important part of killing the germs. 

\”For centuries, hand washing has been considered the most important measure to reduce the burden of health care–associated infection. … Although studies have reported the importance of thorough hand drying after washing, the role of hand drying has not been widely promoted, and its relevance to hand hygiene and infection control seems to have been overlooked. Lack of attention to this aspect may negate the benefits of careful hand washing in health care.\”

Paper towels are the most hygienic of the hand-drying options: they dry skin faster, help remove contamination through friction, and don\’t risk spreading germs through the air.

\”Although jet air dryers had drying efficiency similar to paper towels, their hygiene performance was still worse than paper towels. The differences in bacterial numbers after drying with air dryers and paper towels could be due to other factors rather than the percentage of dryness alone. Friction can dislodge microorganisms from the skin surface during both hand washing and drying. Antimicrobial agents in soaps have too little contact time to have bactericidal effects during a single use or with sporadic washings, making friction the most important element in hand drying. It is likely that paper towels work better because they physically remove bacteria from the hands, whereas hot air dryers and jet air dryers cannot. In many instances, however, rubbing hands with hot air dryers to hasten drying would only lead to greater bacterial numbers and airborne dissemination. It might be that rubbing hands causes bacteria to migrate from the hair follicles to the skin surface. Many studies have found friction to be a key component in hand drying for removing contamination. …\”

\”Hot air dryers are generally not recommended for use in health care settings because such dryers are relatively slow and noisy and their hygiene performance is questionable. Cloth roller towels are not recommended because they can become common use towels at the end of the roll and can be a source of pathogen transfer to clean hands. Recently, jet air dryers have undergone independent certification within the food safety arena in Australia, attesting to their increased hygiene benefits as opposed to the traditional hot air-drying method. However, the criteria and process of obtaining this type of certification remain questionable. The health and safety aspects of jet air dryers for use in locations where hygiene is paramount should still be carefully examined by the scientific community. Therefore, this makes paper towel drying, during which little air movement is generated, the most hygienic option of hand-drying methods in health care.\”

Air dryers, and especially jet dryers, are noisier. They can irritate skin.

\”Air dryers, particularly jet air dryers, are obviously noisier than paper towels or cloth towels. … [T]he mean decibel level of using a jet air dryer at 0.5 m was 94 dB, which is in excess of that of a heavy truck passing 3 m away. When 2 jet air dryers were used at the same time, the decibel level at a distance of 2 m was 92 dB. Therefore, in washrooms with jet air dryers, the noise level could constitute a potential risk to those exposed to it for long periods. … \”

\”Use of air dryers may cause hands to become excessively dry, rough, and red. … Affected persons often experience a feeling of dryness or burning; skin that feels rough; and erythema, scaling, or fissures. When the hands become irritated, health care workers may not wash their hands as often or as well. Concern regarding this effect of air dryers could become an important cause of poor acceptance of hand hygiene practices.\”

The environmental effect of paper towels is slightly worse than air dryers, but only very slightly. 

 \”[T]he paper towel method emits relatively higher greenhouse gases than the hot air dryer method (1377 vs 1337 kg of carbon dioxide equivalent). In terms of environment sustainability, the hot air dryer method surpasses the paper towel method with better scores for 6 indicators (respiratory organics, respiratory inorganics, ozone layer, ecotoxicity, acidification/eutrophication, and fossil fuels) compared with 5 indicators (carcinogens, climate change, radiation, land use, and minerals) for paper towels.\”

Paper towels cost slightly more than air dryers. 

\”Using paper towels is more costly than using air dryers. Paper towels must be replaced frequently, whereas air dryers usually require little maintenance. … However, air dryers can be costly to purchase and install. Therefore, those responsible for facility management should perform a careful cost analysis to determine whether they are cost-effective in their building.\”

People prefer to use paper towels–and people\’s preferences have value in this overall calculation, too. 

\”Another survey of 2516 US adults in 2009 still found that most people preferred to dry their hands with paper towels. If  they had a choice, 55% of respondents selected paper towels, 25% selected jet air dryers, 16% selected hot air dryers, 1% selected cloth roller towels, and 3% were not sure. … Hence, given the strong preference for using paper towels, hand hygiene adherence would possibly decrease if paper towels are not available in washrooms.\”

As the conclusion of academic studies often love to point out, there are vast possibilities for future research on this topic that go beyond the questions already discussed. 

\”Does the quality of paper towel have an effect on hand hygiene adherence? When recycled paper is used for hand drying, what kinds of studies are appropriate to assess the cost benefit of using recycled paper? Many questions remain unanswered. … The maintenance of a clean environment around paper towels is also important. Paper towels deposited in bins could act as a bacteriologic reservoir if disposal is not managed properly. …  The risk of potential contamination among dispenser exits, paper towels, and hands should be considered in the design, construction, and use of paper towel dispensers. Architects working in the health care industry should also be aware of these issues when designing equipment for new facilities.\”

The OECD has just published its Development Co-operation Report 2012: Lessons in linking sustainability and development, which includes a number of essays about various aspects of foreign aid and its role in development. (Fair warning: Those looking for deeply skeptical viewpoints about foreign aid will not find them well-represented in this volume.) Here, I\’ll stick to some of the big-picture facts about patterns of foreign aid and present a few figures from the Statistical Annex. (And yes, I\’m the sort of person who, when getting a report, has a tendency to read the Statistical Annex first.)

First, here\’s the trendline of official development assistance over time, expressed in constant 2010 dollars, and showing some context of private capital flows. The heading refers to the DAC, which is the Development Assistance Committee, a group of the OECD countries that give most of the aid. The bottom blue area is official development aid. The two small ribbons in the middle are other official aid flows and grants from private voluntary organizations. The gray area at the top is private capital flows to these aid-recipient countries. Clearly, private capital flows fluctuate a lot, and it\’s always useful to remember that the countries which need aid the most are often not the countries that are especially attractive for private sector investment. Still, it\’s striking that in most years over the last three decades, private capital flows to the group of countries receiving aid is considerably larger in size than foreign aid.

This figure puts foreign aid in perspective in two other ways. In constant 2010 U.S. dollars, as measured on the right-hand axis, foreign aid from all countries in the world now exceeds $120 billion. In my checking account, this would be untold riches. But spread over the context of the world economy, it is not an especially large amount. The right-hand axis shows foreign aid as a percentage of the Gross National Income of the donor countries: since the 1960s, this share has sagged from about 0.5% of GNI to about 0.25-0.30% of GNI. To put it another way, the economies of donor countries have been growing faster than their foreign aid spending over the last half-century.

The final figure shows the sources of official development aid. Clearly, foreign aid is primarily a European project, although the U.S. also gives a significant share.

Many Americans wildly overestimate how much the federal government spends on foreign aid. For example, this 2010 survey found that Americans believe that the federal government spends 25% of its budget on foreign aid, and would like to cut that amount to 10%. In reality, only about 1% of federal spending is foreign aid. Maybe this is 1% is still too much! But as a matter of arithmetic, trimming foreign aid would have an essentially negligible effect on the U.S. governments deficit problem.

 

A couple of weeks ago, I posted on \”China\’s Economic Growth: A Different Storyline.\” Here, I\’ll follow up with three snippets about China\’s economy that crossed my desk recently: news on China\’s currency, on over-investment in China, and a way in which the U.S. and Chinese economies are increasingly and intriguingly intertwined. 

The value of China\’s currency

One of the most common complaints against China is that it preserves an undervalued currency as a way of stimulating its exports in world markets. As I pointed out in my earlier post, China\’s currency was actually weakening when China was running a near-zero balance of trade through much of the 1980s and 1990s, and China\’s large trade surpluses of the last few years have actually been accompanied by a strengthening renminbi yuan. The U.S. Department of the Treasury presents a semi-annual Report to Congress on International Economic and Exchange Rate Policies. In discussing China\’s exchange rate the report says: 

\”From June 2010, when China moved off of its peg against the dollar (that it had reintroduced in 2008), through November 9, 2012, the RMB has appreciated by a total of 9.3 percent against the dollar. Because inflation in China has been higher than in the United States over this period, the RMB has appreciated more rapidly against the dollar on a real, inflation-adjusted, basis, appreciating 12.6 percent since June 2010 and 40 percent since China initiated currency reform in 2005. … China’s real effective exchange rate (REER) – a measure of its overall cost-competitiveness relative to its trading partners – has appreciated since China initiated currency reform in mid-2005, after declining between 2001 and 2005. From July 2005 to October 2012, China’s real effective exchange rate appreciated by 27 percent. … [T]he IMF concluded that the RMB was moderately undervalued against a broad basket of currencies, and Table 5 in the IMF’s Pilot External Sector Report shows the RMB was undervalued by between 5 and 10 percent on a real effective basis, as of July 2012.\”

Thus, whatever the merits of the complaints about undervaluation of China\’s currency back in 2005, large changes have happened since then. Some further strengthening of the yuan seems in store, as well.

Overinvestment in China

From a U.S. point of view, the idea that over-investing could harm an economy seems almost nonsensical. But after all, investment involves a tradeoff: less consumption now in return for more production and consumption in the future. In addition, investment will tend to have diminishing marginal returns–that is, increasing a country\’s investment rate from 10-20% of GDP will have a bigger payoff in the future than increasing that same country\’s investment rate from 40-50% of GDP. At some point, the social costs of giving up present consumption will be greater than the benefits of ratcheting investment a little higher.

Il Houng Lee, Murtaza Syed, and Liu Xueyan analyze these questions in \”Is China Over-Investing and Does it Matter?\”, which appears as IMF Working Paper WP/12/277 published in November. Based on their model, they find: \”Even allowing for elevated investment levels associated with most
economic take-offs, the econometric evidence suggests that China is over-investing. China’s
predicted investment norm over the last thirty years has ranged between 33-43 percent of GDP. In reality, it has fluctuated in a much broader band of 35-49 percent of GDP.\”

They offered a comparison of investment levels across emerging market economies that I found interesting. The first figure compares investment levels and growth rates for these countries in the early 1990s, when China\’s investment and growth patterns were not all that different from others in this comparison group. The second figure shows the same comparison in a more recent period, when China has clearly become an outlier.

The Chinese government has recognized for several years now that its economy needs \”rebalancing\” from being investment-driven to being consumption-driven. The U.S Treasury semi-annual report says it this way: \”Chinese leaders have identified shifting away from growth driven by exports toward a greater reliance on domestic consumption as a critical goal for sustaining growth in the medium to long term. China has partially succeeded in shifting away from a reliance on exports for growth, and China’s current account surplus has fallen markedly over the past four years, from 10.1 percent of GDP in 2007 to 2.8 percent in 2011. In the first three quarters of 2012, China’s current account fell to 2.6 percent of GDP …\”

Western Innovation Intertwined with Chinese Production

\”When the California high-tech company Eye-Fi introduced a new memory chip in 2005 with built-in wi-fi capability it faced a challenge common to many technology firms: how to take a promising prototype and turn it into a mass-market, low-cost product—and get it to market before its rivals.
Eye-Fi’s solution was an approach that Western firms increasingly are taking in response to the emergence of China as a manufacturing superpower. It used a local California boutique manufacturer to develop prototypes, which Eye-Fi’s engineers refined on an almost daily basis. As demand took off and the product was widely marketed, Eye-Fi moved from low-volume boutique production in the United States to high-volume, low-cost production in China. The high-skill innovation and development took place in the United States, but the lower-skill mass production was moved offshore. As Chinese mass manufacturing increasingly dominates global production, this story is being repeated across the United States, Europe, and Japan.The stories of Apple’s iPhone and iPad are similar.\”

They report the results of a more systematic statistical study: \”Events such as China’s accession to the WTO [in 2001- are natural experiments for examining the effect of competition from low-wage countries—an opportunity we put to use in our research. In the largest ever study of the impact of China on Western technological change, we tracked the performance of almost half a million manufacturing firms in 12 European countries over the past decade … A startling finding is that about 15 percent of technical change in Europe in the past decade can be attributed directly to competition from Chinese imports, an annual benefit of almost €10 billion to European economies.\”

In the globalizing economy of the future, at least some of the dynamism and competitiveness of the U.S. economy will be determined by the ability of U.S. firms to build these sorts of ties with operations in China, as well as India, Latin America, eastern Europe, and probably Africa, too.

A lot of folks have a version of chronic fatigue syndrome when the topic of budget deficits comes up. After all, wasn\’t there a big spat over budget deficits through most of the 1980s and into the 1990s? And wasn\’t there a big spat over deficits through the middle years of the George W. Bush presidency in the mid-2000s? Every time you turn around the last few years, it feels like the federal government is about to the official \”debt ceiling\” and there\’s yet another round of breathless high stakes negotiating that pushes the problem back until after the next election, when we get to do it all again.

Thus, it\’s important to understand that America\’s current trajectory of deficits and debt is not just one more round  of political games. Instead, we have entered a situation where deficits and debt are already well outside usual parameters. What\’s often hard to explain is that the U.S. deficit and debt problem isn\’t (yet) an emergency situation that is likely to rock the U.S. economy in the next year or two or three. There\’s still some time for adjustments. But we really don\’t want to waste that time. Daniel Thornton offers useful overview and insights in \”The U.S. Deficit/Debt Problem:A Longer-Run Perspective,\” in the November/December 2012 issue of the Review published by the Federal Reserve Bank of St. Louis.

For starters, here\’s a figure showing U.S. annual budget deficits over time going back to 1800. There are five episodes of major budget deficits in the history of the U.S. government: the Civil War, World War I, the Great Depression, World War II, and the last few years. The deficits of the last few years don\’t match those of the major wars in U.S. history, but as a share of GDP, they do exceed the deficits of the Great Depression.

For another perspective, here\’s the ratio of accumulated gross government debt/GDP. The main episodes of high budget deficits are visible here as upward bumps in the ratio. The debt/GDP ratio is approaching levels that have only been broached by the funds borrowed to fight World War II.

Thornton emphasizes that the roots of our current deficit and debt troubles go back well before the Great Recession of 2007-2009, and well before Bush tax cuts earlier in the 2000. Instead, Thornton locates the start of the problems back to about 1970. In the chart of annual deficits, for example, notice that after about 1970 a pattern of volatile but growing deficits emerges. The pattern is interrupted for a few years in the late 1990s by the higher tax revenues and lower social spending resulting from the unsustainable dot-com boom, but a return to the larger deficits was coming eventually. Similarly, the debt/GDP chart shows that ratio bottoming out around the mid-1970s, and then beginning to climb–again with a bump for the dot-com years of the late 1990s.

What factor has been driving spending higher? Thornton\’s answer is straightforward: \”[M]ost of the increase in spending that generated the persistent deficit over the 38 years before the financial crisis was spending for Medicare and Medicaid, particularly Medicare.\”

My own take is that it\’s been clear since at least the 1980s, and arguably earlier, that the U.S. budget was going to run into severe difficulties when the baby boom generation started retiring. The leading edge of the boomer generation was born in 1946, and thus is just now hitting age 65 and heading into retirement in substantial numbers. This demographic shift was going to cause problems for Social Security, but those problems could be dealt with by phasing back the retirement age and tweaking formulas for payments and benefits. In comparison, there is no easy way of addressing the combination of an aging American and steadily rising health care costs. 

In other words, a fiscal crisis has been coming for the U.S. budget for some decades. But before the Great Recession, we thought we had 20 years or so to make adjustments before we hit the danger zone. When the Great Recession squashed tax revenues and the attempt at fiscal stimulus pushed up spending, much of that lead time evaporated. The Congressional Budget Office focuses on a somewhat different number than Thornton does, looking at debt \”held by the public\” rather than \”gross\” debt–essentially leaving out debt that the federal government owes to itself, like Treasury bonds held in the Social Security trust fund. By that measure, back in December 2007 before the Great Recession hit, long-term budget projections from CBO were that the debt/GDP ratio would rise to the danger zone of 100% by around 2030.  Eighteen months later, after the Great Recession hit, the June 2009 report from the CBO forecast that the debt/GDP ratio would hit 100% around 2022.

Of course, it would have been far more sensible to address these issues of high and rising health care costs and the looming problems of large fiscal deficits back before a Great Recession hit, but it wasn\’t politically possible to do so. So now we get to face these problems, decades in the making, in a weak economy and with a shortened timeline. 

A UK organization called the Global Climate Project has put out its annual estimates of annual carbon emissions, and perhaps unsurprisingly, the world economy is on track to set a new record in 2012 of 38.2 billion tons, up a few percentage points from 2011.

Here\’s one figure from the report showing trendlines for the four largest emitters: China, the U.S., the EU, and India. Notice in particular that China is not only by far the largest carbon emitter, but is a spike-like upward trend in emissions. Emissions in the U.S. are fairly flat since the late 1990s. Emissions from India are on a path to soon surpass emissions from the EU.

This next figure shows carbon emissions on a per capita basis. The U.S. economy is by far the highest in per capita carbon emissions, although the level is down a fair amount since the 1970s, and down in the last 10 years or so as well. The rise in world per capita emissions is again being driven by China in particular, as well as India and other emerging market economies.

News stories on the report (for example, here ) quote climate change scientists to the effect that it\’s time to \”throw everything we have at the problem.\” What does that mean in practice?

I posted about a year ago on my support for \”The Drill-Baby Carbon Tax: A Grand Compromise on Energy Policy.\” \”The Drill-Baby Carbon Tax is my proposed grand compromise for energy policy in the United States. As the name suggests, it has two parts. On one side, there would be a national commitment to move ahead with all deliberate speed in developing the vast U.S. fossil fuel energy resources that are now technologically available. On the other side, the United States would enact a appropriate carbon tax to offset concerns over the risks of climate change.\”

In particular, those who feel that climate change is truly serious threat should be supporting accelerated exploitation of natural gas resources. As the just-released Global Carbon Project report notes,  \”The recent shift from coal to gas in the US could “kick start” mitigation\”. In a post last June, I reviewed some evidence on \”Unconventional Natural Gas and Environmental Issues.\” Yes, it\’s important that the newly available gas resources be exploited with care and best practices. But because natural gas burns so much more cleanly than coal, this shift offers a definite method of reducing carbon emissions over the next decade or so.

In the spirit of throwing everything we can at the problem, what other options are available? Last July I posted in\”Other Air Pollutants: Soot and Methane\” on some analysis and proposals for reducing these other air pollutants, both for their immediate health benefits, which are substantial, and also because they play an important role in climate change. I\’m less positive about increasing fuel economy standards for cars, for reasons discussed in a February post, \”Are the New Fuel Auto Economy Standards for Real?\”

We should also be looking at other methods of environmental protection that could have offsetting effects on carbon emissions. As one example, the most recent issue of Resources magazine from Resources for the Future discussed protection of mangroves in \”Blue Carbon: A Potentially Winning Climate Strategy.\”

\”Mangroves, which are among the most unique and rapidly disappearing natural environments in the world, store enormous amounts of carbon, especially in the earth below their roots, possibly equal in total to roughly 2.5 times annual global CO2 emissions. Between 1990 and 2005, mangrove loss occurred at a rate of about 0.7 percent per year. When these coastal habitats are disturbed by changes in land use, the so-called blue carbon locked away in the bodies of the plants or in the soil is gradually exposed to air and released as CO2 into the atmosphere. In a new study released by RFF and the University of California, Davis, co-authors Juha Siikamäki, James Sanchirico, and Sunny Jardine estimate that protecting mangrove forests from development can reduce CO2 emissions at a cost of $4–$10 per ton, while the current market prices for carbon offsets are on the order of $10–$20. By protecting these ecosystems from development or destruction, global leaders could achieve a reduction in greenhouse gas emissions on par with taking millions of cars off the roads. This suggests that in many places mangroves are worth saving for their carbon storage potential alone.\”

The study by Siikamäki, Sanchirico, and Jardine appeared in the September 2, 2012, issue of Proceedings of the Natural Academy of Sciences: a pre-print version is available here.  In a follow-up \”Commentary\” in that same issue, Ken Caldeira offers a word of pragmatic warning about mangrove protection. He points out that \”approximately 80% of the global “emissions avoidance potential” from mangrove protection is located in the 50% of countries that rank lowest on the World
Bank governance index. … Protection of mangroves provides a cost-effective means of avoiding CO2 emissions and, importantly, helps to maintain biodiversity. However, we need good policies and good institutions that can provide confidence that contracts can be enforced, displacement can be prevented, and some semblance of permanence can be a realistic expectation. It is shameful that we do not simply find the resources to protect and sustainably manage all mangrove ecosystems—and
consider avoided carbon emissions to be an ancillary cobenefit.\”

What else might be tried? I\’m all in favor of continuing research and development on other options that might prove useful: alternative forms of energy that don\’t produce carbon emissions, technologies for carbon capture and storage, making more of the roofs and roads white so that they are more reflective, even more controversial proposals for geo-engineering the clouds or the ocean. But at present, it\’s not clear to me how cost-effective these steps would be at a scale large enough to matter.

I sometimes find myself in the situation of spending time with people who speak very strongly about the dangers of climate change and fiercely attack those who do not trumpet these risks. I sometimes stand accused of not speaking out loudly enough, which is probably a fair complaint. I have no expertise in atmospheric science, and I do not understand at any deep level how climate models are built. However, I do accept that many top scientists believe that the risks of global climate change are real, and when confronted with risks, economics can offer useful ways of thinking about how the cost-effective policies to mitigate those risks.

But what strikes me as peculiar in these discussions is that the same folks who have been lecturing me about how I don\’t blow my little trumpet loudly enough about the enormous risks of climate change become quite picky when talking about possible solutions. For them, the policy agenda for climate change is to favor energy conservation and \”green\” alternative energy, but little else. They often oppose exploiting new natural gas resources. They are often queasy about a carbon tax. They reflexively dislike the idea that someone might find a way to capture and store carbon–thus solving the problem of carbon emissions without any reduction in energy use. They spend little time on the subject of how one might get carbon emissions from China and India under some semblance of control, nor on issues of how to reduce soot and methane or how to save mangrove swamps.

If the risks posed by high levels of carbon emissions and other greenhouse gases are worth addressing, and I think they are, then it\’s potentially useful and cost-effective to think about addressing them from every possible direction.

For low-income countries, the appropriate definition of \”poverty\” is often based on the minimum level of consumption needed to keep body and soul together. For higher-income countries, poverty is almost always set as a relative measure: that is, an amount that would be too far below the standards commonly prevailing in that society. As low-income countries become better off, they typically start raising their poverty lines. As Martin Ravallion points out in \”A Relative Question\” in the December 2012 issue of Finance & Development:   \”For example, China recently doubled its national poverty line from 90 cents a day to $1.80 (adjusted to reflect constant 2005 purchasing power). Other countries—including Colombia, India, Mexico, Peru, and Vietnam—have also recently revised their poverty lines upward.\”

Ravallion and Shaohua Chen compiled a list of official poverty lines across 100 countries, and compare them to consumption levels per capita in each country. For the details of how it was done, see their working paper here. But here\’s the nice picture from Ravallion\’s F&D article showing the results.

Here are a few patterns that jump out at me:

1) As one might expect, what a country uses as its official level of poverty rises with the level of personal consumption. Ravallion writes: \”The highest line is in Luxembourg, at $43 a day, while the United States, with a similar level of average consumption to Luxembourg, has a $13-a-day line. The relativist gradient is evident as consumption levels decline. The average poverty line of the poorest 20 or so countries is $1.25 a day—which is how the World Bank’s international absolute line was set. Even among developing countries that use absolute lines, countries with higher average incomes tend to have higher real lines. Across countries it seems that poverty is indeed relative.\”

2) The U.S. poverty line, relative to income is substantially lower than the poverty lines often used by other high-income countries. For high-income countries, where to draw the poverty line is a social and political decision. Of course, it\’s also fairly common in many U.S. anti-poverty programs to have benefits that extend up to 125% or 150% or 200% or more of the \”official\” poverty line. Still, one suspects that what each society labels as \”poverty\” reveals something about how that society perceives the issue of those with low incomes and how that society will react to those issues.

3) When an economy grows rapidly, it is quite common to have a situation where some regions and individuals expand their consumption more rapidly than others. Thus, it is possible to have a situation in which people are better off in absolute terms–that is, their level of consumption has risen–but in which many of those same people feel that in relative terms, they are now worse off compared the new social norms in their society. Emerging markets like the BRIC countries Brazil, Russia, India, and China are all in their own ways facing the social turbulence in which reductions in absolute poverty are not matched by reductions in relative  poverty.