Tuesday, August 27, 2019

On the efficacy of the "sniff test" for understanding climate impacts


Economists (and other high-statured people) often pride themselves on having good noses.  When encountering a research finding, they can often apply a quick "sniff test" to evaluate whether the results of this finding are likely true or false.

We encounter the sniff test frequently when we discuss our estimates of the potential impacts of future warming on domestic or global economic output. Economic orthodoxy has has long held that 3-4C of warming will reduce global GDP by a few percentage points over the next century relative to a world were temperature was held fixed.  These estimates are based largely on earlier cross-sectional studies relating average output to average temperature, and have provided critical input to the construction of "damage functions" used in benchmark integrated assessment models.  Output from these models, in turn, have played a pivotal role in policy-making around the social cost of carbon (e.g. see here).

Newer analysis done by your G-FEED bloggers and others using panel based methods have found much larger potential effects of warming on output (e.g. see here), e.g. ~20% loss of global GDP in a +4C world, relative to a world where temperature had stayed fixed.  Because these estimates are so much larger than previous estimates, they have frequently failed the sniff test, both publicly and in referee reports we've received.  Some people have told us the results just seem "too big".  No way can climate change make us 20% poorer than we would have been without it.

Rather than adjudicating the methods underlying these newer results, I want to evaluate this sniff test itself by simply looking at some historical data.  This is in the spirit of Sol's last post: before we argue so strongly for a particular approach or result based on our priors, how bout we just look at some data.  Is there historical evidence for some regions performing 20% better than others over century or shorter time scales?

Exhibit 1:  let's just look at income growth in US states.  Below is a plot of real per capita income growth since 1980 in selected US states, with the y-axis normalized to show the % change in income relative to 1980.  Even in this relatively short 35-year time span (a third of a century, for those scoring at home), there is huge variation in performance: income in Massachusetts grew >130% over this period, while incomes in Nevada grew only 30%.  Even the difference between coastal-elite Massachusetts and California over this 35-year period exceeds 20%.  So variation in performance of around 20% tis clearly within our very recent historical experience in this country, on a time scale much shorter than a century.
Data: Bureau of Labor Statistics

Ah, you say, but this is just the US, and we know we have rampant inequality in this country, etc etc.  This variation can't be representative of the rest of the world, right?

Okay:  below is the plot for a small sample of OECD countries, using real GDP/cap from World Bank WDI.  Again, plotting data since only 1980, there's been a ton of variation in observed growth in per capita incomes, with neighboring high-income countries varying by way more than 20% in how much they've grown.  The plot is of course way more stark if you include developing countries, with some countries only growing a few percentage points over the period, and others (e.g. China) growing by >1000% (and screwing up the axes of any plot you try to make...).  So:  massive variation at the country level within just a few decades.
Data: World Bank World Development Indicators

Ah, you say, this is just ~35 years of data -- way too short a time scale to look at these long run trends.  Can't possibly be true for longer time scales, right? Don't countries converge on longer time scales?

Okay:  below is a plot of real per capita growth rates over multiple centuries, based on the Maddison data, for a random selection of countries with data back to 1800.  At this time scale, you see absolutely gargantuan differences in changes in per capita incomes.  German incomes grew nearly 5000% since 1800, Portuguese incomes grew 2000%, while South African incomes grew only about 500%.
Data: Maddison Project
These century scale differences in income over time are roughly two orders of magnitude larger than what our climate impact estimates would predict to be the difference between unmitigated climate change, and a world where warming didn't happen.

So in light of these historical data, can we please do away with the vaunted "sniff test"?  Our estimates or climate impacts are small relative to the variation in historical performance we've seen, and that's true whether you look within countries over recent decades, or (even more so) across countries over very long time periods.  None of this, of course, tells us whether climate change will reduce economic output by 20%;  it just tells us that we cannot reject a 20% estimate out of hand for being "way too big".

But this begs the question:  why are our noses so bad?  Why is the sniff test so un-efficacious? Perhaps we continue to under-appreciate the power of compounding.  A key result from our earlier paper (building on key earlier work by Dell, Jones, and Olken, and shown by multiple other groups as well, see here, here, here), is that changes in temperature can affect the growth rate of GDP.  And small effects on the growth rate can have large effects on the level of income over long time scales.

E.g. consider an economy growing at 2% for a century (the US, roughly).  Knocking only a quarter of a percent off the growth rate -- i.e. growing at 1.75% instead of 2% -- leads to an economy that's >20% poorer than it would have been after 100 years.  Very small growth effects can lead to large level effects over long times scales.

Another analogy (h/t to my colleague and co-author Noah Diffenbaugh) is the continued success of managed mutual funds, despite the clear evidence that the small management fees charged by these funds leads to huge reductions in your accumulated investment over longer time scales, relative to investing in index funds with no fees.  Just as small fees eat away at your total portfolio earnings, small hits to the growth rate cumulate into large level effects down the line.  But the mutual fund industry in the US is $18 trillion (!!).

So let's continue to argue about methodological issues and about how best to understand the response of aggregate output to warming.  More posts from us on that soon.  But, please, can we stop applying the sniff test to these results?  Our noses work less well than we think.

Monday, August 26, 2019

Do GDP growth rates have trends? Evidence from GDP growth data

Over the years, there have a been a handful of critiques of some of our prior research on GDP growth centering on the concern that we model country-specific time trends in growth rates. This concern seems to be experiencing a resurgence, due in part to an RFF working paper by Richard Newell, Brian Prest, and Steven Sexton which claims that including trends in GDP growth regressions is "overfitting" (I'll probably post about this paper in greater depth later). In addition, Richard Rosen recently posted a PNAS comment asserting that this approach was obviously flawed, and Richard Tol has been tweeting something similar.

So is it obviously wrong to account for trends in growth rates when looking at GDP growth data?  One way to settle this would be to look at some GDP growth data.

Grabbing the GDP growth data from our 2015 paper, I write a single (very boring) command that regresses GDP per capita growth rates for the USA on time and a constant (for the period 1960-2013).
reg TotGDPgrowthCap year if iso == "USA"
The result is seeing that GDP growth for the USA has been declining by a steady 0.043% per year per year (p-value = 0.018):


So it certainly seems that growth is unlikely to be constant over time. (Remember that a trend in growth rates means that log(income) over time is not linear, but curved.) Newell et al. advocate for treating the above time series as if it is centered around a constant (not a downward trend), which seems at odds with the data itself, the macro-economic theory of convergence, as well as the findings of the Newell et al analysis itself (more on that in the later post). Nowhere in the Newell et al. paper, the Rosen comment, or the Tol tweets did the authors look at the data and ask if there was statistical evidence of a trend.

The modeling approach in our previous work goes further than this, however. For example, in our 2015 paper we allow each country to exhibit a growth rate that has a (potentially) quadratic country-specific time trend.  This modeling choice was not arbitrary, but actually resulted from looking at our data fairly carefully.

First, countries sometimes have trends in growth that are not linear. As shown above, the trend in USA growth is extremely linear, so in a quadratic model the coefficient on the quadratic term will basically be zero and have no effect on the model (it's precisely -2.89e-06 if you try it with the USA data). But in other cases, the trend is clearly not linear. Take China for example: economic policies in China have changed dramatically over the last several decades, and the rate of these changes has itself not been steady, so the rate of changes in growth rates might itself change (implying curvature in a trend). This turns out to be reasonable intuition, and the quadratic term in a China-GDP time series regression proves to be nonzero and significant.

Second, different countries have different trends in growth, so it's important that trends in growth are country-specific. This too is pretty obvious if one looks at GDP growth data. For example, India's growth rate has been increasing over time (0.1% per year per year, p-value < 0.000) while the USA's growth rate has been declining (-0.043% per year per year, p-value = 0.018). A simple F-test strongly rejects the hypothesis that they are the same trend (p-value < 0.000). Newell et al. and others seems to advocate for models that assume trends are the same across all (or many) countries without testing if there is statistical evidence that these trends are different. Halvard Buhaug made a similar error in his critique of some of Marshall and David's work on climate and conflict (Kyle Meng and I demonstrated the single-command F-test Buhaug should have used in a PNAS paper).  Here are plots from four major economies demonstrating the diversity of trends that show up very clearly in the data:



Taken together, the data suggest that there is strong evidence that (1) there are nonzero trends in GDP growth, (2) these trends are not the same across countries, (3) these trends are not linear in many cases.

The safest way to deal with these facts (at least in the climate-economy contexts that we study) is to allow trends in growth rates to be modeled flexibly so that they can be different across countries and they can be curved if the data suggest they should be. There are multiple ways to do that, and country-specific quadratic trends is one straightforward way to do it. If the trends are actually linear, they will be modeled as basically linear (statistical software may actually drop the quadratic term if trends are linear enough). And if they are are the same across countries, they will be estimated to be the same. But if they are in fact different across countries, or curved over time, the model will not erroneously assume they are homogenous and constant.

I think the meta-moral of the story is to simply look at your data and listen to what it is telling you.  F-tests and the "plot" command are both compelling and often underutilized.

Tuesday, June 18, 2019

Congressional testimony on economic consequences of climate change

Since it's basically a blog post, here's the oral testimony I gave last week to the House Budget Committee during the Hearing on "The Costs of Climate Change: Risks to the U.S. Economy and the Federal Budget." If you have hours to spare, you can watch the whole hearing or read the full (referenced) written testimony. It's not every day that someone asks you summarize a decade of research progress from your field in 800 words, so it seems worth documenting it somewhere.
Thank you Chairman Yarmuth, Ranking Member Womack, and members of the Committee for inviting me to speak today. 
My name is Solomon Hsiang, and I am the Chancellor’s Professor of Public Policy
at the University of California, Berkeley and currently a Visiting Scholar at Stanford. I was trained in both economics and climate physics at Columbia, MIT, and Princeton. My research focuses on the use of econometrics to measure the effect of the climate on the economy. 
The last decade has seen dramatic advances in our understanding of the economic value of the climate.  Crucially, we now are able to use real-world data to quantify how changes in the climate cause changes in the economy. This means that in addition to being able to project how unmitigated emission of greenhouse gasses will cause the physical climate to change, we can now also estimate the subsequent effect that these changes are likely to have on the livelihoods of Americans. 
Although, as with any emerging research field, there are large uncertainties and much work remains to be done. Nonetheless, I’d like to describe to you some key insights from this field regarding future risks if past emissions trends continue unabated. 
First, climate change is likely to have substantial negative impact on the US economy.  Expected damages are on the scale of several trillions of dollars, although there remains uncertainty in these numbers. For example, in a detailed analysis of county-level productivity, a colleague at University of Illinois and I estimated that the direct thermal effects alone would likely reduce incomes nation-wide over the next 80 years, a loss valued at roughly 5-10 trillion dollars in net present value. In another analysis, a colleague from University of Chicago and I computed that losses from intensified hurricanes were valued at around 900 billion dollars. Importantly, these numbers are not a complete accounting of impacts and other notable studies report larger losses. 
Second, extreme weather events are short-lived, but their economic impact is long-lasting.  Hurricanes, floods, droughts, and fires destroy assets that took communities years to build.  Rebuilding then diverts resources away from new productive investments that would have otherwise supported future growth. For example, a colleague at Rhodium Group and I estimated that Hurricane Maria set Puerto Rico back over two decades of progress; and research from MIT indicates that communities in the Great Plains have still not fully recovered from the Dustbowl of the 1930s. As climate change makes extreme events more intense and frequent, we will spend more attention and more money replacing depreciated assets and repairing communities. 
Third, the nature and magnitude of projected costs differs between locations and industries.  For example, extreme heat will impose large health, energy, and labor costs on the South; sea level rise and hurricanes will damage the Gulf Coast; and declining crop yields will transform the Plains and Midwest. 
Fourth, because low income regions and individuals tend to be hurt more, climate change will widen existing economic inequality.  For example, in a national analysis of many sectors, the poorest counties suffered median losses that were 9 times larger than the richest.  
Fifth, many impacts of climate change will not be felt in the marketplace, but rather in homes where health, happiness, and freedom from violence will be affected.  There are many examples of this. Mortality due to extreme heat is projected to rise dramatically.  Increasingly humid summers are projected to degrade happiness and sleep quality. Research from Harvard indicates that warming will likely elevate violent crime nationwide, producing over 180,000 sexual assaults and over 22,000 murders across eight decades. Colleagues at Stanford and I estimate that warming will generate roughly 14,000 additional suicides in the next thirty years. Increasing exposure of pregnant mothers to extreme heat and cyclones will harm fetuses for their lifetime. These impacts do not easily convert to dollars and cents, but they still merit attention. 
Sixth, populations across the country will try to adapt to climate change at substantial cost.  Some adaptions will transform jobs and lifestyles, some will require constructing new defensive infrastructure, and some will involve abandoning communities and industries where opportunities have deteriorated. In all cases, these adaptations will come at real cost, since resources expended on coping cannot be invested elsewhere. 
Lastly, outside of the US, the global consequences of climate change are projected to be large and destabilizing.  Unmitigated warming will likely slow global growth roughly 0.3 percentage points and reduce political stability throughout the tropics and subtropics. 
Together, these findings indicate that our climate is one of the nation’s most important economic assets. We should manage it with the seriousness and clarity of thought that we would apply to managing any other asset that also generates trillions of dollars in value for the American people. 
Thank you.

Monday, November 5, 2018

The SHCIT List

Just like George Lucas, I write my literature reviews out of order. But I'm happy to say that after several years of messing around in this field, in collaboration with great coauthors, I've finally finished the tetralogy that I've always wanted to complete.  The latest installment (Episode I) just came out in the JEP (it's designed to be a soft on-ramp for economists who are unfamiliar with climate change science to get acquainted with the problem).

Sol Hsiang's Climate Impacts Tutorial reading list:

  1. An Economist’s Guide to Climate Change Science  (what is the physical problem?)
  2. Using Weather Data and Climate Model Output in Economic Analyses of Climate Change (how do we look at the data for that problem?)
  3. Climate Econometrics (how does one analyze that data to learn about the problem?)
  4. Social and Economic Impacts of Climate (what did we learn when we did that?)

This addition completes the box set that can get any grad student up to speed on the broader climate impacts literature.

I hope this is helpful. I think I'm going to go and do more research on elephant poaching now...


Thursday, August 23, 2018

Let there be light? Estimating the impact of geoengineering on crop productivity using volcanic eruptions as natural experiments (Guest post by Jonathan Proctor)

[This is a guest post by Jonathan Proctor, a Doctoral Fellow at the Global Policy Lab and PhD candidate in the Ag and Resource Econ department here at Berkeley]

On Wednesday I, and some notorious G-FEEDers, published a paper in Nature exploring whether solar geoengineering – a proposed technology cool the Earth by reflecting sunlight back into space—might be able to mitigate climate-change damages to agricultural production. We find that, as intended and previously described, the cooling from geoengineering benefits crop yields. We also find, however, that the shading from solar geoengineering makes crops less productive. On net, the damages from reduced sunlight wash out the benefits from cooling, meaning that solar geoengineering is unlikely to be an effective tool to mitigate the damages that climate change poses to global agricultural production and food security. Put another way, if we imagine SRM as an experimental surgery, our findings suggest that the side effects are as bad as the cure.

Zooming out, solar geoengineering is an idea to cool the earth by injecting reflective particles --usually precursors to sulfate aerosols -- into the high atmosphere. The idea is that these particles would bounce sunlight back into space and thus cool the Earth, similarly to how you might cool yourself down by standing in the shade of a tree during a hot day. The idea of such sulfate-based climate engineering was, in part, inspired by the observation that the Earth tends to cool following massive volcanic eruptions such as that of Pinatubo in 1991, which cooled the earth by about half a degree C in the years following the eruption.

Our visualization of the stratospheric aerosols (blue) that scattered light and shaded the planet after the eruption of Mount Pinatubo in 1991. Each frame is one month of data. Green on the surface indicates global crop lands. (The distance between the aerosol cloud and the surface is much larger than in real life.) 

A major challenge in learning the consequences of solar geoengineering is that we can’t do a planetary-scale experiment without actually deploying the technology. (Sol’s questionably-appropriate analogy is that you can’t figure out if you want to be a parent through experimentation.) An innovation here was realizing that we could learn about the impacts of solar geoengineering without incurring the risks of an outdoor experiment by using giant volcanic eruptions as natural experiments. While these eruptions are not perfect proxies for solar geoengineering in every way, they give us the necessary variation we need in high atmosphere aerosol concentrations to study some of the key effects on agriculture. (We expand on how we account for the important differences between the impacts of volcanic eruptions and solar geoengineering on agricultural production later in this post). This approach builds on previous work in the earth science community which has used the eruptions to study solar geoengineering’s impact on climate.  Here’s what we found:

Result 1: Pinatubo dims the lights


First, we find that the aerosols from Pinatubo had a profound impact on the global optical environment. By combing remotely sensed data on the eruption’s aerosol cloud with globally-dispersed ground sensors of solar radiation (scraped from a Russian website that recommends visitors use Netscape Navigator) we estimate that the Pinatubo eruption temporarily decreased global surface solar radiation (orange) by 2.5%, reduced direct (i.e. unscattered, shown in yellow) insolation by 20% and increased diffuse (i.e. scattered, shown in red) sunlight by 20%.

Effect of El Chichon (1982) and Mt Pinatubo (1991) on direct (yellow), diffuse (red) and total (orange) insolation for global all-sky conditions.

These global all-sky results (i.e. the average effect on a given day) generalize previous clear-sky estimates (the effect on a clear day) that have been done at individual stations. Like a softbox or diffusing sheet in photography, this increase in diffuse light reduced shadows on a global scale. The aerosol-scattering also made redder sunsets (sulfate aerosols cause a spectral shift in addition to a diffusion of light), similar to the volcanic sunsets that inspired Edvard Munch’s “The Scream.” Portraits and paintings aside, we wanted to know: how did these changes in sunlight impact global agricultural production?

Isolating the effect of changes in sunlight, however, was a challenge. First, the aerosols emitted by the eruption alter not only sunlight, but also other climatic variables such as temperature and precipitation, which impact yield. Second, there just so happened to be El Nino events that coincided with the eruptions of both El Chichon and Pinatubo. This unfortunate coincidence has frustrated the atmospheric science community for decades, leading some to suggest that volcanic eruptions might even cause El NiƱos, as well as the reverse (the former theory seems to have more evidence behind it).

To address the concern that volcanoes affect both light and other climatic conditions, we used a simple “condition on observables” design – by measuring and including potential confounds (such as temperature, precipitation and cloud cover) in the regression we can account for their effects. To address the concurrent El Nino, we do two things. First, we directly condition on the variables though which an El Nino could impact yields – again temperature, precipitation and cloud cover. Second, we condition on the El Nino index itself, which captures any effects that operate outside of these directly modeled channels. Essentially, we isolate the insolation effect by partitioning out the variation due to everything else – like looking for your keys by pulling everything else out of your purse.



The above figure schematically illustrates our strategy. The total effect (blue) is the sum of optical (red) and climatic components (green). By accounting for the change in yields due to the non-optical factors, we isolate the variation in yields due to stratospheric aerosol-induced changes in sunlight.

Result 2: Dimming the lights decreases yields


Our second result, and the main scientific contribution, is the finding that radiative scattering from stratospheric sulfate aerosols decreases yields on net, holding other variables like temperature constant. The magnitude of this impact is substantial – the global average scattering from Pinatubo reduced C4 (maize) yields by 9.3% and C3 (soy, rice and wheat) yields by 4.8%, which is two to three times larger than the change in total sunlight. We reconstruct this effect for each country in the figure below:

Each line represents one crop for one country. These are the reconstructed yield losses due to the estimated direct optical effects of overhead aerosols.

My young cousins dismissed the sign of this effect as obvious – after all plants need sunlight to grow. But, surprising to my young cousins, the prevailing wisdom in the literature tended to be that scattering light should increase crop growth (Sol incessantly points out that David even said this once). The argument is that the reduction in yields from loss of total light would be more than offset by gains in yield through an increase in diffuse light. The belief that diffuse light is more useful to plants than direct light stems from both the observation that the biosphere breathed in carbon dioxide following the Pinatubo eruption and the accompanying theory that diffusing light increases plant growth by redistributing light from the sun-saturated leaves at the top of the canopy to the light-hungry leaves below. Since each leaf has diminishing photosynthetic productivity for each incremental increase in sunlight, the theory argues, a more equal distribution of light should promote growth.

Aerosols scatter incoming sunlight, which more evenly distributes sunlight across the leaves of the plant. We test whether the loss of total sunlight or the increase in diffuse light from aerosol scattering has a stronger effect on yield.

While this “diffuse fertilization” appears to be strong in unmanaged environments, such as the Harvard Forest where the uptake of carbon increased following the Pinatubo eruption, our results find that, for agricultural yields, the damages from reduced total sunlight outweigh the benefits from a greater portion of the light being diffuse.

We cannot tell for sure, but we think that this difference between forest and crop responses could be due to either their differences in geometric structure (which could affect how deeply scattered light might penetrate the canopy):


Or to a re-optimization towards vegetative growth at the cost of fruit growth in response to the changes in light:

Two radishes grown in normal (left) and low light (right) conditions.  Credit: Nagy Lab, University of Edinburgh

This latter re-optimization may also explain the relatively large magnitude of the estimated effect on crop yield.

Result 3: Dimming damages neutralize cooling benefits from geo


Our final calculation, and the main policy-relevant finding of the paper, is that in a solar geoengineering scenario the damages from reduced sunlight cancel out the benefits from warming. The main challenge here was figuring out how to apply what we learned from volcanic eruptions to solar geoengineering, since the climate impacts (e.g. changes in temperature, precipitation or cloud cover) of a short-term injection of stratospheric aerosols differ from those of more sustained injections (e.g. see here and here). To address this, we first used an earth system model to calculate the impact of a long-term injection of aerosols on temperature, precipitation, cloud cover and insolation (measured in terms of aerosol optical depth). We then apply our crop model that we trained on the Pinatubo eruption (which accounts for changes in temperature, rainfall, cloud cover, and insolation independently) to calculate how these geoengineering-induced changes in climate impact crop yields. This two-step process allows us to disentangle the effects of solar geoengineering on climate (which we got from the earth system model) and of climate on crops (which we got from Pinatubo). Thus, we can calculate the change in yields due to a solar geoengineering scenario even though volcanic eruptions and solar geoengineering have different climatic fingerprints. Still, as with any projection to 2050, caveats abound such as the role of adaptation, the possibility of optimized particle design, or the possibility that variables other than sunlight, temperature, rainfall and cloud cover could play a substantial role.

Estimated global net effect of a geo-engineering on crop yields through four channels (temperature, insolation, cloud cover, precipitation) for four crops. The total effect is the sum of these four partial effects.

So, what should we do? For agriculture, our findings suggest that sulfate-based solar geoengineering might not work as well as previously thought to limit the damaging effects of climate change. However, there are other sectors of the economy that could potentially benefit substantially from geoengineering (or be substantially damaged, we just don’t know). To continue the metaphor from earlier, just because the first test of an experimental surgery had side effects for a specific part of the human body does not mean that the procedure is always immediately abandoned. There are many illnesses that are so harmful that procedures known to cause side effects are sometimes still worth the risk. Similarly, research into geoengineering should not be entirely abandoned because our analysis demonstrated one adverse side effect, there may remain good reasons to eventually pursue such a strategy despite some known costs. With careful study, humanity will eventually gain a better understanding of this powerful technology. We hope that the methodology developed in this paper might be extended to study the effects of sulfate aerosol injection on ecosystem or human health and would be open to collaborate on future studies. Thanks for reading, and I’m excited to hear any thoughts the community may have.

Tuesday, April 3, 2018

Claims of Bias in Climate-Conflict Research Lack Evidence [Uncut Version]

Marshall and I had an extremely brief Correspondence published in Nature last week. We were reacting to an article "Sampling bias in climate–conflict research" by Adams et al. in Nature Climate Change and an Editorial published in Nature discussing and interpreting some of the statements by Adams et al.  Below is the full 300-word unedited "director's cut" of our original submission, which was edited down by the journal. Two other short comments in the same issue (actually same page!) provided other perspectives.

Butler & Kefford pointed out that prior literature describes climate stress as amplifying pre-existing conflict risk, rather than being the "sole cause" as Adams et al. suggest previous studies suggest (yes, this is getting confusing). We agree with this interpretation and the evidence seem to back it up pretty clearly. Our analyses indicate fairly consistent percentage changes in conflict risk induced by climatic shifts, so places with high initial risk get more of a boost from climatic events.

Glieck, Lewandowsky & Kelly argued that the earlier articles were an oversimplification of prior research, and that focusing on locations where conflict occurs is important for helping to trace out how climate induces conflict. I would think that this point would resonate with Adams et al, since some of those authors do actual case studies as part of their research portfolio. It does kind of seem to me that case studies would be the most extreme case of "selection on the outcome" as Adams et al define it.

Finally, here's what we originally wrote to fit on a single MS Word page:

Claims of Bias in Climate-Conflict Research Lack Evidence 
Solomon Hsiang and Marshall Burke 
A recent article by Adams et al. [1] and accompanying editorial [2] criticize the field of research studying links between climate and conflict as systematically biased, sowing doubt in prior findings [3,4]. But the underlying analysis fails to demonstrate any evidence of biased results. 
Adams et al. claim that because most existing analyses focus on conflict-prone locations, the conclusions of the literature must be biased. This logic is wrong. If it were true, then the field of medicine would be biased because medical researchers spend a disproportionate time studying ill patients rather than studying each of us every day when we are healthy. 
Adams et al.’s error arises because they confuse sampling observations within a given study based on the dependent variable (a major statistical violation) with the observation that there are more studies in locations where the average of a dependent variable, the conflict rate, is higher (not a violation). Nowhere does Adams et al. provide evidence that any prior analysis contained actual statistical errors. 
We are also concerned about the argument advanced by Adams et al. and repeated in the editorial that it is “undesirable” to study risk factors for populations at high risk of conflict because it may lead to them being “stigmatized.” Such logic would imply that study of cancer risk factors for high risk patients should not proceed because success of these studies may lead to the patients being stigmatized.  We believe that following such recommendations will inhibit scientific research and lead to actual systematic biases in the literature. 
Research on linkages between climate and conflict is motivated by the desire to identify causes of human suffering so it may be alleviated. We do not believe that shying away from findings in this field is an effective path towards this goal. 
References 
1. Adams, Ide, Barnett, Detges. Sampling bias in climate–conflict research. Nature Climate Change (2018).
2. Editorial. Don’t jump to conclusions about climate change and civil conflict. Nature, 555, 275-276 (2018).
3. Hsiang, Burke, Miguel. Science (2013) doi:10.1126/science.1235367
4. Burke, Hsiang, Miguel. Ann. Rev. Econ. (2015) doi:10.1146/annurev-economics-080614-115430



Monday, December 4, 2017

New Damage Functions for the Agricultural Sector – Guest Post by Fran Moore

Last week I had a new paper come out with some fantastic co-authors (Delavane Diaz, Tom Hertel, and Uris Baldos) on new damage functions in the agricultural sector. Since this covers a number of topics of interest to G-FEED readers (climate damages, agricultural impacts, SCC etc), I thought I’d dig a bit into what I see as some of the main contributions.
Firstly what we do. Essentially this is an exercise in trying to link a damage function directly to the scientific consensus on climate impacts as represented by findings in the IPCC. We therefore rely on a database of over 1000 results on the yield response to temperature previously published by Challinor et al. and used to support conclusions in the food security chapter of Working Group 2. We do a bit of reanalysis (using a multi-variate regression, adding soybeans, allowing for more geographic heterogeneity in response) to get yield-temperature response functions that can be extrapolated to a global grid to give productivity shocks at 1, 2, and 3 degrees of warming (available for other researchers to use here).
As readers of G-FEED well know though, getting productivity shocks is only half the battle because what we really want are welfare changes. Therefore, we introduce our productivity shocks into the 140-region GTAP CGE model, which has a particularly rich representation of the agriculture sector and international trade. This then gives us welfare changes due to agricultural impacts at different levels of warming, which is what we need for an IAM damage function. Finally, we take our findings all the way through to the SCC by replacing the agricultural damages from FUND with our new estimates. Our headline result is that improving damages just in the agricultural sector leads the overall SCC to more than double.
There’s lots more fun stuff in the paper and supplementary information including a comparison with results from AgMIP, some interesting findings around adaptation effectiveness, and a sensitivity analysis of GTAP parameters. But here I want to highlight what I see as three main contributions.
Firstly I think a major contribution is to the literature on improving the scientific validity of damages underlying IAM results. The importance of improving the empirical basis of damage functions has been pointed out by numerous people. This is something Delavane and I have worked on previously using empirically-estimated growth-rate damages in DICE, and something that Sol and co-authors have done a lot of work on. I think what’s new here is using the existing biophysical impacts literature and tracing its implications all the way through to the SCC. There is an awful lot of scientific work out there on the effects of climate change relevant to the SCC, but wrangling the results from a large number of dispersed studies into a form that can be used to support a global damage function is not straightforward (something Delavane and I discuss in a recent review paper). In this sense the agriculture sector is probably one of the more straightforward to tackle – we definitely relied on previous work from the lead authors of the IPCC chapter and from the AgMIP team. I do think this paper provides one template for implementing the recommendation of the National Academy of Sciences SCC report around damage functions – that they be based on current and peer-reviewed science, that they report and quantify uncertainty wherever possible, and that calibrations are transparent and well-documented.
Secondly, an important contribution of this paper is on quantifying the importance of general-equilibrium effects in determining welfare changes. Since so much climate impacts work estimates local productivity changes, it raises the question of what these can or can’t tell us about welfare under global climate change. We address this question directly by decomposing our welfare changes into three components: the direct productivity effect (essentially just the local productivity change multiplied by crop value), the terms-of-trade effect, and the allocative efficiency effect (caused by interactions with existing market distortions). The last one is generally pretty small in our work, so regional changes in welfare boil down to a combination of local productivity changes and the interaction between a region’s trade position and global price changes. This breakdown for 3 degrees of warming is shown below.

For these productivity shocks, the terms-of-trade (ToT) effect is regionally pretty important. In a number of cases (notably the US, Australia, Argentina, and South Africa) it reverses the sign of the welfare change of the productivity effect. In other words, a number of regions experience yield losses but welfare gains because the increasing value of exports more than compensates for the productivity losses (with the opposite in South Africa). There are a few rules-of-thumb for thinking about how important the ToT effects are likely to be. Firstly, the ToT effects cancel out at the global level, so if you are only interested in aggregate global damages, you don’t have to worry about this effect. By similar logic, the higher the level of regional aggregation, the less important ToT effects are likely to be, since larger regions will likely contain both importers and exporters. Secondly, the importance of ToT effects depends on the magnitude of relative price changes which in turn depends on the productivity shocks. If the effect of climate change is to redistribute production around the globe rather than to increase or decrease aggregate production, then ToT effects will be smaller. We see this in our AgMIP results, where losses in the tropics are offset to a greater degree by gains in temperate regions, leading to smaller price changes and correspondingly smaller ToT effects.
A final point I’d like to highlight is the quantitative importance of our findings for the SCC. We knew from previous work by Delavane that agriculture is important in driving the SCC in FUND. Nevertheless, such a large increase in the total SCC from updating just one sector, in a model that contains 14 different impact sectors, is striking and begs the question of what would happen with other sectors. Moreover, there are suggestions that other models might also be underestimating agricultural impacts. Neither PAGE nor DICE model the agricultural sector explicitly, but both include agricultural impacts as part of more aggregate damage functions (market impacts in PAGE09 and non-SLR damages in DICE 2013). By coupling damage functions from these models to standardized socio-economic and climate modules, we are able to make an apples-to-apples comparison of our agriculture-sector damages with these damage functions. The graph below didn’t make it into the paper, but I think is informative:
                                                                                                                         
What you see is that our estimated agricultural damages (from the meta-analysis of yield estimates) are actually larger than all market damages included in PAGE. This indicates either that there are very small negative impacts and large off-setting benefits in other market sectors, or that PAGE is substantially under-estimating market damages. Comparing our results to DICE would imply that agricultural impacts constitute 45% of non-SLR damages. This seems high to me, considering this damage function includes both market and non-market (i.e. mortality) damages. For instance, in their analysis of US damages, Sol and co-authors found agricultural impacts to be dwarfed by costs from increased mortality, and to be smaller than effects on labor productivity and energy demand, suggesting to me that agricultural damages might also be currently under-estimated in DICE.

That’s my (excessively-long) take on the paper. Thank you to the GFEEDers for the opportunity. Do get in touch if you have any questions or comments on the paper – fmoore at ucdavis dot edu.