Yotta Point

Election 2014: Why Did Democrats Lose the US Senate?

I decided to return briefly from hibernation to do some analysis on this. My findings are posted in this presentation:

Election 2014: Why Did Democrats Lose The US Senate?

 

P.S. The PDF version is here.

Fallacies Galore in Ridley's Scarcity Fallacy

A weekend ago, Matt Ridley wrote an engaging piece for the Wall Street Journal that was originally titled "The Scarcity Fallacy" - the title has since changed to "The World's Resources Aren't Running Out". The basic thesis of his essay is this:

Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again

In the body of his essay, Ridley says:

Ecologists call this "niche construction"—that people (and indeed some other animals) can create new opportunities for themselves by making their habitats more productive in some way. Agriculture is the classic example of niche construction: We stopped relying on nature's bounty and substituted an artificial and much larger bounty.

Economists call the same phenomenon innovation. What frustrates them about ecologists is the latter's tendency to think in terms of static limits. Ecologists can't seem to see that when whale oil starts to run out, petroleum is discovered, or that when farm yields flatten, fertilizer comes along, or that when glass fiber is invented, demand for copper falls.

...and adds:

I nowadays lean to the view that there are no limits because we can invent new ways of doing more with less.

I tend to generally agree with Ridley's premise that innovation of various kinds has allowed us to extend the use of resources or find alternate ways to meet our needs. I very much share this optimistic view of humanity and future possibilities.

That said, some of the claims in his essay made me wonder how well researched the essay is and how accurately it represents the facts or mainstream views on some of the areas of discussion. Since I write now and then on climate change, I figured I'd pick that as an example to discuss Ridley's essay - sure enough, a quick read of Ridley's claims makes it evident his discussion is amazingly superficial and creates many fallacies of its own in terms of how it represents the scientific/economic thinking on this subject. In fact, I would not be surprised if his discussion of topics other than climate change were likely as superficial and fallacy-ridden, because the last time he wrote on similar subjects in 2012, the claims were problematic to say the least.

Let's start with these two passages in his current essay (I've highlighted some portions in bold text):

This disagreement goes to the heart of many current political issues and explains much about why people disagree about environmental policy. In the climate debate, for example, pessimists see a limit to the atmosphere's capacity to cope with extra carbon dioxide without rapid warming. So a continuing increase in emissions if economic growth continues will eventually accelerate warming to dangerous rates. But optimists see economic growth leading to technological change that would result in the use of lower-carbon energy. That would allow warming to level off long before it does much harm.

It is striking, for example, that the Intergovernmental Panel on Climate Change's recent forecast that temperatures would rise by 3.7 to 4.8 degrees Celsius compared with preindustrial levels by 2100 was based on several assumptions: little technological change, an end to the 50-year fall in population growth rates, a tripling (only) of per capita income and not much improvement in the energy efficiency of the economy. Basically, that would mean a world much like today's but with lots more people burning lots more coal and oil, leading to an increase in emissions. Most economists expect a five- or tenfold increase in income, huge changes in technology and an end to population growth by 2100: not so many more people needing much less carbon.

Dictionary.com defines "fallacy" as follows:

Some Readings on Income and Wealth Inequality and Intergenerational Mobility

I have been trying to develop a deeper understanding on the topic of income and wealth inequality and wanted to bookmark for myself some pertinent research and posts.

Josh Barro [Business Insider]

• 95% Of Income Gains Since 2009 Went To The Top 1% — Here's What That Really Means
• David Brooks is Wrong About Inequality
• Sorry, Libertarians — Inequality Does Matter

Andrew Berg, Jonathan Ostry [IMF]

• Equality and Efficiency
• [with Tsangarides] Redistribution, Inequality, and Growth
• Inequality and Unsustainable Growth: Two Sides of the Same Coin?

Matthew O'Brien [The Atlantic]

• Why The 1% Don't Feel Rich

Miles Corak [University of Ottawa]

• Income Inequality, Equality of Opportunity, and Intergenerational Mobility; PDF
• How to Slide Down the ‘Great Gatsby Curve’: Inequality, Life Chances, and Public Policy in the United States

Kathleen Geier [Inequality Matters]

• Ten facts you should know about global economic inequality

Colin Gordon [Dissent]

• The Computer Did It? Technology and Inequality
• Who Pays? Taxes and American Inequality

David Howell [The New School]

Unionization and Jobs/Wages in Today's Economy

Evan Soltas’ blog posts and chart, following his Bloomberg View article ("Is the U.S. Better Off Without Unions?"), are quite interesting and worth reading. I tend to agree with his observations on why unionization has declined in the US (and apparently other developed countries) in the second half of the 20th century and I also question the focus on unions as a key method of addressing unemployment and wage pressure challenges faced by US workers. However, I am not convinced that Soltas' ideas to address the issue are that effective. So, I'd like to offer a different perspective on this subject given my background as an executive in the Silicon Valley tech industry. This perspective focuses on the after-effects of stock-based compensation on various macro factors.

First, some context. In Silicon Valley, tech labor has tended to be non-unionized for quite some time. Additionally, over the last two decades, I've seen software design, hardware manufacturing, hardware design and other functions move outside of the US (I have also been in positions where I have moved certain jobs overseas). The reasons are simple. There are qualified workers who can do these jobs outside the US, typically at a much lower cost. Moreover, when a company's competitors move jobs or are located overseas in cheaper labor markets, for financially competitive reasons the company ends up having to do the same. Additionally, some of the larger tech companies that sell directly in non-US end markets need workers in those regions. Despite this trend, and despite many tech jobs being non-unionized, Silicon Valley has managed to maintain a decent jobs picture (example) for well-paid employees - I think primarily because US tech companies continue to be at the forefront of driving significant innovation where more experienced US workers have an advantage over workers is job markets outside the US. My experience suggests that at least in Tech, where workers tend to be paid relatively well because of their skills, unionization has not been a significant factor in driving employment or wage trends. I can’t extrapolate from this to infer that the tech experience should be applied to every other industry but it is suggestive that we need to look for deeper explanations for increases in income inequality and decline in unionization in the US and other economies.

The Hockey Stick and The Climate Wars: A Brief Review and Climate Change Discussion

I recently read Professor Michael Mann's book "The Hockey Stick and The Climate Wars". There are several reviews of the book online, a couple of examples being Shawn Lawrence Otto's review at The Huffington Post and Jeff Masters' review at Wunderground. However, I found the book compelling, engaging and valuable on several fronts and felt it was worth making a few observations here. If you are a person who is not entirely familiar with the recent history and politics of climate science, it offers a highly readable and informative summary that captures some of the progress and setbacks over the last two decades or so. Mann's passion for climate science comes through very well in the book and in the process he also addresses in some detail the following aspects of climate change.

I. Scientific Process, Climate Politics & Denialism

1) The IPCC scientific process and rigor which is quite substantial to the point of making the reports somewhat conservative - despite the seepage of occasional errors into IPCC reports

2) The right role of true skepticism in scientific inquiry - and how this differs from the practice of climate change denial (or climate denial) that uses a combination of (a) a veneer of skepticism, (b) often incompetence in basic statistics and (c) the use of deliberately misleading data

• Mann cites several examples in his book; a perusal of blogs like Deltoid, Skeptical Science, Open Mind and others provides interminable, yet dark, amusement on this front

3) The slow but gradual evolution of scientific knowledge, a process that is self-correcting and generates better understanding over time

• Mann offers many interesting examples from the climate change field contrasting them with the typical demands of the blog/media/news cycle that might immediately trumpet a new research paper as if it almost single-handedly destroyed the scientific consensus, without waiting for the time-intensive scientific process to peer assessment, correction and learning

4) The role of the key players in the fossil-fuels sector - whose future assets, fuel reserves and stock prices are at significant risk if meaningful climate change policy actions are taken - and that of other ideologically aligned wealthy donors in funding climate denialism

5) The deplorable, often personal attacks on climate scientists who publicly speak or write about the serious manifestations and consequences of climate change through willful misrepresentation of their or others' work and/or false accusations of fraud or misconduct

• As Mann shows, these attacks are usually fronted by certain politicians (usually Republicans close to the fossil fuel industry), a handful of scientists who are typically not climate science experts, and often by denialist writers, bloggers and pseudo-scientists. Mann also suggests that the manufactured controversy has often coincided with time periods when the U.S. Congress was poised to pass climate change legislation - thereby making it easier to kill such legislation.
• The attacks and their consequences are examined in much detail given Mann's personal experience and the character assassination campaign he and some of his peers have faced over the years; he particularly explores the controversy over the "hockey stick" and the Climategate episode
• Mann makes reference to another excellent, must-read book on this particular topic - "Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming" by Naomi Oreskes and Eric Conway

6) The increasing use of blogs (e.g., RealClimate) by climate scientists to communicate the science to the public and media, and push back in real time on false, distorted or misleading presentations of climate data

II. Science of Climate Change

7) The role that various natural (e.g., solar activity, volcanoes, various oceanic oscillations that operate over multi-year, decadal, multi-decadal or multi-century periods - such as the multi-year oscillation called ENSO or El-Nino/La Nina) and human-induced/anthropogenic factors (CO₂, sulfur dioxide - SO₂, etc.) play in influencing global warming and climate change

• Mann walks readers through how different factors can affect climate and temperature in different ways, thereby providing a nuanced discussion of climate change and warming, which is often missing or understated in websites arguing against the evidence for anthropogenic global warming

8) The role of temperature proxies - such as tree rings, ice cores, lake sediments, etc. - in the estimation of local, regional and global average temperatures in past centuries and millennia when accurate temperature measurements were not available

• In particular, Mann devotes considerable effort to explain the famous "hockey stick" graph (which has since been independently validated by both the National Academy of Sciences as well as recent work by NOAA's NCDC) and discusses topics such as the so-called Medieval Warm Period, urban-heat island (UHI) effect, and others which play an important role in climate change debates

9) The use of statistical frameworks such as principal component analysis (PCA) in the understanding of underlying phenomena and variables driving temperature changes

Mann's book tries to cover all that and more and does a really nice job overall in giving the reader an expansive view of the nuanced subject of climate change, while passionately conveying the real urgency of acknowledging the dangers of ongoing and future warming and the need for immediate action. I highly recommend this book.

In terms of where the book could have been improved, I would suggest the following thoughts for Mann and other climate scientists to consider. Unless someone is an avid follower of the field of climate change and global warming, it is difficult to grasp the nuances and subtleties inherent in understanding climate, weather and the variables that can cause them to shift. I think Mann's book can be further improved, perhaps in his next edition, by more explicitly delving into common points of confusion for people I have talked to, such as:

• Dueling reports of record heat and record cold (recent examples): This confusion might persist because typical discussions on global warming, even by scientists, fail to adequately inform people that warming refers only to averages and that record heat and cold can co-exist in a warming world as long as record heat events significantly outnumber record cold events as the average temperature rises
• Reports attributing certain seemingly contradictory climatic and meteorological events to global warming (e.g., less snow v. blizzards, flooding v. drought, etc.): It's important that scientists invest more time in developing communication to explain how both droughts and severe flooding could result from warming, that both blizzards and reduced snow can be a consequence of warming, etc.
• Why seemingly modest increases in global temperature (e.g., 0.8 degrees C) should result in significant increases in extreme events: It wasn't until the excellent work of Hansen et al. in 2012 did a clear framework become available to average readers like me to explain to others that a small shift in averages can lead to a large increase in probability of 3-sigma, 4-sigma and beyond temperatures, which in turn can lead to more extreme events over time, relative to past experience
• Lack of clear understanding of the role of additional factors that cause otherwise CO₂-influenced temperature changes to be non-monotonic: The recent work by Skeptical Science is very welcome in this context but it is rare to see scientists use simplified means of communication on such an important topic

Additionally, I would like to urge Mann and his colleagues/peers to invest more time in discussing & explaining the role of the potent greenhouse gas methane (CH₄) and the pros and cons of migrating our energy use from fuels like coal to natural gas, especially given the increasing concerns of methane leakage during natural gas extraction.

Finally, while I very much like blogs like Real Climate, climate scientists need to do a better job of communicating their findings and implications in plain English. Again, Skeptical Science is doing a fantastic job on this and newer initiatives like Climate Communication are welcome and overdue but scientists need to be more tuned to this need going forward.

Reads for June 24

It's been a while since my last round-up of interesting posts, so here is a reading list for this weekend (updated).

Economics & Finance

• Henry Blodget at Business Insider: Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low
• Ben Cassel at Real Time Economics (WSJ): "Number of the Week: Corporations Not Hoarding Cash"
• Eric Platt at Business Insider: America's Debt Levels Are Falling To Pre-Crisis Levels - but also see David Cay Johnston at Reuters looking at income as well: "America's Long Slope Down" and Mish Shedlock's comments at Global Economic Analysis
• Tyler Durden at Zero Hedge: The Chart That Scares The "1%" The Most
• Joe Weisenthal at Business Insider: Yesterday's Philly Fed Report Implies A Horrendous Jobs Report
• Joe Weisenthal at Business Insider: The Difference Between Obama's First Term And Bush's First Term In One Devastating Chart
• New Deal Democrat at Business Insider: Inflation Is Under Control, And It's A Sign Of Bad Things
• Zarathustra at Also Sprach Analyst: Quantitative easing and the (lack of) responses in bond yields
• Paul Krugman at NYT: Interest Rates: Varieties of Error
• Scott Barber at Alpha Now/Thomson-Reuters: "Crude Oil Futures Bouncing Near Their Lows of 2012" - has interesting charts comparing historical and recent behavior of oil vs. economic indicators and stocks; also see Sober Look's related analysis: "Crude oil vs. US equities: dislocation continues"
• Sober Look: "Dr. Copper Says Watch Out Below" & "Summer of 2011 Redux"
• Mark Thomas at Economist's View: Did Income Inequality Contribute to the Great Recession?
• Jie Jenny Zou at Real Time Economics (WSJ): Inequality Has Increased in Income and Consumption, Economists Argue [via]; here's the link to the paper by Attanasio, Hurst and Pistaferri: "The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010" [and a related post on income inequality across recent Presidents here; links here and here worth a look as well]
• David Cay Johnston at Reuters: "The Fortunate 400"
• Econompicdata: "Valuation Matters: Equities vs Bonds Edition"; "Dividend vs. Treasury Yields"; "Stocks For The Long Run?"
• Jared Bernstein at On The Economy: "CBO’s Long-Term Budget Outlook: What It’s Telling Us"
• Zarathustra at Also Sprach Analyst: "Coal inventory in various Chinese ports hit record highs" [also see Sober Look's post on this]
• Zarathustra at Also Sprach Analyst: "Is China massaging macro data? (Ans: Yes)"
• Sober Look: "India's Currency Spirals Out of Control" [see this older post as well]

Energy & Environment, Climate Change

• Climate Central: The Heat is On: U.S. Temperature Trends
• National Research Council: Sea-Level Rise for the Coasts of California, Oregon, and Washington: Past, Present, and Future (2012)
• Climate Central has a neat interactive online tool that allows you to assess the impact of sea-level rise on your coastal town or city
• Stefan at Real Climate: "What makes sea-level rise?"
• Andrew Freedman at Climate Central: "Did Global Warming Set Stage for Duluth Flooding?"

Healthcare

• Lane Kenworthy at Consider the Evidence: "Is rising obesity a product of income inequality and economic insecurity?"; "Why the Surge in Obesity?"
• Duff Wilson and Janet Roberts at Reuters: "Special Report: How Washington went soft on childhood obesity"

Miscellaneous

• Elizabeth Flock at US News/Washington Whispers: "Five Charts That Show How Our Democracy Isn't Working"

That's it for today.

"Why Smart People Are Stupid" and Other Revelations About the Brain

UPDATE 6/24: I cited Jonah Lehrer below. This has to be read to be believed - Lehrer might as well have titled his article about himself.

One of the best books that I read recently is Nobel Prize winner Daniel Kahneman's "Thinking, Fast and Slow". You'll find a lot of reviews of the book online (e.g., Jim Holt at the NYT), but the best thing to do would be to pick up a copy of the book and read it (Sci Am has reprinted a portion recently). As one of the reviewers in Amazon.com, Adam Smythe, wrote [all bold text in this post is my emphasis]:

Daniel Kahneman, the author of this exceptional book, and Amos Tversky (who died in 1996) made economics and other disciplines a lot more realistic--and tougher--for economists, researchers and students. Prior to their work, economists and others maintained classical theories and explanations that relied on certain seemingly logical assumptions about human behavior. However, people don't always behave the way logic might suggest, for a variety of reasons that Kahneman (and Tversky) explained, starting in the 1970s. Today, the subject of behavioral decision-making is one of the more exciting ones in fields like economics, finance, medicine and even law, thanks to their pioneering work. In recognition of the impact of his work in economics, Kahneman, a cognitive psychologist and professor emeritus at Princeton, won the Nobel Prize in Economics in 2002, specifically for his work on prospect theory.

The title of this book comes from Kahneman's discussion of two simple models of how people think. "System 1" thinking corresponds to fast, intuitive, emotional and almost automatic decisions, though it sometimes leaves us at the mercy of our human biases. "System 2" thinking is more slow-going and requires more intellectual effort. To nobody's surprise, we humans are more likely to rely on System 1 thinking, because it saves us effort, even if it can lead to flawed thinking.

Andrew Revkin at Dot Earth (NYT) posted the video a recent talk by Kahneman and added:

As I noted via Twitter during the meeting, this talk and many other engaging presentations at the event illustrate the importance of adding a fresh facet to the popular notion that today’s citizens, and particularly students, would do well to improve their capacity for critical thinking:

“Critical thinking has to include assessing one’s own thinking.”

Last week, Jonah Lehrer at The New Yorker, mentioned Kahneman's work and wrote about another recent study whose implications are important in a post titled "Why Smart People are Stupid". Here are some relevant extracts from Lehrer's piece, but go read his entire post:

Do Surveys of Consumer Confidence Provide Insight Into Actual Economic Activity?

Sober Look has two good, worth reading posts - "The story of two risk indices" and "The jump in U Michigan sentiment index is driven by consumer expectations". I'll try to return to the first post later but I thought I'd comment on the second one - which is about indicators tied to what we generally refer to as 'consumer sentiment' or 'consumer confidence'. SL makes some good points about these indices but he does not mention a larger point that I want to call out here - which is that these indices very clearly are not at all good gauges of absolute economic activity.

1) Let's start with SL's first point that the Thomson Reuters/University of Michigan's survey of consumer sentiment registered a reading in August 2011 that was as low as the reading in November 2008 - which, as SL says is "...a bit surprising and not at all intuitive, with anecdotal evidence suggesting that 08 felt far worse than 2011".

He's completely right about the non-intuitive nature of index values - but it is also completely non-intuitive when you look at non-anecdotal evidence. For example:

• The change in real GDP in Q4 2008 was -8.9% whereas in Q3 2011, GDP changed by +1.8%
• Retail sales changed at an annual rate of  more than -10% in Q4 2008 compared to +6 to 8% in Q3 2011
• Industrial production and capacity utilization were much lower in Q4 2008 compared to Q3 2011
• The economy was losing jobs at the average rate of ~600,000 jobs/month in Q4 2008 as opposed to gaining on average ~150,000 jobs a month in Q3 2011

So, what exactly is the Thomson Reuters/University of Michigan Consumer Sentiment measuring?

2) Second, SL adds:

What drove the sentiment index to levels comparable to 2008? The index actually has two components: the Current Conditions Index and the Consumer Expectations Index. And it was the "expectations" component that pushed the whole index to this low point. In fact according to U Michigan, when it came to consumer expectations, the "end of the world" was coming in August of 2011 - a point on the index that was in fact lower than the expectations measure in 2008 (as shown in the chart below). This is puzzling. Were consumers reacting to all the market driven media frenzy in August that wasn't as prevalent in 2008? Were consumers not as focused on the state of the financial markets in the past as they are now?

On the other hand the "current conditions" component did not dive anywhere close to its 08 lows, which is more in line with other economic indicators.

So, basically, according to this measure of consumer sentiment, in August 2011 the Consumer Expectations index fell lower than the lowest value in 2008! Yet, all the above indicators measuring the real health of the economy (see above) were much worse in Q4 2008 than in Q3 2011 and Q4 2011. How is it that, not just the overall consumer sentiment index, but also its consumer expectations component, seems so out of whack with macroeconomic conditions (current and immediate future)?

3) Third, SL discusses another indicator on consumer confidence:

Average Scaling Behavior in Biology, Cities and Corporations

I recently started reading some research from Geoffrey West, Luis Bettencourt and others on scaling phenomena relating to averages (there are always deviations). This is an incredibly rich topic and one cannot possibly do justice to it in a single post, so I'll merely highlight one or two findings from the research and provide links for further reading.

A good place to start is this article on biological organisms in Physics Today from 2004, by Geoffrey West and James Brown - "Life's Universal Scaling Laws". A couple of key passages (all bold text corresponds to my emphasis):

In marked contrast to the amazing diversity and complexity of living organisms is the remarkable simplicity of the scaling behavior of key biological processes over a broad spectrum of phenomena and an immense range of energy and mass. Scaling as a manifestation of underlying dynamics and geometry is familiar throughout physics. It has been instrumental in helping scientists gain deeper insights into problems ranging across the entire spectrum of science and technology, because scaling laws typically reflect underlying generic features and physical principles that are independent of detailed dynamics or specific characteristics of particular models. Phase transitions, chaos, the unification of the fundamental forces of nature, and the discovery of quarks are a few of the more significant examples in which scaling has illuminated important universal principles or structure.

In biology, the observed scaling is typically a simple power law: Y = Y₀M^b, where Y is some observable, Y₀ a constant, and M the mass of the organism.^1-3 Perhaps of even greater significance, the exponent b almost invariably approximates a simple multiple of 1/4. Among the many fundamental variables that obey such scaling laws - termed "allometric" by Julian Huxley⁴ - are metabolic rate, life span, growth rate, heart rate, DNA nucleotide substitution rate, lengths of aortas and genomes, tree height, mass of cerebral grey matter, density of mitochondria, and concentration of RNA.

[...]

An intriguing consequence of these "quarter-power" scaling laws is the emergence of invariant quantities,⁷ which physicists recognize as usually reflecting fundamental underlying constraints. For example, mammalian life span increases as approximately M^1/4,  whereas heart rate decreases as M^-1/4, so the number of heartbeats per lifetime is approximately invariant (about 1.5 x 10⁹), independent of size...

Bettencourt and West discussed cities and their economics and laws of scaling in their article in Scientific American last year titled "Bigger Cities Do More With Less". Here are some notable points:

By sifting through this flood of data, covering thousands of cities around the world, we have unveiled several mathematical “laws” that explain how concentrating people in one place affects economic activity, return on infrastructure investment and social vitality. Despite the rich diversity of metropolitan regions across the U.S., China, Brazil and other nations, we found a remarkable universality in the way that socioeconomic characteristics increase with a city’s population. For example, if the population of a city is doubled, whether from 40,000 to 80,000 or from four million to eight million, we systematically see an average increase of around 15 percent in measures such as wages and patents produced per capita. If eight million people all live in one city, their economic output will typically be about 15 percent greater than if the same eight million people lived in two cities of half the size. We call this effect “superlinear scaling”: the socioeconomic properties of cities increase faster than a direct (or linear) relation to their population would predict.

The data also reveal that cities’ use of resources follows a similar, though inverted, law. When the size of a city doubles, its material infrastructure—anything from the number of gas stations to the total length of its pipes, roads or electrical wires—does not. Instead these quantities rise more slowly than population size: a city of eight million typically needs 15 percent less of the same infrastructure than do two cities of four million each. This pattern is referred to as sublinear scaling. On average, the bigger the city, the more efficient its use of infrastructure, leading to important savings in materials, energy and emissions.

Our findings also show that these patterns of increased productivity and decreased costs hold true across nations with very different levels of development, technology and wealth. Although we have much more information for cities in richer parts of the world, we are beginning to obtain good data from rapidly developing countries as well, and they seem to fit the same mold. The gross domestic product for cities in Brazil and China, for instance, closely follows the same superlinear curve that western European and North American cities exhibit, though starting from a lower baseline. We believe that the pattern holds true because the same basic social and economic processes are at work, whether in São Paulo’s favelas, under Beijing’s smog-filled skies or along Copenhagen’s tidy streets.

Although urban superlinear scaling, which represents the average, idealized behavior of a city of a given size, prevails around the globe, actual cities deviate to varying degrees from the roughly 15 percent enhancements that come with size. Detailed data covering 40 years show, for example, that San Francisco and Boston are richer than their size would indicate, whereas Phoenix or Riverside, Calif., are somewhat poorer. Curiously, these deviations persist for decades: cities tend to stay remarkably close to their overperforming or underperforming histories. For example, cities that have attempted to improve their lot by creating conditions for the “next Silicon Valley” have often had disappointing results. Our research suggests that certain intangible qualities of social dynamics—more than the development of material infrastructure—hold the key to generating virtuous cycles of innovation and creation of wealth. These processes, such as the development of a spirit of local entrepreneurship, a reputation for cutting-edge novelty, and a culture of excellence and competitiveness, are difficult to design through policy because they rely on the dynamics of a city’s social fabric across many dimensions. We expect the results of this exciting area of research will lead to better “recipes” for sustainable socioeconomic development.

See the Physics Today article as well this article for some discussion of West's work, including some of the criticisms of the averages and how they miss various deviations from the averages. A recent paper that critiques the Bettencourt/West research on cities is this one by Cosma Shalizi, who says:

Reads for Jan 14

Economics & Finance

• Dean Baker at Beat The Press: How Is It Possible The Fed's Image Can Be Tarnished Further?; The Japan Story; More on the Celebration Over December's Job Report
• Gavyn Davies at FT: America’s incredible shrinking labour force (via)
• Joe Weisenthal at Business Insider: Something Has To Give Here; CHART OF THE DAY: The Final Word On ADP, The Most Controversial Economic Report There Is (also see this)
• Simon Johnson at Economix: Ron Paul and the Banks
• Kenneth Kutner: Low Interest Rates and Housing Bubbles: Still No Smoking Gun (via)
• Paul Krugman at NYT: Germans and Aliens; US Net Investment Income
• Andrew Berg and Jonathan Ostry in Foreign Policy: How Inequality Damages Economies (via)
• Alan Krueger, Chairman of the Council of Economic Advisors of the US: The Rise and Consequences of Inequality in the United States (see the accompanying slides here, via)
• An old post by Lane Kenworthy at Consider the Evidence has an interesting chart: Slow Income Growth for Middle America (via)
• Robert Greenstein at CBPP's Off The Charts Blog: Romney’s Wrong: Federal Low-Income Program Dollars Go Overwhelmingly to Beneficiaries
• Mike Konczal at Rortybomb: A Quick Note on the Distributional Consequences of a Lack of Refinancing Options
• William Black at Credit Writedowns: Real Financial Regulators Love Prosecutions of Fraudulent Bank CEOs
• Yves Smith at Naked Capitalism: Crowd-Sourcing the Revolving Door (also see here and here)
• Mark Whitehouse at Bloomberg's The Ticker: On the Capture of Economists (via)
• Simon Wren-Lewis at Mainly Macro: Mistakes and Ideology in Macroeconomics (via) - also see: Chris Dillow at Stumbling and Mumbling: Mechanisms and Models (via)
• Ejaz Ghani at Vox: Reshaping Tomorrow: What will India look like in 2025? (via)

Energy & Environment, Food Security, Climate Change

• Global Macro Monitor at Credit Writedowns: Chart of the Day: U.S. Gasoline Consumption Tanks in 2011
• James Hamilton at Econbrowser: Reducing Petroleum Consumption from Transportation - has a bunch of illuminating stats for the US v. other countries from this paper by Christopher Knittel
• Tom Smerling at Skeptical Science: U.S. 2011: The Wet Get Wetter, the Dry Get Drier [also, a useful 2005 report on Natural Disaster Hotspots is a good related reference]
• Tom Curtis at Skeptical Science: Global Warming: Trend and Variation
• Dana1981 at Skeptical Science: A Big Picture Look at Global Warming
• Stephen Lacey at Climate Progress: What Do Falling Natural Gas Prices Mean for Renewables?
• Peter Sinclair at Climate Denial Crock of the Week: Climate Change and Sea Level Rise: “An Emerging Hockey Stick”

Healthcare and Education

• Aaron Carroll at The Incidental Economist: Lots of people can’t fire their insurance companies (via)
• Kelly Kennedy at USA Today: 5% of patients account for half of health care spending [link to full study here]
• Ray Fisman at Slate: Thanks, Teach ("A new study suggests that a good grade school teacher can boost college attendance rates, reduce teenage pregnancy, and increase a student’s earning potential.")
• Catherine Rampell at Economix: Do College Grads Earn Less Now Than 40 Years Ago?; College-Educated Workers Gaining Jobs, High School Grads Losing Them

Miscellaneous

• Barry Ritholtz at The Big Picture: Internet Censorship
• Kevin Drum at Mother Jones: Less Lead, Less Crime

That's it for today.