Archive for the ‘Climate Change’ Category

Random Thoughts After a Long Hiatus

September 21, 2015 2 comments

It has been quite a while since I last posted on this blog. I finally decided to catch up by posting a series of remarks on a number of issues that are of interest to economists and (hopefully) others.

Disparate Impact Analysis

I teach in a university economics department. If you were to attend one of our faculty meetings, you would observe that nobody in the room is a seven-foot Chinese basketball player. Does that mean the faculty in my department discriminated against the seven-foot Chinese basketball players in the world who wanted to be on our staff and attend this meeting? If you were to use a nonsensical theory known as disparate impact analysis, then if seven-foot Chinese basketball players were a politically-protected group, the answer is yes and my university could be charged with discrimination in federal court.

To say the least, disparate impact analysis ignores the scientific method which most of us learned in primary school. The fact that a person has the disease known as AIDS does not imply how the person got that disease. The reason is that medical science has determined that the disease can be contracted in more than one way. Similarly, if one group of individuals makes less money than another group, there are many reasons why this may be so.  One of those reasons could be discrimination but how do we know this to be true? Put differently, there are causal relationships in an economy and there are many random events that can make a group of individuals have the demographic characteristics that they have. Read more…

Hurricane Sandy and Climate Change

November 2, 2012 4 comments

One of my pet peeves as a professional economist is how often I see individuals do economic analysis despite the fact that they have absolutely no credentials in the social science of economics. I regularly hear lay persons say economic nonsense when they do economics “without a license” but occasionally they do get it right. These expressions of ignorance occur with respect to other academic disciplines as well and climate science is one area where the public is regularly offered the opinions of individuals with no professional credentials in the field.

I recently observed comments in the media by Al Gore and Michael Bloomberg, neither of whom has professional expertise in climate science, that Hurricane Sandy provides evidence of climate change. There is absolutely no reason why any of us should be interested in their opinions on this subject, any more than we should be interested in their opinions on what medical treatment we should receive to cure any of the ailments that we have. We should be interested in the opinions of practicing professionals in the field of climate science and Roger Pielke, a professor at the University of Colorado, has recently written (see his article on hurricanes) on the lessons to be drawn, if any, from the latest hurricane to come ashore in the U.S. There are several noteworthy aspects of his article.

One is that he practices economics without credentials in the field but, in this case he gets it right when he says that by providing taxpayer-backed flood insurance at below-market rates, the government encourages people to locate in risky areas. That is, the insurance provides an incentive for individuals to take on more risk. I have previously written about this phenomenon on this blog when I discussed the economic notion of moral hazard. So this program by the government illustrates the perverse effects of economic incentives and, in the case of this program, we learn that the insurance results in riskier behavior by the owners of the insurance as compared to what the owners would do if they purchased unsubsidized insurance in private markets. Read more…

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