Tag Archives: risk

Economics

Beware. Economic Growth May Kill You

There is a long-held belief that economic growth and prosperity makes for a happier, healthier populace. Most economists and social scientists, and indeed lay-people, have subscribed to this idea for many decades.

But, this may be completely wrong.

A handful of contrarian economists began noticing a strange paradox in their research studies from 2000. Evidence suggests that rising incomes and personal well-being are linked in the opposite way. It seems that when the US economy is improving, people suffer more medical problems and die faster.

How could this be? Well, put simply, there are three main factors: increased pollution from increased industrial activity; greater occupational hazards from increased work; and, higher exposure to risky behaviors from greater income.

From the Washington Post:

Yet in recent years, accumulating evidence suggests that rising incomes and personal well-being are linked in the opposite way. It seems that economic growth actually kills people.

Christopher Ruhm, an economics professor at the University of Virginia, was one of the first to notice this paradox. In a 2000 paper, he showed that when the American economy is on an upswing, people suffer more medical problems and die faster; when the economy falters, people tend to live longer.

“It’s very puzzling,” says Adriana Lleras-Muney, an economics professor at the University of California, Los Angeles. “We know that people in rich countries live longer than people in poor countries. There’s a strong relationship between GDP and life expectancy, suggesting that more money is better. And yet, when the economy is doing well, when it’s growing faster than average, we find that more people are dying.”

In other words, there are great benefits to being wealthy. But the process of becoming wealthy — well, that seems to be dangerous.

Lleras-Muney and her colleagues, David Cutler of Harvard and Wei Huang of the National Bureau of Economic Research, believe they can explain why. They have conducted one of the most comprehensive investigations yet of this phenomenon, analyzing over 200 years of data from 32 countries. In a draft of their research, released last week, they lay out something of a grand unified theory of life, death and economic growth.

To start, the economists confirm that when a country’s economic output — its GDP — is higher than expected, mortality rates are also higher than expected.

…

The data show that when economies are growing particularly fast, emissions and pollution are also on the rise. After controlling for changes in air quality, the economists find that economic growth doesn’t seem to impact death rates as much. “As much as two-thirds of the adverse effect of booms may be the result of increased pollution,” they write.

…

A booming economy spurs death in other ways too. People start to spend more time at their jobs, exposing them to occupational hazards, as well as the stress of overwork. People drive more, leading to an increase in traffic-related fatalities. People also drink more, causing health problems and accidents. In particular, the economists’ data suggest that alcohol-related mortality is the second-most important explanation, after pollution, for the connection between economic growth and death rates.

This is consistent with other studies finding that people are more likely to die right after they receive their tax rebates. More income makes it easier for people to pay for health care and other basic necessities, but it also makes it easier for people to engage in risky activities and hurt themselves.

Read the entire story here.

Environs

The Coming Energy Crash

By some accounts the financial crash that began in 2008 is a mere economic hiccup compared with the next big economic (and environmental) disaster — the fossil fuel crisis accompanied by risk denial syndrome.

From the New Scientist:

FIVE years ago the world was in the grip of a financial crisis that is still reverberating around the globe. Much of the blame for that can be attributed to weaknesses in human psychology: we have a collective tendency to be blind to the kind of risks that can crash economies and imperil civilisations.

Today, our risk blindness is threatening an even bigger crisis. In my book The Energy of Nations, I argue that the energy industry’s leaders are guilty of a risk blindness that, unless action is taken, will lead to a global crash – and not just because of the climate change they fuel.

Let me begin by explaining where I come from. I used to be a creature of the oil and gas industry. As a geologist on the faculty at Imperial College London, I was funded by BP, Shell and others, and worked on oil and gas in shale deposits, among other things. But I became worried about society’s overdependency on fossil fuels, and acted on my concerns.

In 1989, I quit Imperial College to become a climate campaigner. A decade later I set up a solar energy business. In 2000 I co-founded a private equity fund investing in renewables.

In these capacities, I have watched captains of the energy and financial industries at work – frequently close to, often behind closed doors – as the financial crisis has played out and the oil price continued its inexorable rise. I have concluded that too many people across the top levels of business and government have found ways to close their eyes and ears to systemic risk-taking. Denial, I believe, has become institutionalised.

As a result of their complacency we face four great risks. The first and biggest is no surprise: climate change. We have way more unburned conventional fossil fuel than is needed to wreck the climate. Yet much of the energy industry is discovering and developing unconventional deposits – shale gas and tar sands, for example – to pile onto the fire, while simultaneously abandoning solar power just as it begins to look promising. It has been vaguely terrifying to watch how CEOs of the big energy companies square that circle.

Second, we risk creating a carbon bubble in the capital markets. If policymakers are to achieve their goal of limiting global warming to 2 °C, 60 to 80 per cent of proved reserves of fossil fuels will have to remain in the ground unburned. If so, the value of oil and gas companies would crash and a lot of people would lose a lot of money.

I am chairman of Carbon Tracker, a financial think tank that aims to draw attention to that risk. Encouragingly, some financial institutions have begun withdrawing investment in fossil fuels after reading our warnings. The latest report from the Intergovernmental Panel on Climate Change (IPCC) should spread appreciation of how crazy it is to have energy markets that are allowed to account for assets as though climate policymaking doesn’t exist.

Third, we risk being surprised by the boom in shale gas production. That, too, may prove to be a bubble, maybe even a Ponzi scheme. Production from individual shale wells declines rapidly, and large amounts of capital have to be borrowed to drill replacements. This will surprise many people who make judgement calls based on the received wisdom that limits to shale drilling are few. But I am not alone in these concerns.

Even if the US shale gas drilling isn’t a bubble, it remains unprofitable overall and environmental downsides are emerging seemingly by the week. According to the Texas Commission on Environmental Quality, whole towns in Texas are now running out of water, having sold their aquifers for fracking. I doubt that this is a boom that is going to appeal to the rest of the world; many others agree.

Fourth, we court disaster with assumptions about oil depletion. Most of us believe the industry mantra that there will be adequate flows of just-about-affordable oil for decades to come. I am in a minority who don’t. Crude oil production peaked in 2005, and oil fields are depleting at more than 6 per cent per year, according to the International Energy Agency. The much-hyped 2 million barrels a day of new US production capacity from shale needs to be put in context: we live in a world that consumes 90 million barrels a day.

It is because of the sheer prevalence of risk blindness, overlain with the pervasiveness of oil dependency in modern economies, that I conclude system collapse is probably inevitable within a few years.

Mine is a minority position, but it would be wise to remember how few whistleblowers there were in the run-up to the financial crash, and how they were vilified in the same way “peakists” – believers in premature peak oil – are today.

Read the entire article here.

Image: power plant. Courtesy of Think Progress.

BigBang

Dopamine on the Mind

Dopamine is one of the brain’s key signalling chemicals. And, because of its central role in the risk-reward structures of the brain it often gets much attention — both in neuroscience research and in the public consciousness.

From Slate:

In a brain that people love to describe as “awash with chemicals,” one chemical always seems to stand out. Dopamine: the molecule behind all our most sinful behaviors and secret cravings. Dopamine is love. Dopamine is lust. Dopamine is adultery. Dopamine is motivation. Dopamine is attention. Dopamine is feminism. Dopamine is addiction.

My, dopamine’s been busy.

Dopamine is the one neurotransmitter that everyone seems to know about. Vaughn Bell once called it the Kim Kardashian of molecules, but I don’t think that’s fair to dopamine. Suffice it to say, dopamine’s big. And every week or so, you’ll see a new article come out all about dopamine.

So is dopamine your cupcake addiction? Your gambling? Your alcoholism? Your sex life? The reality is dopamine has something to do with all of these. But it is none of them. Dopamine is a chemical in your body. That’s all. But that doesn’t make it simple.

What is dopamine? Dopamine is one of the chemical signals that pass information from one neuron to the next in the tiny spaces between them. When it is released from the first neuron, it floats into the space (the synapse) between the two neurons, and it bumps against receptors for it on the other side that then send a signal down the receiving neuron. That sounds very simple, but when you scale it up from a single pair of neurons to the vast networks in your brain, it quickly becomes complex. The effects of dopamine release depend on where it’s coming from, where the receiving neurons are going and what type of neurons they are, what receptors are binding the dopamine (there are five known types), and what role both the releasing and receiving neurons are playing.

And dopamine is busy! It’s involved in many different important pathways. But when most people talk about dopamine, particularly when they talk about motivation, addiction, attention, or lust, they are talking about the dopamine pathway known as the mesolimbic pathway, which starts with cells in the ventral tegmental area, buried deep in the middle of the brain, which send their projections out to places like the nucleus accumbens and the cortex. Increases in dopamine release in the nucleus accumbens occur in response to sex, drugs, and rock and roll. And dopamine signaling in this area is changed during the course of drug addiction.  All abused drugs, from alcohol to cocaine to heroin, increase dopamine in this area in one way or another, and many people like to describe a spike in dopamine as “motivation” or “pleasure.” But that’s not quite it. Really, dopamine is signaling feedback for predicted rewards. If you, say, have learned to associate a cue (like a crack pipe) with a hit of crack, you will start getting increases in dopamine in the nucleus accumbens in response to the sight of the pipe, as your brain predicts the reward. But if you then don’t get your hit, well, then dopamine can decrease, and that’s not a good feeling. So you’d think that maybe dopamine predicts reward. But again, it gets more complex. For example, dopamine can increase in the nucleus accumbens in people with post-traumatic stress disorder when they are experiencing heightened vigilance and paranoia. So you might say, in this brain area at least, dopamine isn’t addiction or reward or fear. Instead, it’s what we call salience. Salience is more than attention: It’s a sign of something that needs to be paid attention to, something that stands out. This may be part of the mesolimbic role in attention deficit hyperactivity disorder and also a part of its role in addiction.

But dopamine itself? It’s not salience. It has far more roles in the brain to play. For example, dopamine plays a big role in starting movement, and the destruction of dopamine neurons in an area of the brain called the substantia nigra is what produces the symptoms of Parkinson’s disease. Dopamine also plays an important role as a hormone, inhibiting prolactin to stop the release of breast milk. Back in the mesolimbic pathway, dopamine can play a role in psychosis, and many antipsychotics for treatment of schizophrenia target dopamine. Dopamine is involved in the frontal cortex in executive functions like attention. In the rest of the body, dopamine is involved in nausea, in kidney function, and in heart function.

With all of these wonderful, interesting things that dopamine does, it gets my goat to see dopamine simplified to things like “attention” or “addiction.” After all, it’s so easy to say “dopamine is X” and call it a day. It’s comforting. You feel like you know the truth at some fundamental biological level, and that’s that. And there are always enough studies out there showing the role of dopamine in X to leave you convinced. But simplifying dopamine, or any chemical in the brain, down to a single action or result gives people a false picture of what it is and what it does. If you think that dopamine is motivation, then more must be better, right? Not necessarily! Because if dopamine is also “pleasure” or “high,” then too much is far too much of a good thing. If you think of dopamine as only being about pleasure or only being about attention, you’ll end up with a false idea of some of the problems involving dopamine, like drug addiction or attention deficit hyperactivity disorder, and you’ll end up with false ideas of how to fix them.

Read the entire article here.

Image: 3D model of dopamine. Courtesy of Wikipedia.

Idea Soup

The College Application Essay

Most U.S. high school seniors have now finished their last days of the last year through the production line that is the educational system. Most will also have a college, and courses, selected from one of the thousands of U.S. institutions that offer further education. Competition to enter many of these colleges is steep and admissions offices use a variety of techniques and measurements to filter applicants and to gauge a prospective student’s suitability. One such measure is the college entrance essay, which still features quite prominently alongside GPA, SAT, and ACT scores and, of course, the parental bank balance.

The New York Times recently featured several student essays that diverged from the norm — these were honest and risky, open and worldly. We excerpt below one such essay for Antioch College by Julian Cranberg:

Ever since I took my first PSAT as a first-semester junior, I have received a constant flow of magazines, brochures, booklets, postcards, etc. touting the virtues of various colleges. Simultaneously, my email account has been force-fed a five-per-week diet of newsletters, college “quizzes,” virtual campus tour links, application calendars, and invitations to “exclusive” over-the-phone question-and-answer sessions. I am a one-year veteran of college advertising.

They started out by sending me friendly yet impersonal compliments, such as “We’re impressed by your academic record,” or “You’ve impressed us, Julian.” One of the funniest yet most disturbing letters I received was printed on a single sheet of paper inside a priority DHL envelope, telling me I received it in this fashion because I was a “priority” to that college. Now, as application time is rolling around, they’ve become a bit more aggressive, hence “REMINDER – University of X Application Due” or “Important Deadline Notice”..

How is it that while I can only send one application to any school to which I am applying, it is okay for any school to send unbridled truckloads of mail my way, applying for my attention? If I have not already made it clear, it’s an annoyance, and, in fact, turns me and undoubtedly others off to applying to these certain schools. However, this annoyance is easy to ignore, and, if I wanted to, I could easily forget all about these mailings after recycling them or deleting them from my email. But beneath the simple annoyance of these mailings lies a pressing and unchallenged issue..

What do these colleges want to get out of these advertisements? For one reason or another, they want my application. This doesn’t mean that their only objective is to craft a better and more diverse incoming class. The more applications a college receives, the more selective they are considered, and the higher they are ranked. This outcome is no doubt figured into their calculations, if it is not, in some cases, the primary driving force behind their mailings..

And these mailings are expensive. Imagine what it would cost to mail a school magazine, with $2.39 postage, to thousands of students across the country every week. The combined postage charge of everything I have received from various colleges must be above $200. Small postcards and envelopes add up fast, especially considering the colossal pool of potential applicants to which they are being sent. Although vastly aiding the United States Postal Service in its time of need, it is nauseating to imagine the volume of money spent on this endeavor. Why, in an era of record-high student loan debt and unemployment, are colleges not reallocating these ludicrous funds to aid their own students instead of extending their arms far and wide to students they have never met? I understand where the colleges are coming from. The precedent that schools should send mailings to students to “inform” them of what they have to offer has been set, and in this competitive world of colleges vying for the most applications, I only see more mailings to come in the future. It’s strange that the college process is always presented as a competition between students to get into the same colleges. It seems that another battle is also happening, where colleges are competing for the applications of the students..

High school seniors aren’t stupid. Neither are admissions offices. Don’t seniors want to go to school somewhere where they will fit and thrive and not just somewhere that is selective and will look good? Don’t applications offices want a pool of people who truly believe they would thrive in that college’s environment, and not have to deal with the many who thought those guys tossing the frisbee in the picture on the postcard they sent them looked pretty cool? I think it’s time to rethink what applying to college really means, for the folks on both sides, before we hit the impending boom in competition that I see coming. And let’s start by eliminating these silly mailings. Maybe we as seniors would then follow suit and choose intelligently where to apply.

More from the New York Times:

“I wonder if Princeton should be poorer.”

If you’re a high school senior trying to seduce the admissions officer reading your application essay, this may not strike you as the ideal opening line. But Shanti Kumar, a senior at the Bronx High School of Science, went ahead anyway when the university prompted her to react in writing to the idea of “Princeton in the nation’s service and in the service of all nations.”

Back in January, when I asked high school seniors to send in college application essays about money, class, working and the economy, I wasn’t sure what, if anything, would come in over the transom.

But 66 students submitted essays, and with the help of Harry Bauld, the author of “On Writing the College Application Essay,” we’ve selected four to publish in full online and in part in this column. That allowed us to be slightly more selective than Princeton itself was last year.

What these four writers have in common is an appetite for risk. Not only did they talk openly about issues that are emotionally complex and often outright taboo, but they took brave and counterintuitive positions on class, national identity and the application process itself. For anyone looking to inspire their own children or grandchildren who are seeking to go to college in the fall of 2014, these four essays would be a good place to start.

Perhaps the most daring essay of all came from Julian Cranberg, a 17-year-old from Brookline, Mass. One of the first rules of the college admissions process is that you don’t write about the college admissions process.

But Mr. Cranberg thumbed his nose at that convention, taking on the tremendous cost of the piles of mail schools send to potential students, and the waste that results from the effort. He figured that he received at least $200 worth of pitches in the past year or so.

“Why, in an era of record-high student loan debt and unemployment, are colleges not reallocating these ludicrous funds to aid their own students instead of extending their arms far and wide to students they have never met?” he asked in the essay.

Antioch College seemed to think that was a perfectly reasonable question and accepted him, though he will attend Oberlin College instead, to which he did not submit the essay.

“It’s a bold move to critique the very institution he was applying to,” said Mr. Bauld, who also teaches English at Horace Mann School in New York City. “But here’s somebody who knows he can make it work with intelligence and humor.”

Read the entire article here.