Emergy evaluation perspectives of an irrigation improvement project proposal in China

Emergy theory and method are used to evaluate the feasibility of an irrigation improvement project in China and its contribution to local agricultural development. An emergy method for evaluating the costs and benefits of the project and a composite index named the emergy cost-benefit ratio (EmCBR) were developed. The emergy evaluation shows that the major costs associated with the proposed project come from earthwork (77.4% of the total cost) and concrete work (15.4%), and that water saving (43.0% of the total benefit) and agricultural yield increase (56.9%) are the most important contributions. The calculated EmCBR is 0.97 (the lowest value for a feasible project is 1.0) which indicates that this project would not be feasible in emergy terms. The regional agricultural system could not benefit from the proposed project, according to several emergy indices: emergy yield ratio (EYR), emergy investment ratio (EIR), environmental load ratio (ELR) and environmental sustainability index (ESI). The results show that conventional cost-benefit analysis could fail to provide an adequate decision-making framework because it is unable to value resources and environmental impacts properly. More additional emergy evaluations should be completed on other alternatives to the proposed project to provide adequate guidelines for selecting the best alternative that contributes most to agricultural development with limited environmental impact.     

A simple estimator for the correlated random coefficient model

This note presents an estimator for the linear correlated random coefficient model which is an extension of Garen's (1984) selectivity bias method. The choice between the proposed estimator and IV estimation reflects a trade-off between efficiency and first-stage reduced form robustness.     

Pricing the environment: a critique

A distinction is drawn between opportunity cost and willingness to pay (wtp) approaches to valuing the environment. Wtp is the appropriate measure in situations where there is no prior commitment to environmental standards, otherwise opportunity cost measures apply. Wtp would not normally or properly be used to formulate environmental standards. For a wide range of environmental attributes, where the conditions of direct perception of the environmental problem do not hold, meaningful expressions of wtp cannot be obtained. In these circumstances the underlying model of the Pigovian externality which leads to attempts to measure wtp is inapplicable. While a decision rule based on wtp could still be used it possesses no welfare significance. The critique has implications for sustainability when defined to require trade-offs between natural and person-made capital. Sustainability is practically achieved by developing a set of environmental standards.     

On the asymmetric impact of macro–variables on volatility

We extend the GARCH–MIDAS model to take into account possible different impacts from positive and negative macroeconomic variations on financial market volatility: a Monte Carlo simulation which shows good properties of the estimator with realistic sample sizes. The empirical application is performed on the daily S&P500 volatility dynamics with the U.S. monthly industrial production and national activity index as additional (signed) determinants. We estimate the Relative Marginal Effect of macro variable movements on volatility at different lags. In the out-of-sample analysis, our proposed GARCH–MIDAS model not only statistically outperforms the competing specifications (GARCH, GJR-GARCH and GARCH–MIDAS models), but shows significant utility gains for a mean-variance investor under different risk aversion parameters. Attention to robustness is given by choosing different samples and estimating the model in an international context (six different stock markets).     

Moment Estimation of the Probit Model with an Endogenous Continuous Regressor

We propose a generalized method of moments (GMM) estimator with optimal instruments for a probit model that includes a continuous endogenous regressor. This GMM estimator incorporates the probit error and the heteroscedasticity of the error term in the first‐stage equation in order to construct the optimal instruments. The estimator estimates the structural equation and the first‐stage equation jointly and, based on this joint moment condition, is efficient within the class of GMM estimators. To estimate the heteroscedasticity of the error term of the first‐stage equation, we use the k‐nearest neighbour (k‐nn) non‐parametric estimation procedure. Our Monte Carlo simulation shows that in the presence of heteroscedasticity and endogeneity, our GMM estimator outperforms the two‐stage conditional maximum likelihood estimator. Our results suggest that in the presence of heteroscedasticity in the first‐stage equation, the proposed GMM estimator with optimal instruments is a useful option for researchers.     

Nonparametric regression estimation with general parametric error covariance: a more efficient two-step estimator

Recently Martins-Filho and Yao (J Multivar Anal 100:309–333, 2009) have proposed a two-step estimator of nonparametric regression function with parametric error covariance and demonstrate that it is more efficient than the usual LLE. In the present paper we demonstrate that MY’s estimator can be further improved. First, we extend MY’s estimator to the multivariate case, and also establish the asymptotic theorem for the slope estimators; second, we propose a more efficient two-step estimator for nonparametric regression function with general parametric error covariance, and develop the corresponding asymptotic theorems. Monte Carlo study shows the relative efficiency loss of MY’s estimator in comparison with our estimator in nonparametric regression with either AR(2) errors or heteroskedastic errors. Finally, in an empirical study we apply the proposed estimator to estimate the public capital productivity to illustrate its performance in a real data setting.     

On Liu estimators for the logit regression model

This paper introduces a shrinkage estimator for the logit model which is a generalization of the estimator proposed by Liu (1993) for the linear regression. This new estimation method is suggested since the mean squared error (MSE) of the commonly used maximum likelihood (ML) method becomes inflated when the explanatory variables of the regression model are highly correlated. Using MSE, the optimal value of the shrinkage parameter is derived and some methods of estimating it are proposed. It is shown by means of Monte Carlo simulations that the estimated MSE and mean absolute error (MAE) are lower for the proposed Liu estimator than those of the ML in the presence of multicollinearity. Finally the benefit of the Lie estimator is shown in an empirical application where different economic factors are used to explain the probability that municipalities have net increase of inhabitants.     

Physical energy cost serves as the “invisible hand” governing economic valuation: Direct evidence from biogeochemical data and the U.S. metal market

Energy supply is mandatory for the production of economic value. Nevertheless, tradition dictates that an enigmatic “invisible hand” governs economic valuation. Physical scientists have long proposed alternative but testable energy cost theories of economic valuation, and have shown the gross correlation between energy consumption and economic output at the national level through input-output energy analysis. However, due to the difficulty of precise energy analysis and highly complicated real markets, no decisive evidence directly linking energy costs to the selling prices of individual commodities has yet been found. Over the past century, the US metal market has accumulated a huge body of price data, which for the first time ever provides us the opportunity to quantitatively examine the direct energy-value correlation. Here, by analyzing the market price data of 65 purified chemical elements (mainly metals) relative to the total energy consumption for refining them from naturally occurring geochemical conditions, we found a clear correlation between the energy cost and their market prices. The underlying physics we proposed has compatibility with conventional economic concepts such as the ratio between supply and demand or scarcity's role in economic valuation. It demonstrates how energy cost serves as the “invisible hand” governing economic valuation. Thorough understanding of this energy connection between the human economic and the Earth's biogeochemical metabolism is essential for improving the overall energy efficiency and furthermore the sustainability of the human society.     

Foresight: A major tool in tackling sustainable development

For many decades, the concept of sustainability has been highly successful in public policies and even in the business world.¹ Nowadays, all initiatives must be sustainable and are primarily assessed on that criterion. However, the efforts made to construct specific methods dedicated to building sustainable strategies seem rather weak. Futurists themselves underestimate the relationship between sustainable development and foresight, even if they are talking about sustainable planning.² They remain generally unaware that foresight could be a major tool in tackling sustainability as well as one of the best methods of preparing sustainable strategies and policies.Indeed, one of the biggest problems in sustainability approaches is the simplistic way used to define the concept, for instance, by using only the very first part of the 1987 the Bruntland report Our Common Future and by limiting the fields of activity on sustainability to the three pillars of the OECD model: economy, social questions, environment.At the Copenhagen United Nations Climate Change Conference (December 2009), it seemed forgotten that sustainability is already an old issue in which futurists were heavily involved at the time of the United Nations Stockholm Environment Conference (1972), in the Limits to Growth Report, published by the Club of Rome (1972)³ and in the OECD Interfutures Foresight, spurred on by Jacques Lesourne (1978).⁴Since that time (forty years ago!) researchers and consultants have learned how to deal with the concept of sustainability, how to analyze it as an ultimate aim for society as a whole as well as a complex object that needs to be approached with adequate methods such as systemic analysis.As Christian Stoffaës said, the aim of foresight is sustainable development in a changing world. As a result, the ultimate aim of strategic foresight appears to be clear: it is sustainability. This article highlights that fundamental relationship as we see it today.⁵     

Reconciling sustainability, systems theory and discounting

Most definitions of sustainability imply that a system is to be maintained at a certain level, held within certain limits, into the indefinite future. Sustainability denies run-away growth, but it also avoids any decline or destruction. This sustainability path is hard to reconcile with the renewal cycle that can be observed in many natural systems developing according to their intrinsic mechanisms and in social systems responding to internal and external pressures. Systems are parts of hierarchies where systems of higher levels are made up of subsystems from lower levels. Renewal in components is an important factor of adaptation and evolution. If a system is sustained for too long, it borrows from the sustainability of a supersystem and rests upon lack of sustainability in subsystems. Therefore by sustaining certain systems beyond their renewal cycle, we decrease the sustainability of larger, higher-level systems. For example, Schumpeter's theory of creative destruction posits that in a capitalist economy, the collapse and renewal of firms and industries is necessary to sustain the vitality of the larger economic system. However, if the capitalist economic system relies on endless growth, then sustaining it for too long will inevitably borrow from the sustainability of the global ecosystem. This could prove catastrophic for humans and other species. To reconcile sustainability with hierarchy theory, we must decide which hierarchical level in a system we want to sustain indefinitely, and accept that lower level subsystems must have shorter life spans. In economic analysis, inter-temporal discount rates essentially tell us how long we should care about sustaining any given system. Economists distinguish between discount rates for individuals based on personal time preference, lower discount rates for firms based on the opportunity cost of capital, and even lower discount rates for society. For issues affecting even higher-level systems, such as global climate change, many economists question the suitability of discounting future values at all. We argue that to reconcile sustainability with inter-temporal discounting, discount rates should be determined by the hierarchical level of the system being analyzed.     

Is an Exhaustible Resource Economy Sustainable?

The paper focuses on two alternative concepts of sustainability dominating the literature: (i) maximum permanently maintainable consumption level (Fisherian income) and (ii) the amount of consumption that leaves total value of wealth intact (Hicksian income). In the context of a pure exhaustible resource economy, the author derives an explicit relationship between the two sustainability criteria and shows that while such an economy is not sustainable in the former sense, it is in the latter sense provided social preferences are represented by a logarithmic utility function. The implications of the two concepts for greening of national income are derived. Finally, the paper shows the range of values of the parameters of the model for which the utilitarian optimal path can be close to paths satisfying the alternative sustainability criteria, suggesting that such outcomes are less likely for very poor resource‐dependent countries than for the rich ones.     

PAYG pensions, tax-cum-subsidy and A-Pareto efficiency

An overlapping generation’s small open economy with endogenous fertility and time cost of children is analysed to show that the command optimum can be decentralised in a market setting using a PAYG transfer from the young to the old and a tax-cum-subsidy policy (i.e., a linear wage tax on labour income collected and rebated in a lump-sum way within the younger working-age generation). Indeed, the latter instrument stimulates fertility and then reduces the opportunity cost of children. Moreover, by applying the generalised notion of Pareto efficiency introduced by Golosov et al. (2007) in a context of endogenous population, some normative conclusions can be drawn: since only the utilities of those who are actually born are evaluated, we apply the concept of A-efficiency and conclude that when PAYG pensions are in existence, the tax-cum-subsidy policy can effectively be used as an alternative to the child allowance to internalise the externality of children, while also representing an A-Pareto improvement.     

西部地区农户禀赋对农业技术采纳的影响分析

本文着眼于农户禀赋对农业技术采纳决策的影响 ,以我国西部陕西、宁夏、四川三省区的 41 9个农户样本、2 8个村级样本为依据 ,在修正了现有理论模型的基础上 ,对小麦新品种技术和蔬菜、水果的保护地生产技术两种在采纳成本上分属不同层次的技术进行分析。在分析过程中 ,我们把机会成本引进模型 ,得出新技术的进入门槛和技术采纳的机会成本共同影响着农户采纳农业新技术的可能性等相关结论 ,从而提出改变技术推广思路等相关建议。     

A ‘conservative’ ridge estimator

In this paper an alternative to the Ordinary Ridge Estimator (ORE) introduced by Hoerl and Kennard (1970) is proposed. This estimator is called a ‘Conservative’ Ridge Estimator (CRE), because it puts a heavier weight on the unbiasedness and a smaller weight on the statistical stability of the ‘unstable’ estimation components than the ORE does. Nevertheless, the CRE often performs better in terms of the Mean Square Error of estimation.     

Bringing economic opportunity into line with environmental influence: A discussion on the Coase theorem and the Porter and van der Linde hypothesis

Environmental concerns and tightened environmental policy parameters have been associated with the notion of additional costs of compliance rather than with innovation and sustainability. The contrary, has also been suggested, claiming that strict environmental legislation merely serves as a catalyst for firms to retain obvious economic and environmental mutual gains–so called win–wins–laying around waiting to be collected. Such implications can be seen from the Porter and van der Linde writings, heavily criticised by Palmer et al. as being built on faulty examples. This paper supports that conclusion and uses property rights and transactions costs theories to find private incentives to explore the win–wins for those actors who have the largest potentials to diminish the pressure on our environment. By applying the Coase theorem, emphasising transaction costs and property rights, this paper argues that strong public support is needed to create private incentives for exploring economic and environmental win–win innovations. The public support suggested is to (A) extend producer responsibilities–where the same costs which may be neglected by the end consumers will, if transferred to the design owner, be viewed as a production cost–and to (B) enforce environmental public procurement. Both may be combined with a support to (C) actors (such as non-governmental organisations and consumer agencies) positioning themselves as information bridges by informing the consumers. The negative effects of asymmetric information among actors can, thereby, be diminished as well as the low interest to primarily care for the environment among common consumers.     

Interval regression models with endogenous explanatory variables

We consider the estimation of linear models where the dependent variable is observed by intervals and some continuous regressors may be endogenous. Our approach, an IV version of the technique devised by Stewart (Rev Econ Stud 50(3):737?C753, 1983), is fully parametric and two estimators are proposed: a two-step estimator and a limited-information maximum-likelihood estimator. The results can be summarized as follows: the two-step estimator has an intuitive appeal, and a Monte Carlo experiment suggests that its relative efficiency is rather satisfactory. The limited-information maximum-likelihood estimator, however, is probably simpler to implement and has the advantage of providing a framework in which several testing procedures are more straightforward to perform. The application of two-stage least squares to a proxy of the dependent variable built by taking midpoints, on the other hand, leads to inconsistent estimates; Monte Carlo evidence suggests that the bias arising from the ??midpoint?? technique is much worse than the effect of distributional misspecification. An example application is also included, which uses Australian data on migrants?? remittances; endogeneity effects are substantial and using conventional estimation methods leads to substantially misleading inference.     

Ecological sustainability in policy assessments: A wide-angle view and a close watch

We give a perspective from two practitioners on some of the challenges of addressing sustainability concerns in environmental policy assessments. We focus on the ecological dimension of sustainability, which is closely related to the concept of “ecosystem resilience.” First, we discuss several recent benefit-cost analyses conducted by EPA that illustrate many of the practical difficulties analysts have faced when attempting to assess the ecological benefits of proposed regulations. Next, we discuss the importance of increased coordination of policy assessments among offices and agencies that traditionally operate more or less independently. We conclude by using a stylized model to illustrate how using an “adaptive management” approach to designing and evaluating policies can help to avoid some of the limitations of standard policy assessments highlighted in this special section of Ecological Economics and elsewhere.     

THE VALUE O F NONMARKET HOUSEHOLD PRODUCTION: OPPORTUNITY COST VERSUS MARKET COST ESTIMATES

This paper discusses the problem of valuing the time spent on household production and presents estimates of that production for the United States in 1960 and 1970. The estimates are derived by using both opportunity cost and market cost valuations of household time. A comparative analysis of these estimates concludes first that opportunity cost estimates exceeded market cost estimates by 1.0 to 3.0 percent of the GNP. Second, the ratio of household production to the GNP, although declining slightly between 1960 and 1970, may in the long run tend to be relatively stable. These conclusions do not support the popular views that over time household production will decline in relative magnitude, or that the opportunity cost method of valuing household time, relative to the market cost method, is significantly upward biased.     

Treatment effect analysis of early reemployment bonus program: panel MLE and mode-based semiparametric estimator for interval truncation

We use Korean data to find the effects of Early Reemployment Bonus (ERB) on unemployment duration; ERB is a bonus that the eligible unemployed receive if they find a job before their unemployment insurance benefit expires. A naive approach would be comparing the ERB receiving group with the non-receiving group, but the ERB receipt is partly determined by the unemployment duration itself (thus, an endogeneity problem). Interestingly, there were many individuals who did not receive the ERB despite being fully eligible, and this is attributed to being unaware of the ERB scheme. Taking this as a ??pseudo randomization??, we construct treatment and control groups using only the eligible. Our data set is an unbalanced panel with the response variable interval-truncated due to eligibility requirement of the ERB. We propose a panel random-effect MLE and a semiparametric ??mode-based?? estimator for the interval-truncated response. Our empirical finding is that the effect varies much, depending on individual characteristics. As for the mean effects, whereas the MLE indicates large duration-shortening effects, the semiparametric estimator shows much weaker and mostly insignificant effects.