Raleigh, Clionadh, and Henrik Urdal. 2007. Climate change, environmental degradation and armed conflict. Political Geography 26, no. 6 (August): 674-694. doi:10.1016/j.polgeo.2007.06.005.
From Abstract: "Climate change is expected to bring about major change in freshwater availability, the productive capacity of soils, and in patterns of human settlement. However, considerable uncertainties exist with regard to the extent and geographical distribution of these changes...We argue that our best guess about the future has to be based on our knowledge about the relationship between demography, environment and violent conflict in the past...This article represents a new approach to assess the impact of environment on internal armed conflict by using georeferenced...data and small geographical, rather than political, units of analysis. It addresses some of the most important factors assumed to be strongly influenced by global warming: land degradation, freshwater availability, and population density and change. While population growth and density are associated with increased risks, the effects of land degradation and water scarcity are weak, negligible or insignificant. The results indicate that the effects of political and economic factors far outweigh those between local level demographic/environmental factors and conflict" (674).
"To address the issue of whether climate change poses a traditional security threat, we build on propositions from the environmental security literature, identifying potential links between natural resource scarcity and violent conflict. We combine these propositions with environmental change scenarios from...[IPCC]...and develop testable hypotheses about the expected relationships...If soil degradation, freshwater scarcity and population pressure have influenced the risk of conflict in the past, we assume that this may also inform us about likely security implications of climate change. Obvious limitations to such approach are the possibilities that climate change will bring about more severe and more abrupt forms of environmental change than we have experienced in the past" (675).
While the lion's share of studies on the relationship between resource scarcity and conflict focus on state-based units, this study will focus on 100 square kilometer blocks.
The existing literature on resource scarcity and conflict focuses on the following causal chains: "firstly, increasing temperatures, precipitation anomalies and extreme weather is expected to aggravate processes of resource degradation that is already underway" (676). "Secondly, significantly increasing sea levels as well as more extreme weather conditions will force millions of people to migrate, potentially leading to higher pressures on resources in areas of destination and subsequently to resource competition" (677).
Their soil data: "The measure of soil degradation throughout the world was commissioned by the International Soil Reference and Information Centre. The information...is based on questionnaire answers from numerous soil experts throughout the world" (683).
"It appears from this disaggregated analysis that demographic and environmental variables only have a very moderate effect on the risk of civil conflict" (689).
Wednesday, December 30, 2009
Hendrix and Glaser: Trends and Triggers
Hendrix, Cullen S., and Sarah M. Glaser. 2007. Trends and triggers: Climate, climate change and civil conflict in Sub-Saharan Africa. Political Geography 26, no. 6 (August): 695-715. doi:10.1016/j.polgeo.2007.06.006.
The Abstract: "The conventional discourse relating climate change to conflict focuses on long term trends in temperature and precipitation that define ecosystems and their subsequent impact on access to renewable resources. Because these changes occur over long time periods they may not capture the proximate factors that trigger conflict. We estimate the impact of both long term trends in climate and short term climatic triggers on civil conflict onset in Sub-Saharan Africa. We find that both operationalizations have a significant impact. Climates more suitable for Eurasian agriculture are associated with a decreased likelihood of conflict, while freshwater resources per capita are positively associated with the likelihood of conflict. Moreover, positive changes in rainfall are associated with a decreased likelihood of conflict in the following year. We also assess the outlook for the future by analyzing simulated changes in precipitation means and variability over the period 2000-2099. We find few statistically significant, positive trends in our measure of interannual variability, suggesting that it is unlikely to be affected dramatically by changes in climate" (695).
There has been much assumed about the link between climate change and conflict, though, "The causal link between climate change and threats to security...is not specified" (696).
One set of literature argues that a decrease in renewable resources will lead to conflict. Another argues that variation in climate will lead to conflict. "We investigate these arguments from two complementary perspectives. First, the effects of climate change on the onset of conflict must be conceived of as (1) long term trends that may lead to a higher baseline probability of conflict, and (2) short term triggers that affect the interannual variability in that probability" (696).
They explore changes in precipitation using the NCAR-PCM model.
"These findings point to two conclusions. The first is that the future for Africa is not necessarily one defined by increasing interannual variability in rainfall, the most significant climatic variable in our analysis of conflict onset. The second regards policy. Our findings suggest that reducing dependence on rainwater for agriculture may mitigate conflict, even as rainfall variability is not predicted to increase over time" (696-7).
Lit Review:
Good review of literature on water availability and conflict.
"Thus framed, we address two open questions in the literature. The first is how to combine stationary trend measures with temporally variant trigger measures in order to model the environmental conditions that lead to conflict. The second regards the neo-Malthusian tendency to assume (a) that resources are dwindling and (b) that fewer resources lead inexorably to conflict" (698).
"...we can generate hypotheses regarding the effects of land degradation, climatic conditions, and freshwater abundance on the likelihood of conflict. Land degradation refers to processes that negatively affect land productivity. If productivity is defined as the expected benefit per unit of effort, then we expect higher levels of land degradation to be associated with lower returns to agriculture and therefore to higher likelihood of conflict, ceterus paribus" (699).
They use PRIO/Uppsala data for their dependent variable.
"Land degradation is defined as the temporary or permanent reduction in the reproductive capacity of land as a result of human action" (701)
"Our findings suggest that interannual variability in rainfall is a more significant determinant of conflict than our measures of climate, land degradation, and freshwater resources. Admittedly, these results may be biased due to stationary in the trend measures, a problem addressed critically in section two but which ultimately proves insurmountable in our analysis due to constraints on available data" (710).
The authors find that the future of Sub-Saharan stability vis-à-vis climate change is relatively positive, as the forecasts to not show large amounts of variability interannual pattern changes. They argue that this is due to a regional bias.
One key take-away from my perspective is that we need to look at interannual variability in forecasts of precipitation.
The Abstract: "The conventional discourse relating climate change to conflict focuses on long term trends in temperature and precipitation that define ecosystems and their subsequent impact on access to renewable resources. Because these changes occur over long time periods they may not capture the proximate factors that trigger conflict. We estimate the impact of both long term trends in climate and short term climatic triggers on civil conflict onset in Sub-Saharan Africa. We find that both operationalizations have a significant impact. Climates more suitable for Eurasian agriculture are associated with a decreased likelihood of conflict, while freshwater resources per capita are positively associated with the likelihood of conflict. Moreover, positive changes in rainfall are associated with a decreased likelihood of conflict in the following year. We also assess the outlook for the future by analyzing simulated changes in precipitation means and variability over the period 2000-2099. We find few statistically significant, positive trends in our measure of interannual variability, suggesting that it is unlikely to be affected dramatically by changes in climate" (695).
There has been much assumed about the link between climate change and conflict, though, "The causal link between climate change and threats to security...is not specified" (696).
One set of literature argues that a decrease in renewable resources will lead to conflict. Another argues that variation in climate will lead to conflict. "We investigate these arguments from two complementary perspectives. First, the effects of climate change on the onset of conflict must be conceived of as (1) long term trends that may lead to a higher baseline probability of conflict, and (2) short term triggers that affect the interannual variability in that probability" (696).
They explore changes in precipitation using the NCAR-PCM model.
"These findings point to two conclusions. The first is that the future for Africa is not necessarily one defined by increasing interannual variability in rainfall, the most significant climatic variable in our analysis of conflict onset. The second regards policy. Our findings suggest that reducing dependence on rainwater for agriculture may mitigate conflict, even as rainfall variability is not predicted to increase over time" (696-7).
Lit Review:
Good review of literature on water availability and conflict.
"Thus framed, we address two open questions in the literature. The first is how to combine stationary trend measures with temporally variant trigger measures in order to model the environmental conditions that lead to conflict. The second regards the neo-Malthusian tendency to assume (a) that resources are dwindling and (b) that fewer resources lead inexorably to conflict" (698).
"...we can generate hypotheses regarding the effects of land degradation, climatic conditions, and freshwater abundance on the likelihood of conflict. Land degradation refers to processes that negatively affect land productivity. If productivity is defined as the expected benefit per unit of effort, then we expect higher levels of land degradation to be associated with lower returns to agriculture and therefore to higher likelihood of conflict, ceterus paribus" (699).
They use PRIO/Uppsala data for their dependent variable.
"Land degradation is defined as the temporary or permanent reduction in the reproductive capacity of land as a result of human action" (701)
"Our findings suggest that interannual variability in rainfall is a more significant determinant of conflict than our measures of climate, land degradation, and freshwater resources. Admittedly, these results may be biased due to stationary in the trend measures, a problem addressed critically in section two but which ultimately proves insurmountable in our analysis due to constraints on available data" (710).
The authors find that the future of Sub-Saharan stability vis-à-vis climate change is relatively positive, as the forecasts to not show large amounts of variability interannual pattern changes. They argue that this is due to a regional bias.
One key take-away from my perspective is that we need to look at interannual variability in forecasts of precipitation.
Tuesday, December 29, 2009
Nordas and Gleditsch: Climate Change and Conflict
Nordås, Ragnhild, and Nils Petter Gleditsch. 2007. Climate change and conflict. Political Geography 26, no. 6 (August): 627-638. doi:10.1016/j.polgeo.2007.06.003.
There is a widening consensus that the impacts of climate change will change the terrain of conflict. This article begins by noting IPCC reports, along with governmental reports issued by US, German, NGO and IO sources.
The authors then review the academic literature on climate change and conflict. They find it generally wanting, as many sources are not peer-reviewed and the total scope of work is sparse. Additionally, much of the literature that does exist is contentious: do nations cooperate around water resource issues, or come to blows?
The authors highlight five articles that help to form a backbone of the study of the relationship between climate change and conflict.
"This literature outlines several possible causal chains from climate change to conflict. The starting-point for most of these is that climate change results in a reduction of essential resources for livelihood, such as food or water, which can have one of two consequences: those affected by the increasing scarcity may start fighting over the remaining resources. Alternatively, people may be forced to leave the area, adding to the number of international refugees or internally displaced persons. Fleeing environmental destruction is at the outset a less violent response to adverse conditions than armed conflict or genocide. But when the migrants encroach on the territory of other people who may also be resource-constrained, the potential for violence arises" (631).
Drivers from climate change of conflict include changes in the availability of resources (food, fuel or water), forced migration, dramatic weather events, moves away from fossil fuels quickly, thus radically changing the price of oil and impacting dependent countries, or reduced economic output as a result of attempts to reduce carbon emissions.
They end with a focus on five points to improve analysis of this relationship: 1. conflict models and climate change models need to be synthesized; 2. what kinds of violence do we expect to emerge from climate change?; 3. there needs to be an accounting of both the positive and negative impacts of climate change; 4. the impacts of climate change need to be increasingly disaggregated; and 5. consequences should not focus on rich countries alone, but the globe.
There is a widening consensus that the impacts of climate change will change the terrain of conflict. This article begins by noting IPCC reports, along with governmental reports issued by US, German, NGO and IO sources.
The authors then review the academic literature on climate change and conflict. They find it generally wanting, as many sources are not peer-reviewed and the total scope of work is sparse. Additionally, much of the literature that does exist is contentious: do nations cooperate around water resource issues, or come to blows?
The authors highlight five articles that help to form a backbone of the study of the relationship between climate change and conflict.
"This literature outlines several possible causal chains from climate change to conflict. The starting-point for most of these is that climate change results in a reduction of essential resources for livelihood, such as food or water, which can have one of two consequences: those affected by the increasing scarcity may start fighting over the remaining resources. Alternatively, people may be forced to leave the area, adding to the number of international refugees or internally displaced persons. Fleeing environmental destruction is at the outset a less violent response to adverse conditions than armed conflict or genocide. But when the migrants encroach on the territory of other people who may also be resource-constrained, the potential for violence arises" (631).
Drivers from climate change of conflict include changes in the availability of resources (food, fuel or water), forced migration, dramatic weather events, moves away from fossil fuels quickly, thus radically changing the price of oil and impacting dependent countries, or reduced economic output as a result of attempts to reduce carbon emissions.
They end with a focus on five points to improve analysis of this relationship: 1. conflict models and climate change models need to be synthesized; 2. what kinds of violence do we expect to emerge from climate change?; 3. there needs to be an accounting of both the positive and negative impacts of climate change; 4. the impacts of climate change need to be increasingly disaggregated; and 5. consequences should not focus on rich countries alone, but the globe.
Monday, December 28, 2009
Lee: Climate Change and Armed Conflict
Lee, James R. 2009. Climate Change and Armed Conflict: Hot and Cold Wars. Routledge studies in peace and conflict resolution. London: Routledge.
There are two areas where conflict arising from climate change is likely: the Equatorial Tension Belt and the Polar Tension Belt. The ETB represents conflicts that will arise from the following causes: the age of the society and the overall environmental impact; the size of populations and the resource pressures implied; the kind of environment-desert or tropics-lend themselves to increased impact from climate change; historical legacy; and resource distribution (9-10). In the PTB, conflict will arise over the need to extract resources that become available due to receding ice stocks.
“Climate change will tend to make the existing Equatorial Tension Belt hotter and drier, and these twin conditions are likely to lead to greater conflict. Forecasts suggest that problems will intensify as demographic and socio-economic factors add further pressures on resources” (10).
The conceptualization of the relationship between climate change and conflict involves a framing of perspectives on the future: some are optimists, some are pessimists. These can be generally grouped into idealist and realist camps.
Some argue that climate change is not going to create substantial impetus for conflict. Others argue that conflict will emerge in certain zones, and not in others. These are referred to as “tame” zones and “untamed” zones (22).
The first tame zone is those that are interdependent because of trade. The second tame zone involve those who are democratic.
Chapter 2 reviews some historic instances of climate change and conflict.
Chapter 3 looks out at forecasts of climate change and conflict.
The beginning focuses on an overview of IPCC reports and findings.
Compares ACTOR forecasts for conflict with historic prevalence of conflict (from Uppsala) and then juxtaposes this with IPCC forecasts for low, intermediate and high temperature change. Again, forecasts of climate change are compared with Fund for Peace forecasts of state failure. IPCC regions are then each specifically explored.
Six scenarios are then deployed.
There are two areas where conflict arising from climate change is likely: the Equatorial Tension Belt and the Polar Tension Belt. The ETB represents conflicts that will arise from the following causes: the age of the society and the overall environmental impact; the size of populations and the resource pressures implied; the kind of environment-desert or tropics-lend themselves to increased impact from climate change; historical legacy; and resource distribution (9-10). In the PTB, conflict will arise over the need to extract resources that become available due to receding ice stocks.
“Climate change will tend to make the existing Equatorial Tension Belt hotter and drier, and these twin conditions are likely to lead to greater conflict. Forecasts suggest that problems will intensify as demographic and socio-economic factors add further pressures on resources” (10).
The conceptualization of the relationship between climate change and conflict involves a framing of perspectives on the future: some are optimists, some are pessimists. These can be generally grouped into idealist and realist camps.
Some argue that climate change is not going to create substantial impetus for conflict. Others argue that conflict will emerge in certain zones, and not in others. These are referred to as “tame” zones and “untamed” zones (22).
The first tame zone is those that are interdependent because of trade. The second tame zone involve those who are democratic.
Chapter 2 reviews some historic instances of climate change and conflict.
Chapter 3 looks out at forecasts of climate change and conflict.
The beginning focuses on an overview of IPCC reports and findings.
Compares ACTOR forecasts for conflict with historic prevalence of conflict (from Uppsala) and then juxtaposes this with IPCC forecasts for low, intermediate and high temperature change. Again, forecasts of climate change are compared with Fund for Peace forecasts of state failure. IPCC regions are then each specifically explored.
Six scenarios are then deployed.
Monday, December 7, 2009
Dupuy: Understanding War
Trevor N Dupuy, Understanding War: History and Theory of Combat (New York: Paragon House, 1987).
“Students of military art and military science have long sought fundamental laws or theories that would explain the interactions of military forces in combat and the outcomes of battles” (xxi). This book attempts to highlight these patterns, as the authors believe that they occur regularly. The focus of the study is military history.
“Although no one can possibly know now what the next war will really be like, there can be no question that the emotional, conceptual and intellectual aspects of combat through the ages are basically the same in war after war…Over the past twenty-five years I have, I believe, identified thirteen unchanging operational features or concepts, which I call “The Timeless Verities of Combat” (1).
“Students of military art and military science have long sought fundamental laws or theories that would explain the interactions of military forces in combat and the outcomes of battles” (xxi). This book attempts to highlight these patterns, as the authors believe that they occur regularly. The focus of the study is military history.
“Although no one can possibly know now what the next war will really be like, there can be no question that the emotional, conceptual and intellectual aspects of combat through the ages are basically the same in war after war…Over the past twenty-five years I have, I believe, identified thirteen unchanging operational features or concepts, which I call “The Timeless Verities of Combat” (1).
Monday, November 16, 2009
Blainey: The Causes of War
Blainey, Geoffrey. 1973. The Causes of War. New York: Free Press.
This book is a wide ranging exploration of the causes of war and peace. The author refers to its structure as an "intellectual detective story" (vii), and proceeds to explore and adjudicate a large chunk of extant literature, keeping some insights, and tossing others away.
The book begins with a claim that, "for every thousand pages published on the causes of wars there is less than one page directly on the causes of peace" (3). Many of the theories explored in the first two chapters are arcane, and are not explorations of the causal dynamics of international conflict, but rather the identification of a certain possibly correlated variable (ie., there is a certain amount of energy that a society has, and it can be for international conflict or domestic, or that this energy can be used in building the economy, or that there is a process of jingoism, war and then weariness, which eventually leads to more war (87), etc).
Theories of war explore, in part, perceptions about the likelihood of victory, finding that many who perceive wars to be winnable and short are likely to engage. Though, when this happens from two sides, it becomes problematic, as both sides cannot win.
"A prediction of a war about to be fought is thus a crystallization of many moods and arguments, each of which has some influence on the decision to make war" (54).
Potential alliances also inform the decision to go to war.
There was previously a relationship between wars and the deaths/succession of monarchs.
Few wars are started in December and January.
The discussion of balance of power is interesting. Is it the balancing of power that makes for more peace, or is it the hegemon that makes for a peaceful environment? This is a crucial question in the study of international conflict. "The idea that an even distribution of power promotes peace has gained strength partly because it has never been accompanied by tangible evidence. Like a ghost it has not been captured and examined for pallor and pulsebeat" (112).
On the interaction of diplomats: "In peace time the relations between two diplomats are like relations between two merchants. While the merchants trade in copper or transistors, the diplomats' transactions involve a variety of other issues which they have in common. A foreign minister or diplomat is a merchant who bargains on behalf of his country. He is both buyer and seller, though he buys and sells privileges and obligations rather than commodities. The treaties he signs are simply more courteous versions of commercial contracts"
(115).
"Wars usually end when the fighting nations agree on their relative strength, and wars usually begin when fighting nations disagree on their relative strength" (122).
“One may suggest that nations, in assessing their relative strength, were influenced by seven main factors: military strength and the ability to apply that strength efficiently in the chosen zone of war; predictions of how outside nations would behave in the event of war; perceptions of internal unity and of the unity or discord of the enemy; memory or forgetfulness of the realities and sufferings of war; perceptions of prosperity and of ability to sustain, economically, the kind of war envisaged; national and ideology; and the personality and mental qualities of the leaders who weigh the evidence and decide for peace or war” (123).
Skipped book 3.
This book is a wide ranging exploration of the causes of war and peace. The author refers to its structure as an "intellectual detective story" (vii), and proceeds to explore and adjudicate a large chunk of extant literature, keeping some insights, and tossing others away.
The book begins with a claim that, "for every thousand pages published on the causes of wars there is less than one page directly on the causes of peace" (3). Many of the theories explored in the first two chapters are arcane, and are not explorations of the causal dynamics of international conflict, but rather the identification of a certain possibly correlated variable (ie., there is a certain amount of energy that a society has, and it can be for international conflict or domestic, or that this energy can be used in building the economy, or that there is a process of jingoism, war and then weariness, which eventually leads to more war (87), etc).
Theories of war explore, in part, perceptions about the likelihood of victory, finding that many who perceive wars to be winnable and short are likely to engage. Though, when this happens from two sides, it becomes problematic, as both sides cannot win.
"A prediction of a war about to be fought is thus a crystallization of many moods and arguments, each of which has some influence on the decision to make war" (54).
Potential alliances also inform the decision to go to war.
There was previously a relationship between wars and the deaths/succession of monarchs.
Few wars are started in December and January.
The discussion of balance of power is interesting. Is it the balancing of power that makes for more peace, or is it the hegemon that makes for a peaceful environment? This is a crucial question in the study of international conflict. "The idea that an even distribution of power promotes peace has gained strength partly because it has never been accompanied by tangible evidence. Like a ghost it has not been captured and examined for pallor and pulsebeat" (112).
On the interaction of diplomats: "In peace time the relations between two diplomats are like relations between two merchants. While the merchants trade in copper or transistors, the diplomats' transactions involve a variety of other issues which they have in common. A foreign minister or diplomat is a merchant who bargains on behalf of his country. He is both buyer and seller, though he buys and sells privileges and obligations rather than commodities. The treaties he signs are simply more courteous versions of commercial contracts"
(115).
"Wars usually end when the fighting nations agree on their relative strength, and wars usually begin when fighting nations disagree on their relative strength" (122).
“One may suggest that nations, in assessing their relative strength, were influenced by seven main factors: military strength and the ability to apply that strength efficiently in the chosen zone of war; predictions of how outside nations would behave in the event of war; perceptions of internal unity and of the unity or discord of the enemy; memory or forgetfulness of the realities and sufferings of war; perceptions of prosperity and of ability to sustain, economically, the kind of war envisaged; national and ideology; and the personality and mental qualities of the leaders who weigh the evidence and decide for peace or war” (123).
Skipped book 3.
Wednesday, September 16, 2009
Singer: Correlates of War: I
Singer, JD. 1978. The Correlates of War. New York: Free Press.
The Correlates of War project has provided much literature and remains a foundational cut in the study of global conflict. Singer is obviously the god-father of this project, and, while it has found many detractors, it has undoubtedly moved the debate about state instability and war in new directions.
Volume one of the series represents Singer's own work, primarily. It begins by exploring some of the potential cause of war, such as arms build-up, and the logic behind such transactions. It explores issues widely, arguing for the normative study of conflict following a scientific method. It is also adequately, in my opinion, cautious about the veracity of what can be known in the field of conflict, as well as more broadly within the social sciences; the projects is intentionally titled the "correlates" and not the "causes".
When he moves into discussions of prediction, he argues for more thorough use of computer simulations in place of games, intuition and other methods where assumptions are not made as explicit as possible. Through computer simulations, scholars must make the variables, parameters and theories used in their models explicit. This is seen as being valuable.
The experiments in this book are directed at wars between nations. Some basic and standard statistical methods are used to explore bivariate and multivariate relationships between independent variables as they explain the output of war.
Much of the book reads pedantically.
The Correlates of War project has provided much literature and remains a foundational cut in the study of global conflict. Singer is obviously the god-father of this project, and, while it has found many detractors, it has undoubtedly moved the debate about state instability and war in new directions.
Volume one of the series represents Singer's own work, primarily. It begins by exploring some of the potential cause of war, such as arms build-up, and the logic behind such transactions. It explores issues widely, arguing for the normative study of conflict following a scientific method. It is also adequately, in my opinion, cautious about the veracity of what can be known in the field of conflict, as well as more broadly within the social sciences; the projects is intentionally titled the "correlates" and not the "causes".
When he moves into discussions of prediction, he argues for more thorough use of computer simulations in place of games, intuition and other methods where assumptions are not made as explicit as possible. Through computer simulations, scholars must make the variables, parameters and theories used in their models explicit. This is seen as being valuable.
The experiments in this book are directed at wars between nations. Some basic and standard statistical methods are used to explore bivariate and multivariate relationships between independent variables as they explain the output of war.
Much of the book reads pedantically.
Wednesday, August 19, 2009
The Economic Benefits of Intelligent Technologies
Access Economics Pty Limited. 2009. The Economic Benefits of Intelligent Technologies. April.
"This report reviews the potential economic benefits that may flow from the adoption of smart technologies and systems in different parts of the economy...The amount of all forms of data that are regularly collected throughout the community rapidly expand on a daily basis. Intelligent systems have the capacity of using these data to improve decision-making and co-ordination throughout society, thereby lifting economic efficiency and living standards" (i).
"Overall, the adoption of smart technologies and systems in the five areas identified are conservatively estimated to result in:
• an increase in the net present value (NPV) of Gross Domestic Product...of between $35 billion to $80 billion over the first ten years, with precise estimates depending on how much spare capacity is in the economy;
• in the case where the economy is operating at full employment, an increase of labour productivity of around 0.5% as the deployment of the technologies becomes widespread; and
• in the case where the economy is operating at less than full employment the impact on jobs is more pronounced as the technologies become widespread. In 2014 alone this results in more than 70,000 jobs being added to the economy" (ii).
This report explores different areas in which smart technology can have profound effects, specifically electricity, transport, health, water and high-speed broadband (HSBB).
"The rollout of high speed broadband both enables the more effective implementation of smart technologies in other areas of the economy-including electricity, water, transport and health-as well as providing other direct and substantive benefits to individuals, businesses and the environment through the availability to deliver a range of commercial, government and information services more efficiently" (1).
The report reviews the literature on the topic, and then explores smart-technologies in an equilibrium model. Two scenarios are then explored: an economy at full employment and an economy with less than full employment.
"This report reviews the potential economic benefits that may flow from the adoption of smart technologies and systems in different parts of the economy...The amount of all forms of data that are regularly collected throughout the community rapidly expand on a daily basis. Intelligent systems have the capacity of using these data to improve decision-making and co-ordination throughout society, thereby lifting economic efficiency and living standards" (i).
"Overall, the adoption of smart technologies and systems in the five areas identified are conservatively estimated to result in:
• an increase in the net present value (NPV) of Gross Domestic Product...of between $35 billion to $80 billion over the first ten years, with precise estimates depending on how much spare capacity is in the economy;
• in the case where the economy is operating at full employment, an increase of labour productivity of around 0.5% as the deployment of the technologies becomes widespread; and
• in the case where the economy is operating at less than full employment the impact on jobs is more pronounced as the technologies become widespread. In 2014 alone this results in more than 70,000 jobs being added to the economy" (ii).
This report explores different areas in which smart technology can have profound effects, specifically electricity, transport, health, water and high-speed broadband (HSBB).
"The rollout of high speed broadband both enables the more effective implementation of smart technologies in other areas of the economy-including electricity, water, transport and health-as well as providing other direct and substantive benefits to individuals, businesses and the environment through the availability to deliver a range of commercial, government and information services more efficiently" (1).
The report reviews the literature on the topic, and then explores smart-technologies in an equilibrium model. Two scenarios are then explored: an economy at full employment and an economy with less than full employment.
Tuesday, August 4, 2009
Transforming America's Power Industry
The Brattle Group. Transforming America's Power Industry: The Investment Challenge 2010-2030.
The AEO makes projections out to 2030 of US electricity consumption by type of production. The Brattle Group, through the use of the Regional Capacity Model (RECAP), then took these projections, makes its own projections out to 2030 and develops scenarios around uncertainty.
In the Brattle Group's Reference Scenario, one important initial assumption that was changed was the overall price of construction for different types of energy. These revised numbers came from an updated EPRI report that highlighted the increasing cost of construction above inflation, which was the assumption of the AEO 2008 report.
The Brattle Group also used higher Fuel Prices than AEO in their forecast.
The Reference Scenario is similar to the AEO figure, but incorporates higher fuel and construction costs (outlined in more detail in the report). "The Reference Scenario should not be viewed as our 'base' or 'most likely' scenario, but rather a starting point for our analysis" (11).
In addition to the Reference Scenario, the Brattle Group produced scenarios that focused on energy savings provided by EE/DR (Energy Efficiency/Demand Response) measures. These scenarios were broken down two-fold: firstly, there was assumed to be "realistically achievable potential" (RAP). Secondly, there was assumed to be "maximum achievable potential" (MAP). "...our RAP Efficiency Base Case Scenario includes EE/DR savings as our best estimate of projected demand for electricity prior to the full modeling of price response or a national carbon policy" (16).
"One of the two components of the EPRI forecast is energy efficiency (EE). The EE forecasts consider an extensive set of technologies and measures for the residential, commercial, and industrial sectors. These EE technologies and measures affect different end uses. Programs, products, and services that encourage customers to adopt EE technologies and measures come in several forms, including rebates and subsidies. Following are some of the various technologies and measures considered in teh EPRI study and the end uses they affect" (16).
1. Residential High-Efficiency Equipment: HVAC, lighting, etc.
2. Commercial High-Efficiency Equipment: Same as above for commercial buildings.
3. Industrial High-Efficiency Equipment: Further along the same lines as above, but for industry.
Demand Response, on the other hand, is focused heavily on reducing peak demand for energy. Three types of demand response were modeled:
1. Direct Load Control (DLC): utility companies can shut off an end-user's A/C, for example.
2. Interruptible Service: utility companies can ask industry or commercial groups to reduce energy at certain times.
3. Dynamic Pricing: This requires AMI infrastructure.
"A major cost that is likely to be capitalized in the EE/DR forecast is investment in AMI, the equipment that enables dynamic pricing (as well as a wide range of operational benefits and reliability improvements). Harvesting potential gains from DR programs will require a substantial capital investment in AMI, as well as consumption patterns away from peak periods in response to price signals. To estimate the capital cost of DR initiatives, we separately projected the investment in AMI that likely would be necessary to support these forecasts. Our projection of AMI investment costs is driven primarily by three factors:" (22-3).
1. Final AMI Penetration Rate: "For the MAP Efficiency Scenario, we have assumed that 30 percent of residential customers and 50 percent of C&I customers would be equipped with AMI. These participation rates were reduced by roughly 60 percent to produce the RAP Efficiency Base Case Scenario" (23).
2. AMI Deployment Rate Over Time: "We assume that AMI deployment will begin in 2010 for C&I customers and in 2015 for residential customers. Full deployment will be reached in 2030 for the RAP Efficiency Base Case Scenario. Deployment is accelerated under the MAP Efficiency Scenario, reaching full deployment in 2020" (23).
3. Cost of AMI per Customer: "Based on a review of California shareholder filings for AMI budget approval, we have estimated the full cost per residential customer to be $300. The cost per C&I customer is estimated at $1,500" (23).
The fourth scenario developed explored the implications of the "Prism Analysis" conducted by EPRI. This focuses on the different feasible areas in which the electricity sector can reduce carbon emissions. The Prism Analysis is comprised of seven events:
1. Energy Efficiency Reduction in Load Growth
2. Doubling the level of Renewable Generation Capacity Over AEO 2008 Forecast
3. Tripling Nuclear Capacity over AEO 2008.
4. Improve Efficiency of Coal Generation
5. CCS
6. PHEVs
7. Increased Distributed Energy Resources (DER)
Four major technologies comprise the core of these seven events:
1. Energy Effiency: The assumptions in the Prism RAP Scenario for EE/DR were the same as in the RAP Efficiency Base Case Scenario
2. CCS: All factories after 2020 were assumed to have CCS with 90% efficacy
3. Renewables: These increased assuming more and expanding RPS requirements
4. Nuclear
The AEO makes projections out to 2030 of US electricity consumption by type of production. The Brattle Group, through the use of the Regional Capacity Model (RECAP), then took these projections, makes its own projections out to 2030 and develops scenarios around uncertainty.
In the Brattle Group's Reference Scenario, one important initial assumption that was changed was the overall price of construction for different types of energy. These revised numbers came from an updated EPRI report that highlighted the increasing cost of construction above inflation, which was the assumption of the AEO 2008 report.
The Brattle Group also used higher Fuel Prices than AEO in their forecast.
The Reference Scenario is similar to the AEO figure, but incorporates higher fuel and construction costs (outlined in more detail in the report). "The Reference Scenario should not be viewed as our 'base' or 'most likely' scenario, but rather a starting point for our analysis" (11).
In addition to the Reference Scenario, the Brattle Group produced scenarios that focused on energy savings provided by EE/DR (Energy Efficiency/Demand Response) measures. These scenarios were broken down two-fold: firstly, there was assumed to be "realistically achievable potential" (RAP). Secondly, there was assumed to be "maximum achievable potential" (MAP). "...our RAP Efficiency Base Case Scenario includes EE/DR savings as our best estimate of projected demand for electricity prior to the full modeling of price response or a national carbon policy" (16).
"One of the two components of the EPRI forecast is energy efficiency (EE). The EE forecasts consider an extensive set of technologies and measures for the residential, commercial, and industrial sectors. These EE technologies and measures affect different end uses. Programs, products, and services that encourage customers to adopt EE technologies and measures come in several forms, including rebates and subsidies. Following are some of the various technologies and measures considered in teh EPRI study and the end uses they affect" (16).
1. Residential High-Efficiency Equipment: HVAC, lighting, etc.
2. Commercial High-Efficiency Equipment: Same as above for commercial buildings.
3. Industrial High-Efficiency Equipment: Further along the same lines as above, but for industry.
Demand Response, on the other hand, is focused heavily on reducing peak demand for energy. Three types of demand response were modeled:
1. Direct Load Control (DLC): utility companies can shut off an end-user's A/C, for example.
2. Interruptible Service: utility companies can ask industry or commercial groups to reduce energy at certain times.
3. Dynamic Pricing: This requires AMI infrastructure.
"A major cost that is likely to be capitalized in the EE/DR forecast is investment in AMI, the equipment that enables dynamic pricing (as well as a wide range of operational benefits and reliability improvements). Harvesting potential gains from DR programs will require a substantial capital investment in AMI, as well as consumption patterns away from peak periods in response to price signals. To estimate the capital cost of DR initiatives, we separately projected the investment in AMI that likely would be necessary to support these forecasts. Our projection of AMI investment costs is driven primarily by three factors:" (22-3).
1. Final AMI Penetration Rate: "For the MAP Efficiency Scenario, we have assumed that 30 percent of residential customers and 50 percent of C&I customers would be equipped with AMI. These participation rates were reduced by roughly 60 percent to produce the RAP Efficiency Base Case Scenario" (23).
2. AMI Deployment Rate Over Time: "We assume that AMI deployment will begin in 2010 for C&I customers and in 2015 for residential customers. Full deployment will be reached in 2030 for the RAP Efficiency Base Case Scenario. Deployment is accelerated under the MAP Efficiency Scenario, reaching full deployment in 2020" (23).
3. Cost of AMI per Customer: "Based on a review of California shareholder filings for AMI budget approval, we have estimated the full cost per residential customer to be $300. The cost per C&I customer is estimated at $1,500" (23).
The fourth scenario developed explored the implications of the "Prism Analysis" conducted by EPRI. This focuses on the different feasible areas in which the electricity sector can reduce carbon emissions. The Prism Analysis is comprised of seven events:
1. Energy Efficiency Reduction in Load Growth
2. Doubling the level of Renewable Generation Capacity Over AEO 2008 Forecast
3. Tripling Nuclear Capacity over AEO 2008.
4. Improve Efficiency of Coal Generation
5. CCS
6. PHEVs
7. Increased Distributed Energy Resources (DER)
Four major technologies comprise the core of these seven events:
1. Energy Effiency: The assumptions in the Prism RAP Scenario for EE/DR were the same as in the RAP Efficiency Base Case Scenario
2. CCS: All factories after 2020 were assumed to have CCS with 90% efficacy
3. Renewables: These increased assuming more and expanding RPS requirements
4. Nuclear
Friday, July 31, 2009
Hledik: How Green Is the Smart Grid?
Hledik, R. 2009. How Green Is the Smart Grid? The Electricity Journal 22, no. 3: 29-41.
"A simulation of the US power system suggests that both conservative and more technologically aggressive implementations of a smart grid would produce a significant reduction in power sector carbon emissions at the national level. A conservative approach could reduce annual CO2 emissions by 5 percent by 2030, while the more aggressive approach could lead to a reduction of nearly 16 percent by 2030" (29).
Two scenarios are examined, as the concept of "smart grid" has not been fully concretized. Scenario one explores technologies that are currently available. The second explores an expansion of possible future technologies.
"At a basic level, the smart grid will serve as the information technology backbone that enables widespread penetration of new technologies that today's electrical grid cannot support. These new technologies include cutting-edge advancements in metering, transmission, distribution, and electricity storage technology, as well as providing new information and flexibility to both consumers and providers of electricity. Ultimately, access to this information will improve the products and services that are offered to consumers, leading to more efficient consumption and provision of electricity" (30).
A key aspect of smart grid technology is advanced metering infrastructure (AMI). This leads to dynamic pricing of energy.
There are a variety of pushes to produce more energy from renewable sources. These each have different goals. Doubling the Renewable Portfolio Standards (RPS) would lead to 19% of energy being produced by renewables in 2030. T. Boone Pickens calls for 20% from renewable by 2020, as does the EU. The New Apollo program wants 25% by 2025. Google's energy plan calls for 60% by 2030. Repower America suggests that 75% come from renewables in the next 10 years.
The Brattle Group's RECAP model is used to explore these scenarios using EIA data and assumptions.
"Among the key outputs of RECAP is a forecast of the CO2 emissions from both existing and new power plants. This forecast depends on both the projected mix of new plants that will be added to the system, and the operation of all power plants that are connected to the grid. Implementation of a smart grid will influence both of these. In this study, there are four specific smart grid impacts that have been modeled" (37). These are: peak demand reduction, conservation, increased penetration of renewables and reduced line loss.
Three scenarios are explored out to 2030. Firstly, a business as usual forecast, which shows average annual increases in CO2 emissions of 0.7%. Secondly, the Conservative Scenario, which posits the effects of existing ICT technology on CO2 shows an average annual growth of 0.5%. Finally, the Expanded Scenario shows an average annual growth rate of -0.1%.
Overall, dynamic pricing leads to a nominal improvement in overall CO2 emissions. The combination of dynamic pricing and information displays leads to a 5% reduction in annual CO2 emissions. "By far, the single largest reduction comes from the cleaner mix of generating capacity that is enabled by distributed resources and an expanded transmission system, amounting to a 9.9% reduction in CO2 emissions" (39).
"A simulation of the US power system suggests that both conservative and more technologically aggressive implementations of a smart grid would produce a significant reduction in power sector carbon emissions at the national level. A conservative approach could reduce annual CO2 emissions by 5 percent by 2030, while the more aggressive approach could lead to a reduction of nearly 16 percent by 2030" (29).
Two scenarios are examined, as the concept of "smart grid" has not been fully concretized. Scenario one explores technologies that are currently available. The second explores an expansion of possible future technologies.
"At a basic level, the smart grid will serve as the information technology backbone that enables widespread penetration of new technologies that today's electrical grid cannot support. These new technologies include cutting-edge advancements in metering, transmission, distribution, and electricity storage technology, as well as providing new information and flexibility to both consumers and providers of electricity. Ultimately, access to this information will improve the products and services that are offered to consumers, leading to more efficient consumption and provision of electricity" (30).
A key aspect of smart grid technology is advanced metering infrastructure (AMI). This leads to dynamic pricing of energy.
There are a variety of pushes to produce more energy from renewable sources. These each have different goals. Doubling the Renewable Portfolio Standards (RPS) would lead to 19% of energy being produced by renewables in 2030. T. Boone Pickens calls for 20% from renewable by 2020, as does the EU. The New Apollo program wants 25% by 2025. Google's energy plan calls for 60% by 2030. Repower America suggests that 75% come from renewables in the next 10 years.
The Brattle Group's RECAP model is used to explore these scenarios using EIA data and assumptions.
"Among the key outputs of RECAP is a forecast of the CO2 emissions from both existing and new power plants. This forecast depends on both the projected mix of new plants that will be added to the system, and the operation of all power plants that are connected to the grid. Implementation of a smart grid will influence both of these. In this study, there are four specific smart grid impacts that have been modeled" (37). These are: peak demand reduction, conservation, increased penetration of renewables and reduced line loss.
Three scenarios are explored out to 2030. Firstly, a business as usual forecast, which shows average annual increases in CO2 emissions of 0.7%. Secondly, the Conservative Scenario, which posits the effects of existing ICT technology on CO2 shows an average annual growth of 0.5%. Finally, the Expanded Scenario shows an average annual growth rate of -0.1%.
Overall, dynamic pricing leads to a nominal improvement in overall CO2 emissions. The combination of dynamic pricing and information displays leads to a 5% reduction in annual CO2 emissions. "By far, the single largest reduction comes from the cleaner mix of generating capacity that is enabled by distributed resources and an expanded transmission system, amounting to a 9.9% reduction in CO2 emissions" (39).
Wednesday, July 15, 2009
Gerner and Schrodt: The Effects of Media Coverage on Crisis Assessment
Gerner, DJ, and PA Schrodt. 1998. The effects of media coverage on crisis assessment and early warning in the Middle East. Early Warning and Early Response.
Media coverage is not uniform, and many point to phenomena such as "media fatigue" to highlight the unevenness of reporting. This piece explores these questions by specifically looking at the Arab-Israeli conflict. It explores media fatigue, finding that it is in fact measurable.
Media fatigue occurs when conflict events are not as heavily covered in regions where conflict events are more likely to occur; as conflicts continue for long periods of time, the media does not report as frequently as when conflicts occur on a more stochastic time horizon. This piece argues that large scale news sources are useful, but that they are more prone to media fatigue. For example, instead of just relying on The NYT for event coding, researches must also look to more specific news sources that deal more clearly with the conflict at hand.
Additionally, media fatigue is not entirely a product of boredom, but also may reflect a kind of competition between different events. For example, the article argues that coverage of the Israeli-Arab conflict was overwhelmed by the collapse of the Soviet Union in 1989.
In the end, however, exploring media fatigue is quite difficult, as it requires counterfactuals.
Media coverage is not uniform, and many point to phenomena such as "media fatigue" to highlight the unevenness of reporting. This piece explores these questions by specifically looking at the Arab-Israeli conflict. It explores media fatigue, finding that it is in fact measurable.
Media fatigue occurs when conflict events are not as heavily covered in regions where conflict events are more likely to occur; as conflicts continue for long periods of time, the media does not report as frequently as when conflicts occur on a more stochastic time horizon. This piece argues that large scale news sources are useful, but that they are more prone to media fatigue. For example, instead of just relying on The NYT for event coding, researches must also look to more specific news sources that deal more clearly with the conflict at hand.
Additionally, media fatigue is not entirely a product of boredom, but also may reflect a kind of competition between different events. For example, the article argues that coverage of the Israeli-Arab conflict was overwhelmed by the collapse of the Soviet Union in 1989.
In the end, however, exploring media fatigue is quite difficult, as it requires counterfactuals.
Schrodt: Event Data in Foreign Policy Analysis
Schrodt, PA. 1994. Event data in foreign policy analysis. Foreign Policy Analysis: Continuity and Change. Prentice-Hall: 145-166.
"Event data are a formal method of measuring the phenomena that contribute to foreign policy perceptions. Event data are generated by examining thousands of newspaper reports on the day to day interactions of nation-states and assigning each reported interaction a numerical score or categorical code. For example, if two countries sign a trade agreement, that interaction might be assigned a numerical score of +5, whereas if the two countries broke off diplomatic relations, that would be assigned a numerical score of -8. When these reports are averaged over time, they provide a rough indication of the level of cooperation and conflict between the two states" (2).
Creating event data involves three distinct steps: 1. identify sources; 2. develop a coding system; 3. train human coders.
"Event data was originally developed by Charles McClelland in the early 1960s as a bridge between the traditional approach of diplomatic history and the new quantitative analysis of international politics advocated in the behavioral approach. McClelland reasoned that history could be decomposed into a sequence of discrete events such as consultations, threats, promises, acts of violence and so forth. Event data formed the link between the then-prevalent general systems theories of international behavior and the textual histories which provided an empirical basis for understanding that behavior" (7).
"Event data are a formal method of measuring the phenomena that contribute to foreign policy perceptions. Event data are generated by examining thousands of newspaper reports on the day to day interactions of nation-states and assigning each reported interaction a numerical score or categorical code. For example, if two countries sign a trade agreement, that interaction might be assigned a numerical score of +5, whereas if the two countries broke off diplomatic relations, that would be assigned a numerical score of -8. When these reports are averaged over time, they provide a rough indication of the level of cooperation and conflict between the two states" (2).
Creating event data involves three distinct steps: 1. identify sources; 2. develop a coding system; 3. train human coders.
"Event data was originally developed by Charles McClelland in the early 1960s as a bridge between the traditional approach of diplomatic history and the new quantitative analysis of international politics advocated in the behavioral approach. McClelland reasoned that history could be decomposed into a sequence of discrete events such as consultations, threats, promises, acts of violence and so forth. Event data formed the link between the then-prevalent general systems theories of international behavior and the textual histories which provided an empirical basis for understanding that behavior" (7).
Monday, July 13, 2009
O'Brien: Anticipating the Good, the Bad adn the Ugly
Sean O'Brien, “Anticipating the Good, the Bad, and the Ugly: An Early Warning Approach to Conflict and Instability Analysis,” Journal of Conflict Resolution 46, no. 6 (2002): 791.
This article explores structural variables as a cause for internal conflict and instability. It uses a statistical model based on fuzzy logic to explore historic cases of instability. The results claim to be accurate for 80% of cases out 5 years.
There is a general review of the history of early-warning systems for instability, and a nice listing of citations. State failure is operationalized in the same way as it was in the SFTF: through genocide/policide; ethnic wars; revolutionary wars; and disruptive regime changes. There is also mention of the most basic SFTF model’s three independent variables: infant mortality, trade openness and democracy. King and Zeng’s (2001) model is highlighted as improving on the SFTF by adding legislative effectiveness and the fraction of the population in the military, as well as correcting other general methodological problems.
“This study seeks to extend this line of work in several ways. First, we are interested in forecasting the likelyhood of country instability or, more precisely, the conditions conducive to instability for every major country of the world over each of the next 15 years. To do so, we identify, evaluate, and ultimately forecast those macrostructural factors at the nation-state level that, when combined with events or triggers such as assassinations, riots, or national disasters, have historically…been associated with different kinds and levels of intensity of conflict” (4).
The study uses KOSIMO data for the dependent variable.
The model is created, the data is validated, the results explored, and limitations are acknowledged.
This article explores structural variables as a cause for internal conflict and instability. It uses a statistical model based on fuzzy logic to explore historic cases of instability. The results claim to be accurate for 80% of cases out 5 years.
There is a general review of the history of early-warning systems for instability, and a nice listing of citations. State failure is operationalized in the same way as it was in the SFTF: through genocide/policide; ethnic wars; revolutionary wars; and disruptive regime changes. There is also mention of the most basic SFTF model’s three independent variables: infant mortality, trade openness and democracy. King and Zeng’s (2001) model is highlighted as improving on the SFTF by adding legislative effectiveness and the fraction of the population in the military, as well as correcting other general methodological problems.
“This study seeks to extend this line of work in several ways. First, we are interested in forecasting the likelyhood of country instability or, more precisely, the conditions conducive to instability for every major country of the world over each of the next 15 years. To do so, we identify, evaluate, and ultimately forecast those macrostructural factors at the nation-state level that, when combined with events or triggers such as assassinations, riots, or national disasters, have historically…been associated with different kinds and levels of intensity of conflict” (4).
The study uses KOSIMO data for the dependent variable.
The model is created, the data is validated, the results explored, and limitations are acknowledged.
Beck and King: Improving Quantitative Studies of International Conflict
Nathaniel Beck and Gary King, “Improving quantitative studies of international conflict: A conjecture,” American Political Science Review 94, no. 1 (2000): 21.
“We address a well-known but infrequently discussed problem in the quantitative study of international conflict: despite immense data collections, prestigious journals, and sophisticated analyses, empirical findings in the literature on international conflict are often unsatisfying. Many statistical results change from article to article and specification to specification. Accurate forecasts are nonexistent. In this article we offer a conjecture about one source of this problem: The causes of conflict , theorized to be important but often found to be small or ephemeral, are indeed tiny for the vast majority of dyads, but they are large, stable, and replicable wherever the ex ante probability of conflict is large” (21).
“In short, we conjecture that many quantitative international conflict studies lack robustness because they look not only for the effects of variables averaged over all dyads, whereas in reality the effects vary enormously over dyads and are only substantively large for those already at relatively high risk of conflict” (22).
“According to our idea, international conflict data differ from other rare events data sets in two ways. The effect of any single explanatory variable changes markedly as a function of changes in the other explanatory variables…and the dependent variables are, in principle, powerful enough to predict whether conflict occurs if the appropriate model is used” (23).
“…neural networks are sometimes treated as a black box for classifyfing very complex data patterns in the absence of theory…In contrast, we hypothesize hat for international conflict data there are massive nonlinear interactive effects, and only the confluence of many causal factors leads to a nontrivial increase in the probability of war. This allows us to interpret the output of the model in a way that is useful for the international relations scholar, not simply as a black box that does a good job of classifying which observations are more or less likely to be conflictual” (27).
“We address a well-known but infrequently discussed problem in the quantitative study of international conflict: despite immense data collections, prestigious journals, and sophisticated analyses, empirical findings in the literature on international conflict are often unsatisfying. Many statistical results change from article to article and specification to specification. Accurate forecasts are nonexistent. In this article we offer a conjecture about one source of this problem: The causes of conflict , theorized to be important but often found to be small or ephemeral, are indeed tiny for the vast majority of dyads, but they are large, stable, and replicable wherever the ex ante probability of conflict is large” (21).
“In short, we conjecture that many quantitative international conflict studies lack robustness because they look not only for the effects of variables averaged over all dyads, whereas in reality the effects vary enormously over dyads and are only substantively large for those already at relatively high risk of conflict” (22).
“According to our idea, international conflict data differ from other rare events data sets in two ways. The effect of any single explanatory variable changes markedly as a function of changes in the other explanatory variables…and the dependent variables are, in principle, powerful enough to predict whether conflict occurs if the appropriate model is used” (23).
“…neural networks are sometimes treated as a black box for classifyfing very complex data patterns in the absence of theory…In contrast, we hypothesize hat for international conflict data there are massive nonlinear interactive effects, and only the confluence of many causal factors leads to a nontrivial increase in the probability of war. This allows us to interpret the output of the model in a way that is useful for the international relations scholar, not simply as a black box that does a good job of classifying which observations are more or less likely to be conflictual” (27).
Saturday, July 11, 2009
Rost and Schneider: A Global Risk Assessment Model for Civil War Onsets
N Rost and G Schneider, “A Global Risk Assessment Model for Civil War Onsets.”
The authors create a model for the risk that different countries face of civil war over the next 5 years using multivariate logit models. Their goal is to establish an effective early warning system that will allow IOs to more effective allocate scarce resources to mitigate potential conflict eruptions.
Early warning systems typically use two types of date: “events data” or “standards-based data”. Events data models typically use news feeds gathered and look at conflict in a specific region and can predict the onset of conflict in a very short period of time. Standards-data use data that is gathered over a much longer period of time and has an annual track-record upon which to build.
The authors argue that, while state strength has been highlighted as a key determinant of the stability of states, one factor that is not added to the equation is the state’s enforcement of basic human rights. While state strength may lead to instability, if a state is actively discriminating against a population, it is expected to potentially exacerbate the problem.
The authors go through a variety of explanations for the onset of civil war, from political to economic to demographic.
They then construct their model. They find that their human rights variable is highly statistically significant with the onset of civil conflict, among a variety of other important variables: civil war decreases with increasing economic development; oil exporters are at higher risk; political instability and mountains do not correlate; population size has no significance; democracy correlates with civil war; military regimes experience more civil war.
The authors create a model for the risk that different countries face of civil war over the next 5 years using multivariate logit models. Their goal is to establish an effective early warning system that will allow IOs to more effective allocate scarce resources to mitigate potential conflict eruptions.
Early warning systems typically use two types of date: “events data” or “standards-based data”. Events data models typically use news feeds gathered and look at conflict in a specific region and can predict the onset of conflict in a very short period of time. Standards-data use data that is gathered over a much longer period of time and has an annual track-record upon which to build.
The authors argue that, while state strength has been highlighted as a key determinant of the stability of states, one factor that is not added to the equation is the state’s enforcement of basic human rights. While state strength may lead to instability, if a state is actively discriminating against a population, it is expected to potentially exacerbate the problem.
The authors go through a variety of explanations for the onset of civil war, from political to economic to demographic.
They then construct their model. They find that their human rights variable is highly statistically significant with the onset of civil conflict, among a variety of other important variables: civil war decreases with increasing economic development; oil exporters are at higher risk; political instability and mountains do not correlate; population size has no significance; democracy correlates with civil war; military regimes experience more civil war.
Goldstone et al: A Global Forecasting Model of Political Instability
JA Goldstone and PIT Force, A global forecasting model of political instability (Political Instability Task Force, 2005).
These authors develop a model that is able to predict state failure out 2 years with 80% accuracy. This does not mean that they predict state failure with 80% accuracy, but whether a state will or will not fail with 80% accuracy. This is a simple model, with a certain kind of regime type being understood as the most highly correlated with failure.
Firstly, there was the operationalization of state failure. For these authors, it is defined fourfold: revolutionary wars (over 1,000 battle deaths in one year), ethnic wars (same), adverse regime changes (drop of 6 points in polity score) or genocides/policies (direct targeting of political parties or ethnic groups by governments w/o death numbers specified). This list was compiled with the help of regional experts. Their n values for each: 62 revolutions, 74 ethnic wars, 111 adverse regime changes, 40 genocide/policies from 55-03.
Their list of independent variables was also compiled with the help of area experts and totaled 75.
The broader goals of the political instability task force are to both understand the variables that cause instability, and to create a model that can identify countries that are likely to be unstable.
As failure is an incredibly discrete event, the method used was a case-control method, which is used for identifying rare diseases in large populations. A positive dependent variable is coupled with a negative dependent variable and the populations are compared. Independent variables were also shifted two years prior to the onset year for dependent variables.
The findings of the group were that relatively simple models can be used to identify cases of instability. Even though there have been myriad explanations for the causes of state failure, these are not the case across the board. Goldstone (2001) argues that, “…the origins of a political crisis can best be understood by turning the problem on its head, asking what factors are necessary for a state to sustain stability despite the various problems-economic, political, social- it might encounter” (8).
The authors found that many variables that are traditionally highlighted as being drivers of state instability miss the mark, as they are not able to point to the underlying instability in the political system, but end up exploring effects of political instability. High inflation, high youth bulge and birth rates are indicative of poor governance: “…in countries that are poorly governed, it is more likely that there will arise bouts of high inflation, or sharp economic reversals, or that people will rely more on family support…” (10). State failure is not understood by looking at the list of challenges that a state must face, but rather the resilience of the state to face those challenges.
Two polity variables that lead to very good results in combination was the degree to which a political process was fractionalized, and the degree to which there was open competition for the political office. “The combination of a winner-take-all, parochial approach to politics with opportunities to compete for control of central state authority represents a powder keg for political crisis” (12).
“According to our research, most economic, demographic, geographic, and political variables do not have consistent and staticially significant effects on the risk of instability onset” (14).
“The model essentially has only four independent variables: regime type, infant mortality, a ‘bad neighborhood’ indicator flagging cases with four or more bordering states embroiled in armed civil or ethnic conflict, and the presence or absence of state-led discrimination” (15).
These authors develop a model that is able to predict state failure out 2 years with 80% accuracy. This does not mean that they predict state failure with 80% accuracy, but whether a state will or will not fail with 80% accuracy. This is a simple model, with a certain kind of regime type being understood as the most highly correlated with failure.
Firstly, there was the operationalization of state failure. For these authors, it is defined fourfold: revolutionary wars (over 1,000 battle deaths in one year), ethnic wars (same), adverse regime changes (drop of 6 points in polity score) or genocides/policies (direct targeting of political parties or ethnic groups by governments w/o death numbers specified). This list was compiled with the help of regional experts. Their n values for each: 62 revolutions, 74 ethnic wars, 111 adverse regime changes, 40 genocide/policies from 55-03.
Their list of independent variables was also compiled with the help of area experts and totaled 75.
The broader goals of the political instability task force are to both understand the variables that cause instability, and to create a model that can identify countries that are likely to be unstable.
As failure is an incredibly discrete event, the method used was a case-control method, which is used for identifying rare diseases in large populations. A positive dependent variable is coupled with a negative dependent variable and the populations are compared. Independent variables were also shifted two years prior to the onset year for dependent variables.
The findings of the group were that relatively simple models can be used to identify cases of instability. Even though there have been myriad explanations for the causes of state failure, these are not the case across the board. Goldstone (2001) argues that, “…the origins of a political crisis can best be understood by turning the problem on its head, asking what factors are necessary for a state to sustain stability despite the various problems-economic, political, social- it might encounter” (8).
The authors found that many variables that are traditionally highlighted as being drivers of state instability miss the mark, as they are not able to point to the underlying instability in the political system, but end up exploring effects of political instability. High inflation, high youth bulge and birth rates are indicative of poor governance: “…in countries that are poorly governed, it is more likely that there will arise bouts of high inflation, or sharp economic reversals, or that people will rely more on family support…” (10). State failure is not understood by looking at the list of challenges that a state must face, but rather the resilience of the state to face those challenges.
Two polity variables that lead to very good results in combination was the degree to which a political process was fractionalized, and the degree to which there was open competition for the political office. “The combination of a winner-take-all, parochial approach to politics with opportunities to compete for control of central state authority represents a powder keg for political crisis” (12).
“According to our research, most economic, demographic, geographic, and political variables do not have consistent and staticially significant effects on the risk of instability onset” (14).
“The model essentially has only four independent variables: regime type, infant mortality, a ‘bad neighborhood’ indicator flagging cases with four or more bordering states embroiled in armed civil or ethnic conflict, and the presence or absence of state-led discrimination” (15).
Monday, June 29, 2009
Moeller: Luhmann Explained
Moeller, H. 2006. Luhmann Explained. Chicago: Open Court.
Excellent overview of Luhmann's Systems Theory. Outlines all key concepts, roots analysis in historical processes, focuses on functional differentiation, explores globalization and then analyzes mass media. I will not present an outline of this as most of this has been copied in other abstracts.
Excellent overview of Luhmann's Systems Theory. Outlines all key concepts, roots analysis in historical processes, focuses on functional differentiation, explores globalization and then analyzes mass media. I will not present an outline of this as most of this has been copied in other abstracts.
Wednesday, June 24, 2009
Seidl and Becker: Niklas Luhmann and Organization Studies
Seidl, D, and KH Becker. 2005. Niklas Luhmann and organization studies. Liber.
Introduction: There are six things that separate Luhmann's work from others:
1. the distinction between psychic and social systems; they do not overlap; they represent environments for each other;
2. his constructivist epistemology, "in particular, it focuses on the schemes of meaning, or 'distinctions', that social (and psychic) systems employ to make sense of themselves and their surroundings" (9);
3. the theory is extensively applied to society (different kinds of system meaning are explained);
4. new insights on traditional dichotomies (agent/structure, structure/process, etc;
5. heavily contributes to organizational studies;
6. self-referentiality, "since the theory aims at including all aspects of the social, it consequently has to include also itself" (9-10)
Luhmann's work is separated into early and late Luhmann. The early work is a continuation of Parsons'. The late work takes place after the "autopoietic turn" (11). "An autopoietic system is a system that reproduces its own elements on the basis of its own elements" (11).
Luhmann's late work can also be separated into two: there is his theory on social systems generally, "in those works he elaborated the general notion of social systems as self-reproducing systems consisting of communications" (11).
:On the other hand, there are his theories that focus on the different types of social systems. In these works the general theory of social systems is specified with regard to the different types of system: society, interaction and organization" (12).
Chapter 1: The Basic Concepts of Luhmann's Theory of Social Systems
The theory of autopoiesis, or self-reproduction, came from Maturana and Varela, two biologists. They were trying to answer questions about what constitutes life. They determined that, "a living system reproduces itself" (22). "They defined the autopoietic systems as a system that recursively reproduces its elements through its own elements" (22).
The opposite of autopoietic systems are allopoietic systems. Autopoietic systems are operatively closed, as no outside operations enter the system. However, this does not mean that they are closed systems, but rather are operatively closed, but interactionally open: all systems exist with environment.
This directly relates to cognition; Maturana and Varela argued that all living systems are also cognitive systems. "In this sense, the operations of an autopoietic system are defined as its cognitions; life and cognitions are one and the same. Hence, everything that has been said about life applies equally to cognition: cognition is a self-referential, autopoietic process" (23).
Self-organization is the ability of a system to create internal structure, which is not predetermined. "The structures themselves, however, are not pre-given in any sense, as in structuralist theories, but are themselves the product of the autopoietic system. In other words, in its reproduction the system produces and reproduces its very own structures of reproduction. This aspect, i.e. the self-determination of its own structures, is referred to as self-organization. Thus, while autopoiesis refers to the reproduction of elements as such, self-organization refers to the determination of structures" (24).
"A central element with8in the theory of autopoiesis is the concept of structural coupling, whi8c h refers to the relation between systems and their environment. As explained above, environmental events can trigger internal processes in an autopoietic system but the concrete processes triggered...are determined by the structures of the system...A system is said to be structurally coupled to its environment...if its structures are in some way or other 'adjusted' to the structures of the environment...; in other words, if the structures of the system allow for reactions to 'important' environmental events. For example, animals living above ground are structurally adapted to a different environment from those living underground" (24).
Luhmann didn't take the concept of autopoiesis directly from biology, but adapted it, attempting to make a general, cross-discipline concept viable. "Luhmann suggests that we speak of autopoiesis whenever the elements of a system are reproduced by the elements of the system itself...Apart from living systems, Luhmann identifies two additional types of autopoietic systems: social systems and psychic systems. While living systems reproduce themselves on the basis of life, social systems reproduce themselves on the basis of communication, and psychic systems on the basis of consciousness or thoughts, their elements are not physical substances but elements of meaning" (25). Social systems are then broken down into either Interactions, Organizations or Societies.
The concept of element is also no longer ontologically privileged. Elements are produced by systems "as a result of being used" (27).
Social Systems
The tradition of sociology would imply that systems are made up of either agents or actions. Luhmann chose communication. Communication is understood as three components: information, utterance and understanding (28).
Information: a selection from a set of possibilities
Utterance: the why and how something is being communicated; the form a communication takes and the reason for the communication
Understanding: "...the distinction between information and utterance". The example given is the statement "I am tired". Taken as words, it is information. However, put in context, there is the utterance (the way it is said, the reason it is said). The understanding is the meaning derived from the distinction between the two (maybe the person who says this wants the other to leave them alone).
"...a communication is ultimately determined through the understanding" (29).
Understanding is only understood within the context of communication. So, when one comment is made, it is understood through the following comment. This following comment is understood by the next. This makes the theory dynamic.
Understanding is also not the end of the communication process. Luhmann argues that a decision must be made to either accept or reject the communication.
This explains how communications produce communications, but not what kinds of communications are produced. For that, one has to understand Luhmann's concept of expectations. If someone states that they are not feeling well, the expectation is that it will not be followed up with a statement about the local sports team. "Luhmann conceptualizes social structures as expectations" (31). Understanding is predicated on expectations. The topics that are germane for communication are relevant to expectations, and thus the structure of the system.
Humans in relation to Social Systems: Persons are constructions of social systems. Human beings are made up of psychic systems and organic systems. The two systems are operationally distinct, but functionally connected.
The psychic system and social system are connected because both are reproduced based on meaning, though differently. Social systems reproduce based on communication. Psychic systems are reproduced based on thoughts. Only thoughts can produce thoughts, as only communication can produce communication. Psychic systems are reproduced based on consciousness.
There are three forms of social systems: society, interaction and organization.
Society is the all-encompassing system outside of which communication does not exist. There have been three major changes within the structure of society historically: archaic times saw differentiation into subsystems (tribes, clans, families: segmented); later, there was differentiation between core and periphery (city/country: stratified); modernity brought about functional differentiation (law, art, etc) (36). Each primary differentiation can be secondarily broken down using a different categorization (stratified primary structure can be secondarily broken down segmentarily.
Functionally differentiated systems distinguish themselves by their "binary coding" (36). For the legal system, things are legal or illegal and cannot be understood otherwise. For economics, it is payment or non-payment. Science is truth/untruth. Only communication from one functionally differentiated system can produce that same system.
Systems can be functionally structurally connected. The example given is of a sales contract which couples economic and legal systems, though it produces very different meaning for both systems.
Interactions are the second form of social systems. These involve the binary present/absent. The structure of the communication determines what is considered communication.
Organization: These social systems are distinguished based on decisions. Decisions are "compact communications" that highlight that there was more than one thing that could have been chosen between (39). Decisions are paradoxical in that the more that the decision highlights that there are alternatives, the less it is likely to have authority as a decision.
"Because of their paradoxical nature, decision communications are subtly calling for their own deconstruction by ensuing communication" (40). How do organizations survive? Organizations close themselves operatively based on decisions. If a decision is destructed, that is also a decision. Secondly, decisions are made based on previous decisions, thus giving historic credibility.
One key aspect of Luhmann is that decisions cannot be made without absorbing uncertainty, as no decision rests on perfect information. "Uncertainty absorption now takes place in the connection between decisions" (41).
Spencer Brown's The Laws of Form was influential to Luhmann. This theory begins with observation as the most foundational concept. "Every observation is constructed from two components: a distinction and an indication" (47). An observer has to focus on one thing, and thus distinguishes between others and makes an indication. "We get a marked state and an unmarked state" (47).
The example of a circle drawn on a piece of paper is used.
The distinction between inside and outside of the circle both separates and unites the two sides.
"The central point in this concept of observation is that once you have drawn a distinction you cannot see the distinction that constitutes the observation - you can only see one side of it...this can be referred to as the 'blind spot' of observation. The complete distinction with both its sides (the inside and outside), can only be seen from outside; if you are inside the distinction you cannot see the distinction" (49).
This leads to two types of observations: first-order and second-order (49). "So far we have been explaining the operation of a first-order observer, who cannot observe the distinction he uses in order to observe. The second-order observer is an observer who observes another observer. He uses a different distinction from the first-order observer: in order to observe the observer, he has to draw a distinction that contains the distinction...of the first-order observer in his marked state. The second-order observer can see the blind spot - the distinction - of the first-order observer. He can see what the first-order observer cannot see and he can see that he cannot see. ...Since the second-order observer needs a distinction to ob serve the distinction of the first-order observer, he himself is a first-order observer, who could be observed by another second-order observer" (49).
Autopoietic systems process distinctions, and this is how the boundary of the system is determined.
Introduction: There are six things that separate Luhmann's work from others:
1. the distinction between psychic and social systems; they do not overlap; they represent environments for each other;
2. his constructivist epistemology, "in particular, it focuses on the schemes of meaning, or 'distinctions', that social (and psychic) systems employ to make sense of themselves and their surroundings" (9);
3. the theory is extensively applied to society (different kinds of system meaning are explained);
4. new insights on traditional dichotomies (agent/structure, structure/process, etc;
5. heavily contributes to organizational studies;
6. self-referentiality, "since the theory aims at including all aspects of the social, it consequently has to include also itself" (9-10)
Luhmann's work is separated into early and late Luhmann. The early work is a continuation of Parsons'. The late work takes place after the "autopoietic turn" (11). "An autopoietic system is a system that reproduces its own elements on the basis of its own elements" (11).
Luhmann's late work can also be separated into two: there is his theory on social systems generally, "in those works he elaborated the general notion of social systems as self-reproducing systems consisting of communications" (11).
:On the other hand, there are his theories that focus on the different types of social systems. In these works the general theory of social systems is specified with regard to the different types of system: society, interaction and organization" (12).
Chapter 1: The Basic Concepts of Luhmann's Theory of Social Systems
The theory of autopoiesis, or self-reproduction, came from Maturana and Varela, two biologists. They were trying to answer questions about what constitutes life. They determined that, "a living system reproduces itself" (22). "They defined the autopoietic systems as a system that recursively reproduces its elements through its own elements" (22).
The opposite of autopoietic systems are allopoietic systems. Autopoietic systems are operatively closed, as no outside operations enter the system. However, this does not mean that they are closed systems, but rather are operatively closed, but interactionally open: all systems exist with environment.
This directly relates to cognition; Maturana and Varela argued that all living systems are also cognitive systems. "In this sense, the operations of an autopoietic system are defined as its cognitions; life and cognitions are one and the same. Hence, everything that has been said about life applies equally to cognition: cognition is a self-referential, autopoietic process" (23).
Self-organization is the ability of a system to create internal structure, which is not predetermined. "The structures themselves, however, are not pre-given in any sense, as in structuralist theories, but are themselves the product of the autopoietic system. In other words, in its reproduction the system produces and reproduces its very own structures of reproduction. This aspect, i.e. the self-determination of its own structures, is referred to as self-organization. Thus, while autopoiesis refers to the reproduction of elements as such, self-organization refers to the determination of structures" (24).
"A central element with8in the theory of autopoiesis is the concept of structural coupling, whi8c h refers to the relation between systems and their environment. As explained above, environmental events can trigger internal processes in an autopoietic system but the concrete processes triggered...are determined by the structures of the system...A system is said to be structurally coupled to its environment...if its structures are in some way or other 'adjusted' to the structures of the environment...; in other words, if the structures of the system allow for reactions to 'important' environmental events. For example, animals living above ground are structurally adapted to a different environment from those living underground" (24).
Luhmann didn't take the concept of autopoiesis directly from biology, but adapted it, attempting to make a general, cross-discipline concept viable. "Luhmann suggests that we speak of autopoiesis whenever the elements of a system are reproduced by the elements of the system itself...Apart from living systems, Luhmann identifies two additional types of autopoietic systems: social systems and psychic systems. While living systems reproduce themselves on the basis of life, social systems reproduce themselves on the basis of communication, and psychic systems on the basis of consciousness or thoughts, their elements are not physical substances but elements of meaning" (25). Social systems are then broken down into either Interactions, Organizations or Societies.
The concept of element is also no longer ontologically privileged. Elements are produced by systems "as a result of being used" (27).
Social Systems
The tradition of sociology would imply that systems are made up of either agents or actions. Luhmann chose communication. Communication is understood as three components: information, utterance and understanding (28).
Information: a selection from a set of possibilities
Utterance: the why and how something is being communicated; the form a communication takes and the reason for the communication
Understanding: "...the distinction between information and utterance". The example given is the statement "I am tired". Taken as words, it is information. However, put in context, there is the utterance (the way it is said, the reason it is said). The understanding is the meaning derived from the distinction between the two (maybe the person who says this wants the other to leave them alone).
"...a communication is ultimately determined through the understanding" (29).
Understanding is only understood within the context of communication. So, when one comment is made, it is understood through the following comment. This following comment is understood by the next. This makes the theory dynamic.
Understanding is also not the end of the communication process. Luhmann argues that a decision must be made to either accept or reject the communication.
This explains how communications produce communications, but not what kinds of communications are produced. For that, one has to understand Luhmann's concept of expectations. If someone states that they are not feeling well, the expectation is that it will not be followed up with a statement about the local sports team. "Luhmann conceptualizes social structures as expectations" (31). Understanding is predicated on expectations. The topics that are germane for communication are relevant to expectations, and thus the structure of the system.
Humans in relation to Social Systems: Persons are constructions of social systems. Human beings are made up of psychic systems and organic systems. The two systems are operationally distinct, but functionally connected.
The psychic system and social system are connected because both are reproduced based on meaning, though differently. Social systems reproduce based on communication. Psychic systems are reproduced based on thoughts. Only thoughts can produce thoughts, as only communication can produce communication. Psychic systems are reproduced based on consciousness.
There are three forms of social systems: society, interaction and organization.
Society is the all-encompassing system outside of which communication does not exist. There have been three major changes within the structure of society historically: archaic times saw differentiation into subsystems (tribes, clans, families: segmented); later, there was differentiation between core and periphery (city/country: stratified); modernity brought about functional differentiation (law, art, etc) (36). Each primary differentiation can be secondarily broken down using a different categorization (stratified primary structure can be secondarily broken down segmentarily.
Functionally differentiated systems distinguish themselves by their "binary coding" (36). For the legal system, things are legal or illegal and cannot be understood otherwise. For economics, it is payment or non-payment. Science is truth/untruth. Only communication from one functionally differentiated system can produce that same system.
Systems can be functionally structurally connected. The example given is of a sales contract which couples economic and legal systems, though it produces very different meaning for both systems.
Interactions are the second form of social systems. These involve the binary present/absent. The structure of the communication determines what is considered communication.
Organization: These social systems are distinguished based on decisions. Decisions are "compact communications" that highlight that there was more than one thing that could have been chosen between (39). Decisions are paradoxical in that the more that the decision highlights that there are alternatives, the less it is likely to have authority as a decision.
"Because of their paradoxical nature, decision communications are subtly calling for their own deconstruction by ensuing communication" (40). How do organizations survive? Organizations close themselves operatively based on decisions. If a decision is destructed, that is also a decision. Secondly, decisions are made based on previous decisions, thus giving historic credibility.
One key aspect of Luhmann is that decisions cannot be made without absorbing uncertainty, as no decision rests on perfect information. "Uncertainty absorption now takes place in the connection between decisions" (41).
Spencer Brown's The Laws of Form was influential to Luhmann. This theory begins with observation as the most foundational concept. "Every observation is constructed from two components: a distinction and an indication" (47). An observer has to focus on one thing, and thus distinguishes between others and makes an indication. "We get a marked state and an unmarked state" (47).
The example of a circle drawn on a piece of paper is used.
The distinction between inside and outside of the circle both separates and unites the two sides.
"The central point in this concept of observation is that once you have drawn a distinction you cannot see the distinction that constitutes the observation - you can only see one side of it...this can be referred to as the 'blind spot' of observation. The complete distinction with both its sides (the inside and outside), can only be seen from outside; if you are inside the distinction you cannot see the distinction" (49).
This leads to two types of observations: first-order and second-order (49). "So far we have been explaining the operation of a first-order observer, who cannot observe the distinction he uses in order to observe. The second-order observer is an observer who observes another observer. He uses a different distinction from the first-order observer: in order to observe the observer, he has to draw a distinction that contains the distinction...of the first-order observer in his marked state. The second-order observer can see the blind spot - the distinction - of the first-order observer. He can see what the first-order observer cannot see and he can see that he cannot see. ...Since the second-order observer needs a distinction to ob serve the distinction of the first-order observer, he himself is a first-order observer, who could be observed by another second-order observer" (49).
Autopoietic systems process distinctions, and this is how the boundary of the system is determined.
Monday, June 15, 2009
Luhmann: System as Difference
Luhmann, N. 2006. System as difference. Organization 13, no. 1: 37.
There are three movements in system theory: the study of closed systems, the move to open systems and finally to self-referential systems. The move from closed to open took into consideration the impact of environment on system. The article touches on Parson's understanding of boundary maintenance, where the system was not an "essence" but rather a process of establishing an outside and an inside. What about the more radical understanding of systems? "Now one can say: a system is the difference between system and environment" (38).
"I thus begin with the claim that a system is difference-the difference between system and environment" (38).
Theories on differentiation are explored, and Luhmann settles on those of George Spencer Brown. These theories involve a mark, which represents a distinction. Luhmann describes these as marks on a paper. There are laws. The "law of calling" states that, "...if I repeat the same distinction (the same mark) several times, then the value of the repeated distinctions taken together is equal to the value of one single distinction" (41). The "Law of Crossing". "A mark can be crossed within the boundary it marks and thus, as it were, be negated. This means that a second distinction can be applied to the first one in such a manner that the original distinction is cancelled" (41-2). The mark of Spencer Brown is a 90 degree angle, a vertical line connected to a horizontal line.
The third concept introduced was originally introduced by Kauffman (1987) and it is an arrow that has been bent to become a self-referential circle.
The distinction has two parts: "...namely the distinction proper, marked by the vertical line, and the indication, marked by the horizontal line" (44).
"...the first point that we enter under the heading 'applications to systems theory' is: a system is a form with two sides" (46).
"Let me summarize these two points once again. The first statement concerns the analysis of form: a system is a difference. The second statement says that a system only needs one single operation, one single type of operation, in order to reproduce the difference between system and environment if the system is to continue to exist...In the case of the social system, we have identified communication as this type of operation. Communication is connected to communication" (48).
There are three movements in system theory: the study of closed systems, the move to open systems and finally to self-referential systems. The move from closed to open took into consideration the impact of environment on system. The article touches on Parson's understanding of boundary maintenance, where the system was not an "essence" but rather a process of establishing an outside and an inside. What about the more radical understanding of systems? "Now one can say: a system is the difference between system and environment" (38).
"I thus begin with the claim that a system is difference-the difference between system and environment" (38).
Theories on differentiation are explored, and Luhmann settles on those of George Spencer Brown. These theories involve a mark, which represents a distinction. Luhmann describes these as marks on a paper. There are laws. The "law of calling" states that, "...if I repeat the same distinction (the same mark) several times, then the value of the repeated distinctions taken together is equal to the value of one single distinction" (41). The "Law of Crossing". "A mark can be crossed within the boundary it marks and thus, as it were, be negated. This means that a second distinction can be applied to the first one in such a manner that the original distinction is cancelled" (41-2). The mark of Spencer Brown is a 90 degree angle, a vertical line connected to a horizontal line.
The third concept introduced was originally introduced by Kauffman (1987) and it is an arrow that has been bent to become a self-referential circle.
The distinction has two parts: "...namely the distinction proper, marked by the vertical line, and the indication, marked by the horizontal line" (44).
"...the first point that we enter under the heading 'applications to systems theory' is: a system is a form with two sides" (46).
"Let me summarize these two points once again. The first statement concerns the analysis of form: a system is a difference. The second statement says that a system only needs one single operation, one single type of operation, in order to reproduce the difference between system and environment if the system is to continue to exist...In the case of the social system, we have identified communication as this type of operation. Communication is connected to communication" (48).
Friday, June 12, 2009
Phelan: What is Complexity Science, Really?
Phelan, SE. 2001. What is complexity science, really? Emergence 3, no. 1: 120-136.
"It is my contention that much of the work in complexity theory has indeed been pseudo-science, that is, many writers in this field have used the symbols and methods of complexity science...to give the illusion of science even though they lack supporting evidence and plausibility" (120).
"The purpose of this article is twofold: to provide a working definition of complexity science; and to use this definition to differentiate complexity science from complexity pseudo-science" (120).
The author then explores arguments in philosophy of science, moving from empiricism, to positivism, to historicism, to constructivism. The author argues that complexity theory offers a new way of studying regularities that is methodologically different from previous science. Science has always been about reducing complexity.
"Complexity science posits simple causes for complex effects. At the core of complexity science is the assumption that complexity in the world arises from simple rules. However, these rules...are unlike rules...of traditional science. Generative rules typically determine how a set of artificial agents will behave in their virtual environment over time, including their interaction with other agents. Unlike traditional science, generative rules do not predict an outcome for every state of the world. Instead, generative rules use feedback and learning algorithms to enable the agent to adapt to its environment over time" (130-1).
Three things that complexity science is not: general systems theory, a postmodern science and a set of "metaphores or analogies based on resemblance thinking" (132).
"Complexity science, defined earlier as the search for generative rules, does not embrace the radical holism of systems theory. Complexity scientists are seeking simple rules that underpin complexity...In contrast, systems theory almost seems to surrender to complexity because it is not particularly interested in the identification of regularities. Regularities do not exist in open systems, almost by definition.
"It is my contention that much of the work in complexity theory has indeed been pseudo-science, that is, many writers in this field have used the symbols and methods of complexity science...to give the illusion of science even though they lack supporting evidence and plausibility" (120).
"The purpose of this article is twofold: to provide a working definition of complexity science; and to use this definition to differentiate complexity science from complexity pseudo-science" (120).
The author then explores arguments in philosophy of science, moving from empiricism, to positivism, to historicism, to constructivism. The author argues that complexity theory offers a new way of studying regularities that is methodologically different from previous science. Science has always been about reducing complexity.
"Complexity science posits simple causes for complex effects. At the core of complexity science is the assumption that complexity in the world arises from simple rules. However, these rules...are unlike rules...of traditional science. Generative rules typically determine how a set of artificial agents will behave in their virtual environment over time, including their interaction with other agents. Unlike traditional science, generative rules do not predict an outcome for every state of the world. Instead, generative rules use feedback and learning algorithms to enable the agent to adapt to its environment over time" (130-1).
Three things that complexity science is not: general systems theory, a postmodern science and a set of "metaphores or analogies based on resemblance thinking" (132).
"Complexity science, defined earlier as the search for generative rules, does not embrace the radical holism of systems theory. Complexity scientists are seeking simple rules that underpin complexity...In contrast, systems theory almost seems to surrender to complexity because it is not particularly interested in the identification of regularities. Regularities do not exist in open systems, almost by definition.
Axelrod and Cohen: Harnessing Complexity
Axelrod, RM, and MD Cohen. 2001. Harnessing complexity: Organizational implications of a scientific frontier. Basic Books.
Complex Adaptive Systems are systems where there are a large number of participants interacting in various ways. There may be a wide variety of participants. Old patterns may continue forward, or they may change quickly.
The goal is not to try to overcome complexity, but to harness complexity.
The authors claim to make important contributions to the field of complexity: "These include the critical role of nonrandom interactions in adaptation, the contrast of biological with informational copying, the relationships between credit allocation and measures of performance" (xii-xiii).
"In our analysis there are there key processes in a Complex Adaptive System. These key processes provide the basis of our three central chapters: Variation, Interaction, and Selection. We see variation, interaction, and selection as interlocking sets of concepts that can generate productive actions in a world that cannot be fully understood. We show how the very complexity that makes the world hard to understand provides opportunities and resources for improvement over time" (xv).
In the first chapter of this pop book, the vocabulary of the framework is explicated: agents, strategy (how agents respond to environment), population, system, selection, adaptation, co-evolution (4-8).
Complex Adaptive Systems make prediction difficult if not impossible.
"Agents, of a variety of types, use their strategies, in patterned interaction, with each other and with artifacts. Performance measures on the resulting events drive the selection of agents and/or strategies through processes of error-prone copying and recombination, thus changing the frequencies of the types within the system" (154).
Complex Adaptive Systems are systems where there are a large number of participants interacting in various ways. There may be a wide variety of participants. Old patterns may continue forward, or they may change quickly.
The goal is not to try to overcome complexity, but to harness complexity.
The authors claim to make important contributions to the field of complexity: "These include the critical role of nonrandom interactions in adaptation, the contrast of biological with informational copying, the relationships between credit allocation and measures of performance" (xii-xiii).
"In our analysis there are there key processes in a Complex Adaptive System. These key processes provide the basis of our three central chapters: Variation, Interaction, and Selection. We see variation, interaction, and selection as interlocking sets of concepts that can generate productive actions in a world that cannot be fully understood. We show how the very complexity that makes the world hard to understand provides opportunities and resources for improvement over time" (xv).
In the first chapter of this pop book, the vocabulary of the framework is explicated: agents, strategy (how agents respond to environment), population, system, selection, adaptation, co-evolution (4-8).
Complex Adaptive Systems make prediction difficult if not impossible.
"Agents, of a variety of types, use their strategies, in patterned interaction, with each other and with artifacts. Performance measures on the resulting events drive the selection of agents and/or strategies through processes of error-prone copying and recombination, thus changing the frequencies of the types within the system" (154).
Thursday, June 11, 2009
Clemens: Complexity Theory as a Tool for Understanding and Coping with Ethnic Conflict and Development Issues in Post-Soviet Eurasia
Clemens, WC. 2002. Complexity Theory as a Tool for Understanding and Coping with Ethnic Conflict and Development Issues in Post-Soviet Eurasia. International Journal of Peace Studies 7, no. 2: 1-16.
This piece uses complexity theory to explore why some central Asian transitioned away from the USSR more peacefully than others. The focus of analysis is on the concept of "fitness".
"Complexity theory is anchored in nine basic concepts: fitness, coevolution, emergence, agent-based systems, self-organization, self-organized criticality, punctuated equilibrium, and fitness landscapes (Lewin, 1992; Kauffman, 1993, 1995, 2000; Axelrod, 1997; Axelrod and Cohen, 1999; Lewin and Regine, 2000; Richards, 2000)" (3).
Fitness, as a concept drawn from complexity theory, emphasizes how the organizational structure of a system determines its ability to cope with change. Organizational structures can vary from very chaotic to very hierarchically ordered. Fit systems are those that fall between chaos and rigidity.
This piece uses complexity theory to explore why some central Asian transitioned away from the USSR more peacefully than others. The focus of analysis is on the concept of "fitness".
"Complexity theory is anchored in nine basic concepts: fitness, coevolution, emergence, agent-based systems, self-organization, self-organized criticality, punctuated equilibrium, and fitness landscapes (Lewin, 1992; Kauffman, 1993, 1995, 2000; Axelrod, 1997; Axelrod and Cohen, 1999; Lewin and Regine, 2000; Richards, 2000)" (3).
Fitness, as a concept drawn from complexity theory, emphasizes how the organizational structure of a system determines its ability to cope with change. Organizational structures can vary from very chaotic to very hierarchically ordered. Fit systems are those that fall between chaos and rigidity.
Wednesday, March 25, 2009
Andrews: Capital Mobility and State Autonomy
Andrews, DM. 1994. Capital mobility and state autonomy: toward a structural theory of international monetary relations. International Studies Quarterly: 193-218.
Capital mobility, it is argued in this piece, has become restrictive enought to be highlighted as a structure in the international system. This paper introduces the "capital mobility hypothesis". Also, it argues against generalizing about the effects that capital mobility will have on all states.
In exploring others who have looked at this topic: "In essence, the central claim of these theorists is that when capital is highly mobile across international borders, the sustainable macroeconomic policy options available to states are systematically circumscribed. International financial integration, so the argument goes, has raised the costs associated with pursuing monetary policies that diverge from regional or international trends. While differences in national preferences, the causal beliefs of policymakers and institutional affiliations may help shape particular patterns of adaptation, proponents of what may be termed the 'capital mobility hypothesis' maintain that changes in the external constraint confronting all states constitute a structural cause of observed shifts in the patterns of states' monetary policy behavior over time" (193-4).
"The central claim associated with the capital mobility hypothesis is that financial integration has increased the costs of pursuing divergent monetary objectives, resulting in structural incentives for monetary adjustment" (203).
Capital mobility, it is argued in this piece, has become restrictive enought to be highlighted as a structure in the international system. This paper introduces the "capital mobility hypothesis". Also, it argues against generalizing about the effects that capital mobility will have on all states.
In exploring others who have looked at this topic: "In essence, the central claim of these theorists is that when capital is highly mobile across international borders, the sustainable macroeconomic policy options available to states are systematically circumscribed. International financial integration, so the argument goes, has raised the costs associated with pursuing monetary policies that diverge from regional or international trends. While differences in national preferences, the causal beliefs of policymakers and institutional affiliations may help shape particular patterns of adaptation, proponents of what may be termed the 'capital mobility hypothesis' maintain that changes in the external constraint confronting all states constitute a structural cause of observed shifts in the patterns of states' monetary policy behavior over time" (193-4).
"The central claim associated with the capital mobility hypothesis is that financial integration has increased the costs of pursuing divergent monetary objectives, resulting in structural incentives for monetary adjustment" (203).
Webb: International Economic Structures, Government Interests and International Coordination of Macroeconomic Adjustment Policies
Webb, MC. 1991. International economic structures, government interests, and international coordination of macroeconomic adjustment policies. International Organization: 309-342.
How does increased capital mobility effect domestic macroeconomic policy coordination measures? "When different countries pursue different macroeconomic policies, it is likely that external payments imbalances, exchange rate movements, or both will result. A number of different types of policy could be used to reconcile national macroeconomic objectives with international constraints imposed by the resulting payments imbalances or exchange rate movements...Three categories of policies are relevant" (314).
External Policies: manipulation of trade and capital controls; Symptom Management: intervention in markets to control them through reserve spending, etc; Internal Policies: adjustment of domestic imbalances between savings and consumption through fiscal and monetary intervention.
See Table 4 (338) for an overview of how different policy coordination measures changed from the 60s to the 80s.
"This article demonstrates that international coordination of macroeconomic adjustment policies was at least as extensive in the 1980s as it had been in the 1960s. Because of changes in the structure o the international economy, however, there were shifts in the pattern of policy coordination: in the 1980s, payments financing coordination was less extensive, capital controls coordination was more extensive, exchange rate coordination was as extensively pursued...and, most important, monetary and fiscal policies became the focus of coordination efforts. The pattern of the 1980s reflects the fact that when international capital mobility is high, the plight of a country facing serious external imbalances can be resolved only by adjustments to monetary and fiscal policies-either those of its own government or those of the governments of other leading countries" (340).
How does increased capital mobility effect domestic macroeconomic policy coordination measures? "When different countries pursue different macroeconomic policies, it is likely that external payments imbalances, exchange rate movements, or both will result. A number of different types of policy could be used to reconcile national macroeconomic objectives with international constraints imposed by the resulting payments imbalances or exchange rate movements...Three categories of policies are relevant" (314).
External Policies: manipulation of trade and capital controls; Symptom Management: intervention in markets to control them through reserve spending, etc; Internal Policies: adjustment of domestic imbalances between savings and consumption through fiscal and monetary intervention.
See Table 4 (338) for an overview of how different policy coordination measures changed from the 60s to the 80s.
"This article demonstrates that international coordination of macroeconomic adjustment policies was at least as extensive in the 1980s as it had been in the 1960s. Because of changes in the structure o the international economy, however, there were shifts in the pattern of policy coordination: in the 1980s, payments financing coordination was less extensive, capital controls coordination was more extensive, exchange rate coordination was as extensively pursued...and, most important, monetary and fiscal policies became the focus of coordination efforts. The pattern of the 1980s reflects the fact that when international capital mobility is high, the plight of a country facing serious external imbalances can be resolved only by adjustments to monetary and fiscal policies-either those of its own government or those of the governments of other leading countries" (340).
Tuesday, March 24, 2009
Grabel: Averting Crisis?
Grabel, I. 2003. Averting crisis? Assessing measures to manage financial integration in emerging economies. Cambridge Journal of Economics 27, no. 3: 317-336.
Grabel highlights five distinct types of risk that are brought about when a country adopts neoliberal policy reforms. These are outlined in Table 1 (319) and are the following types of risk: currency, flight, fragility, contagion and sovereignty. Alternative policies are then outlined in Table 2 (322).
Grabel highlights five distinct types of risk that are brought about when a country adopts neoliberal policy reforms. These are outlined in Table 1 (319) and are the following types of risk: currency, flight, fragility, contagion and sovereignty. Alternative policies are then outlined in Table 2 (322).
Monday, March 23, 2009
Alves, Ferrari and Paula: The Post Keynesian Critique of Conventional Currency Crisis Models
Alves, AJ, F Ferrari, and LF de Paula. 2000. The Post Keynesian critique of conventional currency crisis models and Davidson's proposal to reform the international monetary system. JOURNAL OF POST KEYNESIAN ECONOMICS 22, no. 2: 207-226.
Efficient market theory provides an account of financial crises that focuses on poorly performing economic fundamentals, whether or not speculators are herding or following their own rational behavior. This post-Keynsian approach is quite different in that it focuses on the impossibility of ever fully knowing what the fundamentals are, and thus not being able to ever fully adjudicate as to exactly how the causes of the financial crisis were fundamental related. Thus, speculation is a constant and foundational part of market activity as it is currently organized.
Efficient market theory provides an account of financial crises that focuses on poorly performing economic fundamentals, whether or not speculators are herding or following their own rational behavior. This post-Keynsian approach is quite different in that it focuses on the impossibility of ever fully knowing what the fundamentals are, and thus not being able to ever fully adjudicate as to exactly how the causes of the financial crisis were fundamental related. Thus, speculation is a constant and foundational part of market activity as it is currently organized.
Abdelal: Writing the Rules of Global Finance
ABDELAL, R. 2006. Writing the Rules of Global Finance: France, Europe, and Capital Liberalization. Review of International Political Economy 13, no. 1: 1-27.
Capital controls and their promotion: Why was it true that capital controls formed the cornerstone of the monetary system after WWII but were sacrilegious in the late 90s? This paper attempts to tell that story. There is a difference between how US and European leaders presented the promotion of global capital. The Europeans wanted a more globally managed diffusion of finance while the US was much more keenly interested in an ad hoc approach. The standard story focuses on the role of the US in promoting international finance; this story focuses much more on the European players.
Capital controls and their promotion: Why was it true that capital controls formed the cornerstone of the monetary system after WWII but were sacrilegious in the late 90s? This paper attempts to tell that story. There is a difference between how US and European leaders presented the promotion of global capital. The Europeans wanted a more globally managed diffusion of finance while the US was much more keenly interested in an ad hoc approach. The standard story focuses on the role of the US in promoting international finance; this story focuses much more on the European players.
Wibbels and Arce: Globalization, Taxation, and Burden-Shifting in Latin America
Wibbels, E, and M Arce. 2003. Globalization, Taxation, and Burden-Shifting in Latin America. International Organization 57, no. 01: 111-136.
This paper explores the relationship of taxation policy in Latin America and the possible effects of globalization. "The question becomes: If capital flows and deregulation cause burden-shifting, are governments that reform tax systems rewarded with greater flows? We hypothesize that capital flows do respond to tax policy, but that markets evaluate tax systems as a whole, not just capital's burden of taxation"
The rosy assessment of tax policies that come out of Europe cannot be generalized to the rest of the world. Short-term capital needs require clear signals of country intention to be generated. This having been said, it is not entirely a dire situation for all developing countries, and there is still national room for movement and adjustment.
"In sum, globalization seems to bring a mixed bag for policymakers; it brings a broad set of constraints onto the outlines of policy but provides room for policy choices therein. The most direct evidence of this flexibility is the fact that longer-term markets seem to be less interested in the relative share of taxes paid by capital than in how market friendly tax systems are as a whole. While net capital flows have not rewarded shifts to increase the burden of taxation on labor, these flows have rewarded market-oriented reforms of tax systems. Thus, national policy-makers can attract capital by streamlining tax codes, eliminating distortionary taxes on trade, or increasing the efficiency of existing taxes, rather than contributing to ongoing trends in inequality by eliminating progressive components of tax codes" (131-2).
This paper explores the relationship of taxation policy in Latin America and the possible effects of globalization. "The question becomes: If capital flows and deregulation cause burden-shifting, are governments that reform tax systems rewarded with greater flows? We hypothesize that capital flows do respond to tax policy, but that markets evaluate tax systems as a whole, not just capital's burden of taxation"
The rosy assessment of tax policies that come out of Europe cannot be generalized to the rest of the world. Short-term capital needs require clear signals of country intention to be generated. This having been said, it is not entirely a dire situation for all developing countries, and there is still national room for movement and adjustment.
"In sum, globalization seems to bring a mixed bag for policymakers; it brings a broad set of constraints onto the outlines of policy but provides room for policy choices therein. The most direct evidence of this flexibility is the fact that longer-term markets seem to be less interested in the relative share of taxes paid by capital than in how market friendly tax systems are as a whole. While net capital flows have not rewarded shifts to increase the burden of taxation on labor, these flows have rewarded market-oriented reforms of tax systems. Thus, national policy-makers can attract capital by streamlining tax codes, eliminating distortionary taxes on trade, or increasing the efficiency of existing taxes, rather than contributing to ongoing trends in inequality by eliminating progressive components of tax codes" (131-2).
Rudra and Haggard: Globalization, Democracy and Effective Welfare Spending in the Developing World
Rudra, N, and S Haggard. 2005. Globalization, democracy, and effective welfare spending in the developing world. Comparative Political Studies 38, no. 9: 1015.
"The results show that social spending in 'hard' authoritarian regimes is more sensitive to the pressures of globalization than in democratic or intermediate regimes" (1015; from abstract).
"Our findings cast substantial doubt on the hypothesis that globalization necessarily has an adverse effect on welfare spending in developing countries. We find that political institutions and the rules governing political competition matter. In the face of increasing trade openness, in particular, authoritarian regimes are less generous than democracies with respect to social spending and do worse with respect to several key social performance indicators. Also of significance, we find that under conditions of globalization, 'intermediate' authoritarian regimes show different social spending patterns than 'hard' authoritarian regimes and in some cases, behave more similar to democracies" (1017).
Rudra, N. 2008. Welfare states in developing countries: unique or universal? The Journal of Politics 69, no. 02: 378-396.
Rudra further promotes a distinction between three types of welfare states in LDCs: productive welfare (promote market development), protective welfare (protect select interest groups) and combinations of the above.
"The results show that social spending in 'hard' authoritarian regimes is more sensitive to the pressures of globalization than in democratic or intermediate regimes" (1015; from abstract).
"Our findings cast substantial doubt on the hypothesis that globalization necessarily has an adverse effect on welfare spending in developing countries. We find that political institutions and the rules governing political competition matter. In the face of increasing trade openness, in particular, authoritarian regimes are less generous than democracies with respect to social spending and do worse with respect to several key social performance indicators. Also of significance, we find that under conditions of globalization, 'intermediate' authoritarian regimes show different social spending patterns than 'hard' authoritarian regimes and in some cases, behave more similar to democracies" (1017).
Rudra, N. 2008. Welfare states in developing countries: unique or universal? The Journal of Politics 69, no. 02: 378-396.
Rudra further promotes a distinction between three types of welfare states in LDCs: productive welfare (promote market development), protective welfare (protect select interest groups) and combinations of the above.
Wibbels: Dependency Revisited
Wibbels, E. 2006. Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World. International Organization 60, no. 02: 433-468.
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD-interests that militate against social spending. I argue that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world...Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle" (1; from abstract).
"More specifically, I argue that exposure to international markets affects social spending in developing nations through two steps: first, by increasing the volatility of domestic economies and exposing them to severe business cycles; second, by inspiring pro-cyclical fiscal responses to downturns that imply cuts in social spending" (3).
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD-interests that militate against social spending. I argue that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world...Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle" (1; from abstract).
"More specifically, I argue that exposure to international markets affects social spending in developing nations through two steps: first, by increasing the volatility of domestic economies and exposing them to severe business cycles; second, by inspiring pro-cyclical fiscal responses to downturns that imply cuts in social spending" (3).
Iversen and Cusack: The Causes of Welfare State Expansion
Iversen, Torben, and Thomas Cusack. 2000. The Causes of Welfare State Expansion: Deindustrialization or Globalization? World Politics 52: 313-349.
"It is commonplace to argue that the increasing openness of national economies has meant growing economic insecurity. This insecurity once supposedly fueled demand for larger welfare spending as a form of insurance. The rising tide of globalization, however, is now widely seen as a hindrance to a government's ability to meet these demands and even as a cause of government cutbacks. An alternative view combines this 'second image reversed' with a concern for the political power of labor and the left. This revisionist perspective suggests that the challenges promoted by globalization when met by strong left-labor power within the domestic political system combine to produce a compensation strategy that entails a large and vibrant welfare state. This paper challenges both these views. Our argument, in short, is that most of the risks being generated in modern industrialized societies are the product of technologically induced structural transformations inside national labor markets. Increasing productivity, changing consumption patterns, and saturated demand for products from the traditional sectors of the economy are the main forces of change. It is these structural sources of risk that fuel demands for state compensation and risk sharing" (313).
The economic structure of employment has shifted dramatically. There is no longer such a strong focus on agriculture or industry, two sectors that previously were quite important. This paper contends that governments have responded to this change in three ways: 1| governments have promoted the movement towards jobs in service sectors and have compensated those who take this risk; 2| promote employment in public services; 3| have not promoted public or private opportunities and have promoted things like early retirement.
"The argument that globalization leads to welfare state expansion rests on two causal mechanisms. First, trade and capital market integration is said to expose domestic economies to greater real economic volatility, which implies higher income and employment risks for workers. Second, greater labor- market risks are hypothesized to generate political demands for expansionary spending policies that will cushion and compensate people for such risks" (317). This is strange, as international labor market risk may be a substantive reality, but the most important question is whether this international labor market risk is greater than the domestic labor market risk. The authors do not find increased labor market volatility in the countries explored during this period, thus brining previous analyses into question.
"Our results strongly suggest that deindustrialization, not trade or capital market openness, is the driving force behind the expansion of government spending on both transfers and services. Nevertheless, it could be objected that deindustrialization may itself be a consequence of trade and financial openness or that it was caused by, not causing, government spending" (339).
"It is commonplace to argue that the increasing openness of national economies has meant growing economic insecurity. This insecurity once supposedly fueled demand for larger welfare spending as a form of insurance. The rising tide of globalization, however, is now widely seen as a hindrance to a government's ability to meet these demands and even as a cause of government cutbacks. An alternative view combines this 'second image reversed' with a concern for the political power of labor and the left. This revisionist perspective suggests that the challenges promoted by globalization when met by strong left-labor power within the domestic political system combine to produce a compensation strategy that entails a large and vibrant welfare state. This paper challenges both these views. Our argument, in short, is that most of the risks being generated in modern industrialized societies are the product of technologically induced structural transformations inside national labor markets. Increasing productivity, changing consumption patterns, and saturated demand for products from the traditional sectors of the economy are the main forces of change. It is these structural sources of risk that fuel demands for state compensation and risk sharing" (313).
The economic structure of employment has shifted dramatically. There is no longer such a strong focus on agriculture or industry, two sectors that previously were quite important. This paper contends that governments have responded to this change in three ways: 1| governments have promoted the movement towards jobs in service sectors and have compensated those who take this risk; 2| promote employment in public services; 3| have not promoted public or private opportunities and have promoted things like early retirement.
"The argument that globalization leads to welfare state expansion rests on two causal mechanisms. First, trade and capital market integration is said to expose domestic economies to greater real economic volatility, which implies higher income and employment risks for workers. Second, greater labor- market risks are hypothesized to generate political demands for expansionary spending policies that will cushion and compensate people for such risks" (317). This is strange, as international labor market risk may be a substantive reality, but the most important question is whether this international labor market risk is greater than the domestic labor market risk. The authors do not find increased labor market volatility in the countries explored during this period, thus brining previous analyses into question.
"Our results strongly suggest that deindustrialization, not trade or capital market openness, is the driving force behind the expansion of government spending on both transfers and services. Nevertheless, it could be objected that deindustrialization may itself be a consequence of trade and financial openness or that it was caused by, not causing, government spending" (339).
Avelino, Brown and Hunter: The Effects of Capital Mobility, Trade Openness, adn Democracy on Social Spending in Latin America
Avelino, G, DS Brown, and W Hunter. 2005. The Effects of Capital Mobility, Trade Openness, and Democracy on Social Spending in Latin America, 1980-1999. American Journal of Political Science 49, no. 3: 625-641.
"Empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals. This study seeks to improve upon previous work by (1) employing a more sophisticated and comprehensive measure of financial openness; (2) using a more accurate measure of trade openness based on purchasing power parities; and (3) relying on social spending data that are more complete than those used by previous studies on Latin America. Our estimates suggest that several empirical patterns reported in previous work deserve a second look. We find that trade openness has a positive association with education and social security expenditures, that financial openness does not constrain government outlays for social programs, and that democracy has a strong positive association with social spending, particularly on items that bolster human capital formation" (625; abstract).
"Several empirical patterns emerge from our analysis. First, different measures of trade openness produce radically different results: previous empirical results based on exchange rate conversions are reversed when using a trade measure based on purchasing power parities (PPPs). Second, democracy has a strong and positive correlation with social spending. Third, financial openness does not constrain government spending on social programs. Finally, trade openness has a strong positive impact on the resources devoted to educational and social security while democracy's impact on spending results from increased expenditures for education" (625-6).
The DV they use is a combination of the % of population over 65, unemployment, the level of development, growth, urbanization, democracy, financial openness, trade openness, inflation all over gdp.
Key findings: "(1) democratic regimes spend more on social programs than do their authoritarian counterparts; (2) trade, as measured by purchasing power parities, tends to enhance rather than diminish social spending; and (3) financial openness has little systematic bearing on social spending"
"Trade openness (using PPPs) has a positive (though not always statically significant) impact on aggregate spending, and a strong positive and significant association with spending on social security and education" (637).
"Empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals. This study seeks to improve upon previous work by (1) employing a more sophisticated and comprehensive measure of financial openness; (2) using a more accurate measure of trade openness based on purchasing power parities; and (3) relying on social spending data that are more complete than those used by previous studies on Latin America. Our estimates suggest that several empirical patterns reported in previous work deserve a second look. We find that trade openness has a positive association with education and social security expenditures, that financial openness does not constrain government outlays for social programs, and that democracy has a strong positive association with social spending, particularly on items that bolster human capital formation" (625; abstract).
"Several empirical patterns emerge from our analysis. First, different measures of trade openness produce radically different results: previous empirical results based on exchange rate conversions are reversed when using a trade measure based on purchasing power parities (PPPs). Second, democracy has a strong and positive correlation with social spending. Third, financial openness does not constrain government spending on social programs. Finally, trade openness has a strong positive impact on the resources devoted to educational and social security while democracy's impact on spending results from increased expenditures for education" (625-6).
The DV they use is a combination of the % of population over 65, unemployment, the level of development, growth, urbanization, democracy, financial openness, trade openness, inflation all over gdp.
Key findings: "(1) democratic regimes spend more on social programs than do their authoritarian counterparts; (2) trade, as measured by purchasing power parities, tends to enhance rather than diminish social spending; and (3) financial openness has little systematic bearing on social spending"
"Trade openness (using PPPs) has a positive (though not always statically significant) impact on aggregate spending, and a strong positive and significant association with spending on social security and education" (637).
Feenstra and Hanson: Global Production Sharing and Rising Inequality
FEENSTRA, RC, and GH HANSON. 2001. Global Production Sharing and Rising Inequality: A Survey of Trade and Wages. NBER Working Paper.
"One of the most widely-discussed public policy issues in the United States and many other industrial countries is the decline in the wages of less-skilled workers during the 1980s and 1990s, both in real terms and relative to the wages of more-skilled workers. The question is, what factors account for this change?...In this survey, we present a contrary point of view, and argue that international trade is indeed an important explanation for the increase in the wage gap. Our argument rests on the idea that an increasing amount of international trade takes the form of trade in intermediate inputs. This is sometimes called 'production sharing' by the companies involved, or simply 'outsourcing'. Trade of this type affects labor demand in import-competing industries, but also affects labor demand in the industries using the inputs. For this reason, trade in intermediate inputs can have an impact on wages and employment that is much greater than for trade in final consumer goods. As we shall argue, trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled" (1-2).
From the late 70s to the mid 90s, real wages of those with a high school education fell by 13.4%.
"One of the most widely-discussed public policy issues in the United States and many other industrial countries is the decline in the wages of less-skilled workers during the 1980s and 1990s, both in real terms and relative to the wages of more-skilled workers. The question is, what factors account for this change?...In this survey, we present a contrary point of view, and argue that international trade is indeed an important explanation for the increase in the wage gap. Our argument rests on the idea that an increasing amount of international trade takes the form of trade in intermediate inputs. This is sometimes called 'production sharing' by the companies involved, or simply 'outsourcing'. Trade of this type affects labor demand in import-competing industries, but also affects labor demand in the industries using the inputs. For this reason, trade in intermediate inputs can have an impact on wages and employment that is much greater than for trade in final consumer goods. As we shall argue, trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled" (1-2).
From the late 70s to the mid 90s, real wages of those with a high school education fell by 13.4%.
Haggard and Maxfield: The Political Economy of Financial Internationalization in the Developing World
Haggard, S, and S Maxfield. 1999. The political economy of financial internationalization in the developing world. Issues and Agents in International Political Economy 50, no. 1: 35-68.
What about the internationalization of financial markets in less developing countries? For a very long time, financial markets were constrained through capital controls especially in less developing countries. These authors point out that this is transitioning and explore its effects. Table 1 (36) offers a taxonomy of different types of liberalization.
In an H-O model, K and L are substitutes, so, when K constraints are lifted, the relative cost of K decreases domestically. In a labor-rich environment, this benefits labor. However, this becomes more complex in a multi-sector model, where benefits may be distributed relatively unevenly. "In sum, increases in international trade and investment ties and the opportunities opened by the deepening of international financial markets should increase interest group pressures for financial internationalization, including from foreign firms, while decreasing the effectiveness of government controls. Yet such broad changes are more useful in explaining general trends than they are in accounting for why specific countries liberalize when they do. Crises play an important role in this regard" (40). There is a positive feedback look when there is a crisis after liberalization, as those who want more liberalization may benefit from the crisis and become more powerful.
"As the integration of financial markets deepens, accelerated by the very policy changes that we have analyzed here, international constraints will play an increasingly role in future policy decisions, not only with regard to the capital account but also with reference to economic policy more generally" (62).
What about the internationalization of financial markets in less developing countries? For a very long time, financial markets were constrained through capital controls especially in less developing countries. These authors point out that this is transitioning and explore its effects. Table 1 (36) offers a taxonomy of different types of liberalization.
In an H-O model, K and L are substitutes, so, when K constraints are lifted, the relative cost of K decreases domestically. In a labor-rich environment, this benefits labor. However, this becomes more complex in a multi-sector model, where benefits may be distributed relatively unevenly. "In sum, increases in international trade and investment ties and the opportunities opened by the deepening of international financial markets should increase interest group pressures for financial internationalization, including from foreign firms, while decreasing the effectiveness of government controls. Yet such broad changes are more useful in explaining general trends than they are in accounting for why specific countries liberalize when they do. Crises play an important role in this regard" (40). There is a positive feedback look when there is a crisis after liberalization, as those who want more liberalization may benefit from the crisis and become more powerful.
"As the integration of financial markets deepens, accelerated by the very policy changes that we have analyzed here, international constraints will play an increasingly role in future policy decisions, not only with regard to the capital account but also with reference to economic policy more generally" (62).
Obstfeld and Taylor: Globalization and Capital Markets
Obstfeld, M, and AM Taylor. 2003. Globalization and capital markets. Globalization in historical perspective: 121-187.
Over the past 50 odd years, the rise of capital markets represent a fundamental shift in the way that global economic events impact the rest of the world. This piece wonders what relationship this increasing preeminence of global financial capital has on state autonomy.
There is clear benefit from increased capital flows from the perspective of economic theory. If, however, there is clear benefit for increased capital flows, why were they not imposed after WWII? "What explains the long stretch of high capital mobility that prevailed before 18914, the subsequent breakdown in the interwar period, and the very slow postwar reconstruction of the world financial system? The answer is tied up with one of the central and visible areas in which openness to the world capital market constrains government power: the choice of an exchange rate regime" (13).
"In most of the world's economies, the exchange rate is a key instrument, target, or indicator for monetary policy. An open capital market, however, deprives a country's government of the ability simultaneously to target its exchange rate and to use monetary policy in pursuit of other economic objectives" (14). Excellent overview of the unholy trinity on 14.
"Eventually, the very success of the Bretton Woods system in spurring international trade and the related capital movements brought about its own collapse by resurrecting the 'inconsistent trinity.' For the United States, maintaining fixed exchange rates seemed to require high interest rates and slower growth; for Germany, fixed exchange rates seemed to require giving up domestic control over inflation. Even the relatively limited capital mobility that existed by the early 1970s allowed furious speculative attacks on the major currencies. After vain attempts to restore fixed dollar exchange rates, the industrial countries moved to floating rates early in 1973" (17).
There is a discussion as to the implications of capital mobility on tax structures as well as income distribution.
Over the past 50 odd years, the rise of capital markets represent a fundamental shift in the way that global economic events impact the rest of the world. This piece wonders what relationship this increasing preeminence of global financial capital has on state autonomy.
There is clear benefit from increased capital flows from the perspective of economic theory. If, however, there is clear benefit for increased capital flows, why were they not imposed after WWII? "What explains the long stretch of high capital mobility that prevailed before 18914, the subsequent breakdown in the interwar period, and the very slow postwar reconstruction of the world financial system? The answer is tied up with one of the central and visible areas in which openness to the world capital market constrains government power: the choice of an exchange rate regime" (13).
"In most of the world's economies, the exchange rate is a key instrument, target, or indicator for monetary policy. An open capital market, however, deprives a country's government of the ability simultaneously to target its exchange rate and to use monetary policy in pursuit of other economic objectives" (14). Excellent overview of the unholy trinity on 14.
"Eventually, the very success of the Bretton Woods system in spurring international trade and the related capital movements brought about its own collapse by resurrecting the 'inconsistent trinity.' For the United States, maintaining fixed exchange rates seemed to require high interest rates and slower growth; for Germany, fixed exchange rates seemed to require giving up domestic control over inflation. Even the relatively limited capital mobility that existed by the early 1970s allowed furious speculative attacks on the major currencies. After vain attempts to restore fixed dollar exchange rates, the industrial countries moved to floating rates early in 1973" (17).
There is a discussion as to the implications of capital mobility on tax structures as well as income distribution.
Garrett and Lange: Political Responses to Interdependence
Garrett, G, and P Lange. 1991. Political Responses to Interdependence: What's" Left" for the Left? International Organization 45, no. 4: 539-564.
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
Hardie: The Power of the Markets?
Hardie, I. 2005. The power of the markets? The international bond markets and the 2002 elections in Brazil. Review of International Political Economy 13, no. 1: 53-77.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
Harmes: Institutional Investors and Polanyi's Double Movement
Harmes, A. 2001. Institutional investors and Polanyi's double movement: a model of contemporary currency crises. Review of International Political Economy 8, no. 3: 389-437.
"This article constructs a model of contemporary currency crises which incorporates the role played by institutional investors and the dynamics associated with Karl Polanyi's notion of the 'double movement'. Polanyi's double movement, and its recognition of the need to integrate politics with economics, is used to explain why so many governments are prone to pursue policies that lead to a speculative attack against fixed exchange rates and why virtually every modern fixed exchange rate regime has ended in crisis. Evidence on the short-term and herd behavior of institutional investors is used to explain why contemporary currency crises do not appear to be justified by underlying economic fundamentals and why these crises do so much more damage than their earlier counterparts" (389; from abstract).
There have been more frequent currency crises since the collapse of Bretton Woods in the early 70s. There are two key features of these crises: the speculative actions that attacked the economic systems of these countries were not based on fundamentals and secondly is the severity of the damage caused by these attacks.
Overview of Mundell Flemming on 391.
Dornbusch et all promote the Washington Consensus view that low taxes, free markets and solid monetary policy will cause returns in the long-run (391).
The author explores financial crises from the perspective of Polanyi's double movement. What the double movement doesn't explain is why crises have become pronounced in the 90s. For that, the author explores the increase in herd mentality that arises from increased institutional investors.
"In policy terms, the key difference between the model presented here and those expounded by proponents of the Washington consensus relates to the viability of the different policy options contained within the unholy trinity or Mundell-Fleming thesis. Where neoclassical models focus on policy autonomy and government intervention designed to stimulate employment and protect wages as the cause of currency crises, this article has located the origins of recent crises with the policy options of capital mobility and fixed exchange rates. Many observers have argued that capital mobility has become a structural feature of the global political economy. Whether true or not, the same argument would seem to apply to democracy and, in turn, to the need for governments to retain their monetary policy autonomy. If this is the case, if both capital mobility and democracy have become structural features of the global political economy, then Polanyi's insights imply that fixed exchange rates...are no longer a viable option" (432).
UPDATE:
"...under conditions of capital mobility, governments are forced to choose between either price and exchange rate stability or monetary policy autonomy; they cannot pursue both simultaneously. For example, if a government sought to maintain a stable exchange rate, it would have to forgo the option of stimulating its economy through a monetary expansion. This is the case as an expansionary policy would cause domestic interest rates to fall below foreign rates, leading to an outflow of capital and, in turn, to a depreciation of the currency. To prevent governments from pursuing such expansionary policies (which are regarded as inflationary), proponents of the Washington consensus have often promoted institutional reforms designed to pre-commit governments to policies of price and exchange rate stability. Such measures range from granting full independence to central banks, to the adoption of fixed exchange rates, to the more drastic measure of creating a currency board" (391).
"This article constructs a model of contemporary currency crises which incorporates the role played by institutional investors and the dynamics associated with Karl Polanyi's notion of the 'double movement'. Polanyi's double movement, and its recognition of the need to integrate politics with economics, is used to explain why so many governments are prone to pursue policies that lead to a speculative attack against fixed exchange rates and why virtually every modern fixed exchange rate regime has ended in crisis. Evidence on the short-term and herd behavior of institutional investors is used to explain why contemporary currency crises do not appear to be justified by underlying economic fundamentals and why these crises do so much more damage than their earlier counterparts" (389; from abstract).
There have been more frequent currency crises since the collapse of Bretton Woods in the early 70s. There are two key features of these crises: the speculative actions that attacked the economic systems of these countries were not based on fundamentals and secondly is the severity of the damage caused by these attacks.
Overview of Mundell Flemming on 391.
Dornbusch et all promote the Washington Consensus view that low taxes, free markets and solid monetary policy will cause returns in the long-run (391).
The author explores financial crises from the perspective of Polanyi's double movement. What the double movement doesn't explain is why crises have become pronounced in the 90s. For that, the author explores the increase in herd mentality that arises from increased institutional investors.
"In policy terms, the key difference between the model presented here and those expounded by proponents of the Washington consensus relates to the viability of the different policy options contained within the unholy trinity or Mundell-Fleming thesis. Where neoclassical models focus on policy autonomy and government intervention designed to stimulate employment and protect wages as the cause of currency crises, this article has located the origins of recent crises with the policy options of capital mobility and fixed exchange rates. Many observers have argued that capital mobility has become a structural feature of the global political economy. Whether true or not, the same argument would seem to apply to democracy and, in turn, to the need for governments to retain their monetary policy autonomy. If this is the case, if both capital mobility and democracy have become structural features of the global political economy, then Polanyi's insights imply that fixed exchange rates...are no longer a viable option" (432).
UPDATE:
"...under conditions of capital mobility, governments are forced to choose between either price and exchange rate stability or monetary policy autonomy; they cannot pursue both simultaneously. For example, if a government sought to maintain a stable exchange rate, it would have to forgo the option of stimulating its economy through a monetary expansion. This is the case as an expansionary policy would cause domestic interest rates to fall below foreign rates, leading to an outflow of capital and, in turn, to a depreciation of the currency. To prevent governments from pursuing such expansionary policies (which are regarded as inflationary), proponents of the Washington consensus have often promoted institutional reforms designed to pre-commit governments to policies of price and exchange rate stability. Such measures range from granting full independence to central banks, to the adoption of fixed exchange rates, to the more drastic measure of creating a currency board" (391).
Harvy: A Post Keynesian View of Exchange Rate Determination
HARVEY, JT. 1991. A Post Keynesian view of exchange rate determination. Journal of Post Keynesian Economics 14, no. 1.
There is much out there that has explored exchange rate determination, though not very well. The monetary approach tends not to perform very well. They are not broadly useful models, though they may apply in one situation.
"It is the contention of this author that elements of a theory that can successfully explain the determination of exchange prices under the flexible rate system can be developed from the writings of various Post Keynesian scholars. This paper is intended to provide a rough outline of that approach and to spur further refinement of the model" (61).
"Davidson has emphasized the role of changing expectations in an environment of uncertainty as the key to volatility" (63). "Most important is Schulmeister's contention that those creating the bulk of the demand for foreign exchange are not those needing liquidity for international merchandise trade and investment, but instead the bank trading desks themselves" (63).
There is a distinction between the short-term expectations and the medium-term expectations of investors.
There is much out there that has explored exchange rate determination, though not very well. The monetary approach tends not to perform very well. They are not broadly useful models, though they may apply in one situation.
"It is the contention of this author that elements of a theory that can successfully explain the determination of exchange prices under the flexible rate system can be developed from the writings of various Post Keynesian scholars. This paper is intended to provide a rough outline of that approach and to spur further refinement of the model" (61).
"Davidson has emphasized the role of changing expectations in an environment of uncertainty as the key to volatility" (63). "Most important is Schulmeister's contention that those creating the bulk of the demand for foreign exchange are not those needing liquidity for international merchandise trade and investment, but instead the bank trading desks themselves" (63).
There is a distinction between the short-term expectations and the medium-term expectations of investors.
Hopper: What Determines the Exchange Rate?
Hopper, GP. 1997. What Determines the Exchange Rate: Economic Factors or Market Sentiment? Business Review 5: 17-29.
"Readers of the financial press are familiar with the gyrations of the currency market. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. Either interest rates are rising faster than expected in some country, or the trade balance is up or down, or central banks are tightening or loosening their monetary policies. Whatever the explanations, the underlying belief is that exchange rates are affected by fundamental economic forces, such as money supplies, interest rates, real output levels or the trade balance, which, if well forecasted, give the forecaster an advantage in predicting the exchange rate" (17).
However, it doesn't seem like exchange rates are affected by short-term fundamentals. "Economists have found instead that the best forecast of the exchange rate, at least in the short run, is whatever it happens to be today" (17).
"In this article, we'll review exchange-rate economics, focusing on what is predictable and what isn't. We'll see that exchange rates seem to be influenced by market sentiment rather than by economic fundamentals, and we'll examine the practical implications of this fact...We'll also see that volatility of exchange rates and correlations between exchange rates are predictable, and we'll examine the implications for currency option pricing, risk management, and portfolio selection" (18).
Exchange rate is supposed to be determined by current levels of monetary supplies and country output. Exchange rates are determined by what amount of money can be exchanged for a similar good in a given country. The prices of those goods are determined mainly by money supply levels. If, for example, money supply raises in one country ceteris paribus, this will raise prices in that country and will make that currency exchange at a different rate with the rest of the world. The reason that overall output is taken into consideration is because, when output rises, ceteris paribus, prices will fall (there is more out there but the same amount of money to buy it) and the currency will appreciate against the world.
This is all incredibly problematic because it's an open system and fundamentals are not actually known. Also, the model is problematic because it assumes that price levels can move freely and that they are not "sticky" (19).
Other models: Dornbusch developed the overshooting model, "...in which the average level of prices is assumed to be fixed in the short run to reflect the real-world finding that many prices don't change frequently" (19). Portfolio Balance Model: "In this approach, the supply of and demand for foreign and domestic bonds, along with the supply of and demand for foreign and domestic money, determine the exchange rate" (19-20).
News about the fundamentals may be more informative than the fundamentals (20). This news would change exchange rates if it differed from market expectation.
The key: Market Sentiment Matters in exchange rate determination.
"Readers of the financial press are familiar with the gyrations of the currency market. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. Either interest rates are rising faster than expected in some country, or the trade balance is up or down, or central banks are tightening or loosening their monetary policies. Whatever the explanations, the underlying belief is that exchange rates are affected by fundamental economic forces, such as money supplies, interest rates, real output levels or the trade balance, which, if well forecasted, give the forecaster an advantage in predicting the exchange rate" (17).
However, it doesn't seem like exchange rates are affected by short-term fundamentals. "Economists have found instead that the best forecast of the exchange rate, at least in the short run, is whatever it happens to be today" (17).
"In this article, we'll review exchange-rate economics, focusing on what is predictable and what isn't. We'll see that exchange rates seem to be influenced by market sentiment rather than by economic fundamentals, and we'll examine the practical implications of this fact...We'll also see that volatility of exchange rates and correlations between exchange rates are predictable, and we'll examine the implications for currency option pricing, risk management, and portfolio selection" (18).
Exchange rate is supposed to be determined by current levels of monetary supplies and country output. Exchange rates are determined by what amount of money can be exchanged for a similar good in a given country. The prices of those goods are determined mainly by money supply levels. If, for example, money supply raises in one country ceteris paribus, this will raise prices in that country and will make that currency exchange at a different rate with the rest of the world. The reason that overall output is taken into consideration is because, when output rises, ceteris paribus, prices will fall (there is more out there but the same amount of money to buy it) and the currency will appreciate against the world.
This is all incredibly problematic because it's an open system and fundamentals are not actually known. Also, the model is problematic because it assumes that price levels can move freely and that they are not "sticky" (19).
Other models: Dornbusch developed the overshooting model, "...in which the average level of prices is assumed to be fixed in the short run to reflect the real-world finding that many prices don't change frequently" (19). Portfolio Balance Model: "In this approach, the supply of and demand for foreign and domestic bonds, along with the supply of and demand for foreign and domestic money, determine the exchange rate" (19-20).
News about the fundamentals may be more informative than the fundamentals (20). This news would change exchange rates if it differed from market expectation.
The key: Market Sentiment Matters in exchange rate determination.
Saturday, March 21, 2009
Williamson: Globalization, Convergence and History
Williamson, JG. 1996. Globalization, convergence, and history. Journal of Economic History: 277-306.
From 1850 to the present, the author highlights three main stages of global growth from the perspective of convergence. "Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence" (from abstract; 277).
What is the meaning of convergence? "The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time. Convergence implies an erosion in this gap, at least in percentage terms. New growth theorists call this sigma-convergence. To get sigma-convergence poor countries must grow faster than rich, an event new growth theorists call beta-convergence" (279).
From 1850 to the present, the author highlights three main stages of global growth from the perspective of convergence. "Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence" (from abstract; 277).
What is the meaning of convergence? "The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time. Convergence implies an erosion in this gap, at least in percentage terms. New growth theorists call this sigma-convergence. To get sigma-convergence poor countries must grow faster than rich, an event new growth theorists call beta-convergence" (279).
Heichel, Pape and Sommerer: Is There Convergence in Convergence Research?
Heichel, S, J Pape, and T Sommerer. 2005. Is there convergence in convergence research? An overview of empirical studies on policy convergence. Journal of European Public Policy 12, no. 5: 817-840.
"This article reveals that there is no homogenous picture of policy convergence: Although frequently observed, empirical studies often disagree as to its extent. The representation of policy fields, geographical regions and periods analyzed differ, which makes an overall assessment of policy convergence impossible. The comparability is further constrained by differences in the operationalization and research methods applied by scholars in this field" (from abstract; 817).
The scholarship on convergence is born from a variety of schools with various interests and various approaches. These authors are interested in research projects that focus on empirical results stemming from convergence, and does not make the same set of rigorous distinctions between different kinds of convergence that Knill makes (2005). On pages 820-3 the authors list all of the studies that they explore, their issue area focus, their regional focus, the period in question and whether or not convergence was found.
"This article reveals that there is no homogenous picture of policy convergence: Although frequently observed, empirical studies often disagree as to its extent. The representation of policy fields, geographical regions and periods analyzed differ, which makes an overall assessment of policy convergence impossible. The comparability is further constrained by differences in the operationalization and research methods applied by scholars in this field" (from abstract; 817).
The scholarship on convergence is born from a variety of schools with various interests and various approaches. These authors are interested in research projects that focus on empirical results stemming from convergence, and does not make the same set of rigorous distinctions between different kinds of convergence that Knill makes (2005). On pages 820-3 the authors list all of the studies that they explore, their issue area focus, their regional focus, the period in question and whether or not convergence was found.
Holzinger and Knill: Causes and Conditions of Cross-National Policy Convergence
Holzinger, K, and C Knill. 2005. Causes and conditions of cross-national policy convergence. Journal of European Public Policy 12, no. 5: 775-796.
The study of policy convergence started in the 60s, but grew rapidly in the 90s as European integration and globalization became important phenomena. There is, however, very little robust understanding of the causes and contexts in which policy convergence occurs. "This deficit can be traced to two problems. First, as Seeliger (1996) argues, much more emphasis has been placed on the presentation of empirical results than on systematic theory-building. Second, policy convergence is a rather heterogeneous research field, with scholars coming from different academic backgrounds and disciplines" (775).
Table 1 on 777 explains a relationship of measures of convergence. Table 2 (778) points to different ways that these measures can be conceptualized and measured (Degree of Convergence, Convergence Direction and Convergence Scope). Imposition, Internal Harmonization, Regulatory Competition, Transnational Communication, Independent Problem-Solving are all seen as different reasons that convergence in policy can arise. See Table 4 (793) for an overview. This table combines the different ways convergence can be measured (Table 2) with the different drivers of convergence (previous sentence).
The study of policy convergence started in the 60s, but grew rapidly in the 90s as European integration and globalization became important phenomena. There is, however, very little robust understanding of the causes and contexts in which policy convergence occurs. "This deficit can be traced to two problems. First, as Seeliger (1996) argues, much more emphasis has been placed on the presentation of empirical results than on systematic theory-building. Second, policy convergence is a rather heterogeneous research field, with scholars coming from different academic backgrounds and disciplines" (775).
Table 1 on 777 explains a relationship of measures of convergence. Table 2 (778) points to different ways that these measures can be conceptualized and measured (Degree of Convergence, Convergence Direction and Convergence Scope). Imposition, Internal Harmonization, Regulatory Competition, Transnational Communication, Independent Problem-Solving are all seen as different reasons that convergence in policy can arise. See Table 4 (793) for an overview. This table combines the different ways convergence can be measured (Table 2) with the different drivers of convergence (previous sentence).
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