Category Archives: Ideas

Systemic risk reflections

September 29, 2008 Garry Peterson 1 Comment

Some recent reflections on systemic risk and the financial markets – ranging from details to the big picture.

First, Gretchen Morgenson in the New York Times writes Behind Insurer’s Crisis, Blind Eye to a Web of Risk:

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”— Joseph J. Cassano, a former A.I.G. executive, August 2007

…Although America’s housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators — sometimes even beyond the understanding of executives peddling them.

Originally intended to diminish risk and spread prosperity, these inventions instead magnified the impact of bad mortgages like the ones that felled Bear Stearns and Lehman and now threaten the entire economy.

In the case of A.I.G., the virus exploded from a freewheeling little 377-person unit in London, and flourished in a climate of opulent pay, lax oversight and blind faith in financial risk models. It nearly decimated one of the world’s most admired companies, a seemingly sturdy insurer with a trillion-dollar balance sheet, 116,000 employees and operations in 130 countries.

Second, America’s National Public Radio’s Planet Money has a lot of recent indepth coverage of the financial crisis in this vein available of podcasts. Including a recent one called the day America’s economy almost died.

Looking a more the big economic picture, Predicting Crisis in the United States Economy a profile of Nouriel Roubini discusses the selective vision of models and the biases against discontinuities or nonlinear change.

Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.

The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can’t foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) “These are things most economists barely understand,” Roubini told me. “We’re in uncharted territory where standard economic theory isn’t helpful.”

Finally, Science Fiction writer Charlie Stross writes about the increasing difficulty of projecting the near future at all:

We are living in interesting times; in fact, they’re so interesting that it is not currently possible to write near-future SF.

… Put yourself in the shoes of an SF author trying to construct an accurate (or at least believable) scenario for the USA in 2019. Imagine you are constructing your future-USA in 2006, then again in 2007, and finally now, with talk of $700Bn bailouts and nationalization of banks in the background. Each of those projections is going to come out looking different. Back in 2006 the sub-prime crisis wasn’t even on the horizon but the big scandal was FEMA’s response (or lack thereof) to Hurricane Katrina. In 2007, the sub-prime ARM bubble began to burst and the markets were beginning to turn bearish. (Oh, and it looked as if the 2008 presidential election would probably be down to a fight between Hilary Clinton and Rudy Giuliani.) Now, in late 2008 the fiscal sky is falling; things may not end as badly as they did for the USSR, but it’s definitely an epochal, historic crisis.

Now extend the thought-experiment back to 1996 and 1986. Your future-USA in the 1986 scenario almost certainly faced a strong USSR in 2019, because the idea that a 70 year old Adversary could fall apart in a matter of months, like a paper tiger left out in a rain storm, simply boggles the mind. It’s preposterous; it doesn’t fit with our outlook on the way history works. (And besides, we SF writers are lazy and we find it convenient to rely on clichés — for example, good guys in white hats facing off against bad guys in black hats. Which is silly — in their own head, nobody is a bad guy — but it makes life easy for lazy writers.) The future-USA you dreamed up in 1996 probably had the internet (it had been around in 1986, in embryonic form, the stomping ground of academics and computer industry specialists, but few SF writers had even heard of it, much less used it) and no cold war; it would in many ways be more accurate than the future-USA predicted in 1986. But would it have a monumental fiscal collapse, on the same scale as 1929? Would it have Taikonauts space-walking overhead while the chairman of the Federal Reserve is on his knees? Would it have more mobile phones than people, a revenant remilitarized Russia, and global warming?

There’s a graph I’d love to plot, but I don’t have the tools for. The X-axis would plot years since, say, 1950. The Y-axis would be a scatter plot with error bars showing the deviation from observed outcomes of a series of rolling ten-year projections modeling the near future. Think of it as a meta-analysis of the accuracy of projections spanning a fixed period, to determine whether the future is becoming easier or harder to get right. I’m pretty sure that the error bars grow over time, so that the closer to our present you get, the wider the deviation from the projected future would be. Right now the error bars are gigantic.

Ecosystem services, Greenlash

Decline in salmon causes decline in cultural ecosystem services

September 20, 2008 Garry Peterson Leave a comment

Agriculture increases the supply of food supplied by an ecosystem, but often decreases its ability to supply other services. The same appears to be true for salmon aquaculture. In the Toronto Globe and Mail, Vancouver journalist Mark Hume reports Declining salmon runs blamed for wilderness tourism slump:

All along the B.C. Coast, wilderness tourism operators who run bear-viewing, whale-watching and sport-fishing resorts are reporting tough times because of declining salmon runs.

But the biggest impact may be occurring in the Broughton Archipelago, where Mr. MacKay operates, and where pink salmon runs have all but vanished, sending a shock wave through the region’s ecosystem.

“Some of the northern pods are just not here,” Mr. MacKay said yesterday. “And we’ve had three occasions [this summer] when we did not see any orcas at all. That’s pretty weird.”

He said northern killer whales visit the area during the summer months, collecting in big social gatherings where breeding takes place.

“When they get together like that it’s called Super Pod Day, and we will see over 100 dorsal fins out there at a time,” Mr. MacKay said. “That didn’t happen this year, for the first time since we’ve been collecting data, which is almost 30 years.”

Mr. MacKay said it’s not coincidental that the whales have vanished along with the salmon.

“It’s pretty simple. …What do you think these orcas eat?” he said.

Surveys by the Department of Fisheries and Oceans indicate pink salmon stocks have fallen to extremely low levels in the Broughton Archipelago. In Glendale Creek, a key indicator stream, there have been only 19,000 spawners counted this year, compared with 264,000 last year.

Pink salmon, which usually spawn in prodigious numbers, are a keystone species on the West Coast. Chinook salmon, the mainstay of the orca diet, feed on young pinks, while grizzly and black bears depend on spawning adult pink salmon to bulk up for hibernation.

…

Brian Gunn, president of the Wilderness Tourism Association, said the collapse of salmon stocks is threatening the survival of ecotourism businesses.

“The bear-viewing businesses, the whale-watching operations, they built up a lot of equity showing people these wild animals. Now the fish aren’t there and they are seeing their equity drain away. …If the salmon go, so does the wildlife, and so does the business.”

Mr. Gunn blamed the fish-farming business, saying a heavy concentration of net pens in the Broughton Archipelago has created sea-lice epidemics which kill young salmon.

Ecological Management, Regime Shifts

Financial resilience – Taleb and Mandelbrot reflect on crisis

September 17, 2008 Garry Peterson 3 Comments

Nassim “Black Swan” Taleb writes on Edge about an unwillingness or consider and remember extreme events leads to financial disaster in The Fourth Quadrant: A map of the limits of statistics.

Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the “logic of science”; it is the instrument of risk-taking; it is the applied tools of epistemology; you can’t be a modern intellectual and not think probabilistically—but… let’s not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).

The current subprime crisis has been doing wonders for the reception of any ideas about probability-driven claims in science, particularly in social science, economics, and “econometrics” (quantitative economics). Clearly, with current International Monetary Fund estimates of the costs of the 2007-2008 subprime crisis, the banking system seems to have lost more on risk taking (from the failures of quantitative risk management) than every penny banks ever earned taking risks. But it was easy to see from the past that the pilot did not have the qualifications to fly the plane and was using the wrong navigation tools: The same happened in 1983 with money center banks losing cumulatively every penny ever made, and in 1991-1992 when the Savings and Loans industry became history.

It appears that financial institutions earn money on transactions (say fees on your mother-in-law’s checking account) and lose everything taking risks they don’t understand. I want this to stop, and stop now— the current patching by the banking establishment worldwide is akin to using the same doctor to cure the patient when the doctor has a track record of systematically killing them. And this is not limited to banking—I generalize to an entire class of random variables that do not have the structure we thing they have, in which we can be suckers.

And we are beyond suckers: not only, for socio-economic and other nonlinear, complicated variables, we are riding in a bus driven a blindfolded driver, but we refuse to acknowledge it in spite of the evidence, which to me is a pathological problem with academia. After 1998, when a “Nobel-crowned” collection of people (and the crème de la crème of the financial economics establishment) blew up Long Term Capital Management, a hedge fund, because the “scientific” methods they used misestimated the role of the rare event, such methodologies and such claims on understanding risks of rare events should have been discredited. Yet the Fed helped their bailout and exposure to rare events (and model error) patently increased exponentially (as we can see from banks’ swelling portfolios of derivatives that we do not understand).

Are we using models of uncertainty to produce certainties?

…So the good news is that we can identify where the danger zone is located, which I call “the fourth quadrant”, and show it on a map with more or less clear boundaries. A map is a useful thing because you know where you are safe and where your knowledge is questionable. So I drew for the Edge readers a tableau showing the boundaries where statistics works well and where it is questionable or unreliable. Now once you identify where the danger zone is, where your knowledge is no longer valid, you can easily make some policy rules: how to conduct yourself in that fourth quadrant; what to avoid.

…

Now it lets see where the traps are:

First Quadrant: Simple binary decisions, in Mediocristan: Statistics does wonders. These situations are, unfortunately, more common in academia, laboratories, and games than real life—what I call the “ludic fallacy”. In other words, these are the situations in casinos, games, dice, and we tend to study them because we are successful in modeling them.

Second Quadrant: Simple decisions, in Extremistan: some well known problem studied in the literature. Except of course that there are not many simple decisions in Extremistan.

Third Quadrant: Complex decisions in Mediocristan: Statistical methods work surprisingly well.

Fourth Quadrant: Complex decisions in Extremistan: Welcome to the Black Swan domain. Here is where your limits are. Do not base your decisions on statistically based claims. Or, alternatively, try to move your exposure type to make it third-quadrant style (“clipping tails”).

Below I’ve redrawn Taleb’s figure. His article provides a fuller picture. Taleb's quadrants

Similarly, Scientific American reprints Benoit Mandelbrot’s 1999 How Fractals Can Explain What’s Wrong with Wall Street:

Individual investors and professional stock and currency traders know better than ever that prices quoted in any financial market often change with heart-stopping swiftness. Fortunes are made and lost in sudden bursts of activity when the market seems to speed up and the volatility soars. Last September, for instance, the stock for Alcatel, a French telecommunications equipment manufacturer, dropped about 40 percent one day and fell another 6 percent over the next few days. In a reversal, the stock shot up 10 percent on the fourth day.

The classical financial models used for most of this century predict that such precipitous events should never happen. A cornerstone of finance is modern portfolio theory, which tries to maximize returns for a given level of risk. The mathematics underlying portfolio theory handles extreme situations with benign neglect: it regards large market shifts as too unlikely to matter or as impossible to take into account. It is true that portfolio theory may account for what occurs 95 percent of the time in the market. But the picture it presents does not reflect reality, if one agrees that major events are part of the remaining 5 percent. An inescapable analogy is that of a sailor at sea. If the weather is moderate 95 percent of the time, can the mariner afford to ignore the possibility of a typhoon?

Ecosystem services, Regime Shifts

Bamboo, rats, and famine

September 12, 2008 Garry Peterson Leave a comment

Many species of bamboo flower and then die in synchronized cycles. These cycles have substantial ecological impacts, and in post cyclone Burma appear to be contributing to famine. From the Guardian Cyclone, starvation – now plague of rats devastates Burmese villages

Four months after Cyclone Nargis devastated Burma, another natural disaster has struck the country. This time the ruling military regime has had 50 years to prepare for it, yet it has still proved unable and unwilling to respond.

The disaster, known in Burma as maudam, is caused by a cruel twist of nature. Once every 50 years or so the region’s bamboo flowers, producing a fruit. The fruit attracts hordes of rats, which feed on its seeds. Some believe the rich nutrients in the seeds cause the rodents to multiply quickly, creating an infestation. After devouring the seeds, the rats turn on the villagers’ crops, destroying rice and corn. In a country once known as the rice bowl of Asia, thousands of villagers are on the brink of starvation.

The last three cycles of flowering occurred in 1862, 1911 and 1958, and each time they were followed by a devastating famine. The current maudam is proving just as disastrous.

The same sequence of events – bamboo flowering, fruit, rats, and then famine – occurred earlier this year in the mountains of Bangladesh.

Adaptation, Ecological Economics, Networks, Reorganization, Visualization

Shipping containers and world trade

September 11, 2008 Garry Peterson 1 Comment

The BBC is planning to follow and report on the progress of a container around the world for a year. They have painted a container and bolted a GPS transmitter to allow is readers to follow its progress around the world on their map (as I write this the container full of whiskey in Scotland).

The BBC named their project The Box after The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger an interesting book on the history of containerization and its effect on globalization by Marc Levinson (here is a book review from Ethan Zuckerman and an essay by Witold Rybczynski).

I read the book earlier this year and enjoyed it. I would have liked more economic history and statistics in the book, but its main problem was that people mocked me when I told them I was reading a book about containers. However, containers have become an essential part of global trade and of its rapid growth.

$Trends in world trade of total merchandise, intermediate goods and other commercial services, from 1988-2006 (100=1988). From WTO\'s World Trade Report 2008.$
Trends in world trade of total merchandise, intermediate goods and other commercial services, from 1988-2006 (100=1988). From the WTO’s World Trade Report 2008.

Below are some maps of parts of global trade. They give a bit of an idea of where such a container is likely to move between.

Structure of world trade of between 28 OECD countries in 1992. The size of the nodes gives the volume of flows in dollars (imports and exports) for each country . The size of the links stands for the volume of trade between any two countries. Colors give the regional respectively memberships in different trade organisations: EC countries (yellow), EFTA countries (green), USA and Canada (blue), Japan (red), East Asian Countries (pink), Oceania (Australia , New Zealand) (black). From Max Planck Institute for the Study of Societies.

World trade imbalance web for the years 1960 and 2000. Directed network of merchandise trade imbalances between world countries. Each country appears as a node and the direction of the arrow follows that of the net flow of money. (Serrano et al 2007).

The book – The Box – includes lots of interesting history of the container system, and how as a system it lead to innovations, efficiencies, and had many unintendend consequences. One example, is that it made many old ports obsolete which reshaping many city centres (over decades), but also the creation of new ports and the changes in container ships they triggered – caused ongoing shifts in global trade patterns.

One key cycle of change was a postive feedback between ship size and port attributes. Because the fuel consumption of a ship does not increase proportionately to the number of containers a ship can carry – containers ships have become bigger and bigger – which has had the effect of focusing trade into ports that can handle the large ships and the trade volume. These big ports then lead to the construction of more bigger ships. Wikipedia lists the world’s busiest container ports – the top are Singapore, Shanghai, Hong Kong , Shenzen, and Busan. This concentration of big ships in big ports has had the effect of making world trade unexpectedly (for economic theory) “lumpy.” Paul Krugmann explains:

[Economic theory suggests] a country like China should export a wider range of products to a small country, like Ecuador, than it does to a big country, like the US. Why? Because Ecuador, being small, probably has fewer industries that are cost-competitive with Chinese exports. In fact, however, China seems to export a wider range of stuff to bigger economies.

A possible explanation is the lumpiness of transport costs: there are more container ships heading from China to US ports than to Ecuadorian ports, so that it’s worth sending over a bigger range of stuff. It’s like the reason there are fewer food choices in supermarkets on St. Croix (where we spent our last vacation) than in New Jersey — there’s just one boat with groceries coming over every once in a while, so you can’t keep, um, arugula in stock.

Reading the Box also makes it clear that while higher fuel prices will reshape trade patterns and probably boat designs, neither global trade patterns nor transportation costs will return to those of the 1960s or 1970s. This is due to huge improvements in logistics that have radically dropped the labour cost for shipping goods long distances, and this has also decreased fuel costs.

The rapid expansion of skills in logistics is a hidden environmental efficiency of the moden world economy – in that it allows things to be moved around for less cost than earlier in history. However as occurs with most increases in efficiency, modern society undoes the environmental advantages of efficiency by using the cost saving to simply move more stuff for the same amount of money.

Logistics makes at least parts of the world “flatter.” And the ease of making these connections appears to make it easier to spread tools and ideas as well as goods. The World Bank claims that countries with the most predictable, efficient, and best-run transportation routes and trade procedures are also the most likely to take advantage of technological advances, economic liberalization, and access to international markets. While countries with higher logistics costs are more likely to miss the opportunities of globalization. The World Bank ranks countries using a logistics performance index which measures the ease with which the country connects to the global economy. Singapore, Netherlands, and Germany are at the top as the most accessible; while Rwanada, East Timor, and Afghanistan are at the bottom of the rankings.

Of course, novel solutions also produce novel problems. Discarded containers litter landscapes worldwide (finding uses for them has become a standard architecture project), container ports are centres of environmental and biotic pollution, and the ease of using containers is also useful for smuggling.

And at least my impression from reading The Box, was that containerization has not finished trasnforming the world economy.

—

P.S. Ethan Zuckerman also has a long post Mapping a connected world discussing containers and world trade.

Reorganization, Visualization

A transforming Arctic

September 9, 2008 Garry Peterson Leave a comment

Arctic sea ice, Sept 8, 2008 (From NASA EO).

From EO Newsroom

This image shows Arctic sea ice concentration on September 8, 2008, as observed by the Advanced Microwave Scanning Radiometer–Earth Observing System (AMSR-E) sensor on NASA’s Aqua satellite. The observations are collected on a pixel by pixel basis over the Arctic. The percentage of a 12.5-square-kilometer pixel covered by ice is shown in shades of dark blue (no ice) to white (100 percent ice). The gray line around the Arctic basin shows the median minimum extent of sea ice from 1979-2000. (The median of a data set is the middle value if you arrange the numbers in order from smallest to largest.)

The southern portions of the Northwest Passage through the Arctic (the western route from Europe to Asia through the islands of northern Canada) opened in early August. Then in early September, ice scientists confirmed that the waters around the Russian coastline—the Northern Sea Route— were navigable, but still treacherous, with shifting floes of thick, multi-year ice, that could coalesce rapidly. The image shows that the widest avenue through the Northwest Passage, Parry Channel, still harbored some ice, but the more circuitous, southern waterways were clear. On the other side of the Arctic Ocean, the passage around Russia’s Taymyr Peninsula, normally locked in by ice, was similarly open. According to a press release from the U.S. National Ice Center, “This is the first recorded occurrence of the Northwest Passage and Northern Sea Route both being open at the same time.”

The summer opening of the Arctic means that new uses of the Arctic are likely to emerge. International legal experts believe that “existing laws governing everything from fish stocks to bio-prospecting by pharmaceutical companies” are inadequate.

To date, the eight Arctic nations (the United States, Russia, Canada, Norway, Sweden, Iceland, Denmark and Finland) have limited discussions to existing agreements, such as the law of the sea. Environmental groups would like new laws, but others have suggested a more feasible, and adaptive response may be to strengthen the role of the existing Arctic Council to better govern a changing Arctic in a more adaptive way.

Ideas

Buffered and pourous individuals

September 9, 2008 Garry Peterson Leave a comment

Canadian Philosopher Charles Taylor, author of the Secular Age and member of the Bouchard-Taylor commission on multiculturalism in Quebec, writes on The Immanent Frame about our Buffered and porous selves:

Almost everyone can agree that one of the big differences between us and our ancestors of five hundred years ago is that they lived in an “enchanted” world, and we do not; at the very least, we live in a much less “enchanted” world. We might think of this as our having “lost” a number of beliefs and the practices which they made possible. But more, the enchanted world was one in which these forces could cross a porous boundary and shape our lives, psychic and physical. One of the big differences between us and them is that we live with a much firmer sense of the boundary between self and other. We are “buffered” selves. We have changed.

This is not a mere “subtraction” story, for it thinks not only of loss but of remaking. With the subtraction story, there can be no epistemic loss involved in the transition; we have just shucked off some false beliefs, some fears of imagined objects. Looked at my way, the process of disenchantment involves a change in sensibility; one is open to different things. One has lost a way in which people used to experience the world.

…

Modern Westerners have a clear boundary between mind and world, even mind and body. Moral and other meanings are “in the mind.” They cannot reside outside, and thus the boundary is firm. But formerly it was not so. Let us take a well-known example of influence inhering in an inanimate substance, as this was understood in earlier times. Consider melancholy: black bile was not the cause of melancholy, it embodied, it was melancholy. The emotional life was porous here; it didn’t simply exist in an inner, mental space. Our vulnerability to the evil, the inwardly destructive, extended to more than just spirits that are malevolent. It went beyond them to things that have no wills, but are nevertheless redolent with the evil meanings.

See the contrast. A modern is feeling depressed, melancholy. He is told: it’s just your body chemistry, you’re hungry, or there is a hormone malfunction, or whatever. Straightway, he feels relieved. He can take a distance from this feeling, which is ipso facto declared not justified. Things don’t really have this meaning; it just feels this way, which is the result of a causal action utterly unrelated to the meanings of things. This step of disengagement depends on our modern mind/body distinction, and the relegation of the physical to being “just” a contingent cause of the psychic.

But a pre-modern may not be helped by learning that his mood comes from black bile, because this doesn’t permit a distancing. Black bile is melancholy. Now he just knows that he’s in the grips of the real thing.

Here is the contrast between the modern, bounded, buffered self and the porous self of the earlier enchanted world. As a bounded self I can see the boundary as a buffer, such that the things beyond don’t need to “get to me,” to use the contemporary expression. That’s the sense to my use of the term “buffered” here and in A Secular Age. This self can see itself as invulnerable, as master of the meanings of things for it.

These two descriptions get at, respectively, the two important facets of this contrast. First, the porous self is vulnerable: to spirits, demons, cosmic forces. And along with this go certain fears that can grip it in certain circumstances. The buffered self has been taken out of the world of this kind of fear. For instance, the kind of thing vividly portrayed in some of the paintings of Bosch.

…
And so the boundary between agents and forces is fuzzy in the enchanted world; and the boundary between mind and world is porous, as we see in the way that charged objects can influence us. I have just been referring to the moral influence of substances, like black bile. But a similar point can be made about the relation to spirits. The porousness of the boundary emerges here in various kinds of “possession”—all the way from a full taking over of the person, as with a medium, to various kinds of domination by or partial fusion with a spirit or God. Here again, the boundary between self and other is fuzzy, porous. And this has to be seen as a fact of experience, not a matter of “theory” or “belief.”

via 3 quarks

Ecological Economics

Improve Devlopment Lending to Build Resilience

July 24, 2008 Garry Peterson Leave a comment

Andrew Revkin writes in the New York Times about a recent world bank report that finds that the world bank is not lending in ways that invest in natural capital or resilience (The report is online at worldbank.org/oed). However, there is increasing awareness that that is a big problem. Remember that if you want to make efficient investments or buy stocks now, always take the help of a leading online trading platform like RoboMarkets. Revkin writes that the report states that:

it was vital for the bank and its partners to intensify their focus on measurable environmental protection, given rising vulnerability to environmental risks and the increasing flow of financing for projects related to climate change.

“They need to begin to see the inextricable link between sustaining environment and reducing poverty,” Vinod Thomas, the director-general of the evaluation group, said in an interview. “It is clear now from the Amazon to India that if environmental sustainability is not raised as a priority then all bets are off.”

… Cheryl Gray, the director of the review group for the World Bank, said the lack of consistent internal tracking of the environmental facets of projects was an indicator of how much work needs to be done.

The World Bank Group approved its first set of common environmental standards in 2001, for the first time making environmental stewardship part of its core mission of reducing poverty.

But the new evaluation found a persistent lack of environmental focus in each step along the lending chain — from the priorities that shape development projects to the environmental standards and monitoring required in the field.

Revkin also asked the report’s authors about World Bank’s lack of investment to reduce or mitigate disaster damage. On Dot Earth Revkin quotes

Vinod Thomas, the director-general of the World Bank Group’s independent evaluation group, said a recent report on the Bank’s work on disasters found the same problem. “The bank has done well on the reconstruction side,” he told me. “But even where disasters recur, the preventive side gets neglected, for political reasons. Reconstruction gets photos.”

Things appear to be improving, though, Mr. Thomas said, partly because analysts for the bank and its lending partners are running the numbers on the economic benefits of resilience. “The rate of return on prevention can be 4 to 12 times the investment,” he said.

Often, he noted, there is no inconsistency between environmental conservation and resilience to disasters. He cited the example of maintaining coastal mangrove forests as a buffer against flooding. Communities bounded by mangroves persist while those exposed to the waves vanish. There’s no need to crunch numbers to figure that out.

Regime Shifts, Visualization

Algal Bloom along the Coast of China

July 9, 2008 Garry Peterson Leave a comment

There has been a lot of news coverage of the large coastal algal bloom at China’s Olympic sailing site in Qingdao. The Chinese government claims the bloom is now under control.

NASA’s Earth Observatory has published some remote sensed images of the bloom from MODIS:

On June 28, 2008, the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Aqua satellite captured these images of Qingdao and the bay of Jiaozhou Wan. The top image is a natural-color image similar to what a digital camera would photograph. The bottom image is a false-color image made from a combination of light visible to human eyes and infrared light our eyes cannot see. In this image, vegetation appears vibrant green, including the strips of algae floating in the bay and in the nearby coastal waters.

These images show the bay at the beginning of a local cleanup effort. (Daily images of the area are available from the MODIS Rapid Response Team.)

Regime Shifts

The long history of human-environment interactions in China

July 9, 2008 Elena Bennett 2 Comments

In a recent paper, JA Dearing and colleagues (J. Paleolimnology 40: 3-31) use paleolimnological techniques to explore the long-term history of the region around Erhai Lake in Yunnan Province. Lake sediment cores (which can explain catchment vegetation, flooding, soil erosion, sediment sources and metal workings) are complemented by independent regional climate time-series from speleothems, archaeological records of human habitation, and a detailed documented environmental history. The authors integrate these data to “provide a Holocene scale record of environmental change and human–environment interactions.”

They use these data to ask:

“How sensitive are the studied environmental system processes to climate and human drivers of change?”
“Can we observe long-term trajectories of socio-environmental interactions, or periods of social collapse and recovery?”

The authors identify a number of points at which there were major changes in the human interaction with the landscape, including ~9000 cal year BP, when sediment records show a ‘human-affected environment’, ~4800 cal year BP, when major deforestation for grazing led to the extirpation of forest species and some functional units, and ~2000 cal year BP at the introduction of paddy field irrigated farming, and ~1600 cal year BP at which point surface erosion and gullying were caused by increased exploitation of mountain slopes. They go on to suggest that these records indicate several major ‘periods’ in human-environment interactions in this area:

The earliest of these cases probably represents the dispersion of the population away from the established sedentary agricultural units on alluvial fans to the more inhospitable margins of the lake and the valleys. This perhaps signifies the end of the ‘nature dominated’ phase (Messerli et al.) where society could cause significant modification of the landscape but was still vulnerable to the main risks of drought and flood (though the evidence for climate determinism is weak). In contrast, the introduction of irrigation is associated with a trend of weakening monsoon intensity, increasing numbers of centennial scale dry phases, and population growth. It represents an agrarian society in transition, using technological innovation to raise carrying capacities without increasing greatly the vulnerability to drought or flood. The third period is linked to natural population growth, inward migration and metal extraction brought about by the rise of Nanzhao/Dali as a major center”

The authors then ask at what stage of the adaptive cycle the modern Erhai socio-ecological system exists:

At Erhai, the slow processes of weathering and soil accumulation, in association with vegetation cover held fairly constant by a benign early-mid Holocene climate, were interrupted by fast processes of anthropogenic modification of vegetation. For many centuries, this concatenation of ‘slow–long’ and ‘fast–short’ processes led to a resilient land use-soil system (cf. Gunderson and Holling). But increasing perturbations led to system failure, and we can observe that the late Ming environmental crisis represents the end of the last release phase. Thus, the modern landscape may be approaching a conservation phase (K) characterised by minimum resilience.

Dearing and colleagues explore the meanings of this research for current sustainability and conclude that the main threat to the region is high magnitude-low frequency flooding of the agricultural plain and low terraces, which is exacerbated by:

continued use of high altitude and steep slopes for grazing and cultivation that generate high runoff from unprotected slopes and maintain active gully systems, particularly in the northern basins;
reduction or poor maintenance of paddy field systems, engineered flood defences, river channels and terraces; [and]
increased intensities of the summer monsoon.

This fascinating paper is an excellent example of how historical data sources can be integrated to provide a new perspective on social and ecological change over long periods of time.

Resilience Science