Bruce, It is said that adult development is based on experiential learning, and as you noted many years ago in a somewhat different context, we have experienced more than we have learned. It is sad that we seem to be unable — across countries, cultures or organizations — to foster cumulative learning — may be the Tea Party radio talk show hosts are right — we are nation of “low information voters.” On that depressing note I will go back to watching the nightly news.Ron
On Jun 11, 2014, at 3:40 PM, ‘Bruce G. Potter’ bpotter [irf-members-news] wrote:

This from “Mr. Wu’s Blog” on the official United Nations SIDS2014 web site at <http://www.sids2014.org/index.php?menu=1579>. This web site brings together most of the UN background information in preparation for the Third Conference on Small Island Developing States, which will be held in Apia, Samoa, 1 to 4 September, 2014.

Another issue on the SIDS2014 web site of probable interest to IRF supporters would be the “SIDS Partnerships Briefs” — perhaps one such partnership could be promoted to increase the velocity of transfer of academic research and information about critical small island conditions (such as unique economic constraints) for policy making application.

Thought it interesting . . . . I look forward to future analyses of other aspects of small island life.

Mr. Wu’s Blog on Economic Vulnerabilities

Much of the attention to SIDS has been directed to ecological vulnerabilities of SIDS. Indeed, to a significant extent it is these inherent and particular vulnerabilities that make for the special case of sustainable development of SIDS. However, as I remarked at the launch of the International Year of SIDS in February this year, what has received less attention is that these inherent vulnerabilities often exacerbate other social, economic and environmental problems. Here I would like to elaborate on some of the economic vulnerabilities. As indicated in the name of their grouping, SIDS are characterized by smallness. This feature gives rise to economic disadvantages, including narrow resource base and dependence on a limited number of goods and services for exports, high import dependence, small domestic markets, dependence on export markets, and limited ability to achieve economies of scale.

Coastal and marine resources, for example, are the main sources of economic activities and livelihoods for most SIDS. Tourism contributes to more than half of the GDP in some SIDS; in the Caribbean region, tourism generates over $25 billion in annual revenues, accounting for a quarter of the regional GDP and six million jobs. But this heavy dependence on tourism is often impacted by natural disasters and the vicissitudes of the global economy. Today – nearly six years after the onset of the world financial crisis – SIDS are still dealing with its fallout.

The decline in tourism in the aftermath of the global financial crisis contributed to the increase in public indebtedness of SIDS. The high import prices of food, fuel and other commodities have worsened their public debt ratios. As a result, a number of SIDS have debt burdens in excess of their GDPs, with more than 20% of government revenues allocated for debt servicing. Among other effects, high debt burdens constrain SIDS governments’ fiscal space, reduce their essential public expenditures and erode their abilities to invest in physical and social capital.

Recognizing that economic growth has stalled in SIDS, Member States, in the ongoing consultations on the outcome document of the SIDS Conference, have emphasized the importance of achieving higher economic growth.

Wu Hongbo
UN DESA’s Under-Secretary-General & Secretary-General for the Third International Conference on SIDS

Remoteness is another defining characteristic of SIDS that leads to economic disadvantages, especially in terms of transport and communication and access to world markets. Many SIDS face relatively higher transport costs, as they are often excluded from main air and sea transport routes, requiring relatively small and fragmented cargo deliveries. This in turn results in higher per-unit costs, eroding their economic competitiveness. Remoteness from the main trade routes also gives rise to delays in transport services. Moreover, SIDS have to contend with high energy dependence, which absorbs a significant amount of their export earnings. With rising oil prices, fuel import bills represent up to 20 percent of annual imports of SIDS, and between 5 to 20 percent of their GDP.

An expert group convened by UNCTAD two years ago demonstrated through evidence-based studies that SIDS are significantly more vulnerable to external shocks with economic consequences; they are considerably more exposed to oil price-related shocks; and their economies are structurally more vulnerable to climate change effects.

Recognizing that economic growth has stalled in SIDS, Member States, in the ongoing consultations on the outcome document of the SIDS Conference, have emphasized the importance of achieving higher economic growth. They are deliberating on a broad range of measures in support of SIDS economies, many of which address the problems I have highlighted here.

__._,_.___

Happened to run across this Table of Contents for the reports of an important (some would claim the MOST important) small island capital program in the Caribbean. The program has several parallel tracks in several locations. In duration, it is well beyond mid-point and seems to be better managed and reported than most (based on a half century of work in the field).

Here’s the Table of Contents:

Unless this is a papermaking or recycling project I think this illustrates a problem.

A good example from the Schumpeter Blog in the Economist, May 14th <http://www.economist.com/news/business/21602757-managers-most-traditional-industries-distrust-promising-new-technology-digital>-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-

Schumpeter

Digital disruption on the farm

Managers in the most traditional of industries distrust a promising new technology

May 24th 2014 | From the print edition

INNOVATION is a word that brings to mind small, nimble startups doing clever things with cutting-edge technology. But it is also vital in large, long-established industries—and they do not come much larger or older than agriculture. Farmers can be among the most hidebound of managers, so it is no surprise that they are nervous about a new idea called prescriptive planting, which is set to disrupt their business. In essence, it is a system that tells them with great precision which seeds to plant and how to cultivate them in each patch of land. It could be the biggest change to agriculture in rich countries since genetically modified crops. And it is proving nearly as controversial, since it raises profound questions about who owns the information on which the service is based. It also plunges stick-in-the-mud farmers into an unfamiliar world of “big data” and privacy battles.

Monsanto’s prescriptive-planting system, FieldScripts, had its first trials last year and is now on sale in four American states. Its story begins in 2006 with a Silicon Valley startup, the Climate Corporation. Set up by two former Google employees, it used remote sensing and other cartographic techniques to map every field in America (all 25m of them) and superimpose on that all the climate information that it could find. By 2010 its database contained 150 billion soil observations and 10 trillion weather-simulation points.

FieldScripts uses all these data to run machines made by Precision Planting, a company Monsanto bought in 2012, which makes seed drills and other devices pulled along behind tractors. Planters have changed radically since they were simple boxes that pushed seeds into the soil at fixed intervals. Some now steer themselves using GPS. Monsanto’s, loaded with data, can plant a field with different varieties at different depths and spacings, varying all this according to the weather. It is as if a farmer can know each of his plants by name.The Climate Corporation planned to use these data to sell crop insurance. But last October Monsanto bought the company for about $1 billion—one of the biggest takeovers of a data firm yet seen. Monsanto, the world’s largest hybrid-seed producer, has a library of hundreds of thousands of seeds, and terabytes of data on their yields. By adding these to the Climate Corporation’s soil- and-weather database, it produced a map of America which says which seed grows best in which field, under what conditions.

Prescriptive planting is catching on fast. Last November another seed producer, Du Pont Pioneer, linked up with a farm-machinery maker, John Deere, to beam advice on seeds and fertilisers to farmers in the field. A farm-supply co-operative, Land O’Lakes, bought Geosys, a satellite-imaging company, in December 2013, to boost its farm-data business.

The benefits are clear. Farmers who have tried Monsanto’s system say it has pushed up yields by roughly 5% over two years, a feat no other single intervention could match. The seed companies think providing more data to farmers could increase America’s maize yield from 160 bushels an acre (10 tonnes a hectare) to 200 bushels—giving a terrific boost to growers’ meagre margins.

But the story of prescriptive planting is also a cautionary tale about the conflicts that arise when data entrepreneurs meet old-fashioned businessfolk. Farmers might be expected to have mixed feelings about the technology anyway: although it boosts yields, it reduces the role of discretion and skill in farming—their core competence. However, the bigger problem is that farmers distrust the companies peddling this new method. They fear that the stream of detailed data they are providing on their harvests might be misused. Their commercial secrets could be sold, or leak to rival farmers; the prescriptive-planting firms might even use the data to buy underperforming farms and run them in competition with the farmers; or the companies could use the highly sensitive data on harvests to trade on the commodity markets, to the detriment of farmers who sell into those markets.

Looking a gift horse in the mouth

In response to such worries, the American Farm Bureau, the country’s largest organisation of farmers and ranchers, is drawing up a code of conduct, saying that farmers own and control their data; that companies may not use the information except for the purpose for which it was given; and that they must not sell or give it to third parties. The companies agree with those principles, though so far their contracts with farmers do not always embody them. Also, once data have been sent and anonymised, farmers might be said no longer to own them, so it is not clear what rights to them they still have. For this reason and others, some Texan farmers have banded together to form the Grower Information Services Co-operative, to negotiate with the data providers.

Another worry is that, since the companies have not yet made the data fully “portable”, farmers may become locked into doing business with a single provider. To assuage all these concerns, the Climate Corporation has set up a free data-storage service for farmers, which others cannot access without the farmers’ permission. New niche data-management firms are entering the market, which should help make it more competitive.

For the time being, though, the biggest companies will dominate prescriptive planting. They collect the most comprehensive data and make better use of them than anyone else. And that raises a problem which affects big data in all its forms. Prescriptive planting could boost yields everywhere, just as mass, anonymised patient records could improve health care. But its success depends on service providers persuading users (farmers or patients) to trust them. If the users think they are taking a disproportionate share of the risks while firms are getting an excessive chunk of the benefits, trust will remain in short supply.

Economist.com/blogs/schumpeter

From the print edition: Business

from the Sunday NY Times <http://www.nytimes.com/2014/05/25/upshot/buying-insurance-against-climate-change.html>

Buying Insurance Against Climate Change

MAY 24, 2014

Photo

The Alliance of Small Island States has been arguing for an international approach to dealing with losses from climate change. Here, Tarawa in Kiribati, an alliance member battling rising sea levels. Credit Kadir Van Lohuizen/NOOR
Economic View

By ROBERT J. SHILLER

The third National Climate Assessment report — released on May 6 by the White House, and representing the work of more than 240 scientists — warns us about our hazardous future and offers many good ideas for dealing with it. But a most important point may be lost in the crowd.
After discussing how to mitigate the coming dangers, the report says, “Commercially available mechanisms such as insurance can also play a role in providing protection against losses due to climate change.” That sentence should have been in big, bold letters and underlined.

That’s because of the substantial risk that efforts to stop global warming will fail. The implications are staggering, and we must encourage private innovation and government support to insure against the devastating financial losses that will result.

The problem is an age-old one: Each country has a strong individual incentive to take a free ride on the rest of the world — to find self-serving or nationalistic justifications for adding carbon dioxide and other pollutants to the global air supply. Such behavior, which in some ways might benefit the individual country while hurting everyone else, is known in economics as an externality problem, and the world has never solved one of this magnitude. We must face facts: There is a real risk of new kinds of climate-related disaster.

In his latest book, “The Climate Casino: Risk, Uncertainty and Economics for a Warming World” (Yale University Press), my Yale colleague William D. Nordhaus describes the uncertainty of global warming’s specific effects around the world. We are taking major gambles with our environment, he says. Expect surprises.

In March, a United Nations report identified with “high confidence” a number of risks that will be visited on different people unequally. It spoke of the “risk of death, injury, ill health or disrupted livelihoods” in low-lying coastal zones and on small islands — and that is just the start. Food systems may break down. There may not be enough water for drinking and irrigation. Ecosystems may be shattered.

In short, we need to worry about the potential for greater-than-expected disasters, especially those that concentrate their fury on specific places or circumstances, many of which we cannot now predict.

That’s why global warming needs to be addressed by the private institutions of risk management, such as insurance and securitization. They have deep experience in smoothing out disasters’ effects by sharing them among large numbers of people. The people or entities that are hit hardest are helped by those less badly damaged.

But these institutions need ways to deal with such grand-scale issues. Governments should recognize that by giving these businesses a profit incentive to prepare for these unevenly distributed disasters. After all, fire insurance does no good unless you buy it before the house burns down. And you have to diversify your portfolio before the stock market crashes.

Fortunately, we aren’t too late to take action to insure against some climate risks. And yet this has not been a major element in most of the climate debate.

We already have weather derivatives that can help, like the 50 contracts in 13 countries offered by the Chicago Mercantile Exchange. A ski resort can already buy protection against inadequate snowfall and a city can buy protection against too much snowfall next winter by, in effect, taking the opposite side of the same futures contract (through the exchange), thereby pooling their opposite risks. There are also catastrophe bonds, like the three-year, $1.5 billion Everglades Re Ltd. issue sponsored this month by the Citizens Property Insurance Corporation. It would provide relief to the insurer of Floridians hit by a bad hurricane; in such an event, the bond holders would bear losses.

But there is a problem with instruments like these: They tend to focus on relatively short-term risks, and don’t hedge against the increasing cost of disasters over distant future years. Yet if the problems of global warming become more serious, they will very likely be long-lasting, raising some complex, tough-to-quantify issues. Some kinds of crises, like hurricanes, may remain intermittent, but their tendency toward severity may build in a slow, hard-to-predict process and in complex geographical patterns.

Psychologically, it’s hard for most of us to take the initiative on long-term, ill-defined risks. Three scholars — Howard C. Kunreuther and Mark V. Pauly of the University of Pennsylvania and Stacey McMorrow of the Urban Institute — show this in their book, “Insurance and Behavioral Economics: Improving Decisions in the Most Misunderstood Industry” (Cambridge University Press). But they argue that if we’re aware of them, these psychological impediments can be reduced, and they urge the innovation of long-term risk management contracts that address the problem of climate change.

Some progress is being made: The Caribbean Catastrophe Risk Insurance Facility is one recent example of institutional sharing of climate risks. Then there is the Alliance of Small Island States, formed in 1990 as a response to climate change. The group represents 5 percent of the world’s population, and its island members are scattered around the globe. But if sea levels rise substantially, all of them will be affected. These countries generally aren’t big enough to have a heartland that can help coastal dwellers in a climate catastrophe. The alliance has been arguing for an international approach to dealing with such loss and damage.

These are only beginnings. We have a crucial need to bring innovation to our risk-management institutions. We need to make them flexible, to clarify their long-term international legal status, to develop mechanisms and indexes that can be the basis of long-term risk management contracts and to educate the public about them. Most important, we need concrete action now to build a mechanism that will provide real help for the victims of climate-change disasters.

ROBERT J. SHILLER is Sterling Professor of Economics at Yale.