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Register a new userComplexity, economic science and possible economic benefits of climate change mitigation policy
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Jean-Francois Mercure
Publication date
2013
fields
Physics
and research's language is
English
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Conventional economic analysis of stringent climate change mitigation policy generally concludes various levels of economic slowdown as a result of substantial spending on low carbon technology. Equilibrium economics however could not explain or predict the current economic crisis, which is of financial nature. Meanwhile the economic impacts of climate policy find their source through investments for the diffusion of environmental innovations, in parts a financial problem. Here, we expose how results of economic analysis of climate change mitigation policy depend entirely on assumptions and theory concerning the finance of the diffusion of innovations, and that in many cases, results are simply re-iterations of model assumptions. We show that, while equilibrium economics always predict economic slowdown, methods using non-equilibrium approaches suggest the opposite could occur. We show that the solution to understanding the economic impacts of reducing greenhouse gas emissions lies with research on the dynamics of the financial sector interacting with innovation and technology developments, economic history providing powerful insights through important analogies with previous historical waves of innovation.
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Urbanization plays a crucial role in the economic development of every country. The mutual relationship between the urbanization of any country and its economic productive structure is far from being understood. We analyzed the historical evolution of product exports for all countries using the World Trade Web (WTW) with respect to patterns of urbanization from 1995-2010. Using the evolving framework of economic complexity, we reveal that a countrys economic development in terms of its production and export of goods, is interwoven with the urbanization process during the early stages of its economic development and growth. Meanwhile in urbanized countries, the reciprocal relation between economic growth and urbanization fades away with respect to its later stages, becoming negligible for countries highly dependent on the export of resources where urbanization is not linked to any structural economic transformation.
Two network measures known as the Economic Complexity Index (ECI) and Product Complexity Index (PCI) have provided important insights into patterns of economic development. We show that the ECI and PCI are equivalent to a spectral clustering algorithm that partitions a similarity graph into two parts. The measures are also related to various dimensionality reduction methods and can be interpreted as vectors that determine distances between nodes based on their similarity. Our results shed a new light on the ECIs empirical success in explaining cross-country differences in GDP/capita and economic growth, which is often linked to the diversity of country export baskets. In fact, countries with high (low) ECI tend to specialize in high (low) PCI products. We also find that the ECI and PCI uncover economically informative specialization patterns across US states and UK regions.
Climate change has become one of the biggest global problems increasingly compromising the Earths habitability. Recent developments such as the extraordinary heat waves in California & Canada, and the devastating floods in Germany point to the role of climate change in the ever-increasing frequency of extreme weather. Numerical modelling of the weather and climate have seen tremendous improvements in the last five decades, yet stringent limitations remain to be overcome. Spatially and temporally localized forecasting is the need of the hour for effective adaptation measures towards minimizing the loss of life and property. Artificial Intelligence-based methods are demonstrating promising results in improving predictions, but are still limited by the availability of requisite hardware and software required to process the vast deluge of data at a scale of the planet Earth. Quantum computing is an emerging paradigm that has found potential applicability in several fields. In this opinion piece, we argue that new developments in Artificial Intelligence algorithms designed for quantum computers - also known as Quantum Artificial Intelligence (QAI) - may provide the key breakthroughs necessary to furthering the science of climate change. The resultant improvements in weather and climate forecasts are expected to cascade to numerous societal benefits.
We have recently introduced the ``thermal optimal path (TOP) method to investigate the real-time lead-lag structure between two time series. The TOP method consists in searching for a robust noise-averaged optimal path of the distance matrix along which the two time series have the greatest similarity. Here, we generalize the TOP method by introducing a more general definition of distance which takes into account possible regime shifts between positive and negative correlations. This generalization to track possible changes of correlation signs is able to identify possible transitions from one convention (or consensus) to another. Numerical simulations on synthetic time series verify that the new TOP method performs as expected even in the presence of substantial noise. We then apply it to investigate changes of convention in the dependence structure between the historical volatilities of the USA inflation rate and economic growth rate. Several measures show that the new TOP method significantly outperforms standard cross-correlation methods.
The ongoing rapid urbanization phenomena make the understanding of the evolution of urban environments of utmost importance to improve the well-being and steer societies towards better futures. Many studies have focused on the emerging properties of cities, leading to the discovery of scaling laws mirroring, for instance, the dependence of socio-economic indicators on city sizes. Though scaling laws allow for the definition of city-size independent socio-economic indicators, only a few efforts have been devoted to the modeling of the dynamical evolution of cities as mirrored through socio-economic variables and their mutual influence. In this work, we propose a Maximum Entropy (ME), non-linear, generative model of cities. We write in particular a Hamiltonian function in terms of a few macro-economic variables, whose coupling parameters we infer from real data corresponding to French towns. We first discover that non-linear dependencies among different indicators are needed for a complete statistical description of the non-Gaussian correlations among them. Furthermore, though the dynamics of individual cities are far from being stationary, we show that the coupling parameters corresponding to different years turn out to be quite robust. The quasi time-invariance of the Hamiltonian model allows proposing an analytic model for the evolution in time of the macro-economic variables, based on the Langevin equation. Despite no temporal information about the evolution of cities has been used to derive this model, its forecast accuracy of the temporal evolution of the system is compatible to that of a model inferred using explicitly such information.
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