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MICROBEHAVIORAL
ECONOMETRIC
METHODS
Theories, Models, and
Applications for the Study
of Environmental and
Natural Resources
S. NIGGOL SEO
Muaebak Institute of Global Warming Studies
Seoul, Korea
Amsterdam • Boston • Heidelberg • London

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broaden our understanding, changes in research methods, professional practices, or medical treatment
may become necessary.
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ABOUT THE AUTHOR
S. NIGGOL SEO
Professor S. Niggol Seo is a natural resource economist who specializes
in the study of global warming. Born in a rural village in South Korea
in 1972, he studied at a doctoral degree program at the University of
California at Berkeley and received a PhD degree in Environmental and
Natural Resource Economics from Yale University in May 2006 with a dis-
sertation on microbehavioral models of global warming. Since 2003, he has
worked with the World Bank on various climate change projects in Africa,
Latin America, and Asia. He held professorial positions in the UK, Spain, and
Australia from 2006–15. Professor Seo has published three books and over
45 international journal articles on global warming. He frequently serves
as a journal referee for more than 30 international journals and has been
on the editorial boards of the two journals: Food Policy, Applied Economic
Perspectives and Policy. He received an Outstanding Applied Economic
Perspectives and Policy Article Award from the Agricultural and Applied
Economics Association in Pitsburgh in June 2011.
ix
PREFACE
Environmental and natural resources provide humanity with shelters and

basic materials to live on. Human beings have survived and flourished on
this Earth by appropriating and enjoying environmental surroundings and
natural resources. During the past two centuries, it is noted that humanity’s
influences on nature and the environment have vastly increased. Notwith-
standing the remarkable growth in economic well-being realized over this
time period, there are many signs that citizens of Earth are concerned about
how humans utilize and care for natural and environmental endowments on
the planet. In order to answer many pressing concerns and scholarly inqui-
ries, a large array of research fields on environmental and natural resources
has emerged.
This book presents a full spectrum of microbehavioral econometric
methods that can be applied to a large variety of studies of environmental
and natural resources. The microbehavioral econometric methods are con-
cerned with how an individual makes decisions, taking into account given
circumstances, to make the best use of concerned resources.This book plac-
es the ensemble of microbehavioral econometric and statistical methodolo-
gies in the context of how an individual, a community, or a society makes
decisions on essential natural resources and environmental assets.
The present author puts together a large number of theories, models,
and empirical studies that fall into the literature of microbehavioral meth-
ods and studies.The approach of the book is therefore encompassing, cover-
ing economics, statistics, psychology, public policy, finance, environmental
science, ecology, climate science, and global affairs. The descriptions of the
statistical methods are taken purposefully to cover the entire range of meth-
odological advances that are pertinent to modeling individual decisions and
outcomes.
This book provides applications of the microbehavioral methodologies
to natural resource managers’ decision problems faced with global warm-
ing and climatic changes. The nature of the problem of global warming
is reviewed succinctly. The present author provides detailed explanations
of how the microbehavioral methodologies developed in the first three
chapters of the book can be applied to examine behaviors of individuals,
communities, and societies in response to changing external climate condi-
tions. The book utilizes the rural farm household survey data collected at
xi
xii Preface
the continental level in Latin America, Africa, and India. These low-latitude
regions are on their own of great interest to environmental and natural
resource researchers for their unique economies, societies, ecologies, and
climates.
The present author hopes that the book will provide a valuable resource
to the students and professionals of environmental and natural resource
studies. The book is ideal for a textbook of a range of microbehavioral
statistics courses in the school of environment, school of agricultural and
natural resources, and school of public policy. The book also unfolds many
important academic frontiers in the studies of microbehavioral statistics
which are hoped to serve as an attraction for the scholars and professionals
of microbehavioral statistics and economics.
Finally, the present author wishes to thank all those involved directly or
indirectly in the publication of this book. Many professors at Yale University
and the University of California Berkeley have given invaluable comments,
albeit informally, on various aspects of the book. Their contributions are
acknowledged in the first chapter and throughout the book. The present
author also expresses gratitude to many who sponsored the Muaebak Insti-
tute of Global Warming Studies in Seoul where this book has been written.
Wish you a great journey!
S. Niggol Seo
Muaebak Institute of Global Warming Studies
Seoul, Korea
http://www.muaebakinstitute.org
CHAPTER 1
Introduction to the
Microbehavioral Econometric
Methods for the Study of
Environmental and Natural
Resources
This book is written as a textbook of the microbehavioral econometric
methods applicable to the studies of environmental and natural resourc-
es. This book covers the microeconometrics literature in a comprehen-
sive manner, both from the perspective of an individual agent’s economic
decisions and from the perspective of statistical modeling. The full range
of statistical methods to be presented in the book are elucidated through
empirical applications to the research questions on global climate changes,
agricultural and natural resource enterprises, changes in ecosystems, and
economic development in low-latitude developing countries.
This book can be used as a textbook for graduate-level courses in the
environmental studies such as environmental and ecological statistics, envi-
ronmental research methods, valuation methods, environmental and natural
resource economics, agricultural economics. The book can also be adopted
as a full or supplementary textbook in any graduate-level econometrics
courses, especially in the courses related to microeconometrics and discrete
choice modeling.
The book is written for the scholars, practitioners, and policy-makers of
global and local environmental, developmental, and natural resource issues,
with empirical applications drawn from the researches on global warming
and an individual’s adaptation decisions to global warming. The book pays
special attention to natural resources and ecosystems in low-latitude devel-
oping countries in Sub-Saharan Africa, Latin America, and Asia and explains
how changes in these systems and natural resources are an integral part of
the microbehavioral econometric models applied to the studies of environ-
mental and natural resources.
Microbehavioral Econometric Methods Copyright © 2016 Elsevier Inc.

All rights reserved. 1
2 Microbehavioral Econometric Methods
Although microeconometric methods have been widely applied to

the applied economics research questions since seminal publications by
McFadden, Hackman, and their colleagues (McFadden, 1974; Heckman,
1979; Dubin and McFadden, 1984), there are still few, if not none, micro-
econometrics textbooks available that have a clear objective of addressing
local and global environmental and natural resource issues.
Notwithstanding, recent efforts across the environmental and resource
research communities have increasingly unraveled that behavioral decisions
and responses of individuals lie at the heart of today’s major environmental
problems as well as solutions for such problems (Mendelsohn, 2000, 2012;
Seo, 2006, 2015a). This field of research is still emerging and the present
author believes that it has high potential to offer a major theoretical and
practical breakthrough in the studies of environmental and natural resource
problems, which have long shackled intellectual endeavors and policy
dialogues, with global warming research and negotiations being only one
example.
From another angle, the unique opportunities that local and global en-
vironmental studies present in advancing the current state and quality of
the microeconometrics literature have been by and large overlooked or un-
noticed. Among the econometricians and applied statisticians, there is little
awareness of environmental and natural resource studies that apply a variety
of microeconometric tools to address numerous problems that are of major
policy issues of today. One of the objectives of the book is, therefore, to
highlight a new frontier in the microeconometrics literature that has been
advanced in the environmental and resource research communities.
This is not to say that the book will be a dictionary of microecono-
metrics. The present author does not intend to cover all the minute details
of the microeconometrics literature, which may be accessed through other
sources such as McFadden (1984, 1999a,b); Train (2003); and Cameron and
Trivedi (2005). Rather, the book has a focus on what decisions are made
by an individual agent in the face of environmental changes and constraints
and how these decisions and economic outcomes can be modeled empiri-
cally by employing a battery of statistical methods to yield economically
meaningful policy conclusions. The book will highlight a number of ad-
vances achieved through the studies of individual’s decisions on managing
environmental and natural resources.
This does not mean that the book will only deal with the microecono-
metric concepts and methods in a perfunctory manner. The entire array of
methodological options available in the microeconometrics and statistics
Introduction to the Microbehavioral Econometric Methods 3
literature will be elaborated throughout the book in the contexts of individ-

uals’ decision-makings and economic consequences of such decisions with
regards to the environmental choices and tradeoffs. In an endeavor to write
a crisp, accessible, and interesting book on microbehavioral econometric
methods, however, the present author will put an emphasis on some meth-
odological options and treat other methodological options rather lightly.
What are micro decisions taken by the individuals in responding to
environmental and natural changes and/or constraints? To natural resource
scientists and economists are known numerous decisions that are condi-
tioned by environmental constraints such as global climatic changes and
pollution of the environment (Tietenberg and Lewis, 2014; Seo, 2015a).
Some of these decisions and the consequences of such decisions have been
contentiously debated in the research communities as well as in the interna-
tional policy roundtables on environmental and natural resource problems.
Let’s consider several examples. A farmer makes a large number of deci-
sions in consideration of the climate and weather conditions of the region
where her/his farm is located, which have consequences on the revenues
and costs that she/he can generate (Mendelsohn et al., 1994). Farmers in
Sub-Saharan Africa are observed to switch an agricultural system from a
crops-only to a mixed crops-livestock system or a livestock-only system
when the climate becomes hotter and more arid (Seo, 2010a,b). If climate
becomes more variable and risky through an increase in the coefficient of
variation in precipitation (CVP) over a 30 year period, they are observed to
switch to a mixed system (Seo, 2012c).
These changes in individuals’ behaviors or strategies would occur be-
cause of changes in net incomes that can be earned by the individual farms
due to an alteration in the climate condition.That is, farmers at present man-
age their farms in order to maximize the profit from farming and natural
resource activities given climate, soil, and other external conditions. When
the climate condition is altered due to global warming in the next decades
and centuries, farmers and natural resource managers are expected to adjust
their practices and enterprises to cope with, that is, adapt to such changes in
the environmental conditions (Mendelsohn, 2000; Seo, 2006, 2013, 2014a).
Another example is choices of animals by rural households. In hotter
climate zones, African farmers are observed to switch from cattle, both beef
cattle and dairy cattle, to goats and sheep (Seo and Mendelsohn, 2008a).
Farmers in Africa are also found to switch from cattle and sheep to goats and
chickens in humid climate conditions, the phenomenon which is also ob-
served in Australian agriculture (Seo and Mendelsohn, 2008a; Seo, 2015d).
This means that farmers prefer to raise sheep in a hot and arid climate zone
(Seo and Mendelsohn, 2008a; Seo et al., 2010). In the high variability and
risk zones resulting from the monsoon climate in India, Indian rural house-
holds are found to increase the number of goats owned (Seo, 2016).
Rural areas of the world rely heavily on forests and forest products for
income, forest services, and various trades (Peters et al., 1989; Vedeld et al.,
2007). The amount of forest resources varies across the continents: in South
America, a forest-cover as defined by >50% forest cover over the land area
is as large as 44% of the total land area of the continent (WRI, 2005). In the
tropical countries of Africa and Latin America, rural residents adopt a vari-
ety of forest-related enterprises, either specialized or diversified, in order to
utilize the large amount of available forest resources (Seo, 2010c, 2012a). In a
hotter and wetter climate zone, rural residents are found to rely more often
on forest resources and adopt forest-related enterprises (Seo, 2012b). That
is, rural households are observed to switch away from the other enterprises
such as crops-based or animals-based to forest-related enterprises such as a
forest-only enterprise, a forests-crops enterprise, or a crops-livestock-forests
enterprise (Seo, 2012a).
An ocean-based example of microbehavioral decisions is decisions by
the residents in the coastal zones. If the sea levels in many important coastal
zones were to rise due to an increase in sea surface temperature and global
warming as projected by climate scientists, coastal residents may either build
a coastal wall or decide to leave the coastal city or town if expected damage
is too high or the cost of protection is too high (Yohe and Schlesinger, 1998;
Ng and Mendelsohn, 2006; IPCC, 2014).
Coastal towns and residents that are frequently in the path of deadly hur-
ricanes should make not a few decisions in order to reduce the vulnerability
and damages from hurricane strikes, especially if the severity and frequency
of hurricanes were to increase due to global warming (Emanuel, 2013). For
example, concerned municipalities may issue an early warning, evacuate
the residents, build bunkers and shelters, educate the residents on specific
protective measures, or prevent the residents from walking outside during
the hurricane landfalls. A more sophisticated hurricane trajectory predic-
tion, a more wind-resistant building, and a sound levee system will help
vulnerable individuals make right decisions (Seo, 2015e; Bakkensen and
Mendelsohn, 2015).
A response to a change in external factors sometimes calls for a commu-
nity level cooperative action. For example, a sea wall to protect from a sea
level rise is unlikely to be built by a single coastal resident. A construction
of a sea wall to protect a coastal zone has a characteristic of a community

good. The sea wall should cover the entire coastal line; a single crack or an
empty space in the stretch of the sea wall will render the rest of the sea wall
ineffective in stopping an inundation.
Another example of a community response in managing agricultural
and natural resources is the construction of a public irrigation system. A
majority of irrigation schemes are privately built and managed. If, how-
ever, an irrigation system can service an entire community while a pri-
vate irrigation is too costly, it would be more efficient to construct the
irrigation system jointly by community members rather than individually
(Coman, 1911; Seo, 2011a). For the same reason, it may be more efficient
for a local government to provide a public irrigation system. A public irriga-
tion scheme, however, can also result in inefficiencies.
In managing environmental and natural resources, a community-level
decision with an informal agreement and coordination can play a pivotal
role in providing a local public good and efficiently allocating a common
pool resource, especially in a tightly-knit community (Ostrom, 2009). For
example, a commons in a village can be managed through an informal
agreement among the village members in order to prevent excess utiliza-
tion. This book will place community-level decisions in the context of mi-
crobehavioral decisions by a community which are apposite for applications
of the microbehavioral econometric methods.
Numerous decisions made by individuals or rural managers in response
to climatic changes or environmental constraints have been studied em-
pirically in the past two decades through applications of microeconometric
methods (Seo, 2006). Over time, policy implications of empirical studies
of individual decisions have rapidly become clearer owing to fast-paced
changes in a global negotiation landscape on global warming.
It dawned on the researchers and policy-makers that we cannot know
quantitatively how much damage global warming will incur without a full
consideration of these micro decisions (Adams et al., 1990; Rosenzweig and
Parry, 1994; Mendelsohn et al., 1994). The magnitude of expected damage
from global warming will by and large determine the level of carbon tax and
the level of reduction in the emissions of greenhouse gases called for, the two
critical policy variables (Nordhaus, 1994, 2013).What it implies is that quan-
titative results from the microbehavioral models presented in this book often
turn out to be a key input variable for policy dialogues on various issues.
On a more practical side, the micro decisions some of which were briefed
above are increasingly recognized in the policy communities as a center-piece
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of policy responses to global environmental challenges (Seo, 2015a,c).

Reflecting the gradual awakening, the focal point of global negotiations
has gradually shifted from a mitigation focus in the early years to an adapta-
tion focus in the recent years (UNFCCC, 1992, 1998, 2011b, 2013). Many
countries which have rejected the Kyoto Protocol’s mitigation commit-
ments, including the United States, China, and South Korea, have volun-
tarily pledged billions of dollars to the United Nations’ adaptation finance
known as the Green Climate Fund.
The gravity of the research on microbehavioral decisions in the face of
global environmental challenges has been elucidated by the ever increasing
influences the microbehavioral studies have had on numerous policy discus-
sions of global warming as demonstrated in part by the above-referenced
international policy documents (UNFCCC, 2015). This again demon-
strates the prominence of the microbehavioral econometric methods in the
policy-relevant areas of research such as global environmental problems and
natural resource uses.
There are a number of specialized microeconometrics textbooks that
are widely adopted in relevant courses including Train (2003); Cameron
and Trivedi (2005); and Agresti (2013). There are more than a few major
econometrics textbooks that have had success in the past decade and are
widely adopted as a textbook for econometrics courses, which contain mi-
croeconometric methods as one chapter of the book such as Johnston and
Dinardo (1997); Wooldridge (2010); and Greene (2011). Relying on the
extensive literature on econometrics, microeconometrics, behavioral eco-
nomics, and environmental and natural resource studies, this book offers a
number of new advances that separate this book from the earlier mentioned
textbooks.
First, this book deals with the full extent of microdecisions. That is to
say, the microbehavioral methods introduced in this book explicitly account
for all the phases of decision-making: reasons, options, alternative classifica-
tions of options, consequences, and welfare changes (Seo, 2010b, 2015b).
At this point of the book, readers may not have a clear understanding of
what these phases are and imply, but will certainly become acquainted grad-
ually with each of these phases as they go further through the book. This
approach of the book, curiously, differs from those approaches adopted in
the other textbooks in which the emphasis is laid heavily on modeling
choice decisions (Train, 2003; Cameron and Trivedi, 2005).
Second, this book provides an illuminating description and analy-
sis of the relationship between the whole system and the subsystems of
economic activities. An individual economic agent’s choice of an occupa-

tion from the full variety of available options inevitably leads to the forma-
tions of subsectors of the economy within the whole economic system.
Available microeconometric textbooks pay little attention to this impor-
tant subject.This is despite the fact that the seminal study by Heckman was
pointing a finger to this development (Heckman, 1979, 2000). This book
will unravel numerous whole system-subsystem relationships that arise
through microdecisions, the ways that the microbehavioral econometric
methods can capture them, and constraints and implications for microbe-
havioral models (Seo, 2015b).
Third, this book provides a fresh perspective on human decisions and
natural systems through microbehavioral econometric models. The warm-
ing of the Earth is viewed as a change in the natural systems. Individuals’
decisions will reflect changes in the natural ecosystems as these changes
are embedded in the varied profitabilities of natural resource intensive
enterprises such as crop agriculture, animal husbandry, and forestry. The
present author will highlight the exquisite interconnections that exist be-
tween ecological systems and human behaviors and anthropogenic systems
(Seo, 2011b, 2012b, 2014a). What this modeling perspective will lead to is
that natural systems are not independent of anthropogenic natural resource
systems and simultaneously the manmade systems are rooted on the natural
ecological systems.
Fourth, this book offers an elegant microbehavioral econometric frame-
work for modeling risk and uncertainties that arise from the environmen-
tal changes and the microbehavioral decisions undertaken to deal with
and adapt to such changes in risk and uncertainties (Seo, 2012c, 2014b).
Making decisions under risk and uncertainties has long been a prominent
economics subject in the context of financial and investment decisions
(Markowitz, 1952; Tobin, 1958; Sharpe, 1964; Black and Scholes, 1973).
Recent experiences of the financial crises in the first decade of the 21st
century, that is, the dotcom bubble burst in 2000 and the global financial
crisis that began in 2008, have given much weight to the behavioral and
psychological factors that influence market indices such as critical value,
framing, irrational exuberance, bubble, and speculation (Kahneman and
Tversky, 1979; Shiller, 1981, 2000, 2005; Case and Shiller, 2003).
In the natural resources intensive sectors, the literature has focused on irre-
versibility of capital investments and threshold events beyond which prethresh-
old states are not recoverable (Arrow, 1971; Arrow and Fisher, 1974; Weitzman,
2009; IPCC, 2012). In the extreme case, the risk involved is undefined
(Mandelbrot, 1963; Mandelbrot and Hudson, 2004, Weitzman, 2009). That

is, the threshold event occurs when no one expects it. However, in most
cases of reality, individuals and communities can deal with the risk and
uncertainties in a rational manner by employing an array of coping strat-
egies (von Neumann and Morgenstern, 1947; Fama, 1970; Udry, 1995;
Nordhaus, 2011; Mendelsohn, 2012).
The microeconometrics literature has, by and large, not explored the
aspects of risk and uncertainties in an individual’s decisions (Train, 2003;
Cameron and Trivedi, 2005). A unique feature of this book is that the
present author provides a category of risk and uncertainties in the con-
text of environmental and natural changes faced by microagents who
make decisions. For example, rainfall swings from severe drought years
to heavy rainfall years and vice versa are examined as one of the risk
factors faced by Sub-Saharan farmers faced with climatic changes
(Janowiak, 1988; Hulme et al., 2001; Shanahan et al., 2009; Seo, 2012c).
Another example of risk factors is a monsoon climate system, which
dominates the regional climate system in India and South Asia. A mon-
soon brings exceedingly high rainfall in the monsoon season which is
often more than 100 times the nonmonsoon season rainfall, which leads
to unique behavioral decisions by Indian farmers (Meehl and Hu, 2006;
IPCC, 2014, Seo, 2016).
This book comprises eight chapters. In Chapters 2 and 3, the present
author provides a full description of microbehavioral methods for model-
ing microdecisions in the context of environmental and natural changes.
Chapter 2 describes the microeconometric methods from the perspectives
of economics, that is, economic options, choices, outcomes, and welfare
changes that are involved in and arise from decision-making. Comparisons
and contrasts with alternative methodological approaches are made in this
chapter whenever needed in order to highlight the micro and behavioral
aspects of the book.
Chapter 3 has the same objective as Chapter 2 of describing the mi-
crobehavioral econometric methods, but the emphasis is laid on the statisti-
cal assumptions and considerations which call for numerous adjustments in
empirical models. The chapter will also provide mathematical proofs and
simulations as necessary of the key equations and formulations that are ap-
plied throughout this book.
Topics discussed in Chapter 3 include binary choice models, poly-
chotomous choice models (McFadden, 1974), choices of discrete choice
methods (Wooldridge, 2010; Greene, 2011), simulation-based methods for
discrete choice models (McFadden and Train, 2000; Train, 2003), selec-
tion bias correction methods when binary or multiple choices are involved
(Heckman, 1979; Lee, 1983; Dubin and McFadden, 1984; Schmertmann,
1994; Dahl, 2002), Monte Carlo simulations for selection bias correction
models (Schmertmann, 1994; Bourguignon et al., 2004), spatial spillover
and neighborhood effects (Moran, 1950a,b; Anselin, 1988; Case, 1992;
Beron and Vijverberg, 2004), identification strategies (Fisher, 1966; Johnston
and Dinardo, 1997; Manski 1995), applications to panel data (Train, 2003;
Cameron and Trivedi, 2005), modeling successive choices (McFadden, 1978;
Chib and Greenberg, 1998), and bootstrap methods for estimating uncer-
tainties (Efron, 1981; Andrews and Buchinsky, 2000).
From Chapter 4–7, applications of the microbehavioral economet-
ric methods developed in the previous chapters are presented. Using
the empirical data collected in South American households, these chap-
ters show quantitative estimates of various measures and concepts of the
microbehavioral methods. The present author highlights the critical and
unique insights that result from modeling microdecisions using micro-
econometric methods by comparing with the results from alternative
methodologies.
Chapter 4 provides an application of the microbehavioral methods
to South American agriculture data which contain the observed farmer
decisions collected from seven countries across the continent (Seo and
Mendelsohn, 2008b). This chapter will showcase all the phases of the
microbehavioral decisions, natural constraints faced by individuals, and re-
sults from such decisions. Being the first chapter with the empirical data,
the chapter will for the first time delineate the environmental problems to
be dealt with in the book and the natural and anthropogenic aspects that are
connected with the problems (IPCC, 2014).
The application in Chapter 5 further develops the concepts and meth-
odologies presented in Chapter 4. It deals with the relationship between the
subsystems and the whole system. The whole system is defined to be
the family of agricultural and natural resource enterprises. A subsystem is
one of these enterprises that an individual chooses. For example, a subsys-
tem may be a livestock-only enterprise. This chapter examines how and
why a microbehavioral modeling of subsystems is similar to a direct mod-
eling of the whole system in some aspects and different from it in other
aspects (Seo, 2015b).
In Chapter 6, the present author provides another application of the
microbehavioral methods by constructing a more complex structure of
the microbehavioral model (Seo, 2012b, 2014b). A more complex struc-

ture is constructed in tandem with the natural systems, ecosystems, or
ecological systems that are predicted to undergo changes under external
forces. An external force in the chapter is anthropogenic footprints on the
natural systems through accumulation of Carbon Dioxide emissions that
result from industrial activities and land use changes. This chapter couples
changes in the natural systems with changes in microbehavioral decisions,
which is a novel concept for both microeconometricians and biogeophysi-
cal scientists.
In Chapter 7, the present author provides another application of the
microbehavioral methods with a focus on the risk and uncertainties that
arise due to environmental changes (Seo, 2012c, 2015f). The present au-
thor examines a variety of ways for modeling environmental risk and
uncertainties that have been well known to the environmental and natural
resource researchers. One of the risk factors, mentioned already earlier, is
the fluctuation of yearly rainfall from severe drought years to extremely
heavy rainfall years and vice versa, which is common in the Sahelian re-
gion. Another example is a monsoon climate in South Asia in which the
amount of rainfall swings drastically back and forth from an extremely
high monsoon rainfall to an extremely low nonmonsoon rainfall. Using
the empirical data from the relevant regions, the present author explains
how an individual manager makes a set of decisions to cope with such
environmental risk and uncertainties.
In describing the concepts and modeling experiences on risk and
uncertainties, the present author draws insights from the financial and
investment economics literature. Major concepts that are reviewed are a
portfolio theory (Markowitz, 1952; Tobin, 1958), attitudes towards risk
(Arrow, 1971), capital asset pricing models (Sharpe, 1964), insurance
(Sumner and Zulauf, 2012), futures (Fabozzi et al., 2009), options (Black
and Scholes, 1973), prospect theory (von Neumann and Morgenstern,
1947; Kahneman and Tversky, 1979), and a speculation and bubble theory
(Fama, 1970; Shiller, 1981, 2014).
In the final chapter, Chapter 8, the present author delves on and en-
deavors to advance policy aspects of the microbehavioral models (Seo,
2014c, 2015c; UNFCCC 2011a, 2011b). Being the primary empirical
question of this book, global warming is at the center of the discussions of
policy implications, relevance, and impacts of the microbehavioral appli-
cations. The importance of adaptation literature in the contexts of global
warming policy decisions is elaborated in detail (Seo, 2015f). However,
the present author extends the descriptions to other environmental and

natural resource issues of our time including energy uses, air pollution,
transportation systems and automobile pollution, water management, and
agricultural and resource subsidies.
The empirical data used in the book for applications of the microbe-
havioral methods are drawn from the studies of global warming and ad-
aptation strategies (Seo, 2015b). Many readers of this book, for example,
graduate students in the economics or statistics department may have only
intermittent observations on the science and economic problems of global
warming. And some of them may not even have had any prior experi-
ence on any other environmental issues. For these readers who pick up this
book for study, it will be worthwhile for the present author to give a brief
introduction to the central environmental issue that is addressed throughout
this book.
The phenomenon of global warming is sometimes referred to as the
defining issue of our times. Although, there are also many people who
would argue against such an emphatic claim, there are many reasons why
the dialogues on global warming have become a deeply troubling issue in
the world. First and foremost, it is because the science of global warming
challenges the ways and foundations that the modern societies have been
built: industrialization, division of labor, specialization, mass productions,
extensive appropriations of natural resources, urbanization, transportation,
communication, and globalization (Smith, 1776; Nordhaus and Tobin, 1972;
Nordhaus, 1977).
The theory of greenhouse effects states that the increases in greenhouse
gases in the atmosphere in the process of industrializations and natural re-
source appropriations form a greenhouse-like blanket in the atmosphere,
which blocks and reflects back the infrared solar radiation from the Earth
surfaces (Le Treut et al., 2007; IPCC, 2014). The greenhouse level serving
as a thermostat, the greenhouse effect leads to an increase in the global
average temperature of the atmosphere.The most powerful greenhouse gas
in altering the Earth’s temperature is carbon dioxide (CO2). Other potent
greenhouse gases are Methane (CH4), Nitrous Oxides (N2O), water vapor
(H2O), and fluorinated gases such as HFCs (hydroflurocarbons), PFCs,
and SF6.
An increase in the level of Carbon Dioxide in the atmosphere was first
systematically recorded by Charles D. Keeling from the Scripps Institute of
Oceanography. His record began in the late 1950s and has continued until
today in the observatory set up in the top of the Mauna Loa Mountain in
Figure 1.1 Atmospheric carbon dioxide concentration since 1950s in the Mauna Loa
Observatory. (The figure is drawn by the author from the data recorded at the Mauna Loa
Observatory as compiled in the Carbon Dioxide Information and Analysis Center of the Oak
Ridge National Laboratory at http://cdiac.ornl.gov).
Hawaii (Keeling et al., 2005). His record shown in Fig. 1.1 above is called
the “Keeling Curve” and is one of the most fundamental findings of global
warming science. The figure shows that the atmospheric concentration of
Carbon Dioxide was below 320 ppm (parts per million) in the 1950s and
has increased since then to around 400 ppm in 2014, overriding seasonal
fluctuations.
Carbon Dioxide is the primary greenhouse gas accounting for more
than 80% of the greenhouse effects (Global Carbon Project, 2014). CO2
is the most troublesome greenhouse gas because it is the byproduct of
burning of fossil fuels such as coal, oil, and natural gas (US EPA, 2011).
The burning of these fossil fuels produces more than 90% of the energy
used in the United States and elsewhere (US EIA AEO, 2014). The en-
ergy produced from low-carbon or zero-carbon energy sources such as
solar energy, wind energy, geothermal energy accounts for less than 2% of
the total energy produced in the United States. This low-carbon energy
production percentage is not significantly higher in any other countries
of the world.
Figure 1.2 Global average temperature anomalies since 1880. (The figure is drawn
from the data provided by the Goddard Institute of Space Studies (GISS) as compiled in the
Carbon Dioxide Information and Analysis Center of the Oak Ridge National Laboratory at
http://cdiac.ornl.gov).
What this means is that the world has no alternative but to rely on
burning of fossil fuels to power economic growth and sustain livelihoods
of people. Technological options such as fusion energy have turned out to
be extremely expensive to develop and the pace of development has been
slow (ITER, 2015, LLNL, 2015). A carbon capture and storage technology
has been employed locally, but is not an economical option for any country
(IEA, 2013).
How much temperature rise can the increase in Carbon Dioxide
concentration in the atmosphere cause? The records of global average
temperature are available since 1880s when instrumental records be-
gan. The Fig. 1.2 above shows the temperature record kept by the God-
dard Institute of Space Studies (GISS) of the National Aeronautic and
Space Administration (NASA) of the United States (Hansen et al., 2006).
The figure shows that the global average temperature has increased by
0.6°C from the 20th century average temperature. The figure plots the
anomalies, that is, yearly deviations from the 20th century annual aver-
age temperature which is about 14°C (Le Treut et al., 2007). Celcius is an
international unit for temperature. A conversion formula from Fahrenheit

(°F) is C = 5/9 × (F – 32).
A contentiously debated key question on the science of global warm-
ing is whether the observed temperature trend shown in Fig. 1.2 is just a
reflection of natural fluctuations of temperature caused by changes in the
nature. Natural causes for global temperature fluctuations are numerous:
inter alia, changes in the Earth’s orbit around the Sun, changes in Sun-
spots, multidecadal fluctuations in ocean currents, and changes in dust in
outer space.
To separate the changes in global temperature caused by natural varia-
tions from the changes in global temperature caused by an anthropogenic
increase in Carbon Dioxide, climate scientists put together all the causes of
temperature changes and attribute them to either natural causes or anthro-
pogenic causes.
The IPCC attribution exercise is shown in Fig. 1.3. In the two figures,
the record of global temperature presented in Fig. 1.2 is reproduced. The
top figure simulates the changes in global average temperature using both
natural causes and anthropogenic causes and overlay them to the observed
trend in temperature. In the bottom figure, scientists simulate the changes
in global average temperature using only natural causes, leaving out changes in
anthropogenic greenhouse gases, and overlay them to the observed trend
in global temperature. As readers can verify, the bottom figure with only
natural causes taken into account cannot explain the changes in the ob-
served global temperature. This means that anthropogenic causes of global
warming must be added to explain the observed increase in global average
temperature in the 20th century.
There is no doubt that the greenhouse effects will lead not only to
changes in global average temperature but also to other weather and climat-
ic variables, the most prominent of which is precipitation changes (Hansen
et al., 2012). A global precipitation is harder to measure than a global tem-
perature since it varies greatly even across a small geographical area, for
example, a small city.This means that a global estimate of rainfall is more dif-
ficult to quantify. Empirical data on regional historical rainfall amounts do
not suggest historical variations in changes in precipitation patterns: there
is no single trend in global precipitation similar to the global temperature
trend shown in Fig. 1.2.
Along with changes in temperature, alteration in precipitation amounts
and patterns have grave consequences on microbehavioral decisions of those
Figure 1.3 Attribution of global warming to natural and anthropogenic causes. (a) Pre-
dicted with both anthropogenic and natural causes; (b) Predicted with natural causes
only. (These figures are drawn by the present author by approximating the means in the
figure in the IPCC 2014 report).
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Figure 1.4 Precipitation changes in the Sahelian region. (The figure was drawn from the
data provided by the Joint Institute for the Study of Ocean and the Atmosphere (JISOA), Uni-
versity of Washington, JISOA, 2015).
who manage natural and environmental resources. In Fig. 1.4, the present
author draws the changes in summer season precipitation in the Sahelian
region (Janowiak, 1988; Hulme et al., 2001). The Sahel is the ecoclimatic
and biogeographic zone of transition in Africa between the Sahara Desert
to the north and the Sudanian Savanna to the south. For the period from
1900 to 2013, the figure shows summer precipitation anomalies from the
summer season mean precipitation constructed from the 30 year period
rainfall data from 1950–79. In the figure, the summer is defined to range
from Jun. to Oct.
As shown in the figure, average summer precipitation has fluctuated
greatly in the Sahelian region since the beginning of the 20th century. In
the early decades of the past century, precipitation often had swung wildly
from year to year. A severe drought year is often followed by a heavy rainfall
year. The most notable is the prolonged drought period in the 1970s and
the 1980s. In the 2000s, precipitation has been relatively higher than the
previous three decades.The severe drought decades in the late 20th century
is preceded by the high rainfall decades from the 1920s–50s.
This swing from the heavy rainfall decades to the severe drought decades
in the Sahel is well known among the climate scientists. This particular
pattern in precipitation is attributed to changes in the ocean circula-

tion known as the Atlantic Multidecadal Oscillation (Hulme et al., 2001;
Shanahan et al., 2009). This particular pattern does not appear in other
continents or regions which exhibit their own unique characteristics in
precipitation patterns.
A key scientific question on global warming is how large and how fast
temperature change will be by the end of 21st century. According to the
recent IPCC report, the prediction is riddled with uncertainties: it ranges
from 1–4.6°C (IPCC, 2001, 2014). The best guess estimate of climate sen-
sitivity is 3°C in response to a Carbon Dioxide doubling.
The IPCC prediction has a wide range because of different assumptions
on the future economy and energy use patterns on which fixed probabilities
cannot be assigned (Nakicenovic et al., 2000; Gordon et al., 2000; Schmidt
et al., 2005). In addition, there are more than a dozen global climate models
called the Atmospheric Oceanic General Circulation Model (AOGCM)
used for the IPCC prediction. These AOGCM models differ from one to
another in the model’s structure and a large number of sensitivity param-
eters (IPCC, 2007; Le Treut et al., 2007).
This book has come to fruition through about one and a half decades’
research by the present author on the economics of global warming. Di-
rectly and indirectly, many people have contributed to the development
of the theories and empirical models presented in this book. The present
author had the honor to learn personally from Professors Robert Men-
delsohn and William Nordhaus. The economic theories on global warming
presented in this book were by and large laid out by the two distinguished
economists, for which the author would like to express heart-felt gratitude
to them (Nordhaus, 1994; Mendelsohn et al., 1994). The microbehavioral
econometric framework presented in this book was conceived initially by
the present author with the advice from Professor Robert Mendelsohn
(Seo, 2006; Seo and Mendelsohn, 2008a,b).
The presentations of the microeconometrics literature throughout the
book draw heavily from the lifetime works by the two distinguished econo-
metricians: Daniel McFadden at the University of California Berkeley and
James Heckman at the University of Chicago. The present author would
like to acknowledge the enduring contribution of their works to environ-
mental and natural resource fields.
Finally, I owe thanks to the editorial team at Elsevier and Academic Press
for superbly managing the publication of this book. J. Scott Bentley coordi-
nated the review process of the book proposal and Susan Ikeda and Julie-Ann
Stansfield coordinated the editorial and production works for the publica-
tion of the book.The present author would like to thank also more than five
anonymous reviewers who provided valuable comments on the proposal.
In closing this chapter, the present author wishes to underscore that the
entire book is written with the ongoing international policy negotiations
on climate change in mind.The success of an international policy interven-
tion will certainly hinge on how well a policy or a set of policies is designed
to capture and alter microdecisions of individuals. A family of microbehav-
ioral econometric methods presented throughout this book will provide an
essential tool for the policy-makers of global warming and for the research-
ers who care to look into the behaviors of individuals.
Exercises
1. From the historical record of global temperature anomalies shown in
Fig. 1.2 measured and calculated by the Goddard Institute of Space
Studies, fit a linear trend line or a nonlinear trend line after employing
several different definitions of climate normals. Is it possible to confirm
statistically that there has been a significant climate change over this
time period?
2. Continuing with the question 1, is it possible to reject statistically
that there has been a significant climate change over a subset of the
time period?
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Hugo, following these directions, concluded a successful search.
"Right," he said. "Ladder, long, wooden, for purposes of climbing,
one. Correct as per memo. Now what?"
"Put it up."
"Right."
"And hold it very carefully."
"Esteemed order booked," said Hugo. "Carry on."
"Are you sure you are holding it carefully?"
"As in a vise."
"Well, don't let go."
Mr. Carmody, dying a considerable number of deaths in the process,
descended. He found his nephew's curiosity at close range even
more acute than it had been from a distance.
"What on earth were you doing up there?" said Hugo, starting again
at the beginning.
"Never mind."
"But what were you?"
"If you wish to know, a rung broke and the ladder slipped."
"But what were you doing on a ladder?"
"Never mind!" cried Mr. Carmody, regretting more bitterly than ever
before in his life that his late brother Eustace had not lived and died
a bachelor. "Don't keep saying What—What—What!"
"Well, why?" said Hugo, conceding the point. "Why were you
climbing ladders?"
Mr. Carmody hesitated. His native intelligence returning, he
perceived now that this was just what the great public would want to
know. It was little use urging a human talking machine like his
nephew to keep quiet and say nothing about this incident. In a
couple of hours it would be all over Rudge. He thought swiftly.
"I fancied I saw a swallow's nest under the eaves."
"Swallow's nest?"
"Swallow's nest. The nest," said Mr. Carmody between his teeth, "of
a swallow."
"Did you think swallows nested in July?"
"Why shouldn't they?"
"Well, they don't."
"I never said they did. I merely said...."
"No swallow has ever nested in July."
"I never...."
"April," said our usually well-informed correspondent.
"What?"
"April. Swallows nest in April."
"Damn all swallows!" said Mr. Carmody. And there was silence for a
moment, while Hugo directed his keen young mind to other aspects
of this strange affair.
"How long had you been up there?"
"I don't know. Hours. Since half-past five."
"Half-past five? You mean you got up at half-past five to look for
swallows' nests in July?"
"I did not get up to look for swallows' nests."
"But you said you were looking for swallows' nests."
"I did not say I was looking for swallows' nests. I merely said I
fancied I saw a swallow's nest...."
"You couldn't have done. Swallows don't nest in July.... April."
The sun was peeping over the elms. Mr. Carmody raised his
clenched fists to it.
"I did not say I saw a swallow's nest. I said I thought I saw a
swallow's nest."
"And got a ladder out and climbed up for it?"
"Yes."
"Having risen from couch at five-thirty ante meridian?"
"Will you kindly stop asking me all these questions."
Hugo regarded him thoughtfully.
"Just as you like, Uncle. Well, anything further this morning? If not,
I'll be getting along and taking my dip."
III
"I say, Ronnie," said Hugo, some two hours later, meeting his friend
en route for the breakfast table. "You know my uncle?"
"What about him?"
"He's loopy."
"What?"
"Gone clean off his castors. I found him at seven o'clock this morning
sitting on a second-floor window sill. He said he'd got up at five-thirty
to look for swallows' nests."
"Bad," said Mr. Fish, shaking his head with even more than his usual
solemnity. "Second-floor window sill, did you say?"
"Second-floor window sill."
"Exactly how my aunt started," said Ronnie Fish.
"They found her sitting on the roof of the stables, playing the ukulele
in a blue dressing gown. She said she was Boadicea. And she
wasn't. That's the point, old boy," said Mr. Fish earnestly. "She
wasn't. We must get you out of this as quickly as possible, or before
you know where you are you'll find yourself being murdered in your
bed. It's this living in the country that does it. Six consecutive months
in the country is enough to sap the intellect of anyone. Looking for
swallows' nests, was he?"
"So he said. And swallows don't nest in July. They nest in April."
Mr. Fish nodded.
"That's how I always heard the story," he agreed. "The whole thing
looks very black to me, and the sooner you're safe out of this and in
London, the better."
IV
At about the same moment, Mr. Carmody was in earnest conference
with Mr. Molloy.
"That man you were telling me about," said Mr. Carmody. "That
friend of yours who you said would help us."
"Chimp?"
"I believe you referred to him as Chimp. How soon could you get in
touch with him?"
"Right away, brother."
Mr. Carmody objected to being called brother, but this was no time
for being finicky.
"Send for him at once."
"Why, have you given up the idea of getting that stuff out of the
house yourself?"
"Entirely," said Mr. Carmody. He shuddered slightly. "I have been
thinking the matter over very carefully, and I feel that this is an affair
where we require the services of some third party. Where is this
friend of yours? In London?"
"No. He's right around the corner. His name's Twist. He runs a sort of
health-farm place only a few miles from here."
"God bless my soul! Healthward Ho?"
"That's the spot. Do you know it?"
"Why, I have only just returned from there."
Mr. Molloy was conscious of a feeling of almost incredulous awe. It
was the sort of feeling which would come to a man who saw miracles
happening all around him. He could hardly believe that things could
possibly run as smoothly as they appeared to be doing. He had
anticipated a certain amount of difficulty in selling Chimp Twist to Mr.
Carmody, as he phrased it to himself, and had looked forward with
not a little apprehension to a searching inquisition into Chimp Twist's
bona fides. And now, it seemed, Mr. Carmody knew Chimp
personally and was, no doubt, prepared to receive him without a
question. Could luck like this hold? That was the only thought that
disturbed Mr. Molloy.
"Well, isn't that interesting!" he said slowly. "So you know my old
friend Twist, do you?"
"Yes," said Mr. Carmody, speaking, however, as if the
acquaintanceship were not one to which he looked back with any
pleasure. "I know him very well."
"Fine!" said Mr. Molloy. "You see, if I thought we were getting in
somebody you knew nothing about and felt you couldn't trust, it
would sort of worry me."
Mr. Carmody made no comment on this evidence of his guest's nice
feeling. He was meditating and did not hear it. What he was
meditating on was the agreeable fact that money which he had been
trying so vainly to recover from Doctor Twist would not be a dead
loss after all. He could write if off as part of the working expenses of
this little venture. He beamed happily at Mr. Molloy.
"Healthward Ho is on the telephone," he said. "Go and speak to
Doctor Twist now and ask him to come over here at once." He
hesitated for a moment, then came bravely to a decision. After all,
whatever the cost in petrol, oil, and depreciation of tires, it was for a
good object. More working expenses. "I will send my car for him," he
said.
If you wish to accumulate, you must inevitably speculate, felt Mr.
Carmody.
CHAPTER VII
I
The strange depression which had come upon Pat in the shop of
Chas. Bywater did not yield, as these gray moods generally do, to
the curative influence of time. The following morning found her as
gloomy as ever—indeed, rather gloomier, for shortly after breakfast
the noblesse oblige spirit of the Wyverns had sent her on a reluctant
visit to an old retainer who lived—if you could call it that—in one of
the smaller and stuffier houses in Budd Street. Pensioned off after
cooking for the Colonel for eighteen years, this female had retired to
bed and stayed there, and there was a legend in the family, though
neither by word nor look did she ever give any indication of it, that
she enjoyed seeing Pat.
Bedridden ladies of advanced age seldom bubble over with fun and
joie de vivre. This one's attitude toward life seemed to have been
borrowed from her favourite light reading, the works of the Prophet
Jeremiah, and Pat, as she emerged into the sunshine after some
eighty minutes of her society, was feeling rather like Jeremiah's
younger sister.
The sense of being in a world unworthy of her—a world cold and
unsympathetic and full of an inferior grade of human being, had now
become so oppressive that she was compelled to stop on her way
home and linger on the old bridge which spanned the Skirme. From
the days of her childhood this sleepy, peaceful spot had always been
a haven when things went wrong. She was gazing down into the
slow-moving water and waiting for it to exercise its old spell, when
she heard her name spoken and turned to see Hugo.
"What ho," said Hugo, pausing beside her. His manner was genial
and unconcerned. He had not met her since that embarrassing
scene in the lobby of the Hotel Lincoln, but he was a man on whom
the memory of past embarrassments sat lightly. "What do you think
you're doing, young Pat?"
Pat found herself cheering up a little. She liked Hugo. The sense of
being all alone in a bleak world left her.
"Nothing in particular," she said. "Just looking at the water."
"Which in its proper place," agreed Hugo, "is admirable stuff. I've
been doing a bit of froth-blowing at the Carmody Arms. Also buying
cigarettes and other necessaries. I say, have you heard about my
Uncle Lester's brain coming unstuck? Absolutely. He's quite non
compos. Mad as a coot. Belfry one seething mass of bats. He's
taken to climbing ladders in the small hours after swallows' nests.
However, shelving that for the moment, I'm very glad I ran into you
this morning, young Pat. I wish to have a serious talk with you about
old John."
"John?"
"John."
"What about John?"
At this moment there whirred past, bearing in its interior a weedy,
snub-nosed man with a waxed moustache, a large red automobile.
Hugo, suspending his remarks, followed it with astonished eyes.
"Good Lord!"
"What about Johnnie?"
"That was the Dex-Mayo," said Hugo. "And the gargoyle inside was
that blighter Twist from Healthward Ho. Great Scott! The car must
have been over there to fetch him."
"What's so remarkable about that?"
"What's so remarkable?" echoed Hugo, astounded. "What's
remarkable about Uncle Lester deliberately sending his car twenty
miles to fetch a man who could have come, if he had to come at all,
by train at his own expense? My dear old thing, it's revolutionary. It
marks an epoch. Do you know what I think has happened? You
remember that dynamite explosion in the park when Uncle Lester
nearly got done in?"
"I don't have much chance to forget it."
"Well, what I believe has happened is that the shock he got that day
has completely changed his nature. It's a well-known thing. You hear
of such cases all the time. Ronnie Fish was telling me about one
only yesterday. There was a man he knew in London, a money
lender, a fellow who had a glass eye, and the only thing that enabled
anyone to tell which of his eyes was which was that the glass one
had rather a more human expression than the other. That's the sort
of chap he was. Well, one day he was nearly konked in a railway
accident, and he came out of hospital a different man. Slapped
people on the back, patted children on the head, tore up I.O.U.'s,
and talked about its being everybody's duty to make the world a
better place. Take it from me, young Pat, Uncle Lester's whole
nature has undergone some sort of rummy change like that. That
swallow's nest business must have been a preliminary symptom.
Ronnie tells me that this money lender with the glass eye...."
Pat was not interested in glass-eyed money lenders.
"What were you saying about John?"
"I'll tell you what I'm going to do. I'm going home quick, so as to be
among those present when he starts scattering the stuff. It's quite on
the cards that I may scoop that five hundred yet. Once a tightwad
starts seeing the light...."
"You were saying something about John," said Pat, falling into step
with him as he moved off. His babble irked her, making her wish that
she could put the clock back a few years. Age, they say, has its
compensations, but one of the drawbacks of becoming grown-up
and sedate is that you have to abandon the childish practice of
clumping your friends on the side of the head when they wander
from the point. However, she was not too old to pinch her companion
in the fleshy part of the arm, and she did so.
"Ouch!" said Hugo, coming out of his trance.
"What about John?"
Hugo massaged his arm tenderly. The look of a greyhound pursuing
an electric hare died out of his eyes.
"Of course, yes. John. Glad you reminded me. Have you seen John
lately?"
"No. I'm not allowed to go to the Hall, and he seems too busy to
come and see me."
"It isn't so much being busy. Don't forget there's a war on. No doubt
he's afraid of bumping into the parent."
"If Johnnie's scared of Father...."
"There's no need to speak in that contemptuous tone. I am, and
there are few more intrepid men alive than Hugo Carmody. The old
Colonel, believe me, is a tough baby. If I ever see him, I shall run like
a rabbit, and my biographers may make of it what they will. You,
being his daughter and having got accustomed to his ways, probably
look on him as something quite ordinary and harmless, but even you
will admit that he's got eyebrows which must be seen to be
believed."
"Oh, never mind Father's eyebrows. Go on about Johnnie."
"Right ho. Well, then, look here, young Pat," said Hugo, earnestly, "in
the interests of the aforesaid John, I want to ask you a favour. I
understand he proposed to you that night at the Mustard Spoon."
"Well?"
"And you slipped him the mitten."
"Well?"
"Oh, don't think I'm blaming you," Hugo assured her. "If you don't
want him, you don't. Nothing could be fairer than that. But what I'm
asking you to do now is to keep clear of the poor chap. If you happen
to run into him, that can't be helped, but be a sport and do your best
to avoid him. Don't unsettle him. If you come buzzing round, stirring
memories of the past and arousing thoughts of Auld Lang Syne and
what not, that'll unsettle him. It'll take his mind off his job and ... well
... unsettle him. And, providing he isn't unsettled, I have strong
hopes that we may get old John off this season. Do I make myself
clear?"
Pat kicked viciously at an inoffensive pebble, whose only fault was
that it happened to be within reach at the moment.
"I suppose what you're trying to break to me in your rambling,
woollen-headed way is that Johnnie is mooning round that Molloy
girl? I met her just now in Bywater's, and she told me she was
staying at the Hall."
"I wouldn't call it mooning," said Hugo thoughtfully, speaking like a
man who is an expert in these matters and can appraise subtle
values. "I wouldn't say it had quite reached the mooning stage yet.
But I have hopes. You see, John is a bloke whom Nature intended
for a married man. He's a confirmed settler-down, the sort of chap
who...."
"You needn't go over all that again. I had the pleasure of hearing
your views on the subject that night in the lobby of the hotel."
"Oh, you did hear?" said Hugo, unabashed. "Well, don't you think I'm
right?"
"If you mean do I approve of Johnnie marrying Miss Molloy, I
certainly do not."
"But if you don't want him...."
"It has nothing to do with my wanting him or not wanting him. I don't
like Miss Molloy."
"Why not?"
"She's flashy."
"I would have said smart."
"I wouldn't." Pat, with an effort, recovered a certain measure of calm.
Wrangling, she felt, was beneath her. As she could not hit Hugo with
the basket in which she had carried two pounds of tea, a bunch of
roses, and a seed cake to her bedridden pensioner, the best thing to
do was to preserve a ladylike composure. "Anyway, you're probably
taking a lot for granted. Probably Johnnie isn't in the least attracted
by her. Has he ever given any sign of it?"
"Sign?" Hugo considered. "It depends what you mean by sign. You
know what old John is. One of these strong, silent fellows who looks
on all occasions like a stuffed frog."
"He doesn't."
"Pardon me," said Hugo firmly. "Have you ever seen a stuffed frog?
Well, I have. I had one for years when I was a kid. And John has
exactly the same power of expressing emotion. You can't go by what
he says or the way he looks. You have to keep an eye out for much
subtler bits of evidence. Now, last night he was explaining the rules
of cricket to this girl, and answering all her questions on the subject,
and, as he didn't at any point in the proceeding punch her on the
nose, one is entitled to deduce, I consider, that he must be strongly
attracted by her. Ronnie thinks so, too. So what I'm asking you to
do...."
"Good-bye," said Pat. They had reached the gate of the little drive
that led to her house, and she turned sharply.
"Eh?"
"Good-bye."
"But just a moment," insisted Hugo. "Will you...."
At this point he stopped in mid-sentence and began to walk quickly
up the road; and Pat, puzzled to conjecture the reason for so abrupt
a departure, received illumination a moment later when she saw her
father coming down the drive. Colonel Wyvern had been dealing
murderously with snails in the shadow of a bush, and the expression
on his face seemed to indicate that he would be glad to extend the
treatment to Hugo.
He gazed after that officious young man with a steely eye. The
second post had arrived a short time before, and it had included
among a number of bills and circulars a letter from his lawyer, in
which the latter regretfully gave it as his opinion that an action
against Mr. Lester Carmody in the matter of that dynamite business
would not lie. To bring such an action would, in the judgment of
Colonel Wyvern's lawyer, be a waste both of time and money.
The communication was not calculated to sweeten the Colonel's
temper, nor did the spectacle of his daughter in apparently pleasant
conversation with one of the enemy help to cheer him up.
"What are you talking about to that fellow?" he demanded. It was
rare for Colonel Wyvern to be the heavy father, but there are times
when heaviness in a father is excusable. "Where did you meet him?"
His tone disagreeably affected Pat's already harrowed nerves, but
she replied to the question equably.
"I met him on the bridge. We were talking about John."
"Well, kindly understand that I don't want you to hold any
communication whatsoever with that young man or his cousin John
or his infernal uncle or any of that Hall gang. Is that clear?"
Her father was looking at her as if she were a snail which he had just
found eating one of his lettuce leaves, but Pat still contrived with
some difficulty to preserve a pale, saintlike calm.
"Quite clear."
"Very well, then."
There was a silence.
"I've known Johnnie fourteen years," said Pat in a small voice.
"Quite long enough," grunted Colonel Wyvern.
Pat walked on into the house and up the stairs to her room. There,
having stamped on the basket and reduced it to a state where it
would never again carry seed cake to ex-cooks, she sat on her bed
and stared, dry-eyed, at her reflection in the mirror.
What with Dolly Molloy and Hugo and her father, the whole aspect of
John Carroll seemed to be changing for her. No longer was she able
to think of him as Poor Old Johnnie. He had the glamour now of
something unattainable and greatly to be desired. She looked back
at a night, some centuries ago, when a fool of a girl had refused the
offer of this superman's love, and shuddered to think what a mess of
things girls can make.
And she had no one to confide in. The only person who could have
understood and sympathized with her was Hugo's glass-eyed money
lender. He knew what it was to change one's outlook.
II
Mr. Alexander (Chimp) Twist stood with his shoulders against the
mantelpiece in Mr. Carmody's study and, twirling his waxed
moustache thoughtfully, listened with an expressionless face to
Soapy Molloy's synopsis of the events which had led up to his being
at the Hall that morning. Dolly reclined in a deep armchair. Mr.
Carmody was not present, having stated that he would prefer to
leave the negotiations entirely to Mr. Molloy.
Through the open window the sounds and scents of summer poured
in, but it is unlikely that Chimp Twist was aware of them. He was a
man who believed in concentration, and his whole attention now was
taken up by the remarkable facts which his old acquaintance and
partner was placing before him.
The latter's conversation on the telephone some two hours ago had
left Chimp Twist with an open mind. He was hopeful, but cautiously
hopeful. Soapy had insisted that there was a big thing on, but he had
reserved his enthusiasm until he should learn the details. The thing,
he felt, might seem big to Soapy, but to Alexander Twist no things
were big things unless he could see in advance a substantial profit
for A. Twist in them.
Mr. Molloy, concluding his story, paused for reply. The visitor gave
his moustache a final twist, and shook his head.
"I don't get it," he said.
Mrs. Molloy straightened herself militantly in her chair. Of all
masculine defects, she liked slowness of wit least; and she had
never been a great admirer of Mr. Twist.
"You poor, nut-headed swozzie," she said with heat. "What don't you
get? It's simple enough, isn't it? What's bothering you?"
"There's a catch somewhere. Why isn't this guy Carmody able to sell
the things?"
"It's the law, you poor fish. Soapy explained all that."
"Not to me he didn't," said Chimp. "A lot of words fluttered out of him,
but they didn't explain anything to me. Do you mean to say there's a
law in this country that says a man can't sell his own property?"
"It isn't his own property." Dolly's voice was shrill with exasperation.
"The things belong in the family and have to be kept there. Does that
penetrate, or have we got to use a steam drill? Listen here. Old
George W. Ancestor starts one of these English families going—way
back in the year G.X. something. He says to himself, 'I can't last
forever, and when I go then what? My son Freddie is a good boy,
handy with the battle axe and okay at mounting his charger, but he's
like all the rest of these kids—you can't keep him away from the
hock shop as long as there's anything in the house he can raise
money on. It begins to look like the moment I'm gone my collection
of old antiques can kiss itself good-bye.' And then he gets an idea.
He has a law passed saying that Freddie can use the stuff as long as
he lives but he can't sell it. And Freddie, when his time comes, he
hands the law on to his son Archibald, and so on, down the line till
you get to this here now Carmody. The only way this Carmody can
realize on all these things is to sit in with somebody who'll pinch
them and then salt them away somewheres, so that after the cops
are out of the house and all the fuss has quieted down they can get
together and do a deal."
Chimp's face cleared.
"Now I'm hep," he said. "Now I see what you're driving at. Why
couldn't Soapy have put it like that before? Well, then, what's the
idea? I sneak in and swipe the stuff. Then what?"
"You salt it away."
"At Healthward Ho?"
"No!" said Mr. Molloy.
"No!" said Mrs. Molloy.
It would have been difficult to say which spoke with the greater
emphasis, and the effect was to create a rather embarrassing
silence.
"It isn't that we don't trust you, Chimpie," said Mr. Molloy, when this
silence had lasted some little time.
"Oh?" said Mr. Twist, rather distantly.
"It's simply that this bimbo Carmody naturally don't want the stuff to
go out of the house. He wants it where he can keep an eye on it."
"How are you going to pinch it without taking it out of the house?"
"That's all been fixed. I was talking to him about it this morning after I
'phoned you. Here's the idea. You get the stuff and pack it away in a
suitcase...."
"Stuff that there's only enough of so's you can put it all in a suitcase
is a hell of a lot of use to anyone," commented Mr. Twist
disparagingly.
Dolly clutched her temples. Mr. Molloy brushed his hair back from his
forehead with a despairing gesture.
"Sweet potatoes!" moaned Dolly. "Use your bean, you poor sap, use
your bean. If you had another brain you'd just have one. A thing
hasn't got to be the size of the Singer Building to be valuable, has it?
I suppose if someone offered you a diamond you'd turn it down
because it wasn't no bigger than a hen's egg."
"Diamond?" Chimp brightened. "Are there diamonds?"
"No, there aren't. But there's pictures and things, any one of them
worth a packet. Go on, Soapy. Tell him."
Mr. Molloy smoothed his hair and addressed himself to his task once
more.
"Well, it's like this, Chimpie," he said. "You put the stuff in a suitcase
and you take it down into the hall where there's a closet under the
stairs...."
"We'll show you the closet," interjected Dolly.
"Sure we'll show you the closet," said Mr. Molloy generously. "Well,
you put the suitcase in this closet and you leave it lay there. The idea
is that later on I give old man Carmody my cheque and he hands it
over and we take it away."
"He thinks Soapy owns a museum in America," explained Dolly. "He
thinks Soapy's got all the money in the world."
"Of course, long before the time comes for giving any cheques, we'll
have got the stuff away."
Mr. Chimp digested this.
"Who's going to buy it when you do get it away?" he asked.
"Oh, gee!" said Dolly. "You know as well as I do there's dozens of
people on the other side who'll buy it."
"And how are you going to get it away? If it's in a closet in Carmody's
house and Carmody has the key...?"
"Now there," said Mr. Molloy, with a deferential glance at his wife, as
if requesting her permission to re-open a delicate subject, "the
madam and I had a kind of an argument. I wanted to wait till a
chance came along sort of natural, but Dolly's all for quick action.
You know what women are. Impetuous."
"If you'd care to know what we're going to do," said Mrs. Molloy
definitely, "we're not going to hang around waiting for any chances to
come along sort of natural. We're going to slip a couple of knock-out
drops in old man Carmody's port one night after dinner and clear out
with the stuff while...."
"Knock-out drops?" said Chimp, impressed. "Have you got any
knock-out drops?"
"Sure we've got knock-out drops. Soapy never travels without them."
"The madam always packs them in their little bottle first thing before
even my clean collars," said Mr. Molloy proudly. "So you see,
everything's all arranged, Chimpie."
"Yeah?" said Mr. Twist, "and how about me?"
"How do you mean, how about you?"
"It seems to me," pointed out Mr. Twist, eyeing his business partner
in rather an unpleasant manner with his beady little eyes, "that you're
asking me to take a pretty big chance. While you're doping the old
man I'll be twenty miles away at Healthward Ho. How am I to know
you won't go off with the stuff and leave me to whistle for my share?"
It is only occasionally that one sees a man who cannot believe his
ears, but anybody who had been in Mr. Carmody's study at this
moment would have been able to enjoy that interesting experience.
A long moment of stunned and horrified amazement passed before
Mr. Molloy was able to decide that he really had heard correctly.
"Chimpie! You don't suppose we'd double-cross you?"
"Ee-magine!" said Mrs. Molloy.
"Well, mind you don't," said Mr. Twist coldly. "But you can't say I'm
not taking a chance. And now, talking turkey for a moment, how do
we share?"
"Equal shares, of course, Chimpie."
"You mean half for me and half for you and Dolly?"
Mr. Molloy winced as if the mere suggestion had touched an
exposed nerve.
"No, no, no, Chimpie! You get a third, I get a third, and the madam
gets a third."
"Not on your life!"
"What!"
"Not on your life. What do you think I am?"
"I don't know," said Mrs. Molloy acidly. "But, whatever it is, you're the
only one of it."
"Is that so?"
"Yes, that is so."
"Now, now, now," said Mr. Molloy, intervening. "Let's not get
personal. I can't figure this thing out, Chimpie. I can't see where your
kick comes in. You surely aren't suggesting that you should ought to
have as much as I and the wife put together?"
"No, I'm not. I'm suggesting I ought to have more."
"What!"
"Sixty-forty's my terms."
A feverish cry rang through the room, a cry that came straight from a
suffering heart. The temperamental Mrs. Molloy was very near the
point past which a sensitive woman cannot be pushed.
"Every time we get together on one of these jobs," she said, with
deep emotion, "we always have this same fuss about the divvying
up. Just when everything looks nice and settled you start this thing of
trying to hand I and Soapy the nub end of the deal. What's the
matter with you that you always want the earth? Be human, why
can't you, you poor lump of Camembert."
"I'm human all right."
"You've got to prove it to me."
"What makes you say I'm not human?"
"Well, look in the glass and see for yourself," said Mrs. Molloy
offensively.
The pacific Mr. Molloy felt it time to call the meeting to order once
more.
"Now, now, now! All this isn't getting us anywheres. Let's stick to
business. Where do you get that sixty-forty stuff, Chimp?"
"I'll tell you where I get it. I'm going into this thing as a favour, aren't
I? There's no need for me to sit in at this game at all, is there? I've
got a good, flourishing, respectable business of my own, haven't I? A
business that's on the level. Well, then."
Dolly sniffed. Her husband's soothing intervention had failed signally
to diminish her animosity.
"I don't know what your idea was in starting that Healthward Ho
joint," she said, "but I'll bet my diamond sunburst it isn't on the level."
"Certainly it's on the level. A man with brains can always make a
good living without descending to anything low and crooked. That's
why I say that if I go into this thing it will simply be because I want to
do a favour to two old friends."
"Old what?"
"Friends was what I said," repeated Mr. Twist. "If you don't like my
terms, say so and we'll call the deal off. It'll be all right by me. I'll
simply get along back to Healthward Ho and go on running my good,
flourishing, respectable business. Come to think of it, I'm not any too
solid on this thing, anyway. I was walking in my garden this morning
and a magpie come up to me as close as that."
Mrs. Molloy expressed the view that this was tough on the magpie,
but wanted to know what the bird's misfortune in finding itself so
close to Mr. Twist that it could not avoid taking a good, square look at
him had to do with the case.
"Well, I'm superstitious, same as everyone else. I saw the new moon
through the glass, what's more."
"Oh, stop stringing the beads and talk sense," said Dolly wearily.
"I'm talking sense all right. Sixty per cent. or I don't come in. You
wouldn't have asked me to come in if you could have done without
me. Think I don't know that? Sixty's moderate. I'm doing all the hard
work, aren't I?"
"Hard work?" Dolly laughed bitterly. "Where do you get the idea it's
going to be hard work? Everybody'll be out of the house on the night
of this concert thing they're having down in the village, there'll be a
window left open, and you'll just walk in and pack up the stuff. If
that's hard, what's easy? We're simply handing you slathers of
money for practically doing nothing."
"Sixty," said Mr. Twist. "And that's my last word."
"But, Chimpie ..." pleaded Mr. Molloy.
"Sixty."
"Have a heart!"
"Sixty."
"It isn't as though ..."
"Sixty."
Dolly threw up her hands despairingly.
"Oh, give it him," she said. "He won't be happy if you don't. If a guy's
middle name is Shylock, where's the use wasting time trying to do
anything about it?"
III
Mrs. Molloy's prediction that on the night of Rudge's annual dramatic
and musical entertainment the Hall would be completely emptied of
its occupants was not, as it happened, literally fulfilled. A wanderer
through the stable yard at about the hour of ten would have
perceived a light in an upper window: and had he taken the trouble

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Microbehavioral Econometric Methods Theories Models and Applications For The Study of Environmental and Natural Resources 1st Edition S. Niggol Seo

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Environmental and natural resources provide humanity with shelters and

Microbehavioral Econometric Methods Copyright © 2016 Elsevier Inc.

Although microeconometric methods have been widely applied to

literature will be elaborated throughout the book in the contexts of individ-

of a sea wall to protect a coastal zone has a characteristic of a community

of policy responses to global environmental challenges (Seo, 2015a,c).

economic activities. An individual economic agent’s choice of an occupa-

(Mandelbrot, 1963; Mandelbrot and Hudson, 2004, Weitzman, 2009). That

the microbehavioral model (Seo, 2012b, 2014b). A more complex struc-

the present author extends the descriptions to other environmental and

international unit for temperature. A conversion formula from Fahrenheit

pattern in precipitation is attributed to changes in the ocean circula-

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