28 June 2012

Another Economic History of the US

At the Breakthrough Dialogue 2012 later this week I'll be giving a response to Michael Lind, of the New American Foundation and author of the recent book, Land of Promise: An Economic History of the United States with a focus on innovation.

I liked Land of Promise, but I will offer two critiques. One is that while history provides an unbroken narrative structure to economics, it can mask changes that make one era incomparable with another. This is illustrated in the slide above from my presentation.

It shows that in 1800 the size of the entire US economy (GDP in 2005 dollars) was the same size as the GDP of Pascagoula, Mississippi in 2005. (Data from here and here.) By 1850 the US economy had grown to the size of Rhode Island's 2005 GDP, by 1900 it was Virginia, and 1950 it was the size of California's 2005 GDP.

While I am sure that Robbie Maxwell, current mayor of Pascagoula, has some fine ideas on economic development, they probably don't carry the authority of invoking George Washington. Yet, both public officials manage(d) economies of comparable size. So I do have some issues with applying lessons from economic history to innovation-focused policies of the 21st Century.

That said, I do agree with Lind's bottom line:
"Industrial policy is not alien to the American tradition. It is the American tradition." (p. 465)
The bulk of my response will focus on explaining the mythology of the so-called "linear model of innovation" (discussed here in PDF by Godin) which surrounds Vannevar Bush and post-War US science policy -- which Lind accepts far too uncritically.  The linear model, married to a convenient misreading of economics theory, has restricted our view of innovation policy for decades.

Land of Promise is a stimulating book. Despite these issues, I enjoyed it a great deal. (See also David Douglas here).

26 June 2012

An Invasion of Foreign Shoes

Below is a vignette from the Congressional Record, February 13, 1936, Senate floor debate, which I came across today in some research I am doing (yes, I love reading old Congressional Records, wonky enough?).

I thought it was worth sharing, as it helps to show that our political debates have, in some respects, changed very little over 80 years. Politicians (of both parties) have an impressive track record of repeatedly getting it wrong on manufacturing and productivity, and that includes those two guys at the top of this post.

SENATOR ROBERT RICE REYNOLDS (D-NC, right). China is building its own textile plants. There are almost as many textile plants, as I observed only last December when I was there, in Bombay, India, as there are in Lancaster, England. There are 25 or more huge textile plants there. In China, with its 500,000,000 people; in India, with its 350,000,000 people; they have gotten wise to themselves, and they are establishing their own textile plants and growing their own cotton. It is a problem that we in the future shall have to confront, and in dealing with the problem pertaining to cotton I say we should not drive our friends from our doors.

SENATOR DAVID WALSH (D-MA, below). Mr. President, will the Senator yield?

Mr. REYNOLDS. I yield.

Mr. WALSH. Is it not true that the change which the Senator is describing as taking place throughout the countries of the world is applicable not only to textiles but to every other commodity?

Mr. REYNOLDS. Absolutely. I am glad the Senator from Massachusetts injected that statement at this time.

Mr. WALSH. And does not that mean that for the first time, or at least at the present time, we are confronted with the problem of demanding and insisting that the home market be retained and preserved for our manufacturers, when we are losing on all sides the foreign market?

Mr. REYNOLDS. The Senator is exactly correct. We are not only facing competition in textiles and shall have more competition in the future from all the countries in the world with which we have been dealing and from which we have extracted great sums but we are facing competition in every line of endeavor so far as manufacture is concerned.

Mr. WALSH. That is happening even in the case of boots and shoes, which were first manufactured in this country.

Mr. REYNOLDS. Yes; and they are now manufactured in large numbers in Czechoslovakia.

Mr. WALSH. The making of shoes has been a typical American development. We make the best shoes in the world. And now, as the Senator suggests, our shoe manufacturers are in competition with those of Czechoslovakia and other countries; our manufacturers are losing rapidly the foreign shoe market and are threatened with an invasion of foreign shoes.

Mr. REYNOLDS. The Senator is entirely correct.

Mr. WALSH. Another untoward situation that confronts the American producer is that machinery which we have perfected in this country, the best machinery in the world, is now available in every part of the world, and the people of other nations can use our machinery and produce as great a volume as we can at very much cheaper wages.

Mr. REYNOLDS. Because they pay to their laborers engaged in the manufacture of shoes and in other industries about one-tenth of what is paid the American laborer.

Mr. WALSH. Exactly. . .

Mr. REYNOLDS. . . . The great trouble that we are to meet, the great trouble that we shall be forced to face in this country sooner or later-and the time is almost here now-is how are we, under heaven, to be able to continue to maintain the high standards of living that we have maintained for the laboring men of this country?
I am pretty sure that the answer to this question, with the advantage of hindsight, has nothing to do with protecting cobblers from an invasion of foreign shoes.

25 June 2012

The John Maddox Prize

Here is a novel award given by the UK group Sense About Science in partnership with Nature:
The John Maddox Prize will reward an individual who has promoted sound science and evidence on a matter of public interest. Its emphasis is on those who have faced difficulty or hostility in doing so.

Nominations of people at an early stage in their careers are particularly welcomed.

The prize is open to nominations for any kind of public activity, including all forms of writing, speaking and public engagement, in any of the following areas:
  • Addressing misleading information about scientific or medical issues in any forum.
  • Bringing sound evidence to bear in a public or policy debate.
  • Helping people to make sense of a complex scientific issue.
The prize: £2000. An announcement of the winner will be published in Nature.

Sir John Maddox, whose name this prize commemorates, was a passionate and tireless champion and defender of science, engaging with difficult debates and inspiring others to do the same. As a writer and editor, he changed attitudes and perceptions, and strove for better understanding and appreciation of science throughout his long working life.
Know anyone deserving? Nominations due 20 August here. I already have a few people in mind to nominate, but I'd welcome your suggestions -- Feel free to discuss and debate candidates in the comments.

22 June 2012

Just Don't Call it Poverty

Writing in the FT earlier this week, economist John Kay discussed absolute and relative definitions of poverty.  On the absolute:
People who struggle to find enough food to eat are poor. The World Bank’s poverty line is an income of less than $1.25 a day. Financial Times readers, who spend more than that amount on their morning newspaper, are in no position to dispute that judgment. In the past two decades, economic growth in China and India has reduced global poverty by an unprecedented amount. That achievement is not diminished because some individuals in both these countries have become very rich. Fundamentally, poverty is about absolute deprivation.
Kay observes that there is also a relative definition of poverty:
That is clearly not the end of the story, however. On the World Bank standard no one in North America or western Europe is poor. And very few people in these continents do not have enough to eat. We might observe that obesity is a disease not of the rich but of the poor. In making such a statement, we endorse the notion that poverty is relative not absolute. That principle is enshrined in the UK definition, which rises with the general standard of living.

The median income is the level that equal numbers of people are above and below, so that a rise in Sir Martin Sorrell’s bonus does not lead anyone into poverty – that would confuse poverty and inequality. But the choice of median income as a reference level has a wider significance. It encapsulates the idea that in a rich society, poverty is an enforced inability to participate in the everyday activities of that society. You might therefore be poor if you lack access to antibiotics or Facebook, even though in this respect you are no worse off than the Sun King or John D. Rockefeller, and in other respects considerably better off than most people in the world.

However, to define poverty as social exclusion takes the definition far away from the assessment of income. It is not hard to imagine places in which few, if any, people experience a sense of exclusion. These might include both sophisticated societies with high incomes per head – towns in Scandinavia – and simple cultures without access to modern essentials – rural villages in the developing world. Poverty becomes a cultural and political phenomenon rather than an economic one.
Under the definition that I have proposed on this blog for wealth, poverty would simply be an absence of wealth, or a deficit of valued outcomes.

But once we define poverty in terms of outcomes beyond simple incomes as measured in currency units, we have indeed entered the territory of culture and politics, and ultimately, what constitutes a life worth living.

Just as GDP doesn't measure all that matters when it comes to wealth, I am deeply skeptical of efforts to define multi-dimensional metrics of "poverty" that integrate different valued outcomes. Statistics are indeed important inputs to policy, and I prefer mine simple and transparent.

So let's leave poverty defined in terms of absolute income, as defined by the World Bank and others. If we care about obesity, lack of access to antibiotics or even Facebook -- all perfectly legitimate valued outcomes -- then let's track these outcomes on their merits and based on transparent variables that measure these outcomes. Just don't label these issues "poverty" as it will conflate arguments about what it means to be wealthy with efforts to attain whatever valued outcomes we as a society decide to pursue.

18 June 2012

R&D is not Innovation

During the 1950s and 1960s, advocates for government investments in science and technology (mainly basic research at universities) pulled off a remarkable coup. They successfully integrated conceptions of "basic research" with a linear model of innovation, making R&D a key variable in expectations for what led to national economic competitiveness.

The most recent science policy statement of the US National Academy of Sciences, ominiously titled, Rising Above the Gathering Storm (RAGS), led off with this warning (here in PDF), which illustrates such expectations:
The prosperity the United States enjoys today is due in no small part to investments the nation has made in research and development at universities, corporations, and national laboratories over the last 50 years. Recently, however, corporate, government, and national scientific and technical leaders have expressed concern that pressures on the science and technology enterprise could seriously erode this past success and jeopardize future US prosperity.
But does R&D spending correlate with economic success? Not necessarily says John Bussey in the WSJ:
Asia is spending so much on R&D that this year it will pull ahead of total spending in the Americas for the first time.

Advantage Asia?

Maybe not. In the world of R&D spending, more doesn't necessarily mean better. And R&D may not describe all the innovation that matters.

"I think the numbers are pretty useless," says Michael Schrage, a research fellow at MIT's Sloan School who has studied the subject. "What matters more is the kind of innovator you are. If it were really true that the people who spent the most on R&D were the most successful, we wouldn't be subsidizing General Motors.""There's no statistically significant relationship between how much a company spends on R&D and how they perform over time," adds Barry Jaruzelski of Booz & Co.
Why do we believe that R&D is the wellspring of economic growth? Because we have been seduced by an incorrect reading of economic theory that has distorted Schumpeterian economics and the so-called Solow residual.

Here is how the NAS RAGS report puts it:
Early in the 20th century, Joseph Schumpeter argued that innovation was the most important feature of the capitalist economy. Starting in the 1950s, Robert Solow and others developed methods of accounting for the sources of growth, leading to the observation that technologic change is responsible for over half the observed growth in labor productivity and national income.
Sure, there are caveats to this discussion presented in the RAGS report ... on p. 458. On p. 1 the report says this without such caveats:
Economic studies conducted even before the information-technology revolution have shown that as much as 85% of measured growth in US income per capita was due to technological change.
As I have noted on this blog, "technological change" is an (unfortunate) bit of economic jargon that refers to a change in the so-called production function. It does not refer to science-based technology. But in discussions of innovation policy such as that found in RAGS, "technological change" means only science-based technology, typically supported by government R&D investments.

Benoit Godin, the insightful scholar of the history of innovation, explains the consequences as follows (here in PDF):
The problem is that the academic lobby has successfully claimed a monopoly on the creation of new knowledge, and that policy-makers have been persuaded to confuse the necessary with the sufficient condition that investment in basic research would by itself necessarily lead to successful applications.
Hence, we get arguments for the importance of doubling government S&T funding in this or that area, predicated on a boost to economic competitiveness and keeping up with the Chinese/Indians/Japanese/Europeans/etc. Outside of academia, a broader set of lessons appears to be well-understood:
Booz & Co. in 2007 listed the biggest global corporate spenders of R&D. The top 10 were Toyota, Pfizer, Ford, Johnson & Johnson, DaimlerChrysler, General Motors, Microsoft, GlaxoSmithKline, Siemens and IBM.

Then it drew up a second list, a group of companies it called "high-leverage innovators" that returned the best financial performance for every dollar spent on R&D. Booz screened for companies that, over the five previous years, outperformed industry peers across seven measures—including profit, sales growth, and shareholder return—while also spending less on R&D as a percentage of sales than the median in their industries.

No company from the first list made the second list. (Winners included Adidas, Apple, Exxon, Google, Kobe Steel, Samsung and Tenneco.)

That disconnect essentially hasn't changed, says Mr. Jaruzelski. Winning at innovation "is all about talent, process, execution and strategy," he says. "That's given the U.S. a pretty strong advantage over time."

"Technology," he adds, "is not equal to innovation."
A 2011 Booz and Co. report concluded:
There is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues.

Spending more on R&D won’t drive results. The most crucial factors are strategic alignment and a culture that supports innovation.
Obstacles to effective discussions of policies that foster innovation stem from the fact that much of government innovation policy is designed by academics and the S&T lobby. Within that community there is confusion about the role of "technological change" in the economy (and even what that phrase means), and more than a little conflation of self interests with what it means to grow societal wealth.

Welcome to Fantasy Island!

I have in the past given the title of "Fantasy Island" to the UK for pursuing an impossible approach to carbon dioxide emissions reductions. Over the next week a much bigger island will take that title (yes, yes, it is a continent, but this is a fantasy!). On July 1, Australia's carbon tax comes into effect, which has already prompted a new round of cheering and critiquing.

Representative of the cheering, Nature Climate Change has just published an essay that celebrates the tax as a model for other countries, without noting that it has been used intentionally as a political wedge issue making it deeply unpopular, and more importantly, that it will do almost nothing to help Australia to meet its short-term emissions reductions targets. This sort of willful blindness is endemic in climate policy discussions among those calling for action. Perhaps the thinking is that maybe if we pretend, then the fantasy will become real.

To understand why Australia's approach to emissions reductions will not just fail, but perhaps even mask BAU as progress, one simply need do a bit of math. Have a look at this analysis (here in PDF) of the targets and timetables of Australia's proposed short-term emissions reductions targets.

Here is the bottom line from the quantitative analysis:
Australia would need to undertake a herculean effort comparable to the level of effort required to build and put into service dozens or more nuclear power plants by 2020 or thousands of solar thermal plants. Were this ‘‘level of effort’’ to be expressed in terms of windmills or other existing technologies the magnitude would be equally as daunting. When coupled with very aggressive efficiency and renewable objectives the level of effort is still enormous. Australia, of course, has no nuclear power plants, and the technology is hotly debated, so even building one plant would be an enormous achievement.

The point being made here of course is not about nuclear power or even solar thermal plants, but about the enormous level of effort needed to meet the proposed short-term targets for Australian emissions reduction. The magnitude of the effort required helps to explain why policy makers look to offsets and other accounting schemes to achieve targets. Regardless of the nature of the legislation ultimately adopted in Australia, the actual decarbonization of the Australian economy will all but certainly fall short of the rates needed to hit the emissions reduction targets.
Of course, when pointing out such things the most common response is likely to be -- "Look boss, de plane, de plane!" I explain in the paper:
Australia has a very carbon intensive economy, thus its ability to dramatically accelerate the decarbonization of its economy offers the promise of many valuable lessons for other countries around the world. However, a focus on targets and timetables for emissions reduction that will be impossible to meet in practical policy implementation runs the risk of engendering public cynicism and even opposition. Currently the nature of international climate politics is such that aggressive promises are met with applause, regardless of their feasibility.
In the coming 10 days, we should expect much discussion of  Australia's carbon tax, but very little of it touching the ground. Welcome to Fantasy Island!

14 June 2012

Where Does Wealth Come From?

This post is a part of an ongoing discussion of innovation policies at the conceptual level, which will eventually lead into a much more empirically focused set of discussions. For me, these posts are about ensuring that I am clear on the concepts that I am discussing, which draw upon a wide literature in (so far) economics, sociology, policy sciences and S&T policy.

Last week I presented a definition of wealth as the accumulation of valued outcomes. Here I ask, where does wealth come from?

This question is necessary to ask and answer if we wish to make collective decisions that lead to greater wealth. Any one who offers a judgment on questions of policy -- that is, decisions focused on attaining valued outcomes -- operates with some conception of the mechanisms through which we attain wealth, whether explicitly or implicitly held. This post is my attempt to lay out a coherent and simple explanation of how I would answer this question.

In a particular context or setting, wealth comes from four sources:
Effort -- This is closely related to the conventional economics concept of labor (and perhaps some economists define labor exactly in this manner), but by effort I mean work not workers. Effort is action.

Resources -- Tangible and intangible assets, which include (importantly) energy, and other environmental and human attributes. This is closely related to some conceptions of "capital" as used by economists (and, again, perhaps some economists use exactly this definition).

Luck -- There are some consequences that are simply the result of factors beyond our intentional actions. These would include, for the individual, a genetic predisposition to good health or a Monet found at a garage sale, and for a nation, bountiful energy resources. Luck can be good or bad with respect to valued outcomes.

Innovation -- Here I mean the Solow residual (in economics terms). In plain language, it is what Peter Drucker defined as "change that creates in a new dimension of performance" or what Joseph Schumpeter defined as "any “doing things differently” in the realm of economic life."
I emphasize the importance of context or setting, which is characterized by some existing combination of effort, resources, luck and innovations (i.e., wealth). From a policy perspective, we do not get to choose the initial context from which decisions are made, that setting is the consequence of history and contingency. What matters is what we do given a particular context.

From the perspective outline here, should we wish to attain greater wealth the most important lever is innovation, which of course can influence effort and resources (i.e., thereby changing aspects of the current context). Luck is largely (but not entirely) not subject to such influence.

The purpose of outlining such a conceptual model of where wealth comes from, in the words of Karl Marx, " is not merely to understand the world, but to change it." Comments, criticisms welcomed and encouraged.

12 June 2012

The Voice of the People: An Echo

I have a guest post up at the Lowy Interpreter on the results of the latest Lowy Poll of public opinion in Australia. I was asked to discuss the poll results related to climate change.  Here is an excerpt:
The 2012 Lowy Poll shows that only 36% of those surveyed agreed with the statement that 'Global warming is a serious and pressing problem. We should begin taking steps now even if this involves significant costs.' Back in 2006, one year before Kevin Rudd elevated the climate issue to national and international prominence, 68% of those surveyed agreed with that same statement, almost twice as many.

But have Australians really gone cold on climate change? The 2012 Lowy Poll shows that 55% surveyed say that their concern about climate change is unchanged since debate on the issue began in Australia, while 38% report being more concerned. Only 7% express a decrease in concern.

How can we reconcile these apparently contradictory positions?
For the answer, please head over to the Lowy Interpreter for the whole post, and please feel free to come back here and comment or ask questions.

11 June 2012

Lowballing Carbon Dioxide Emissions Projections

The IEA has released a new analysis that helps to demonstrate the systemic failure of policy analyses focused on carbon dioxide emissions reductions.

In the new report the IEA projects that by 2030 the world will be emitting about 45 Gt (gigatonnes) of carbon dioxide. Yet, in 2008, just 4 years ago the IEA was projecting 40 Gt CO2 for 2030 (see it at p. 11 at this PDF).

Where did the extra projected 5 Gt CO2 for 2030 (just about equal to an extra United States) come from over the past 4 years?

It came from a systemic underestimate for future emissions that is built in to almost all such exercises. The IEA assumed in 2008 that future emissions would grow from 2005 to 2030 at 1.5% per year. Actually, from 2005-2010 emissions increased by 2.4% per year (data from PBL in this PDF). The 1990 to 2010 average was a 1.9% increase per year, and 2009 to 2010 was a whopping 5.8% increase.

Thus, in 2008 the IEA used a low-balled 1.5% annual rate of increase in projected emissions to 2030. In the years since, actual emissions have increased by much higher than this rate, which means that the new 2012 projection for 2030 needs to start at a higher starting point than was projected just several years ago. Hence, in the new 2012 report the IEA has quietly increased the 2030 level of emissions o 45 Gt from 40 Gt. I actually anticipated this revision almost exactly when the 2008 IEA report came out.

So, based on this experience, what rate is the IEA now using to project emissions from 2015 to 2030 under a business as usual scenario?

1.3% (45 Gt CO2 in 2030, 37 in 2015)

So much for learning from experience.

Such estimates matter because all of the estimates of cost of emissions reductions and level of policy effort required that derive from the IEA projections are contingent upon an assumption of a rate of emissions growth that is much lower than observed in recent years and decades.

This repeated failure to accurately describe the actual magnitude of the emissions reduction challenge occurs so widely that it is the systemic failure of policy analysis of CO2 emissions reductions. We repeatedly trick ourselves into thinking that the task is easier than reality shows.

Unless things change in how such analyses are done, we should expect that future IEA projections will be revised upwards and the charade to continue. A more technical explanation of this dynamic can be found here in PDF and an alternative approach to policy analysis of emission reductions can be found in TCF.

07 June 2012

What is Wealth?

Wealth, simply put, is the accumulation of valued outcomes.

Robert Heilbroner explains that:
Wealth is a fundamental concept in economics – indeed, perhaps the conceptual starting point for the discipline. Despite its centrality, however, the concept of wealth has never been a matter of general consensus.
As it turns out wealth is also central to the study of politics – defined as bargaining, negotiation and compromise in pursuit of valued outcomes (a definition from The Honest Broker). In the study of wealth boundaries between the disciplines of economics and politics merge into shades of grey.

This post seeks to make three points related to wealth. First, wealth is more than money. Second, wealth can refer to outcomes in terms of both ends and means, and ultimately is a subjective concept. And third, it is important to distinguish the redistribution of wealth from the aggregate accumulation of wealth, though both are important, valued outcomes to policy making.

If wealth refers to “valued outcomes,” then what are “valued outcomes”?

The first thing most of us think of as wealth is money. Money is important because it can readily be exchanged for other things. We often use measures of income or economic activity as a descriptor of wealth, and such measures often work quite well, but they don’t tell us everything about what we value. Efforts to measure “happiness” as wealth have become a sort of cottage industry, but have not gained much traction in displacing monetary-based measures of wealth.

In his 1958 classic, Politics: Who Gets What, When, How, political scientist Harold Lasswell suggested eight different categories of valued outcomes: power, income, respect, well being, rectitude, skill, enlightenment and affection. (Lasswell actually used “wealth” but defined it as “income” – I use the latter here to avoid confusion.) While Lasswell’s work has been much discussed for over half a century, including whether the eight value categories are comprehensive or not, the essential point here is that the outcomes that we value in society have many dimensions that go beyond money or that which can be expressed in money. (There are of course philosophers, political scientists and economists who would argue that everything has its price. I am not one of them.)

The presence of different (and often inconsistent) conceptions of what constitutes a valued outcome is of course where politics come in. Because people value different means and ends, we reconcile those different values through various forms of democratic political systems. Take energy as an example. Everyone agrees that the lights should stay on, but people disagree about what means should be used to provide energy – Fossil fuels? Nuclear? Renewables? – and how much they would prefer to pay for energy services. Such differences in perspective cross many of Lasswell’s value categories (maybe all of them). We reconcile those differences via politics, which is how we get done the business of society.

Money helps to illustrate another important aspect of wealth – a distinction between ends and means. Money is a means of achieving valued outcomes, because it is readily exchangeable. The lights come on in my house because I send the power company money every month. Even in that case, the electricity that comes out of my wall is but a means to some other end – in the case of producing this blog post using electricity, enlightenment. Of course, for some – Gordon Gekko comes to mind -- the accumulation of money is an end in itself. One person’s means might be another person’s ends.

Heilbroner explains that economists have debated whether wealth is an objective or subjective metric. Examples of objective measures of wealth cited by economists over many centuries include money (of course), gold (and other forms of capital) and human labor. The idea of an objective metric of wealth is one of the underlying bases for benefit-cost analysis, which is a prominent tool in the policy analyst’s toolbox.

While it would certainly make the tasks of policy analysis (and indeed politics) much easier if there were an objective metric of wealth, the position that I take, simply based on observation, is that wealth is a subjective concept. The fact is that people value different outcomes differently. That said, in an extremely wide range of situations, money does an admirable job serving s a proxy for wealth. A challenge for the analyst is to always remember that money does not measure everything that matters to people.

A final point to make in this post is that wealth can change in both relative and absolute ways. For instance, if you give me all the money in your bank account, I will have become more wealthy, and you less so, but the absolute wealth of society will not have changed. The distribution of wealth is also a valued outcome (and might also be considered in terms of power and rectitude) that different people view differently, and thus from a political perspective should be a part of any discussion of the absolute wealth of society. So while my interests and focus will be on the accumulation of wealth (as valued outcomes) across society, to address this subject properly necessarily requires considering issues of distribution in addition to aggregate accumulation.

With a working definition of "wealth" in hand, in a number of subsequent posts I will take up one of the central questions of both economics and the study of politics, drawing on insights from each field, to explore the following question: How do we as a global society become more wealthy?

04 June 2012

Should Scientific Communications be Privileged?

Writing in the Boston Globe, two scientists at the Woods Hole Oceanographic Institute have expressed concern that they have been required by a court to release email correspondence related to studies of oil flow rates in the aftermath of the Deepwater Horizon oil platform disaster. 

They write:
Because there are insufficient laws and legal precedent to shield independent scientific researchers, BP was able to use the federal courts to gain access to our private information. Although the presiding judge magistrate recognized the need to protect confidential e-mails to avoid deterring future research, she granted BP’s request. . .

BP claimed that it needed to better understand our findings because billions of dollars in fines are potentially at stake. So we produced more than 50,000 pages of documents, raw data, reports, and algorithms used in our research — everything BP would need to analyze and confirm our findings. But BP still demanded access to our private communications. Our concern is not simply invasion of privacy, but the erosion of the scientific deliberative process.
In the lawsuit, the government is suing BP for damages associated with the oil spill and clean-up. The work done by WHOI, under government contracts (e.g., here and here) is presumably a key exhibit in the lawsuit, as the amount of oil spilled and its ultimate fate will be important to determining damages.

Given the many billions of dollars at stake, it should not seem surprising that BP has requested background information on the production of the oil flow estimates by the scientists, including their emails.

for their part, the scientists are worried that the emails may be used against them to impeach their work:
In reviewing our private documents, BP will probably find e-mail correspondence showing that during the course of our analysis, we hit dead-ends; that we remained skeptical and pushed one another to analyze data from various perspectives; that we discovered weaknesses in our methods (if only to find ways to make them stronger); or that we modified our course, especially when we received new information that provided additional insight and caused us to re-examine hypotheses and methods.

In these candid discussions among researchers, constructive criticism and devil’s advocacy are welcomed. Such interchange does not cast doubt on the strengths of our conclusions; rather, it constitutes the typically unvarnished, yet rigorous, deliberative process by which scientists test and refine their conclusions to reduce uncertainty and increase accuracy. To ensure the research’s quality, scientific peers conduct an independent and comprehensive review of the work before it is published.
If their science is sound and has been accurately reported in the peer reviewed literature, then these concerns are misplaced. The messiness of science is a reality and need not undermine solid scientific work. If the peer reviewed work is defensible -- and I presume that it is -- then this case may have to be made, but that would not distinguish this lawsuit from a bazillion others where experts are called to provide evidence.

A second concern raised by these scientists is that their "intellectual property" is at risk. This is a strange concern, as there are multiple avenues for protection of intellectual property that these scientists could take advantage of, protecting themselves from it being stolen by BP. If I were WHOI I'd be more concerned about high value and unprotected IP being shared around via email, regardless of the BP disclosure.

The WHOI scientists conclude:
Our experience highlights that virtually all of scientists’ deliberative communications, including e-mails and attached documents, can be subject to legal proceedings without limitation.
This is correct -- When scientists operate with public support and the resulting work is used in the making of important decisions, whether in a lawsuit or in policy, we should expect that deliberations will be subject to public disclosure. Asking for a special privilege in scientific communication is highly unlikely ever to be a successful strategy under US law. Besides, good science, even when messy, does not need to be hidden from view.