How many catastrophes can we avert?

by on June 18, 2014 at 7:06 am in Economics, Medicine, Philosophy, Political Science | Permalink

There is a new Martin and Pindyck paper on this topic, “Averting Catastrophes: The Strange Economics of Scylla and Charybdis”:

How should we evaluate public policies or projects to avert or reduce the likelihood of a catastrophic event? Examples might include a greenhouse gas abatement policy to avert a climate change catastrophe, investments in vaccine technologies that would help respond to a “mega-virus,” or the construction of levees to avert major flooding. A policy to avert a particular catastrophe considered in isolation might be evaluated in a cost-bene fit framework. But because society faces multiple potential catastrophes, simple cost-bene fit analysis breaks down: Even if the benefi t of averting each one exceeds the cost, we should not avert all of them. We explore the policy interdependence of catastrophic events, and show that considering these events in isolation can lead to policies that are far from optimal. We develop a rule for determining which events should be averted and which should not.

The ungated version is here, I do not at the moment see the link to the gated NBER version I printed out and read.  The main point is simply that the shadow price of all these small anti-catastrophe investments goes up, the more of them we do, and thus we cannot do them all, even if every single investment appears to make sense on its own terms.

I think of this paper as providing a framework for assessing the debates between modern Progressives and pessimistic old school conservatives (not exactly the main debate we are seeing today by the way).  The Progressive states “here is a potential or real catastrophe, let us fix it.”  The pessimistic conservative says in response “there are far greater and less visible catastrophic dangers.  We need to address those instead.”  The pessimistic conservative usually is ignored, and so at the relevant margin it appears the Progressive is correct.  Maybe in a sense the Progressive really is correct.  But in another, more systemic sense the Progressive is walking a dangerous path.  Society is losing the resources it may need to avert the more catastrophic catastrophes.

For the pessimistic conservative of course these often involve foreign policy threats, or they may involve “barbarism” more generally.  I find also that pandemics are popular causes of concern with pessimistic conservatives.

Each time one of these Progressive remedies is adopted, the calculus looks even worse for the pessimistic conservative, as there are fewer resources left to address his causes for concern.  Yet the danger of which the pessimistic conservative warns is greater each time, the longer we ignore it, and the more we devote our resources to other endeavors.

It is an interesting question whether optimistic libertarians or pessimistic conservatives have better (as opposed to more persuasive) arguments against Progressives.  The optimistic libertarian can try “we have a better way of solving this problem!”  The pessimistic conservative is still believing “we must neglect this issue so we can prepare for the even greater doom which may await us.”  The Progressive prefers to argue from general grounds of benevolence, rather than debating which potential catastrophes to confront and neglect, and thus a quest for “free lunch” arguments ensues.

Some sophisticated Progressives may think they are in fact the best friends of the pessimistic conservatives.  They may think the choice under consideration is not “which catastrophe to address?” but rather how we can build up our overall willingness to invest in preventing catastrophes.  In this sense the Progressive may be presenting a valuable warm-up exercise, a bit like flexing the muscles for later combat.  Imagine for instance if ACA were to also later help us monitor and confront a pandemic.  Or if it gave us the political will to make other, later sacrifices.  In that case Progressivism could well be right but only as the handmaiden of pessimistic conservatism and the Progressives would become the true Straussians, achieving one view under the guise of another.

trypaglitch June 18, 2014 at 7:15 am

I’m beginning to suspect that the word “Straussian” is a cryptic allusion to Tyler Cowen’s master plan for world domination.

JWatts June 18, 2014 at 9:37 am

Tyler, can we get a post on your master plan for world domination? After all, How can you know if it’s any good without a third party assessment?

prior_approval June 18, 2014 at 7:39 am

Well, some people’s ‘catastrophes’ are another person’s example of really unintelligent planning –

‘The city hired a Dutch consulting firm to develop an action plan, finalized in 2012, that called for new flood gates, higher roads and a retooled storm water system. Implementing the plan would cost more than $1 billion — the size of the city’s entire annual budget — and protect Norfolk from about a foot of additional water.

As the city was contemplating that enormous price tag, the Virginia Institute of Marine Science (VIMS) last year delivered more bad news: If current trends hold, VIMS scientists said, by the end of this century, the sea in Norfolk would rise by 5 1/2 feet or more.

“Clearly, we’ve got more work to do,” said Ron Williams Jr., Norfolk’s assistant city manager for planning.

Options for dealing with the water are limited, and expensive. The city could protect itself with more barriers. Williams lamented, for instance, that a new $318 million light-rail system — paid for primarily with federal funds — was built at sea level. With a little foresight, he said, the tracks could have been elevated to create a bulwark against the tides.

As it stands, the new rail system could itself be swept away, the money wasted. “Nowhere do we have resiliency built in,” he said.’ http://www.washingtonpost.com/business/economy/in-norfolk-evidence-of-climate-change-is-in-the-streets-at-high-tide/2014/05/31/fe3ae860-e71f-11e3-8f90-73e071f3d637_story.html

Chip June 18, 2014 at 8:09 am

“If current trends hold, VIMS scientists said, by the end of this century, the sea in Norfolk would rise by 5 1/2 feet or more.”

Sea level continues to rise 1mm a year as it has since the little ice age and despite IPCC predictions for an acceleration.

The rise is so slow that it’s basically a guess among the signal noise of satellite altitude adjustments, isostasy and subsidence.

The human signal in temperature change is completely unknown. The evidence for catastrophic change is nil.

TallDave June 18, 2014 at 9:30 am

Yeah, people are grasping at every “might” and “could” out there, no matter how flimsy. See above for a great example, the WAIS is a thousand-year problem. You can find similar predictions of doom dating back to the 1930s.

This is still LIA recovery, there are ports from Roman times that are miles away from the sea today. If you look at Boston or New York since the 1700s, they have actually gained coastline as people have built out.

fwiw June 18, 2014 at 9:40 am

Chip must think his kids are going to be 20 feet tall when they’re 15, because they grew a foot and a half last year.

Or he must think that linear extrapolation from the recent past is a great way to make decisions.

Quick! Buy Google; it was up 2% yesterday. By the end of the year, you’ll have a billion dollars!!!!!!!

Z June 18, 2014 at 12:45 pm

Chip is making the exact opposite point you pretend he is making. In fact, your fevered rant is better directed at your own side.

fwiw June 18, 2014 at 2:26 pm

You’re saying that Chip doesn’t use linear extrapolation? Can you explain those two quotes in this context?

“Sea level continues to rise 1mm a year as it has since the little ice age”
“The evidence for catastrophic change is nil.”

The point is that linear extrapolation is a terrible way to make predictions, especially when talking about catastrophes. That’s what makes them catastrophes.

PS I don’t have a ‘side’. It would take someone with real hubris to approach a scientific question having a ‘side’ he’s on.

chip June 18, 2014 at 1:08 pm

Sea level is always changing. Many old Roman ports around the Mediterranean are now miles from the coast.

Sea level has been rising slowly since the LIA. The IPCC predicted a quick acceleration.

It hasn’t happened. They are puzzled about this and many other predictions, on surface temps, global ice, tropospheric temps etc.

Theory – prediction – validation. That’s how it works.

CAGW is a theory, and the predictions are wrong.

A sensible person has another look, casts a critical eye. Others react emotionally because this was always an emotional investment.

TallDave June 18, 2014 at 9:48 am

Chip’s subsidence point is a great one too. If they had a real issue, they wouldn’t have to resort to PR stunts with fake issues.

Durkheim Weber June 18, 2014 at 2:34 pm

Wow, it certainly is impressive that MR has commentators like Chip who are so intelligent and sophisticated that they know more about global warming than 97% of the actual scientists who study it:
http://www.skepticalscience.com/global-warming-scientific-consensus.htm

Of course, someone will take issue with the website above but the fact is this consensus exists. You may not like it, you can try to argue against the methodology of the vast majority of scientists, but to deny there is an overwhelming consensus is either delusional or dishonest.

If your position requires a conspiracy to stand up (i.e. scientists are purposefully skewing results to show that there is human-driven global warming in order to capture government money – the same old public choice theory tripe), then that should be seen as a big red flag.

JWatts June 18, 2014 at 5:04 pm

“sophisticated that they know more about global warming than 97% of the actual scientists who study it ”

That figure has been debunked. It was arrived at by taking a cross section of papers not actual scientists. Then it ignored two thirds of the papers not explicitly stating an opinion.
At best you could say that (97% of 1/3rd) of roughly 12,000 papers indicated some kind of endorsement of AGW. However, 2/3rds of the papers fell into the following category:
“Does not mention the cause of global warming Or Expresses a position that human’s role on recent global warming is uncertain/undefined.”

http://iopscience.iop.org/1748-9326/8/2/024024/article

Exact numbers:
Endorse AGW 32.6% (3896)
No AGW position 66.4% (7930)
Reject AGW 0.7% (78)
Uncertain on AGW 0.3% (40)

TMC June 18, 2014 at 5:34 pm

“If your position requires a conspiracy to stand up…..then that should be seen as a big red flag.”

AWG funding is 1000x the scientific default position of being skeptical.
People respond to incentives.

Tom Donahue June 19, 2014 at 3:36 am

“Sea level continues to rise 1mm a year as it has since the little ice age and despite IPCC predictions for an acceleration.”

So, you are claiming that sea level rise (SLR) has been constant since the end of the little ice age. I’m curious about two things here. One, where did you get 1 mm/year? Measurements seem to indicate that prior to the 20th century SLR was much lower, from 0.2 to 0.5 mm/yr. Then it increased, and is now from 1.7 to 3.4 mm/yr. So where did this 1 mm/yr come from? Is this based on real-world measurements, or is it just an armchair calculation where you lump the two periods together and take the average?

Two, I’m curious about the theory. Given that temperatures rose sharply in the 20th century, and that the major drivers of SLR (thermal expansion and meltwater) are both linked to temperature, we would expect the rate of SLR to have increased in the 20th century. By the laws of physics. But you are arguing that the rate was constant. How do you explain that?

T. Shaw June 18, 2014 at 10:03 am

So-called progressives would sacrifice at the altar of [fill in the blank] the standards of living of billions of poor, non-white people in order to prevent [fill in the blank].

Richard Fazzone June 18, 2014 at 7:52 am

Left out of this analysis is the political “cost” of “averting catastrophes.” In a democracy, all government action requires political consensus which is not unlimited. And why just “evaluate public policies or projects to avert or reduce the likelihood of a catastrophic event?” In the real world, Government: The Strange Economics and Politics of Scylla and Charybdis.

albatross June 18, 2014 at 1:52 pm

Governments have to be seen to try to address potential catastrophes in a prudent way to keep legitimacy. However, this may involve a lot more being seen to do something than actually doing something. Think of all the crap we allegedly to do prevent future terrorist attacks, most of which are pretty obvious wastes of money and time. But to stop doing them would be to no longer be seen to be doing something about the threat of terrorism.

NPW June 18, 2014 at 8:01 am

If the government spent money on averting catastrophes they’d have to but even more effort in manufacturing disasters. How else could they justify more governmental control?

mulp June 18, 2014 at 2:17 pm

The Bush administration invented calling everything “terrorism” to justify “endless global war on scary people.

The difference between the the “commie” threat that was created circa the 20s is that by the 30s. saying “commie” justified more government and that justified more taxes everywhere in the world. Hitler justified higher taxes based on a threat a day, but commies were a big one, and in France and UK the taxes were used to reduce the internal demand for being commies.

Reagan raised the threat of taxes as well as commies and was wiling to run up massive debt to fight both. But lacking commies with the USSR now the land of ultimate crony capitalism, a new boogeyman was required to justify running massive deficits while cutting taxes and spending massive money with crony capitalists on war: terrorism and taxes.

Duracomm June 19, 2014 at 7:32 am

Mulp,

You provide an excellent example showing why the progressive school of response to potential catastrophes (create a new bureaucracy, promulgate endless new regulations, and hire lots of unionized government workers) is counterproductive and generally produces worse outcomes than doing nothing.


Does TSA = Troyer Squeezing Administration?

The inspection of passengers provided by the Transportation Security Administration (TSA) has been a colossal waste of resources and time.

As Bruce Schneier wrote in a 2012 debate in the pages of The Economist:

Exactly two things have made air travel safer since 9/11: reinforcing the cockpit door, and convincing passengers that they need to fight back. Everything else has been a waste of money. Add screening of checked bags and airport workers and we are done.

All the rest is security theatre. If we truly want to be safer, we should return airport security to pre-9/11 levels and spend the savings on intelligence, investigation and emergency response.

Z June 18, 2014 at 8:20 am

I’m struggling to find a reason for a “framework for assessing the debates between modern Progressives and pessimistic old school conservatives.” If the point is to re-evaluate public debate 100 years ago, then maybe there’s a need for it. That’s not a topic of interest to me so I can offer no opinion on the current tools for that endeavor.

Today, there are no pessimistic conservatives in the public debate. The few still alive are out amongst the exiles. The prevailing consensus amongst the ruling class is a soft corporatism. Albert Speer would recognize modern America instantly. He dreamed of it his whole life.

Brian Donohue June 18, 2014 at 8:23 am

I see more symmetry here. To me, the two big potential looming catastrophes are:

1. AGW destroying the environment
2. Crippling debt destroying the ability of government to do anything

The form of the debate is very similar, but the arguments of the two sides are reversed. Personally, it seems obvious to me that #2, while less apocalyptic, is much more likely and much nearer to hand.

Ray Lopez June 18, 2014 at 9:40 am

@BD– fiscal deficits are only a problem if you accept TC’s “Great Stagnation” thesis. Just before the Industrial Revolution bailed out England, it had a 250% government debt – to – GDP ratio, far above GM Rogoff’s 90% or so redline limit. But England “grew out” of the deficit and in fact enjoyed it’s most prosperous time during the 19th century. At least one billionaire, Pete Peterson, believes #2 is a serious enough problem that he funded a think tank to alert the public about the dangers of debt, the Peter G. Peterson Foundation.

Brian Donohue June 18, 2014 at 12:40 pm

Ray,

I think there is something to Tyler’s view that the “low hanging fruit” for growth has been picked, particularly as regards universal education finding the diamonds in the rough.

The thing about the 250% government debt (and the US 1945 debt for that matter) is that these were largely run up to finance wars. Once the war is over, spending drops dramatically.

The debt we see today is driven by permanent spending, largely on entitlements. Rather than go away, these amounts are poised to take off based on obvious demographic factors.

This year is an election year, so the debt ceiling has been raised to the relief of politicians.

Remember 2013? Fiscal cliff, debt showdown, tax increases (howl!), “trimming” of spending (howl!). I foresee this as government’s permanent MO starting in the early 2020s. Zero fun sir.

mulp June 18, 2014 at 2:44 pm

When were tax cuts an entitlement? Except since 1981….

When was living beyond your means to grow GDP an entitlement? Except since 1981…

“Reagan proved deficits don’t matter” was true for both public and private economies. It wasn’t just public debt that exploded since 1981, but also private debt.

While lots of tax cuts involved supposed incentives to save, the aggregate private economy ran up massive debts.

No longer did seeing your kids off to their working life mean you quickly finished paying off the mortgage and now all the money spent on the mortgage and kids when into retirement savings so you turned 60 in 1980 with no debt and a hundred thousand in utility stocks and bonds paying hefty dividends – utilities representing the bulk of all the capital stock other than housing. For those who were more hands on workers, buying a two flat and renting led to buying and renting duplexes and row houses. All with no debt.

But in those days, government prevented banks from lending to so many people they were forced to live within their means and view banks and other financial institutions as a separate world that was not interested in them.

Brian Donohue June 18, 2014 at 5:06 pm

Vintage mulp! I am honored.

Not sure what you’re on about, as usual. You seem to be suggesting that taxes are too low.

In the good ole USA, local, state, and federal governments are hauling in more than $5.7 trillion this year, That’s $18,000 in revenue for every man, woman, child, and other in this country.

Somehow, they’re still $550 billion short. This year. Never mind the $17.5 trillion already on the nation’s credit card.

And you’re stuck on Reagan’s tax cuts?

http://www.usdebtclock.org/

JWatts June 18, 2014 at 9:40 am

I like the fact that you focus on specifics. Tyler’s post is so vague that it’s hard to even evaluate it. Some examples, such as yours, would have brought the argument into focus.

JWatts June 18, 2014 at 10:00 am

RL – “Just before the Industrial Revolution bailed out England, it had a 250% government debt … But England “grew out” of the deficit and in fact enjoyed it’s most prosperous time during the 19th century.”

RL, that’s a technically correct argument, but it has some serious issues.

“Yet debt service alone ranged between 20 and 60 percent until the end of the 19th century … Nominal public debt was barely reduced over the next century.”

http://edocs.fu-berlin.de/docs/servlets/MCRFileNodeServlet/FUDOCS_derivate_000000002511/discpaper4_2013.pdf

I don’t most people realize what the effects to the US standard of living would be with debt that high. And I’m certain that the public would demand a default on the public debt well before it reached a level of 60%.

There’s also the point that we can’t count on an Industrial Revolution to increase our standard of living to such a large degree that even a very large prior debt is relatively small.

Ray Lopez June 18, 2014 at 11:25 am

@JWatts – though I’m sympathetic to your arguments, the paper you cite was a historical review of German proto-Keynesians who argued government debt is actually often good (e.g., does away with having to maintain a savings fund for emergencies): (paper) “The position of British economists of the classical school that government debt was an impediment to economic progress is relatively familiar. Maybe due to their harsh judgment they treated the issue only in passing. In contrast, considerably less well known today are the contributions of these three German economists [Carl Dietzel,
Lorenz von Stein and A. Wagner] who published entire books devoted to the issue of public debt with a subtly differentiated analysis and who were led to significantly more favorable assessments of the use of debt finance by governments.”. BTW R. Malthus was also a proto-Keynesian, and J. S. Mills somewhat of one.

albatross June 18, 2014 at 1:55 pm

Crippling US government debt can also be addressed by the US congress, without needing to coordinate with other countries. In that sense, it’s probably much easier to address, since a future in which we control our CO2 emissions but much of the rest of the world goes its own way isn’t much different in climate terms from one where we don’t control our emissions, either.

Duracomm June 18, 2014 at 8:30 am

Another aspect of the issue is the fact that the policies progressive enact to avoid catastrophes often make the problem they were trying to solve worse.

dead serious June 18, 2014 at 9:26 am

“Often?” I think you mean “always” AMIRITE?!!!

You’re not trolling hard enough. Here:

‘The pessimistic conservative says in response “there are far greater and less visible catastrophic dangers. We need to address those instead.”’

If by “there are far greater and less visible catastrophic dangers” you mean “get your hand out of my pocket you pinko commie bastard!!! Taxes should be 0…**gag** **wheeze**!!!!!”

GiT June 18, 2014 at 12:22 pm

Don’t forget the real catastrophe of declining public morality and decadent alienation from god. Much worse than taxes.

The Engineer June 18, 2014 at 12:24 pm

We can’t even agree on what the facts of a situation are (i.e. global warming), much less if it is really a problem or what a solution might be.

“Do Nothing” is an acceptable answer under the circumstances.

Thomas June 18, 2014 at 12:39 pm

Isn’t this the point? “Do nothing” versus “do something, do anything, do something” as opposing views of government response.

dead serious June 18, 2014 at 4:57 pm

No. The point of Republicans is “Do nothing” even when faced with overwhelming evidence.

TMC June 18, 2014 at 5:49 pm

You mean AGW, AMIRITE?!!!

You are easily overwhelmed.

dead serious June 18, 2014 at 9:45 pm

Go back to sleep. Grown ups are talking.

Careless June 19, 2014 at 9:25 am

DS does not take kindly to having his shtick used on him.

dead serious June 18, 2014 at 5:01 pm

“We,” meaning scientists and Americans with IQs above, say 105, do agree on the facts of the situation re: global warming.

If your contention is that “we” should refer to every single living American citizen, well, you won’t ever get 100% agreement on anything. So again, this latter “we” being almost a requirement for a Republican to bless the government to take action, the “Do nothing” stance is as close to a religion as one can get.

JWatts June 18, 2014 at 5:07 pm

““We,” meaning scientists and Americans with IQs above, say 105, do agree on the facts of the situation re: global warming.”

Absolutely. “We” also agree that most logical and cost effective approach is a large build out of nuclear power plants to replace existing coal plants supplemented with wind, solar and natural gas.

When should we start pouring the concrete?

Brian Donohue June 18, 2014 at 5:23 pm

There is no consensus beyond “the Earth is getting warmer and humans are at least partly the cause.”

There is no consensus about how much warmer or how fast. There is no consensus about what a 1, 2, or 3 degree increase in temperature means.

And even if there consensus on these matters, there is nothing close to a consensus on what should be done about it.

http://online.wsj.com/news/articles/SB10001424052702303725404579460973643962840

dead serious June 18, 2014 at 5:42 pm

I’m pro-nuclear, so start pouring.

dead serious June 18, 2014 at 5:53 pm

I think there is as close to a consensus as one can get in this fucked-up country and political landscape that burning coal and other fossil fuels is probably not the best idea in the world. And given that there are other options for energy sources, it makes for a less-than-compelling case that we continue down this path.

Is that fair enough?

It’s amazing that we have this giant energy source staring us in the face a good 14 hours a day and, for the god-revering people most of us are, we can’t accept the sun as a giant gift from the almighty creator that keeps on giving and take advantage of it.

I realize that solar isn’t a practical energy source for some applications (e.g. propelling vehicles), but every house on the planet should have solar panels. Even if to partially offset required supplemental consumption of energy derived from the burning of fossil fuels.

For example.

The government should be incentivizing (not a word but should be) citizens to invest in solar use for domiciles, and should penalize use of fossil fuel-dependent activities. Even if we can’t predict *exactly* what the upshot of not doing this would be, we do all recognize that there are many benefits to tapping into alternative energy sources. Yes?

Brian Donohue June 18, 2014 at 6:01 pm

@dead,

I have some sympathy for what you are saying. Long-term, solar is the answer. And it keeps getting more efficient. The problem is, so do conventional sources of energy.

Check out this remarkable graph of CO2 emissions in the US since 1990 (it’s from the EPA):

http://www.epa.gov/climatechange/ghgemissions/gases/co2.html

The best thing we can do is be rich enough to deal with the effects. A push to solar now could kneecap the economy.

Miami will handle whatever comes down the pike a helluva lot better than Bangladesh.

Brian Donohue June 18, 2014 at 6:09 pm

@dead,

by the way, massive investment in clean energy R&D, what you seem to be advocating, is exactly the drum Bjorn Lomborg has been banging for years. And environmentalists hate that dude with the burning passion of 1,000 suns.

I also think some kind of carbon tax, at least to the estimated level of externalities, makes sense. Once upon a time, lots of Republicans agreed.

But some of the draconain steps being advocated are madness. Kyoto (voted down in the US Senate 99-0) was a breathtakingly dumb approach. Lots of environmentalists just hate the idea of people driving around in SUVs, whether its ruining the planet or not. Fracking was heavily propagandized against, but it’s at least part of the story behind the recent drop in CO2 emissions, cuz gas is a lot cleaner and more efficient than coal. Some of these environmentalists are nothing more than latter-day busybody Puritans I telll ya.

dead serious June 18, 2014 at 9:57 pm

I agree that environmentalists are oftentimes unrealistic and unmoving – those people should be ignored. All people on the fringes should be ignored – those who deny science and those who deny reality and compromise.

Re: that graph, I suspect that has little to do with efficiency gains but rather reflects a sustained decrease in miles driven. Have a look at this:

http://www.businessinsider.com/vehicle-miles-driven-2013-2

Brian Donohue June 19, 2014 at 12:48 am

dead

That’s a very interesting chart in its own right.

As it pertains to our discussion, it looks like it probably explains SOME of what has happened with CO2 in recent years, but it hardly gainsays my comment.

TallDave June 20, 2014 at 3:07 am

The problem is the people who complain about “denying science” are promoting highly speculative models whose past predictions have been repeatedly falsified.

Duracomm June 18, 2014 at 11:48 pm

dead serious,

Your ignorance of the law of unintended consequences provides a useful teaching moment for us.


Palm oil: the biofuel of the future driving an ecological disaster now

the European Union’s aim of cutting greenhouse gas emissions by 20% by 2020, partly by demanding that 10% of vehicles be fuelled by biofuels, will see a fresh surge in palm oil demand that could doom the rainforests.

That is likely to kill off the “flagship species” of wildlife such as the Asian elephant, the Sumatran tiger and the orang-utan of Borneo which are already under enormous pressure from habitat loss. Plantation owners regard the orang-utan as pests because it eats the young palm oil plants and hunt them down ruthlessly.

Yet palm oil, mixed with diesel to produce biofuel, was hailed as a potential saviour for the environment. Put simply, the argument runs that the palm oil plants produce organic compounds that when burned in engines do not add to overall carbon dioxide levels. The CO2 absorbed by the plant in its life-cycle should balance the amount it gives out when burned.

However, the more the ecological fairytale is scrutinised the more it begins to look like a bad dream.

Researchers from the Dutch pressure group Wetlands International found that as much as half the space created for new palm oil plantations was cleared by draining and burning peat-land, sending huge amounts of carbon dioxide into the atmosphere.

dead serious June 19, 2014 at 8:20 am

Oh, you got me. I’m totally ignorant of unintended consequences what with my very vocal pro-palm oil agenda.

Also, you’ve definitively proven that attempting to cut carbon emissions means necessarily razing the Amazon rain forest.

Duracomm June 19, 2014 at 11:20 am

dead serious,

Your snark was an entertaining but failed attempt to distract from your flagrant display of environmental ignorance.

dead serious June 19, 2014 at 1:24 pm

You set up some stupid strawman argument and I’m the ignorant one?

Try harder.

Duracomm June 19, 2014 at 11:07 pm

dead serious, providing another teachable moment said,

Also, you’ve definitively proven that attempting to cut carbon emissions means necessarily razing the Amazon rain forest.

The biofuel policies were intended to reduce carbon emissions, the unintended consequence of that policy was rainforest destruction and increased carbon emissions.

The iron law of unintended consequences you remain happily ignorant of is that policies designed to do good things often have bad, unintended consequences.

You might want to learn the difference between strawman and example. They are two different things.

dead serious June 20, 2014 at 3:07 pm

So your self-proclaimed *iron law* *sometimes* has results?

That doesn’t sound very iron-like.

Anyway, let’s put aside your silly point and try this little thought experiment on for size:

If every house in the world were to install solar panels, would this mean we’d have to raze the Amazon rainforest? I’m guessing no. So: what other unintended consequences would you come up with THAT ARE WORSE THAN BURNING FOSSIL FUELS TO PRODUCE THAT SAME AMOUNT OF ENERGY?

(Capitalized so you understand that there isn’t only one side of the equation).

Duracomm June 21, 2014 at 8:52 am

dead serious, providing yet another teachable moment, said,

If every house in the world were to install solar panels, would this mean we’d have to raze the Amazon rainforest? I’m guessing no. So: what other unintended consequences would you come up with THAT ARE WORSE THAN BURNING FOSSIL FUELS TO PRODUCE THAT SAME AMOUNT OF ENERGY?

(Capitalized so you understand that there isn’t only one side of the equation).

The lesson here is there are two sides to the equation and reciting the magic words “solar panel” causes dead serious to ignore the other side of the equation.

The other side of the equation is solar panels are built somewhere and that process can have a negative unintended consequence.

with luck dead serious will start considering both sides of the equation which will help him find out which policies help the environment.

If not he will continue to provide teachable moments useful to those of us in the reality based community.

Solar Energy Firms Leave Waste Behind in China

GAOLONG, China — The first time Li Gengxuan saw the dump trucks from the nearby factory pull into his village, he couldn’t believe what happened. Stopping between the cornfields and the primary school playground, the workers dumped buckets of bubbling white liquid onto the ground. Then they turned around and drove right back through the gates of their compound without a word.

the Luoyang Zhonggui High-Technology Co., here in the central plains of Henan Province near the Yellow River, stands out for one reason: It’s a green energy company, producing polysilicon destined for solar energy panels sold around the world. But the byproduct of polysilicon production — silicon tetrachloride — is a highly toxic substance that poses environmental hazards.

“The land where you dump or bury it will be infertile. No grass or trees will grow in the place. . . . It is like dynamite — it is poisonous, it is polluting. Human beings can never touch it,” said Ren Bingyan, a professor at the School of Material Sciences at Hebei Industrial University.

Andrew' June 18, 2014 at 8:31 am

When I’m the pessimistic conservative and I worry about a pandemic, I go to the closet, see that I still have some duct tape, then I get back to work.

I think the very nature of the two-party system is changing our brains.

Brian Donohue June 18, 2014 at 9:12 am

I’m thinking mini-series:

The prior_approval story: one man’s lonely struggle to not be muzzled in his one-note message on a website he voluntarily engages with on a planet where 99.99% of the population will live and die without ever being aware of its existence or the great crimes attendant thereto

or something like that.

JWatts June 18, 2014 at 9:48 am

I’ve added a total of two names to the Marginal Revolution Kill File script that Dan Weber wrote. The average quality of the comments has noticeably risen. Granted, that was very low hanging fruit and I’m reluctant to add a lot of names to the list.

Andrew' June 18, 2014 at 10:55 am

You may not be reading this, but I don’t really see the problem. I bet anyone I can recognize a PA comment by half of a random sentence with something like 90% accuracy. Then I just skip it.

The most annoying part to me is that I feel like I should be able to help someone with so much logical inconsistency and yet I’m helpless. But then again, I know what having family members is like too.

NPW June 18, 2014 at 11:29 am

I am curious as to how someone becomes p.a. What is the sequence of events that leads a person to post multiple times a day on a website that a vanishing small number of people read? (Sorry, Tyler/Alex)

Or put another way, why does p.a. want to influence the readers of this site? What drives him to want me to stop reading the content? or join his protest?

msgkings June 18, 2014 at 1:11 pm

LOL…

I wish I could see the (apparently deleted) p_a post that triggered your response.

msgkings June 18, 2014 at 1:11 pm

Meant for Brian D.

Jan June 18, 2014 at 1:24 pm

There were a number of deleted posts today. The reasons they were deleted is probably obvious if you think about it, though of course I can’t say I know the reason with 100% accuracy.

JWatts June 18, 2014 at 5:11 pm

Let me guess. They had absolutely nothing to do with the actual thread and it started with an obsessive rant about the evils of GMU, the Mercatus institute, the Koch brothers, the US or some combination there of?

Jan June 18, 2014 at 8:06 pm

Directly related to the topic at hand, but peripherally related to one of the topics you mention.

Careless June 19, 2014 at 9:43 am

+1

Martin June 18, 2014 at 9:16 am

Pindyck also has the paper online via his MIT homepage, it should also be ungated, if I am not mistaken. I did not compare the two, but this “MIT” version does not have the “PRELIMINARY AND INCOMPLETE” on top:

http://web.mit.edu/rpindyck/www/Papers/AvoidCatastrophesMay2014.pdf

TallDave June 18, 2014 at 9:23 am

Ahem asteroids.

Incentives matter. If the issue is one that can be used to extract rents, it evolves many champions.

Axa June 18, 2014 at 9:24 am

Hidden on page 6 is the definition of catastrophe: “We define a catastrophe as an event that permanently reduces consumption by a random fraction φ” either by the death of some fraction of the population, destruction of capital or reduction of aggregate consumption.

First curious thing is that insurance is not mentioned at all. Insurance is the way society deals with catastrophes now, not prevention. Let the big event come and rebuild what you had before with the insurance payment help. Thus, the implicit definition of catastrophe they use is “any event which effects could not be hedged by insurance”.

All the small catastrophes like earthquakes and floods can be managed by insurance. I’m not sure if climate change is a catastrophe that could not be hedged by insurance since we have a lot of time to react. Nuclear terrorism, killer virus and asteroid are in another category since dead people can not claim insurance. I just think climate change was forced in the same category of events that could kill lots of people.

Dan Weber June 18, 2014 at 1:53 pm

Insurance is good for spreading risk, but it doesn’t make risk go away. Since my house catching fire and a friend’s house 1000 miles catching on fire are probably not-correlated, we can each pool costs to help the other in case of fire. Repeat up to big pools and it all makes sense.

A killer asteroid that wipes out a few cities isn’t in the same category.

Axa June 19, 2014 at 6:08 am

That was my point, you can’t put in the same box huge asteroid, killer virus and………….not so deadly and really slow climate change.

Andrew' June 18, 2014 at 9:27 am

Again, your first comment would have banned you at very many blogs.

They don’t like slander.

It’s not that weird.

Andrew' June 18, 2014 at 9:28 am

We still don’t even know why you are mad. It might even be interesting.

I suppose you got screwed by a university. Are you looking for the hundred millionth customer prize?

B Cole June 18, 2014 at 9:35 am

I would like to see this sensibility applied to national defense spending and putative catastrophes. We are told there is a “risk” of terrorism. but so what?

Since 9/11, about 180,000 Americans have been killed by terrorists—they were drunk drivers. 3,000 died in 9/11. About one-fifth of the death toll every year from drink drivers.

If we had no military, what would be the threat of a military invasion and occupation of the USA? (About zero).

If we had only fleets of ballistic subs, and hunter-killer subs, what would be the odds of a military invasion of the USA? (Zero).

Suppose there was one successful terrorist attack on the USA every year, killing 1,000 people. Compared to 15,000 a year killed by drunk drivers, what then should our response be to terrorism? (Ignore it, basically).

TallDave June 18, 2014 at 9:47 am

Driving is useful. Traffic accidents are a cost of driving.

dbg June 18, 2014 at 12:09 pm

so to extend your analogy…

Western hegemony of Islamic countries is useful. Terrorism is the cost of hegemony.

TallDave June 20, 2014 at 3:10 am

Am I the only one whose noticed our imperial Muslim tributaries are late with their payments?

Free society is useful. Terrorism is the cost of a free society.

Finch June 18, 2014 at 10:01 am

Don’t we spend a lot more combating drunk driving deaths than terrorism? The automobile industry is huge, and a large fraction of R&D and manufacturing costs are due to safety engineering and regulation. Just Ford sold $150b in cars last year. This is to say nothing of traffic enforcement, which is smaller, but costs money too.

Also, the CDC seems to think the number of deaths in accidents where alcohol was involved was much closer to 10,000. And presumably for some fraction of those deaths, alcohol was involved but wasn’t the root cause. For example, when a drunk driver is hit in an accident caused by the other car.

dead serious June 18, 2014 at 5:09 pm

You mention auto R&D and manufacturing costs but what features exactly mitigate drunk driving? Name one?

Meanwhile we have a whole new branch of government – and legions of mindless drones at the airports, camped out in building lobbies, etc. – in place purely to serve as anti-terrorism functions.

Finch June 18, 2014 at 5:24 pm

> Name one?

Crumple zones in car structure.

dead serious June 18, 2014 at 10:02 pm

Crumple zones are to lessen the effects of accidents in general and do nothing specifically to address drunk driving.

A mitigant for drunk driving would be a breath or blood analyzer standard in every car and truck.

Finch June 19, 2014 at 10:04 am

You’re being obtuse. Drunk drivers do, occasionally, cause accidents. Features that mitigate accidents mitigate drunk driving. In fact, as B Cole pointed out, they cause a significant fraction of accidents. Without them, we would not spend nearly as much on accident prevention and mitigation.

Less on fancy deformable structures. Less on airbags. Less on ABS. Less on traction control. We’d use cheaper tires. Lighter, more economical cars. Less on traffic enforcement. We spend a fortune on car safety. I realize I have no way of verifying this for you, but a friend who used to work in engineering at a large automaker claimed it was about one third of the cost of each car. That’s several hundred billion dollars a year in the US.

dead serious June 19, 2014 at 1:26 pm

I recognize that a lot is spent on auto safety.

So your claim is that absent drunk driving, auto manufacturers would spend less on these features? Proof?

Because personally-speaking, if drunk driving weren’t a thing I’d still be interested in auto safety features.

NPW June 18, 2014 at 11:21 am

“If we had no military, what would be the threat of a military invasion and occupation of the USA? (About zero).”

Can you explain how the human race is different today than it ever has been in recorded history?

Todd June 18, 2014 at 11:49 am

We’d go back to calling up the militia in times of trouble and not have a standing army. That would be enough to keep the Mexicans and Canadians from invading.

Dan Weber June 18, 2014 at 1:37 pm

The purpose of the US military isn’t to defend the US from invasion. It’s to be the global hegemon. Europe is the biggest beneficiary. They have reduced military spending and there wasn’t been a war among the major European powers since the US took up the mantle over 50 years ago. As much as they complain for effect, they love it.

It’s totally normal to complain that the US is footing the bill for global security.

albatross June 18, 2014 at 2:01 pm

The environment in which we have nobody who threatens to invade us is partly a function of the existence of our large military. If we completely eliminated our military, that environment would change, and we might eventually see some threat of invasion, or more likely some kind of extortion based on the threat of military action against us if we didn’t do what the aggressor wanted.

However, the size of military needed to prevent that sort of thing is probably a tiny fraction of the size of military we have.

B Cole June 18, 2014 at 11:26 pm

Actually I think the reason for crazy-high national security outlays is domestic politics. Money to voters. As for being a hegemon, the USA cannot even prevail in Vietnam, Afghanistan or Iraq. For this world, our military is mostly impotent. Side note: China subs can sink our Pacific ships anytime they want.

dead serious June 18, 2014 at 5:11 pm

There are nuclear weapons that no military can possibly answer when push comes to shove? Is that what you mean?

B Cole June 18, 2014 at 11:05 pm

In part, yes. Fleets of quiet hunter-killer subs can sink ships or close shipping lanes (the Chinese and Russians are exporters). Invasion by sea is out. Ballistic subs carry the nukes. Even if China were to invade they would run the high risk if Beijing getting nuked.
In short, with perhaps 120 subs, the US does not have to worry about invasion. Or the risk is low enough to not worry about it.

Duracomm June 18, 2014 at 11:18 pm

B Cole,

The US is in many ways an island nation. It depends on free and open shipping lanes to get material needed for survival into and out of the US.

Ensuring the free flow of goods is one of the jobs of the military that nobody seems to notice or account for the value of.

Finch June 19, 2014 at 10:07 am

This would work if we were willing to use those nuclear weapons on a regular basis. Otherwise people would just call our bluff. Plus, it assumes nobody else has nuclear weapons.

The nuclear arsenal is obviously extremely cost-effective. But it’s very difficult to credibly threaten that will use it. One advantage of a conventional military is that you can actually employ it without being a moral pariah.

B Cole June 18, 2014 at 11:28 pm

What nation do you expect to invade and by what route?

Finch June 19, 2014 at 10:13 am

Invasion and destruction is the normal fate of large nations. Obviously the largest threat of invasion to the US comes from Russia and secondarily from China, although to be successful it would almost certainly have to follow a nuclear exchange. If one side or the other dominated a nuclear exchange there would likely be a conventional invasion that followed it, if only to stabilize the other country and round up any remaining WMD threat.

That’s why the overwhelming majority of our defense budget is spent on keeping that from happening. Paying for things like tanks, nuclear weapons, fighter jets, and carrier battle groups. It’s an existential threat with a relatively high probability of occurrence. Fighting terrorism gets chicken feed in comparison. Predator drones are cheap. It’s just on the news a lot because a small number of people get killed on a regular basis.

Wonks Anonymous June 18, 2014 at 9:38 am

If you want an example of just that sort of “pessimistic conservative”, I would point to Karl Smith on can-kicking. I recall Jim Manzi might have had a similar view, although he also has a bit of optimistic libertarian in him.

yenwoda June 18, 2014 at 10:51 am

“The Progressive prefers to argue from general grounds of benevolence, rather than debating which potential catastrophes to confront and neglect”

Good thing we have pessimistic conservatives like Cowen to keep us from wasting our resources on fake threats like climate change and access to health insurance, so that we’ll be able to prevent real catastrophes like Saddam driving a nuclear powerboat into New York harbor:

http://www.volokh.com/~volokhc/2003_08_31_volokh_archive.html#106277523563295770

dbg June 18, 2014 at 11:48 am

Why is “Progressive” capitalized in this post, but “conservative” and “libertarian” are not? Progressive is not the name of a political party or organization. it is also a descriptive label for an ideology and should also be lowercased.

This might sound like grammar policing, but I think it makes a difference. The use of language here makes it seem as if “Progressives” are some specific organization where that is not the case. It emphasizes the tendencies to argue against straw-men and degrades the quality of the conversation by putting different ideological positions on unequal footing due to the author’s bias.

msgkings June 18, 2014 at 1:09 pm

Well said.

Donald Pretari June 18, 2014 at 12:05 pm

As someone who believes we’re screwed in the long run due to our own foibles, I think it’s important to avert catastrophes that seriously hinder our ability to have a good time until armageddon occurs, such as a shortage of limes.

Rob42 June 18, 2014 at 12:11 pm

So if there are two potential catastrophes, say a super volcano and a comet (to use extreme examples), stopping each one passes the cost benefit analysis if we ignore the other one, but stopping both the volcano and the comet might cost more than the benefit of continued human existence. If that is a correct simplification, then it sounds like he is saying we are over-measuring the benefit of avoiding a potential catastrophe because we do not include the probability of other catastrophes in the calculations. If that is right, cost-benefit analysis is still correct, even on a case by case basis, but we just need to do the benefit calculations correctly. In other words, cost-benefit analysis as a decision making metric still works, we just need to get the math right. Or am I missing something more subtle than that?

Peter N June 18, 2014 at 12:27 pm

Part of the intent and design of the ACA is Straussian. It’s an attempt to control medical inflation.

1) stopping the practice of shifting the costs of some patients onto others.

2) reducing the negative economic effects of health care cost bankruptcy

3) The infamous “death panels”

4) changes to incentives. For instance providers will be penalized for re-admissions rather than rewarded, as they effectively are now.

5) reductions in the overheads of doctors dealing with insurance companies

6) new tools to combat fraud

7) efficiency gains from computerization, where medical care has lagged

8) reductions in the percentage of revenues insurers can spend on overheads

These represent most of the proposals that have been made for health care cost control. We’re only missing the Republican plan to limit malpractice claims and the Democrats’ desire for a government alternative to private insurance. Call it a draw.

The idea of controlling costs through incentives hasn’t worked very well, since patients aren’t the customers. Insurance companies are, and costs are shifted among different groups of patients. If that changed, so that patients really were customers, it would be a very different story. We’re just beginning to get a hint that this may happen – for instance walk in clinics in drug stores.

So far this all seems to be working (so well, that it may be partly a coincidence), but it’s still early days. We’ll know the answer in another 2 or 3 years.

Henrico Otto June 18, 2014 at 12:38 pm

Wondering. . .

The papers seems to hinge on the idea that the existence of other risks makes it seem more worthwhile to reduce any given individual risk. The authors say “the reason is that the other potential catastrophes [i] reduce expected future consumption, thereby [ii] increasing expected future marginal utility before a climate catastrophe occurs.” These are effects with different directions. Thus, the effect of [i] (i.e., reduced future consumption) is to make the cost of a different catastrophe less (i.e., there is less consumption being affected). The point is that with less overall future consumption, the marginal utility of whatever lesser consumption you have is higher, so reductions have a bigger utility effect. The assumption of the paper is that the effects of [ii] overwhelm [i].

As they explain it “If  n> 1 so that expected marginal utility rises sufficiently when consumption falls, the second eff ect dominates, and the existence of Catastrophe 2 will on net increase the bene fit of averting Catastrophe 1, and raise its WTP.” They go on to say that “Unless noted otherwise, in the rest of this paper we will assume that  n> 1. This is consistent with both the fi nance and macroeconomics literatures, which put  n in the range of 2 to 5 (or even higher).”

Seems like this assumption might not hold if what you are evaluating is not an individual’s utility, but rather whether there will be individuals (or X additional individuals) in the future to enjoy that utility. Any economists here have a view?

foobarista June 18, 2014 at 2:04 pm

The last paragraph is the most interesting, and is a variant of one often used by lefties: the important thing isn’t stopping the disaster, but building out the bureaucracy to be able to stop disasters. Of course, if you aren’t a big fan of bureaucracy, you just don’t “get it” – it’s needed to save the planet, so shut up and obey.

ThomasH June 18, 2014 at 3:06 pm

Clearly maintaining a rapidly growing, flexible economy is part of the optimal response to any combination of future catastrophes. Clearly one might think that anti catastrophe technology is progressing so fast that it would be unwise to invest in today’s version when we can invest tomorrow at lower VP of consumption. This kind of argument is often made about interstellar travel. Future spacecraft with future technology would arrive sooner than spacecraft launched with today’s technology. I don’t see it as particularly relevant to the issue of climate change and asteroid strike prevention since the cost in reduced growth is pretty small.

Marian Kechlibar June 18, 2014 at 4:20 pm

Within the living memory, the world expected global Ice Age, widespread hunger, universal overpopulation and nuclear war. As of 2014, pretty much everything is on its head: the current threats are global warming, obesity pandemics, quick aging of the developed countries and small-scale insurgencies where IEDs are the most sophisticated weapon.

So, who gets to predict the future catastrophes?

Marian Kechlibar June 18, 2014 at 4:25 pm

BTW When it comes to preventable catastrophes…

Lots of homes worldwide, including the USA, were repeatedly destroyed by hurricanes, often with corresponding loss of life. Yet the local inhabitants often build new houses at the same spot or nearby. What do they expect? In this sense, the ancient Amerindian tribes were wiser – if a village was destroyed by natural disaster, they would usually move away as the place was “cursed”.

And this is not just America-bashing… Whenever I look at the map and see the 2-million Naples huddled just under a tremendous live volcano, I can’t help but shudder. If the next Plinian eruption goes the wrong way, there will be no workable way to evacuate the city.

Duracomm June 18, 2014 at 11:09 pm

Marian,

In the US people can rebuild houses in flood zones because the US government underwrites insurance for houses in flood prone areas.

Absent the unintended consequences of poorly thought out government policy those homes would likely never have been built in the flood prone area.

dead serious June 19, 2014 at 2:56 pm

How cute. Someone learned a new term and is taking it out for a spin.

Unintended consequences? Unintended consequences!

rpl June 19, 2014 at 9:24 am

This line of reasoning is kind of Pindyck’s schtick. I never have found it very convincing. The flaw in it is that the benefits of averting catastrophes come in the form of avoiding the costs associated with the catastrophe. That means that paying for the catastrophe is not optional. You can pay to avert it now, or you can pay to recover from it later, but one way or another you will pay. Pindyck’s argument stipulates that averting some catastrophe has a favorable balance of benefits over costs, but follows up by saying that we can’t afford to pay for the mitigation scheme (i.e., because there are other more urgent catastrophes). If that’s true, the one has to ask, if we can’t afford the (cheaper) mitigation costs, then how are we supposed to bear the cost of the cleanup after the catastrophe?

You can try to salvage the argument by saying that the catastrophes are probabilistic, and the averted damages are expectation values. If you go that route, however, then you’re saying that the damages are truly enormous (so as to produce a substantial expectation value when multiplied by a small probability). In that case you still have to mitigate the risks to the point that you have an acceptable chance of your civilization surviving, and the argument winds up being not much different than the standard cost-benefit version (Pindyck’s colleague Martin Weitzman has worked this out in exquisite detail).

There’s another, more subtle, tack you could take, which is to argue that the costs of mitigation are (putatively) real expenditures, while the costs of recovery come (again, putatively) in the form of reduced quality of life. Therefore, when facing a budget constraint on mitigation expenditures, you must accept some quality of life costs from the catastrophe, even if those costs are higher than the mitigation costs would have been. The problem with this line of reasoning is that there is little reason to think that its premises are true. For the types of catastrophe Pindyck likes to talk about, our reluctance as a society to act to mitigate the risks does not stem from being literally unable to find the resources to commit to the project. Rather, it stems from us not wanting to sacrifice things we like in order to free up resources to address the risk. In that sense, the costs of mitigation are every bit as much quality-of-life costs as the costs of recovery.

Finally, Tyler offers another way out, which is to argue that we have to keep our powder dry in case an even more urgent catastrophe comes along. I haven’t thought about that one as much, but the first thing that occurs to me is that this can be used as an argument not just against catastrophe mitigation, but against any project anywhere. No matter how profitable that venture looks, it’s always possible that there’s another one, even better, just around the corner. Taken to its extreme, this argument exhorts us never to act on anything until it’s too late. To some extent, people really do hold back reserves to take advantage of unexpected opportunities (e.g., Warren Buffett and his “elephant gun”), but at some point a realistic assessment of the possibilities leads them to conclude, “This is the best we’re likely to see,” and they commit. It seems likely that a similar logic applies to catastrophe risk mitigation.

In the end, you can’t really escape the conclusion that if you believe that the costs of enduring a disaster are worse than the costs of averting it (again, something Pindyck stipulates in his argument), then you should avert it so as to incur the lower cost. Maybe the calculation changes when a society is devoting everything it’s got to catastrophe mitigation (i.e., when part of the cost of responding to each catastrophe is doing less to respond to the others), but we’re nowhere near that point now.

Pithlord June 19, 2014 at 1:32 pm

This seems correct. If the expected costs of the incremental increase in the probability of a catstrophe from not taking mitigative measures exceed the costs of those mitigative measures, there is no way that we could be better off not taking mitigative action.

Of course, it is possible that we cannot feasibly avert catastrophe. The benefits of doing so might exceed the costs, and exceed our means. But the implication is just that we are doomed, either way.

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