24 October 2009

Superfreak reviewed part 2

(apologies for the delay getting the second part up here, it was a busy weekend)
I had some already to say on the most controversial, chapter 5, status report on geo-engineering. I have now read it for myself. I did not read it as saying "we are global warming skeptics". I read it as "we need solutions to global warming that are efficient, cheap, and powerful". The underlying theme of the entire book is that solutions do not need to be overarching and complicated. They bring up a number of simple things, like white roofs and albedo effects. Or like the ideas behind doctor hand washing nudges and their effects on patient health and mortality and seat belts. And then they bring up geo-engineering relative to the costs or economic drag imposed by cap-and-trade or proposed costs of moderating carbon and other chemical pollutants contributing to global warming (methane for example), and the speed and immediacy at which you could deploy this. What they didn't say was that you then shouldn't need to go out and fix carbon, replacing it with renewable energy sources. There are several critiques on which to base the argument for geo-engineering.
1) Political will is very difficult to assemble for international, much less national, schemes for carbon reduction. This is in spite of places like India and China being, in principle, on board with a need for carbon moderation and reduction. What they aren't willing to trade off, and what most economists aren't from what I can tell, is the probability of growth and the associated development of billions of rural Asians (and Africans) into first world citizens with access and opportunities at the lifestyles they wish to hold. Economics, when it comes down to it, is about trade-offs like this. It is difficult to believe, given history, that a reliance on innovation or simple market solutions is somehow worse than a reliance on severe government interventions in this area.
2) It is difficult to believe that we have a market for these various effects (positive and negative) and that we could then properly place a price for a tax on carbon relative to its total damage, methane, water vapor, whatever it is. This is sometimes given as a support for cap-and-trade over a straight carbon tax. It isn't. A straight carbon tax would do exactly what environmentalists want: raise the price of energy and products based on petrol to reduce consumption rates. And it will do it immediately and obviously. The reason that's not popular is because politicians won't like it. It's not that a simple Pigouvian tax couldn't work (better).
3) Getting people to change patterns en masse by using conservation over innovation will be really, really, really hard. This is true no matter what policies we pursue through national, international, or even local levels. We may need to buy time to let that happen if the climate starts to look like it will fall off a cliff (say with massive ice sheet melting or rising ocean temperatures releasing millions of tons of frozen methane).

That said, I still think that raising the price of gasoline or coal (both by placing a Pigovian tax and decreasing subsidies for both, as well as corn ethanol) is an effective policy. It does appear that rapidly increasing or substantially increasing the price of gasoline eventually has a crunch on their use patterns. Presumably, much as with some sort of water premium on agriculture, you could apply some sort of carbon capture or methane cap and trade on livestock that would raise the price of inefficient farming relative to efficient, less wasteful and less polluting methods. I like having cheap beef and gasoline as much as the next American. I don't think either is properly capturing their underlying costs when we choose to have them (just as cigarettes are dramatically underpriced for their end users, though the effects there are more direct costs). But I think we have to be honest that this is a long-term adjustment (probably taking the better part of a half century to complete on a global scale without some super efficient anti-carbon energy source to replace coal and gasoline). It's one that probably won't be in place, at all, given our apparent insistence on having a fake cap and trade bill instead. And by the time this is in play, it won't be in effect quickly enough to matter. Nor will it likely be working broadly enough as there is no legal means to apply an international premium tax on pollutants. The structural function of national tariffs will help, but only slowly against exporter nations and it will be extremely difficult to apply to importer nations, like the US.

Probably the best chapter in the book is the one on altruism and the new game theory experiments with "Dictator". These help explain a lot of our political processes now, in particular tax policies. But these experiments themselves aren't that complicated and don't have that wide ranging focus that the authors aim for elsewhere. It mostly ends up shining some bright, bright lights on experiments that proclaim they measure altruism (they don't) and the police and media-sexed up version of the infamous Kitty Genovese story as being implausible, possibly even totally false. A side chapter on terrorists and how we can come up with their criminal profiles more effectively is also interesting (essentially describing terrorism as voter participation on steroids), but has a glaring error. Namely, that life insurance policies in most jurisdictions allow for an exception for suicide and will pay out for it. Even suicide bombing. So long as it occurs after a contractually obligated time frame. Thus a profile that excludes life insurance policy ownership is probably a valid criticism if true, but it's mostly just a mythology about insurance that would prevent such efforts. And not a sense of familial and fiscal irresponsibility on the part of the often educated, middle class urban terrorist.

Which leaves only the simple mixture preceding the publicity mess that was the global warming chapter. A story about how doctors don't wash their hands and get their ties in everything. Interspersed with a story about Ford's introduction of seat belts (and the relative effect of car seats on children) and the success of vaccination. Primarily what you would get out of all that is that human beings are terrible at applied risk assessments and their solutions as a result tend to be very simple. Either a subject isn't that big of a deal and isn't worth the media and public panic (car seats for most children over the age of 2, shark attacks, airline safety) or a subject is a big deal but it can be resolved at a minimum of personal effort (washing hands, putting on a seat belt). And it isn't. I'd like to see more of why this resistance to change is around, what it reflects. Bad training or habits? Inertia? Ignorance? Cognitive biases? Because with a subject like global warming, "the answer" seems to be a mixture of conservation and innovation. The public seems instead to be putting a lot of weight on innovation with very little interest in conservation (or no understanding that public policy is, thus far and certainly for the near term, weighted more toward conservation).

I'd like to understand how we could sell "all of the above". My impression from the book was that there isn't a way to do that. So the incentives needed to be changed where possible to do "one of the above, and for that, the one which is cheaper and easier to do". And then let people work out the "we can do better", "more with less", and so on, on their own.
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