The efficient wasteland
In his essay, Richard Revesz argues in favor of a "cost-benefit environmentalism" that embraces economic analysis and "uses both reason and compassion to justify strong environmental rules." It is wonderful to have such a prominent fan of cost-benefit analysis explicitly embrace environmental values; this doesn't happen every day. The trouble is, however, that cost-benefit analysis is at odds with fundamental premises of environmentalism, and it's not particularly good at either reason or compassion.
Environmentalism has many subtleties and variations, but I think most environmentalists share certain core beliefs. They are convinced that the future matters -- that we should protect the earth and its inhabitants into the indefinite future. They worry about other people and other living creatures and about their own complicity in causing others' suffering through environmental degradation. They prefer concreteness over abstraction: They don't just want to read about nature; they want to experience it. They understand the reasons that reason cannot know: the small shiver of joy upon seeing spring's first warbler, the glimpse of the infinite in a summer storm.
These values are foreign to the cost-benefit mindset. Cost-benefit analysts insist -- through use of an arcane technique called discounting -- on treating the future as less important than the present. Sometimes, in fact, they effectively dismiss the future altogether. Cost-benefit analysts dismiss the altruist, explaining either that she does not exist or that she cannot know what is best for other people (even if that means saving them from dying). Cost-benefit analysts also speak in nothing but abstractions: Human lives are not human lives, but "statistical lives" [PDF] -- a handy construct that allows economists to pretend that life itself is not at stake in debates over environmental policy. And shivers of joy and glimpses of the infinite do not appear in cost-benefit tables.
Cost-benefit analysis also produces results that are kin to neither reason nor compassion. Scientists around the world now urge us to act quickly to prevent catastrophic effects from climate change. Many economists soberly advise us to do nothing, or very little, because their calculations demonstrate that the future is worth very little, that people prefer warm weather to cold, and that humans in poor countries are not worth as much as humans in rich ones. These calculations are not the work of the radical fringe in economics; they come from highly regarded cost-benefit practitioners. But they are unreasonable and uncompassionate all the same.
Are environmentalists to blame?
Who is to blame for cost-benefit's failings? One might first suspect industry, which has for decades promoted cost-benefit analysis to further its deregulatory program. One might also suspect the federal government, which has used cost-benefit as a veneer to cover a pro-business, anti-regulatory agenda.
But no, says Revesz, it's actually the environmentalists who are to blame for the biases in cost-benefit analysis. Why? Because they haven't shown up to argue for better cost-benefit analysis.
This is not true. Environmentalists have tried to make cost-benefit analysis less biased against the environment. I should know -- I am one of them. For over a decade, much of my scholarship has been devoted both to making the case against cost-benefit analysis and to pointing out the ways in which the analysis could be improved. There are many others like me. We have written books, articles [PDF], comments to OMB on its cost-benefit approach [PDF], and comments to agencies [PDF] on the same subject. We have said that the federal government places too low a value on human life; that it devalues the future through discounting [PDF]; that it fixates on the costs and dismisses the benefits [PDF] of environmental protection; that it slights the worth of effects that cannot be counted [PDF]. It is no wonder that OMB hasn't listened to us; its anti-regulatory bias is evident in everything from its failure to apply cost-benefit analysis to deregulatory measures to its assiduous efforts to lower the monetary value of a human life.
But Revesz and other cost-benefit proponents apparently haven't heard us, either. Is it possible that environmentalists speak in a strange frequency that cost-benefit proponents cannot hear?
If we build it, will they come?
Revesz wants environmentalists to become more involved in cost-benefit analysis so they can root out the anti-regulatory biases that have crept into it over the years. He is too optimistic, in two ways.
First, Revesz appears to believe that cost-benefit analysis was, at one point, a neutral decision-making tool, but that over time it has been transformed into an anti-regulatory technique. But cost-benefit was never unbiased. Low values for human life, monstrously high discount rates, the shunting aside of effects that cannot be counted, a free pass for deregulatory activities -- all of these have been with us since the beginning. Change is possible, of course, but in this case history suggests it will come exceedingly hard, if at all.
In addition, Revesz seems to think that the economic analysts at OMB and the agencies are unaware of cost-benefit's biases and that they will scurry to correct them once environmentalists point them out. But the biases in cost-benefit analysis are not an oversight. They are the manifestations of an ingrained philosophy that is deeply hostile to environmentalists' arguments.
That philosophy shuns regulation and embraces deregulation. OMB deploys cost-benefit analysis to defeat regulatory interventions, yet it dispenses with it entirely when agencies are deregulating. Thus cost-benefit analysis in regulatory policy today is a technique that works in one direction: against regulation. It is a device used to give a "scientific" veneer to a fundamentally political enterprise. It is a symptom of, not a solution to, the failed politics that Revesz decries.
Without a fundamental political change, it is unrealistic to hope that tinkering with the cost-benefit machinery -- through, say, lower discount rates or higher values for human life -- will meaningfully alter the anti-regulatory results cost-benefit analysis today always manages to obtain.
Less is more
Nevertheless, Revesz urges environmentalists to get on board the cost-benefit train. Cost-benefit "is not going away," he says, because "it is simply necessary to anticipate the likely economic effects of large regulatory programs."
On the contrary. Cost-benefit analysis of environmental programs is a way of losing information about their likely effects, not a way of gaining it. Consider the following facts, as found by EPA:
- The Clean Air Interstate Rule, which requires large reductions in sulfur dioxide and nitrogen oxide emissions, will save over 13,000 lives in the year 2010 alone.
- CAIR will also prevent 180,000 school days lost due to exacerbation of asthma.
Now consider those same facts, stated in cost-benefit terms:
- CAIR will produce almost $57 billion per year in life-saving benefits in the year 2010.
- CAIR will produce almost $8 million in educational benefits in 2010.
Doesn't the second list give less information than the first? If you only had the second list, wouldn't you want to know what the $57 billion in life-saving benefits represents? Wouldn't you be interested to know that EPA has managed, in the last several years, to decrease the value of a life? Wouldn't you also be curious to learn that most lost school days are valued at $0, and why? (Answer: It's because the children's mothers don't work outside the home, so the cost of their children missing school is set at zero.) These are just some of the ways the cost-benefit process -- despite its apparent abundance of information -- actually loses information.
Cost-benefit analysis is a deeply flawed device that has never been the environmentalist's friend. It impedes rather than aids understanding of the concrete consequences of regulations. It would behoove the next president -- and all who value environmental protection -- to do more than fiddle around the margins of old debates, and to question whether a decision-making framework that can stare environmental catastrophe in the face and declare it "efficient" is really the best we can do.
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Comments
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Alexandre Posted 10:59 am
14 May 2008
But having said that, I consider this kind of analysis a useful way to communicate to economists. They usually get lost or over-suspicious when people talk to them with ethereal concepts such as "life" (sarcasm intended, of course). I imagine (I´m no pro) it´s easier to get them talking to you that way.
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Bart Anderson Posted 12:38 pm
14 May 2008
I think the problem is with neo-classical economics as a whole, which is permeated with ideology and hidden assumptions.
Maybe someday, when neo-classical economics is in eclipse, cost-benefit analysis could be dusted off and used -- but this time with scrupulous attention to the assumptions.
Bart
Energy Bulletin
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egbooth Posted 1:07 pm
14 May 2008
While I appreciate your insights and your years of work trying to increase the visibility of these issues, I still don't see any other option to use besides cost-benefit analysis. It seems that your argument is more about the failure of how people have used cost-benefit analysis but not actually the method itself. You raise a very important point regarding the discount rate. I definitely think that the discount rate issue is critical but it is a parameter that can be changed during a cost-benefit analysis. I agree that implementing the reforms to the method that you suggest is a major uphill battle but it still seems like the best plan of attack.
Cost-benefit analysis is so ubiquitous that it's hard to think of alternatives. We all use a form of it every day. The major problem with the method is that we don't understand how to value natural resources and ecosystem services. Can you really blame people, though? It's very complex stuff. Those of us who are conscious to environmental issues can make this valuation quite easily but it is much more challenging to those without that awareness.
I think our goal should be two-fold: 1) Get people (especially young people) outside so they can appreciate the environment and find it easier during their own personal cost-benefit analyses to value natural resources and ecosystem services and 2) Educate people on the true cost of ecosystem services in terms of dollars and cents. There will always be people that don't adequately appreciate the natural world and all that it gives to humanity so putting it terms of dollars and cents will be the only way to reach these people.
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GreenMom Posted 2:45 pm
14 May 2008
On the other hand, I'll hasten to point out that rarely does the cost-benefit analysis drive the regulatory decision. Rather, either the politics, or the environmental/health effects, or some combination of those, drive the decision. The cost-benefit analysis is there, and its results help defend the ultimate regulatory decision -- but the numbers rarely drive that decision. It's just too abstract for political decision-makers.
So that said, while the public could care less how the c-b analysis is conducted, the final numbers are widely reported and pointed at. In that sense it is important how the analysis is conducted, because the dollar numbers can help defend a decision that may not, ultimately, have been made based on those dollar numbers.
And of course all the regulations have to get through OMB review, and OMB cares deeply about the c-b numbers. And during Republican administrations, what OMB cares about really matters. Not so much when the Dems are power, though. Here's hoping January brings good tidings.
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Lisa Heinzerling Posted 11:52 pm
14 May 2008
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Lisa Heinzerling Posted 12:04 am
15 May 2008
One of the biggest successes of the cost-benefit movement has been convincing people that there is no alternative to cost-benefit analysis. This is just not so. In fact, all one needs to do to find alternatives is to look at the parts of the United States Code that contain our environmental laws. You'll find that every single one of them, save one (the Safe Drinking Water Act) relies on decisionmaking frameworks other than formal cost-benefit analysis.
If you don't believe me, just look at the cases Dean Revesz cited in his essay as important landmarks in the environmental movement. Each one of these cases -- including, most obviously, TVA v. Hill, the Supreme Court case rejecting cost-benefit balancing for protection of endangered species -- is at odds with cost-benefit principles. We can make cost-benefit the official test for environmental policies in this country, but we'll have to shove aside a whole lot of law in the process. This is, in fact, exactly what OMB has been up to in the past few years.
I agree with you about getting people outside and educating them about ecosystem services. I also agree that the discount rate is crucial. I'm willing, as you suggest, to change this parameter in cost-benefit analysis. How about changing the discount rate to zero?
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Lisa Heinzerling Posted 12:18 am
15 May 2008
One might be tempted to say, then, that a President with environmentalist leanings could use cost-benefit analysis to justify proregulatory positions. This is undoubtedly true. Put together higher values for human life and health, higher values for ecosystems, a discount rate of zero, no deregulatory bias, and a healthy sense of humility about what we do not know, and one could justify a whole lot of regulation through cost-benefit analysis. But, before doing the analysis, one would already have decided regulation was a good idea. (Otherwise the assumptions would have been different.) So what does cost-benefit analysis get us, other than a false aura of objectivity? Isn't it possible we've had enough of that in the past few years?
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amazingdrx Posted 1:26 am
15 May 2008
I guess many of us fall into economics when talking about renewable/conservation energy policy. It actually can lower energy prices and revive the economy with only the subsidy money now going to our present energy industries.
That's the argument that seems most practical. But it often leaves right/wrong out of the equation. The main reason for energy and ag policy reform really is altruistic.
The quality of life, the value of living with nature, instead of the statistical monetary value of a human life, as you mention. Great writing.
I like a dual approach on energy policy reform. It will raise your quality of life in terms of real human happiness and the financial security that is also vital to life.
http://amazngdrx.blogharbor.com/blog
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naturescene Posted 1:58 am
15 May 2008
There is no shortage of demand for funding to fix environmental problems, but the available funding is limited. All environmental goals are noble, but the fact is that a dollar spent in one place can be much more effective than a dollar spent elsewhere. To ensure that public money is directed to the projects in which it will be most effective, there must be some sort of analysis to compare the pros and cons of a policy option - that is benefit-cost analysis.
If you argue that benefit-cost analysis can't include non-monetary values you have shown that you are completely unaware of the current state of research in environmental economics.
But what you're really arguing against here isn't benefit-cost analysis anyway, it's the use of discount rates. The points made in regard to this are valid, but you've cloaked an interesting argument about discount rates into a straw man over benefit-cost analysis.
There are environmental issues besides climate change, that have immediate impacts and are perfectly suited for benefit-cost analysis.
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cneal Posted 3:36 am
15 May 2008
First of all, economists frequently do account for Henzerling's "small shiver of joy upon seeing spring's first warbler, the glimpse of the infinite in a summer storm." Excuse me... I just threw up in my mouth a little bit.
As I was saying: a good cost-benefit analysis do account for these feelings that people have for environmental goods, even if those goods are things that they themselves will never experience - polar bears and the Great Pacific Garbage patch, for example. It's called contingent valuation and it was first used in the sentence against Exxon for the Valdez. And a good cost-benefit analysis also accounts for general values of egalitarianism by using cost-of-living adjustments to state values of goods in the developing nations in equitable terms.
And what about discount rates? First of all, cost-benefit analyses frequently present their conclusions with a variety of different discount rates, as a way to reflect different prioritizations on the future. Second, if discounting the future is so wicked and anti-environmental, why does everyone (including environmentalists, and including the author) do it?
Remember that economics is a social science. Economists didn't just invent the discount rate: they observed it as a fact of life. Given the choice of $1,000 now or $1,000 to your grandkid fifty years from now, very few people will choose the latter. There's inflation, for one thing, and there's the opportunity cost - if you really want to be altruistic, you'll take the money and buy an interest-earning government bond for your offspring. And there's the plain fact that people prefer instant gratification - even environmentalists who shiver at warblers.
Long story short, if the discount rate weren't real, we'd all be hoarding cash under our mattresses, and we'd be paralyzed at the checkout line, wondering if we might need to save this dollar to buy coffee at some later time when we might be thirstier.
She's also falling into the old enviro trap of demonizing money. Again, though, she forgets that money isn't an invention of economists - it's an invention of society. Money is how we express value for things. Even environmentalists do it - if you value national parks, you express that value by paying the admission fee. Lots of enviros monetize nature by donating big money to the Nature Conservancy. Others express their value for clean air by paying a premium for a hybrid.
Ultimately, cost-benefit analysis is a powerful tool because it provides us with a way to consolidate lots of different opinions, values, and viewpoints into easily-understood monetary terms that everyone can understand.
I suspect that the real problem she has with these analyses is the fact that they incorporate values and opinions that she doesn't share - and that those values actually influence regulation and policy decisions. This is a common frustration among a lot of shrill environmentalists, but it's also a big reason why environmentalists, in general, are considered shrill.
Public consensus is tough, no doubt about it. But even if I generally agree with your environmental values, Ms. Heinzerling, I still don't think that you deserve to discount or dismiss the opinions of others who disagree.
vigorousnorth.blogspot.com
A field guide to the wilderness areas of American inner cities.
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Jason D Scorse Posted 4:14 am
15 May 2008
Discounting is simply a reality- if we truly valued the future as much as we value the present our savings rates would be orders of magnitude greater- this is empirical fact, not an economic bias
Monetization is simply one metric and without it we simply have less information, which is a problem. CBA should not be the only factor influencing decisions, but it is useful.
The key is determining the areas where it is useful- when there are high degrees of uncertainty CBA is less useful
I think in some ways cost-effectiveness analysis is the way to go- society figures out it's environmental goals and then figures out the cheapest (most efficient) way to achieve this
J.S.
I teach environmental economics and blog at http://www.voicesofreason.info.
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David Roberts Posted 4:33 am
15 May 2008
What I don't understand is what the alternative could be. You have a world of limited resources and many worthy goals. You have to decide what to do and what not to do. It seems to me if you're making that decision, you are engaged in CBA, whether you call it that or not. How else would you decide between alternatives other than by weighing which offers better returns -- even if by "returns" you include our affective stance toward nature, or whatnot.
grist.org
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Sam Wells Posted 5:05 am
15 May 2008
You're thinking of C-B for evaluating a regulation, such as going to the OMB with some numbers that could decide the fate of the rule (the OMB is traditionally a place where good rules die).
In the second case I do not support C-B because the Administrator should enforce the Clean Air Act as required by the US Congress, not the OMB. There is a "reasonableness" clause inserted by the Congress that said one kind of technology, should not cost more than $10,000 a ton for removal of hydrocarbon or NOx. It's one of the few I can think of ... most of the C-B was invented during the early days of the Republican Revolution of the 1990's. -sam
Onward through the fog
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tidal Posted 5:08 am
15 May 2008
However, with respect to Jason's third point and specifically dealing with some of the attributes of the climate change issue, I think it's important to consider the recent paper by Harvard's Martin Weitzman: On Modeling and Interpreting the Economics of Catastrophic Climate Change, which discusses the almost unique "fat-tail" problems w.r.t. low-probability high-cost catastrophic outcomes, and how that dilemma leads to conclusions that include:At least potentially, the influence on cost-benefit analysis of fat-tailed structural uncertainty about climate change, coupled with great unsureness about high-temperature damages, can outweigh the influence of discounting or anything else..... (3) all of this translates into placing severe limitations on the reliability of policy advice coming from standard cost-benefit analysis (CBA) of climate change; (4) the conventional economic advice of spending modestly on abatement now but gradually ramping up expenditures over time is an extreme lower bound on what is reasonable rather than a best estimate of what is reasonable; (5) removing the artificial limitations on conventional CBAs that comes from excluding very-high-impact disasters is capable of shifting a more inclusive economic-welfare analysis strongly away from the gradualism of a climate-change policy ramp.
As New Scientist magazine summed it up:The analysis shows that traditional cost-benefit calculations are getting it wrong, but it does so only by proving that extreme events dominate the costs when included in the calculations. It cannot put a figure on how much should be spent now, unlike the old techniques. "The big picture is not as clear as economists had thought," says Weitzman. "This probably means we should spend more money now, but it doesn't tell us how much."
That's a frustrating result, but I think it needs to get "out there" so that business-as-usual CBA doesn't "under-recommend" on climate change mitigation investments/initiatives.
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Lisa Heinzerling Posted 5:43 am
15 May 2008
I don't agree:
It's true that available funding for environmental protection is limited, as naturescene says. But it isn't fixed at some set amount. The amount we spend to protect the environment depends on how important we think environmental protection is. I believe that the more we come to embrace the cost-benefit mindset, the less important we will come to think environmental protection is. If the question is whether to save a "statistical" life, won't you open your wallet less readily than if you realize that actual lives hang in the balance?
Cost-benefit analysis won't ensure that our money is spent on worthy endeavors. Of late, it has only ensured that the money is not spent at all. When OMB sends a rule back to an agency because it fails the cost-benefit test, OMB doesn't tell the agency to regulate something else instead. It just tells the agency not to regulate.
Cost-effectiveness analysis is (as J.S. suggests) really what you're all after. But cost-effectiveness analysis works well only when you have a unidimensional regulatory goal -- when you can ask, for example, whether Policy A or Policy B saves more human lives at a lower cost. If you have multiple goals -- which is usually the case in environmental law -- cost-effectiveness analysis is no longer tractable. And even if you do have just one goal, watch out for discounting's sting here, too. Several well-known studies purporting to show that we could save thousands more lives if we redirected our regulatory resources from environmental protection to other life-saving measures turned almost entirely on the discount rate they used.
The idea that if you are choosing among worthy goals, you MUST be engaged in CBA (DR's comment), is one of the most persistent fallacies in the debate over cost-benefit analysis. Cost-benefit analysis, as used in regulatory policy today, is a highly stylized decisionmaking framework in which the advantages and disadvantages of a regulatory initiative are quantified, then monetized, then (if they occur in the future) discounted (usually at a rate consistent with prevailing rates of return in financial markets). This is not the only or even the ordinary way of making decisions among goals.
Several years ago, I read an essay by a well-known fan of cost-benefit analysis who was describing his decision not to undergo a common screening procedure for cancer. He explained that he had decided that his personal willingness to pay to avoid a risk of 1 in 1 million was $12. Comparing the cost of the screening to the benefit of avoiding the risk of cancer, this fellow decided that the screening wasn't worth it. The importation of cost-benefit analysis into this personal decision didn't make the man seem rational; it made him seem, in all candor, just a little crazy.
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Jon Rynn Posted 6:08 am
15 May 2008
You can't use a methodology that is useful for one domain -- say, a fixed budget and its effects on a measurable set of outcomes -- and apply it to large, complex systems with multiple feedbacks.
The alternative is systems thinking, based on computer simulation. And I have a very good example -- the climate models that climate scientists use. Or, the models that the "Limits to Growth" authors use. Apply those tools to modeling the economy as it interacts with the underlying ecosystems. Once you've constructed a large model, you can use it to focus on specific policy questions.
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David Roberts Posted 6:09 am
15 May 2008
I guess when I envision alternatives, I see a mess. You value nature as such; someone else doesn't value nature as such; and you are at an impasse. Unless there's some common metric that you can translate your preferences into, how do you avoid a clash of unquantifiable values that will, in the end, come down to a brute test of who has more political power? It becomes a quasi-religious argument, does it?
Maybe it's just a failure of imagination, but I guess a lot of us are casting about for what those alternative ways of making decisions are, and how they'd look in practice. Maybe cause for a follow-up essay!
grist.org
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Jonas Posted 6:23 am
15 May 2008
I wish you lots of luck in your battle because you are facing a tremendously autistic opponent - the 'rational' reductionist neoliberal economist.
They blame the environmentalist for thinking in terms of abstractions and poetics.
But just scratch beneath the surface of the white Anglosaxon Protestant cost-benefit analysts' discourse, and, indeed, you find an ideological landscape full of bizarre notions about self, sociality, value, meaning, culture, history, memory, nature.
Everything starts by exposing the false dichotomy in which they try to frame the debate: that of the irrational green children versus the rational and grown up neoliberal economist.
I only hope that your work strengthens the openly ideological case which environmentalists must keep making, and that it is not so much used to engage with the petty, technocratic universe of the cost-benefit calculators.
The economist must be dragged into the ideological battlefield, because that's where he (and we all) belong. We must not enslave ourselves and become so pragmatic as to grant the economist the honor to speak with us on his autistic terms.
I have the feeling environmentalists sometimes are tempted to enter into a dialogue, the basic terms of which already predetermine them getting beaten.
Environmentalists have the advantage of playing two cards, though: on an ironic level they can engage with economists (just to tease them and show them their ignorance - this will take a few centuries, so that's not the priority), while at the same time tapping the huge, universal, 'irrational' pool of human gut feelings which have enough of the cold logic of economics when dealing with such basics as life, humanity, history, culture, nature and sociality.
Environmentalists will win by tapping this pool. They must invest more in it (in the past they won great victories by doing so).
Also: they must unite more, they are too fragmented today.
Working together to expose the economists ideology is a first crucial step. Once that is done, attention must focus on crafting an autonomous, new, green ideology with universal appeal.
You don't need much. Just look at how Lenin won. He didn't use a big economic theory to convince people to join him. He just said: "bourgeois economics suck! Throw them out!" Then he hired some agitators, grabbed power and occupied Leningrad. That's all you need. The people will follow, because they 'feel' you're right.
Cost-benefit analysts suck! They should stick to applying their theory to their own children and everything they cherish. If then, they still don't get why they suck, there's still the Gulag.
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Jonas Posted 6:31 am
15 May 2008
Cost-benefit economists suck!
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Laurence Aurbach Posted 6:45 am
15 May 2008
That dream is a fallacy. Power struggles and values are at the heart of CBA. CBA spits out answers; the answers depend on assumptions; the assumptions are determined by political power and cultural values. We should and must have the most impartial facts on which to base our decisions, but there is no escaping the political process when it comes to making decisions based on those facts. Calling CBA an impartial metric is just a way to conceal that reality.
What are the alternatives to CBA when making political decisions? A review of Heinzerling's book lists these methods:
using holistic, not atomistic, methods;
favoring moral imperatives over cost comparisons;
adopting the precautionary approach when dealing with uncertainty;
promoting fairness towards the poor and future generations
heeding the extreme forecasts when contemplating potentially catastrophic events, such as climate change.
Ped Shed Blog
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David Roberts Posted 6:58 am
15 May 2008
The question, for me, is what you do with that knowledge. Do you get savvier and better about making sure it's progressive values and assumptions fed in the CBA process? Or do you abandon the pretense of objective process altogether and just fight it out in the realm of values?
I'm temperamentally inclined to the former, I guess. Democracy is built on all sorts of useful myths. One of them is that there are processes that can reconcile the competing values of a diverse populace and produce a result that's fair to everyone and accurately reflects the aggregate. In some sense, yeah, that's just a veneer for an underlying struggle that's all about socioeconomic power dynamics. But it's a useful veneer -- it lends the results legitimacy, which is the bedrock of peace and democratic rule.
If you tear down the illusion and expose politics as a raw conflict between factions with irreconcilable values ... well, Jonas' invocation of Stalin is not comforting.
grist.org
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Ron Steenblik Posted 7:27 am
15 May 2008
Depressed? Give them bread and circuses.
Feel you're paying too much for your gasoline? We'll stop charging the federal gasoline tax.
Tired of bumping into people who don't look like or speak like you? Let's erect a wall to keep them out.
Etc.
These are only my personal opinions.
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Laurence Aurbach Posted 11:03 am
15 May 2008
I'm very glad to hear that. Still, it seems that is precisely what our government subscribes to as it (selectively) uses CBA formulations to dismantle longstanding environmental protections and block new ones.
well, Jonas' invocation of Stalin is not comforting.
I find the citation of famous Communist dictators to be distinctly threatening, myself.
But honestly, are these the only two alternatives open to us? Clean, technocratic algorithms vs. unthinking mob-rule dictatorship?
Of course not. That's a red herring, a false dichotomy. We can strive to improve CBA, to improve its assumptions, and use it as one factor among several in the decisionmaking process. And we can incorporate moral considerations, our legacy to future generations, wildcards that CBA is unable to deal with, and in general, a holistic approach that recognizes a more rounded version of human potential than CBA is capable of.
As far as I can tell, that's the path Heinzerling has taken in her own career. Work to improve CBA's assumptions, and also work to fundamentally alter CBA's official role in order to achieve a more holistic decisionmaking process.
Ped Shed Blog
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David Roberts Posted 5:40 pm
15 May 2008
Sounds good to me!
grist.org
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LGT Posted 6:40 pm
15 May 2008
But why must economics be the official language of U.S. regulatory policy?
For the same reason that our "money fetishism" is destroying the world. Not because we need to, but because everyone else is doing it, too!
There's a short essay on "Social Proof" and "Pluralistic Ignorance" at the following URL, which relates to the issues
http://msrb.wordpress.com/2008/04/30/whosoever-shall-call ...
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caniscandida Posted 6:47 pm
15 May 2008
More interesting, IMHO, is Jonas's suggestion that a sexual encounter might result in missing two hours of work the next day.
And much more interesting, IMHO, is his suggestion that those two hours missed would mean the loss of $600.
Plainly I know very little about the other sentient creatures who inhabit this planet with me.
Chickens deserve our true friendship! So do fish! So do other sentient beings! Let us learn to be kind.
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Bart Anderson Posted 7:13 pm
15 May 2008
It's hard to imagine what other framework we would use. I think this is the problem with CBA and hyper-rationalistic systems in general -- they hypnotize us into thinking that these are the only possible approaches.
If we think about it for two minutes, we realize that we (individuals, groups, societies) almost never rely on these rationalistic schemes in making decisions.
For some reason, I loved studying these systems during Management Science in college. Perhaps it was the certainty they promised. As a senior, an important choice was facing me, so I fed all the data into a model, and made the worst decision in my life (hint - it involved a woman).
For 20 years, I worked in one of the top high-tech companies in the world, with very smart, very analytical people. As a company, we employed cutting-edge management tools - graphs, models, etc. - and with regularity, management would throw away the results when they wanted to do something different. (And you know what? They were probably right.)
Perhaps the most thorough application of such tools in the past was Robert McNamara's use of system analysis as Secretary of Defense during the Vietnam War. A truly tragic case of unexamined assumptions. To see how he now looks upon his decisions, see the superb documentary "Fog of War."
Reading history, we quickly see how some of the greatest crimes and worst failures are committed when people prided themselves most on their rationality.
We are hormone-saturated primates and our feelings and intuitions have evolved for a reasons, so let us make the most of it.
Bart
Energy Bulletin
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cneal Posted 12:48 am
16 May 2008
I'd agree that CBA is a tool that needs to be used in conjunction with other political (or moral) considerations. In general, this is indeed how CBA is used.
As someone who considers himself both an economist and an environmentalist, I'd urge you not to dismiss CBA out of hand. Some of the opinions expressed in these comments strike me as being just as noisome and shrill as some of the ideas spouted by free-market extremists like Milton Friedman. Sure, some economists maintain a willful ignorance of the value of environmental goods - but that's no excuse for environmentalists to maintain a willful ignorance of the value of economic analysis.
CBA can actually present environmental arguments in new and compelling terms. During college, I worked on a number of CBAs that accounted for peoples' real values for things like ecosystem services and backcountry recreation experiences in Oregon. The monetary value of these things is significant, and I strongly believe that if more environmentalists familiarized themselves with the economic arguments for conservation, then conservation would be a lot easier for society to embrace.
And with that background, I'm also amused by the idea that CBA is an all-powerful black box that automatically determines policy decisions. It's not, unfortunately. Different assumptions (of risk, of discount rates, etc.) can produce wildly different outcomes. And it's a rare indeed that a CBA will change the preconceived conclusions of whatever bureaucrat or politician is making the final decision.
Ultimately, cost-benefit analysis boils down to a simple question of whether the pros outweigh the cons. We all do this as individuals and as societies, and as we do so, so-called moral imperatives, differing notions of risk, and other values all come into play. These moral values enter into our economic decisions all the time: what kind of food we buy, how much time we take off from work to spend with our family. Economics provides us with a tool to measure how we, as a society, prioritize different and sometimes conflicting values. Sure, we might not always agree with others' values - but if that's the case, you're better off trying to enlighten people to win them over to environmentalism, instead of attacking the analytical tools that reveal this difference of opinion.
vigorousnorth.blogspot.com
A field guide to the wilderness areas of American inner cities.
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Biodiversivist Posted 1:25 am
16 May 2008
CBA can put the brakes on some aspects of human nature. Although I agree, CBA is just a tool. Tools are useful, but any tool can be abused. Look at how Darwinism was abused in the thirties.
The importance and usefulness of CBA is highly overrated by those who butter their bread generating said analysis. There is an inverse relationship between the number of assumptions and accuracy.
Certainly, if someone can find a way to make the act of preserving ecosystems and biodiversity more profitable in the short term than the act of consuming them, they will be saved. That may not be possible, and if it isn't, then we are history because we have evolved to put the highest priority on our children and ourselves, not our great great great grandchildren or other people's children.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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spaceshaper Posted 1:48 am
16 May 2008
With the power thus gained they have dismantled as many environmental protections as they have able to get their shameless hands around as well as doing all kinds of other damage to the public good, all apparently in pursuit of nothing more valuable to the common weal than the accumulation of personal wealth for themselves and their cronies. What makes you think that contrary to the evidence environmentalists "will win" by tapping that same amorphous pool of human emotion? If we're talking about playing the enemy at their own game, please be aware that your well-practiced opponents are eager to engage the battle readily and relentlessly and without the slightest moral compunction or remorse. Ready to go up against that? Come at 'em with a struggling polar bear and they'll bury you in a skinny minute with unemployed coalminers and truckers and pressers of Detroit metal to name just the tip of the far-from-melting iceberg. There are many smart people on the side of the angels in this struggle, but few who will be willing to play on those soul-eroding terms.
Which is why personally, I'll stick to numbers and rationality and growing our understanding of what are the real costs and real benefits of the economic and political framework of our lives. Show how the jobless coalminers and the polar bears are connected and how the economic interests of the one are bound up in the survival of the habitat of the other. THIS is the game that the smart and compassionate among us can, ultimately, win.
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
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atreyger Posted 2:14 am
16 May 2008
In any case, systems modeling is based on an underlying set of assumptions just as much as the cost-benefit analysis. In fact, cost-benefit analysis is a subset of systems analysis. Invoking 'systems thinking' is, in many ways, tantamount to invoking cost-benefit analysis.
For example, current climate models predict an increase of global temperatures between 1.6 and 8.0 degrees C. This is based on a set of scenarios, such as the baseline emission scenario, reduced emission scenario, or increased emission scenario. It is also based on a certain amount of equations and parameters determined using the reductionist approach that approximate the current understanding of how the global climate works. These equations and parameters may have a solid ground in describing current conditions and try to predict a 'typical', but non-existent future. These same factors may not have a solid ground in the future, when there is a whole-scale change in ecosystem functioning, thus changing descriptive equations and parameters, which may make the current models obsolete. Also, clearly we have to assume (and this is HUGE!) that the equations are actually describing what is happening, rather than being serendipitously correct.
However, I am not suggesting that we do not consider modeling as important. No, no. I can find many reasons for why a particular model does not make sense, but I would never suggest dismissing the model, particularly if it has gone through rigorous sensitivity analysis and validation.
Several things to consider:
CBA is a reductionist model, not a complicated multiple-run phenomenological model with a statistical distribution, but it is based on a similar approach to modeling the future.
Scientific holism postulates that the behavior of a system cannot be perfectly predicted, no matter how much data are available.
So, essentially, I am arguing in favor of cost-benefit analysis as a tool in regulatory framework, based on:
Natural (and I would say most artificial systems) are not perfectly predictable.
Discounting is a factor: 'A bird in the hand is worth two in the bush'.
Money is a finite resource. Not the conceptual numbers, but the physical values that money represents.
Decisions have to be made by regulators in terms of dispensing money to appropriate causes.
CBA is an appropriate tool to be used in such cases.
The users of tools are to blame, not the tools themselves. Plenty of knives have been used to do very useful things. Just because knives have killed, does not imply that we should get rid of knives. We should get rid of people that use knives in that way.
OMB in the past decade was primarily run by Bushies, so umm, you wonder why the response is Bush-like?
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amazingdrx Posted 2:32 am
16 May 2008
Show that renewable/conservation energy revolution is profitable on the individual family level, in the monthly budget.
Benefit us! It won't cost nearly as much as Iraq.
http://amazngdrx.blogharbor.com/blog/_archives/2008/5/16/ ...
http://amazngdrx.blogharbor.com/blog
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Jon Rynn Posted 4:27 am
16 May 2008
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atreyger Posted 7:43 am
16 May 2008
This applies to most natural models, i.e. climate, future tree distributions, etc. These models are not to be used as the definitive answer, simply because they cannot be the definitive answer. It is relatively easy to create a map of suitable climatic conditions for white ash, and it is relatively easy to predict the actual rate of ash seedling spread. However, when there is an infestation of ash borers, the natural colonization (and survival for that matter) falls apart. Artificial colonization (supposing no ash borers) is then the question: how badly do the foresters in the spruce-fir zone want ash?
OK, that was a quick and dirty example of how easily we can be thrown off our 'prediction' by two 'small' variables.
In reality, the problem with modeling is that we cannot use it to make decisions about future events without considering the social aspect of decision-making. I am not familiar with any iterative models that address social change and the attitudes of the 'masses'. Personally, I am not interested in these, so maybe that is the reason or maybe that I still believe in individual choices, charismatic and powerful people and the effects of military force in determining societal issues (not that I am for it, I'm just saying that I believe that it happens). Thus, until I experience the advent of a good computer model that can predict the rise of a military dictatorship that will create an event Y, I will assume that societal modeling is in its infancy. Side note: I'm also saying that under the above conditions, climate modeling is in its infancy, but the point is that we cannot foresee the future, and that for example a supervolcano might actual create a nuclear winter.
However, as far as I can grasp this, the second major problem with complex computer models that take into account any long-term societal trends are that they are far too expensive and slow moving. It just takes a long time to gather enough data or a good body of evidence to use as parameters and equations. Then, the model has to be written, and the output from the model has to be verified. This can take several years (and I'm being generous). How about decisions that have to be made now?
In essence, if you're faced with a decision on the appropriate sum of money to be sent to New Orleans or to China in terms of aid, given that you have: a limited budget and the fact that if you send all alloted money to New Orleans (which would really help those people out), a major earthquake COULD strike LA, and thus there will be no budget money to help out those people.
This is where CBA comes in. It's not easy, and it's not fun, but it's an economical triage. I think that if all resources were given to a major train wreck with many serious trauma victims in a location close to a hospital, the majority of them would survive. But what if it's an extremely isolated location where there is only one surgeon on hand?
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Jon Rynn Posted 8:25 am
16 May 2008
So, CBA, like much of economic analysis, performs relatively well when there is a stable set of assumptions -- actually I suppose scarcity sort of helps CBA, because you don't have to account for change in the variables that are scarce. Thus, as long as its kept within the confines for which it was designed, it can be useful, which seems to be where aurbach and roberts wound up.
Even though big, complex models are difficult and expensive, it would still be nice to fund the hell out of them! It should be possible to do some economic models, that use material resources as inputs, like machinery, resources, technologies, costs, not incentives, to be able to at least get some idea of the practicality of various schemes, such as using particular solar/wind technologies. I'm not sure what you would call this, maybe closer to an engineering model than an economics model.
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JMG Posted 9:19 am
16 May 2008
It is reprinted, I think, in "The Wind's Twelve Quarters," though I could be wrong about the collection title.
The 5% Project
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Nucbuddy Posted 12:42 pm
16 May 2008
Full text:
google.com/search?q=%22Walk+Away+from+Omelas%22
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Bart Anderson Posted 5:27 pm
16 May 2008
Whoever controls the purse strings, controls the application of CBA. Client: How much is two plus two?
Consultant: How much do you want it to be? To me, it is a fantasy to imagine that public policies are determined by rational thought. We are assuming this, in a country with George Bush as President? I can think of little U.S. policy that makes any rational sense.
Most of us here are verbal, reasonable people. We like the world of rationality because we are comfortable in it.
We are prone to the serious mistake of putting too much weight on rationality, in a world of Machiavellian politics and Godfathers.
The neo-conservatives are the most successful political movement in modern times, and they do not make this mistake.
The opponents of environmentalism do not make this mistake.
Yes, it's fun to talk about the fine points of CBA but the real world operates according to different rules. Forget this reality and you can forget about political power.
Bart
Energy Bulletin
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