Global Warming: Economists' Views

I recently came across a report of a random poll of economists done in 2005, from which it looks as though my views on global warming are not as far out as I had assumed, at least among my fellow economists. The piece can be found at:

http://ew-econ.typepad.fr/articleAEAsurvey.pdf

The relevant table:

Table 1:

Impact of Greenhouse Gases

In comparison to a world in which greenhouse gas levels were stable, rising levels of greenhouse gases by the end of the twenty-first century will cause GDP per capita in the U.S. to be:

a. more than 10 percent lower. 12.5%
b. about 5 to 10 percent lower. 7.1
c. about 1 to 5 percent lower. 21.4
d. less than 1 percent lower or higher. 35.7
e. about 1 to 5 percent higher. 16.1
f. more than 5 percent higher. 7.1

So a substantial majority think the effect will be either tiny or positive.

Ideological Betrayal, Left and Right

I noticed a recent article in Mother Jones, The Seduction of Paul Wellstone, about a politician who took office as "the Senator from the left" but apparently failed to live up to his supporters' hopes. The implication of the article is that such a failure is a likely, but not inevitable, result of the collision between ideological commitment and the politics and culture of Congress.

The article did not discuss the issue from the other side, Republican politicians who started outside the usual range of their party. No doubt one could find examples of the same pattern. On the other hand, Ron Paul provides a striking example in the other direction, a libertarian Republican who did, mutatis mutandis, what Wellstone's initial supporters hoped he would do—remained true to his principles, and made a serious effort to raise public support for them.

It remains to be seen whether other libertarians, most obviously Rand Paul, will follow his path or Wellstone's.

On the East Coast in April

I am attending two conferences a week apart in April, with several days free between them. I occasionally get emails from people interested in having me give a talk if I happen to be in their area. Since I do not keep track of such requests very carefully, I thought it would be worth describing my current schedule here and seeing whether there were people who would like me to give a talk at some convenient time and place—the approach that gave me two rather busy weeks in Europe quite recently.

April 11-12, Touro University, Islip, Long Island

April 16th, University of Baltimore, Baltimore
April 17th, University of Maryland, Baltimore

April 18-19th, Duke University, Durham, N.C.

The first conference apparently ends after lunch, so I could do something in the New York area as early as the evening of the 12th. My current assumption is that I will drive south on the 12th or 13th and spend a few days in the D.C. area, speak at the University of Maryland on the 17th, then drive or fly down to Durham, then back home.

For those who like listening to me

I have just added to the page with links to many of my published lectures an additional set of links to webbed interviews, video, audio, or text.

A Note on Economic Methodology

I recently came across a talk by Roderick Long in which he criticizes my father's methodological position, in particular the argument in his essay "The Methodology of Positive Economics," an essay which defends the use of unrealistic models in economics, such as perfect competition, on the grounds that the ultimate test of a model is not its descriptive accuracy but its ability to make correct predictions. The talk struck me as an  attempt to make sense of the position without  understanding it. Hence this post, in which I will attempt to explain the Chicago school methodology practiced by (among many others) both my father and myself. 

Roderick starts his argument by imagining a theory of Harry Potter movies according to which some invisible force builds up over time to produce a Harry Potter movie every year. That theory predicts that each year there will be a new movie. For some years the prediction is correct, but eventually it fails. Someone with a more realistic theory would have produced a more correct prediction—that the series of movies would end, probably at the point when it had covered all of the books.

The first theory successfully predicts a reasonably likely event, a successful movie having a sequel, several times. That is evidence that it is a good theory, but not very much evidence. A theory built on a more realistic model of the process, in which successful movies are likely to have sequels but a series of movies based on a popular series of books is likely to end when it runs out of books, successfully predicts more facts, so is a superior theory by the criterion of prediction. Roderick's own example is one where the criterion of prediction and the criterion of realism lead to the same result—the more realistic theory is also the better predictor, so is to be preferred on either criterion.

His fundamental mistake, if I understand it correctly, is to imagine that all that is going on in the Chicago approach is blind curve fitting, looking for patterns in the observed data and assuming that those patterns will continue. The problem with that approach is that a body of data can be fitted with an infinite number of different curves. In selecting among the possible patterns that could explain the data, one uses whatever information is available to form a theory. The theory cannot be entirely realistic, since that would require including every feature of the situation that could conceivably be relevant. The test of whether one has done a good job of figuring out what simplified model includes the important factors and excludes the unimportant ones is the ability of the model to make correct predictions.

Crucial to this view of the process is the distinction between explaining facts you already know and predicting facts you do not know, a point that is emphasized in my father's essay but, I think, entirely ignored in Roderick's lecture. Explanation of known facts can be blind curve fitting—but unless you have succeeded in choosing the right model, your predictions of facts that did not go into constructing it are unlikely to be correct. The crucial assumption that distinguishes prediction from explanation is that humans have some ability to correctly perceive patterns, making correct predictions evidence of something more than a lucky guess. You can find a more detailed explanation  here.

Roderick offers an elaborate philosophical explanation of why my father rejects what Roderick views as the correct approach to doing economics, the a priori approach associated with Ludwig Von Mises and some of his followers. There is a much simpler explanation. The problem with that approach, at least in its extreme version, is that pure a priori argument is unable to predict anything of economic interest. If one is completely agnostic about the facts, including both utility functions and production technology, any physically possible pattern of human behavior is consistent with the theory. As I put it long ago in my Price Theory, explaining why the assumption of rationality is empty unless combined with some knowledge of what humans value:

Why did I stand on my head on the table while holding a burning $1,000 bill between my toes? I wanted to stand on my head on the table while holding a burning $1,000 bill between my toes.

I conclude that the correct way of doing economics combines a priori theory with evidence. You form plausible conjectures on the basis of  theory and evidence, where part of forming them is deciding what simplifications, what unrealistic features of the model, assume away inessential complications while retaining the essential features of what you are trying to understand. You find out how good a job you have done by using the conjectures to make predictions and seeing whether the predictions are correct. An added benefit of that process, as I discovered in the course of writing my first published journal article in economics, is that finding real world predictions of your model may force you to think through the model itself more clearly.

That is the Chicago School methodology as I understand and practice it.

The Other Half of the Global Warming Problem

For reasons I have discussed in earlier posts,  I am skeptical of the claim that global warming on the scale suggested by the IPCC projections is a serious problem that needs to be dealt with. In this post, I want to look at the other side of the problem. If one accepts the conventional view that it is a serious enough problem to justify the cost of the sharp reduction in the use of fossil fuels needed to substantially reduce it, can it be done?

The reason I suspect it cannot is that preventing global warming faces a public good problem at several levels. Consider first the individual level. One might argue that if global warming is going to make me worse off, that is a reason for me to reduce my use of fossil fuels in order to prevent it. The problem is that although it is a reason, it is a very weak reason, because I would be bearing all of the cost—driving less, or being colder in winter and hotter in summer, or paying more to get my electricity from solar power instead of from natural gas—while receiving only a tiny fraction of the benefit. As with other public goods, one would expect it to be underproduced and, since this is a public good for an enormous public, drastically so.

One popular solution to a public good problem is to have the good produced by government. Have the government hold down the production of CO2 by a carbon tax or a cap and trade system, subsidize the development of technologies for recyclable power, and in various other ways force its citizens to modify their behavior to reduce global warming.

One problem with this solution is that we have no good way of making a government act in the interest of those it rules, in part due to another public good problem. Anything I do to make government do the right things—figuring out which politician supports good policies and voting for him or contributing to his campaign, writing books or op-eds defending good policies and criticizing bad—is itself producing a public good for a large public, since almost all of the benefit of good policies goes to other people. Public goods, especially for large publics, are underproduced, which explains why many voters—about half of them, judging by the highly unscientific experiment of asking students in classes I teach—do not even know the name of the congressman who represnts them, and almost no voter knows enough about all of the relevant issues to have a sound basis for deciding how to vote. That outcome is referred to in the public choice literature as rational ignorance. It is rational to be ignorant when information costs you more than it is worth to you.

If we have no way of making government consistently act in the national interest, we cannot count on government action to deal with global warming, even if it is in our interest to do so. And even if we did have a reliable way of controlling our government, we would still face a second level of public good problem. Controlling global warming is a public good not only at the individual level but at the national level, since if the U.S. holds down its emission of CO2, any benefit is shared with all other countries, whether or not they hold down theirs. Hence even a U.S. government that did act in the interest of its population might choose not to deal with global warming unless it could somehow arrange for most other countries to do so as well. Such an agreement among many beneficiaries of a public good is hard to arrange. It is even harder when, as in this case, the benefits are very unevenly distributed. Even if global warming produces net costs, which for the purposes of this post I am assuming, the costs to some countries will be larger than to others and some countries, most obviously in cold regions, will probably benefit.

I have just offered reasons, at several levels, why nothing will be done to prevent global warming, even if it is worth preventing. Readers may reasonably ask how I can explain the fact that things are being done. The U.S. House passed a cap and trade bill some years ago, although it never made it through the Senate, and it looks as though there will be renewed attempts to get a carbon tax or something similar in the near future. The current administration has subsidized a variety of activities, such as biofuels and the development of electric automobiles, on the theory that they reduce global warming. Similar policies have been employed by a number of other countries, many of which committed themselves some years back to specified future reductions in carbon emissions.

The answer is that while such policies are not worth doing, politically speaking, as a way of reducing global warming, they may be politically profitable in other ways. A loan guarantee to a company whose investors support the current administration, for instance, is a private good, or a public good with a very small public, from the standpoint of those investors, and one they will be willing to pay for in campaign donations or other ways of rewarding the politicians responsible for it. A carbon tax provides a new way of getting money into the hands of government, where it can be used to buy votes or reward supporters. Cap and trade, along the lines of the actual bill passed by the House, generates valuable assets—permits permitting the emission of a set amount of carbon dioxide. Those assets can be, in the House bill were, allocated to politically favored groups. In all of these ways, the campaign against global warming provides rhetorical support for politicians doing things they would like to do, but things that, absent that support, might cost them votes.

Consider as an analogous case Obama’s stimulus program. Very likely Obama believed his own rhetoric, believed that it would bring down unemployment. But supposed he didn’t. As long as other people believed it, the stimulus made political sense for him, since it gave him a convincing excuse to spend large amounts of borrowed money. If he didn’t believe it he had to worry a little about the failure of unemployment to come down as predicted—but, as the most recent presidential election demonstrates, that problem can be overcome. He succeeded in getting reelected by a comfortable margin, despite the striking difference between what he predicted and what happened.

My conclusion is that there may be no practical way of using political mechanisms to slow or prevent global warming, even if it is worth doing. Public support for doing it will be used by politicians to do things they want to do, many of which will impose substantial costs, which is why they need the warming rhetoric to let them do them. The things they do are unlikely to be well designed to prevent global warming, since that will not be the reason they are being done. I offer as one piece of evidence the biofuels program. Part of the original justification for it was the claim that it would reduce CO2 emissions. At this point, a fair number of environmental leaders and organizations have conceded that it will not. It does, however, raise the price of corn, which makes it politically attractive to politicians who want farmers to vote for them, and there is no sign as yet that it is going to go away.

How to Spend a Million Dollars to Promote Liberty

Some time back, a successful libertarian of my acquaintance asked me to suggest ways of spending money to promote libertarianism. It's a harder problem than it might at first seem. Many, perhaps most, activities that promote liberty, such as writing a successful and persuasive book or starting a firm that provides a substitute for some government service,  work without a subsidy if they work at all. And subsidizing a set of ideas creates what I described in a post some time ago as the rice Christian problem. If you make generous scholarships available to libertarian students, you risk attracting students whose commitment is more to the scholarship than to the ideas, increasing the number of professed libertarians at a cost, possibly substantial, to their quality.

I discussed the question, and some possible answers, in an earlier post. I have just thought of another one.

Most of my books are currently available for free online as well as in hardcopy from Amazon. I do it that way, almost whenever my publisher will let me, because I write books not primarily as a source of income but as a way of spreading ideas. Making a book available online not only means that anyone who wants to read it and is willing to do so off a screen can read it for free, it also means that people who do not know the book exists may find it while looking for something else. The web is a tolerable technology for selling information but a magnificent technology for giving it away. Making my books available for free online might increase my income, either because people find a book online and then buy a copy or in less direct ways, or decrease it. It surely increases the number of people who read them.

I have just finished reading Ethical Intuitionism by Michael Huemer, a libertarian philosopher. It's an interesting and important book, but not a libertarian book, since the subject is not what ethical views are correct but what the nature of ethical views is, what it means to say I should or should not do something and how one knows what one should or should not do. Its argument could be used by a socialist to defend socialist ethics as readily as by a libertarian to defend libertarian ethics.

The author has a more recent book of which that is not true, one that argues against the claim that the state has some special authority that we should respect. I have considered buying it—my university library does not have a copy—but have not so far done so. The book, in paperback or Kindle, costs more than thirty dollars. I am not sure it is worth the cost, in time and money, to read an argument for a conclusion I already agree with, even if written by an author I think well of.

Which gets me to my idea. Suppose a well-off libertarian compiles a list of a hundred books that do a good job of promoting libertarian ideas and are not currently available online, goes to the publishers and offers to buy the online rights. Most books, including most books about ideas, do not make all that much money, so my guess is that a publisher should be willing to sell the online rights for ten thousand dollars, perhaps less. A few will be books that were or are best sellers, and their rights might be expensive—but those are books that most curious readers can probably find in the local library, so although webbing them would be useful, it would not be as useful as webbing less successful books. Cross them off the list and replace them with a few less expensive ones. Total cost a million dollars.

The project also requires a libertarian lawyer willing to volunteer his time to negotiate the purchases and a libertarian web designer willing to web the books, perhaps with the assistance of a few more libertarians willing to scan them. Libertarian lawyers and libertarian web designers exist—I've even gotten offers from some of the latter to redesign my somewhat out of date web site for free. And putting a hundred such books on the web should significantly increase both the number of people who become convinced by libertarian arguments and the quality of the arguments of those already convinced.

Could a Bare Bones Law School Succeed?

In an earlier post, I described how a law school could provide a no-frills legal education for a small fraction of the current cost, ten thousand dollars a year for two years. That raises the interesting question of whether something along those lines could succeed under current circumstances.

The two problems I discussed were ABA certification requirements and pressure due to the US News and World Reports rankings. The school I described would not get certified and it would not get a high ranking. But graduating from an ABA certified school is not a requirement to take the California Bar, and law schools that score low in the USNWR ratings still get students—at a price lower than the top schools but still much higher than what I am proposing. 

Checking the online description of what is required to be admitted to the California bar, the requirements include one of the following:

• J. D. degree from a law school accredited by the State Bar of California or approved by the ABA;
• Four years of study at a fixed-facility law school registered with the Committee;
• Four years of study, with a minimum of 864 hours of preparation and study per year, at an unaccredited distance-learning or correspondence law school registered with the Committee;
• Four years of study in the law office/judge’s chambers study program; or
• A combination of these methods.

My BBLS will not be approved by the ABA and probably not accredited by the state bar, so its students will have to put in four years, but that could include time apprenticing in a law office with some supervision by the school, so it should be possible to do it as two years of classes, at a cost of ten thousand dollars a year, plus two more years of apprenticeship at a much lower cost—with, presumably, some salary going to the apprentice. Call it a total of thirty thousand.

The school faces a problem that it shares with any school that wants to improve its reputation. It will be judged by the performance of its graduates, most immediately their bar passage rate. That depends partly on the school and partly on the graduates, and until it gets a good reputation good students will go elsewhere.

The problem might be insoluble if BBLS had to start out by competing with relatively good schools, say the top hundred in the USNWR ranking, but it doesn't. It starts out competing with other unaccredited schools. Compared to them, it has one large and obvious advantage—a savings of close to a hundred thousand dollars. That should give it its pick of students who can't get into an accredited school, or can get into one but can't afford it, as well as some who can afford it but choose not to. With better students than other unaccredited schools and at least equally good instruction—what it's saving money on isn't the education but the gold plating—it ought to get better bar passage rates. Which will bring better students. Which will  ... .

It just might work, which raises the question of why nobody, so far as I know, has done it yet.

Comments?

Blowing Second-Hand Smoke

My university is considering a campus-wide smoking ban, justified in part by the claim that second hand smoke kills more than fifty thousand people a year. I am generally suspicious of claims of that sort, so have been trying to explore that one. It turns out that it is a misstatement of a claim in a 2005 report from the California EPA. In that report 50,000 is the midpoint of a range of possible values. In the justification for the proposed ban, it has been converted to a lower bound.

More interesting is the question of where the number comes from. Reading the 2005 report I was unable to answer that question. The number also appears in a Surgeon General's Report, but reading that it is reasonably clear that it is simply repeating the CA EPA figure, not offering an independent estimate.

How could such an estimate be made, given the obvious problems in arranging controlled experiments on the effect of potentially lethal pollutants? One way is by using natural experiments. There have been a number of studies which looked at a city that imposed a smoking ban, compared heart attack death rates after the ban with death rates in comparable cities, and reported a surprisingly rapid and large effect.

There is a problem with that approach. Heart attack deaths in a single city vary randomly—with or without smoking bans, they sometimes go up and sometimes go down. If you want to argue that second hand smoke causes a lot of heart attacks, all you have to do is to find one city where a ban was followed by a decline and report that result. Given the pressure for anti-smoking measures, there are incentives for academics to do so. And even if the researchers are honest and pick their city at random, the study may be more likely to be completed and published if it gets a striking result, especially one that fits what many people want to believe.

One can always find possible problems with studies of controversial issues, especially ones that produce results one does not want to believe, but in this case there is at least some evidence. A 2009 NBER study analyzed all of the data and concluded that there was no effect from smoking bans—cities where the ban was followed by a decline in heart attack deaths were about as common as cities where it was followed by a rise. If that result is correct, it strongly suggests that the conventional view is the result of cherry picking the data.

Which fits my suspicion of scientific "facts" asserted in political controversies, especially ones supported mostly by the fact that  authorities such as the Surgeon General's Report and the CA EPA say they are true. It also fits my more general suspicion of the too popular idea of Official Scientific Truth, to be established by consulting the Official Scientific Authorities rather than by looking at arguments and evidence.

Of course, I too have my biases—not with regard to smoking, since I'm a non-smoker, but with regard to Official Scientific Truth. Can any reader help correct them by pointing me at convincing evidence not merely that second hand smoke has some negative effect, which strikes me as a priori likely, but for the size of the effect? Or at a convincing critique of the NBER paper?

---

"All previous published studies on the health effects of smoking bans share a common methodology: they compare the outcomes in a single community that has passed a smoking ban with outcomes in a small set of nearby communities that have not passed bans. A major contribution of this paper is that we simulate the results from all possible small‐scale studies using subsamples from the national data. We find that large short‐term increases in AMI incidence following a smoking ban are as common as the large decreases reported in the published literature."

(Shetty et. al., "Changes In U.S. Hospitalization And Mortality Rates Following 
Smoking Bans," NBER working paper 14790)

Silent Speech as a Keyboard Alternative

My list of desired cell phone features includes a large screen, a world phone, and a physical keyboard. My current phone, the Samsung Note II, provides the first two. Its virtual keyboard is usable, but much less usable than an ordinary keyboard, or even the tiny keyboard on my old Psion PDA. It is possible that I could change that by training myself in Swype or something similar, but so far I have not done so.

The phone also has an alternative form of text entry—speech to text. It is surprisingly good but still, in my experience, much slower than typing. Possibly that could change with improved software and more practice using it, but there remains a more intractable problem. Text entry to the phone often happens in the presence of other people who would be likely to find my speaking to my phone distracting.

Which suggests an interesting possibility. Many people, mostly those who view cell phones primarily as phones rather than primarily as pocket computer/internet devices, access their phone through a bluetooth earpiece. Perhaps something similar could be created that would pick up words spoken softly enough to be inaudible from a few feet away and use them as the input for speech to text. That could, in principle, provide a form of text input faster and easier than typing—without requiring the additional weight and thickness of a physical keyboard.