Wednesday, December 6, 2017

Is environmental economics stupid?

Bill Clinton’s successful 1992 presidential campaign was famous for (among other things) the internal slogan associated with his advisor Jim Carvey. Reporters told us how, inside campaign HQ, there was a sign on the wall to remind everyone of the central theme of the campaign, the key to electoral victory: “It’s the economy, stupid!”

That perspective remains with us today and has been the framing device for untold column-inches of discussion as to the balance of social and economic forces in Trump’s squeaker win last year.

Did he appeal primarily to White racism?

Was he speaking to a segment of society left behind economically by globalization?

Were his words some sort of salve for people who felt culturally disrespected by coastal elites?

Or, in a hybrid explanation, did economic stagnation and decline leave people receptive to someone who elicited their cultural and racial anxieties?

Behind the noneconomic explanations there is, I think, a presumption that people nonetheless have important economic interests.

In a recent column Fareed Zakaria questions that assumption.

He brings up the work of Berkeley political scientist Paul Pierson, or the more well-known thesis of Thomas Frank in What’s the matter with Kansas? They have overlapping views about how the Republican party is pulling the wool over the eyes of its voters: distract them with social or religious issues like abortion, or with emotive questions of immigration, so that they don’t focus on the ways that Republican policy will devastate them economically.
But what if people are not being fooled at all? What if people are actually motivated far more deeply by issues surrounding religion, race and culture than they are by economics? There is increasing evidence that Trump’s base supports him because they feel a deep emotional, cultural and class affinity for him. And while the tax bill is analyzed by economists, Trump picks fights with black athletes, retweets misleading anti-Muslim videos and promises not to yield on immigration. Perhaps he knows his base better than we do. In fact, Trump’s populism might not be as unique as it’s made out to be. Polling from Europe suggests that the core issues motivating people to support Brexit or the far-right parties in France and Germany, and even the populist parties of Eastern Europe, are cultural and social. [emphasis added]
The discipline of environmental economics has two main components.

The first is to figure out what the economically optimal level of environmental damage, balancing people’s appreciation of a clean environment against their desire for material things bought in the conventional economy.

The second is an analysis of how economic systems lead to more pollution than is optimal, and the design of tools (like markets for carbon-emissions permits) to try to harness people’s economic behavior for the goal of a cleaner environment.

And the underlying assumption is that moral fire for the environment may feel good, but that the real salvation will come from a dispassionate analysis of the people face.

But if Zakaria is right, then the premises of environmental economics are all wrong.

First, it’s a fool’s errand to try to find the “rationally” optimal tradeoff between the green of money and the green of a healthy Earth. People aren’t rationally balancing those two considerations—they’re simply not paying very much attention to the Earth. When it’s something people really care about—like defining ourselves as different from (i.e., better than) others, we’re willing to throw economic calculation to the winds.

So the optimal tradeoff we’re trying to find is actually a chimera, a shade.

Second, the tools we propose to use are just tinkering around the edges. If people aren’t emotionally invested in the well-being of the planet, our environmental tools will be an obstacle to be gotten around, more than an effective set of measures.

And the underlying assumption has it backwards. Unless and until we have a widely shared moral intensity in favor of environmental protection, dispassionate analysis will be of little use.

One could even argue (and I think I remember seeing this position years ago) that the dispassionate analysis is harmful, because it excuses people from considering the environment as a moral cause.

There’s a long historiographical tradition of claiming that slavery was economically inefficient, as well as a counter-argument that, as long as you weren’t a slave, it was economically advantageous for you. But we would think it absurd to decide the question of slavery on the basis of economics. And if, in a debate over slavery, you were to put a lot of weight on the economic efficiency of the institution, you would be giving people license to set aside the morality of the arrangement.

And perhaps environmental economics does something similar with the environment.

These are unsettling thoughts to have at the end of a semester where I’ve taught my favorite course—environmental economics. And I’m not committing myself to them.

But when I read that passage from Zakaria, the connection to my own work jumped off the page, and I wanted to think through the implications.

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