Scientific studies and data get invoked all the time in debates about policy, especially when it comes to matters of environmental policy. But why should those who prefer a cleaner environment (or on the flip side, those who prefer more industry and the benefits it brings) have to justify their preferences with scientific evidence?
What makes environmental policy conflicts so intractable? Why is “science” invoked by both sides of the political spectrum in policy conflicts?
Peter Van Doren returns to the podcast to talk about the thesis of his 2003 Regulation article “Letting Environmentalists’ Preferences Count.” We also discuss property rights and Coase’s theorem as it would apply to these types of disputes.
Trevor Burrus: Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I’m Trevor Burrus.
Matthew Feeney: I’m Matthew Feeney.
Trevor Burrus: Joining us today is Peter Van Doren. He’s a Senior Fellow at the Cato Institute and the editor of Regulation Magazine. Welcome to Free Thoughts again Peter.
Peter Van Doren: Thanks for having me.
Trevor Burrus: I think this is your fifth time on the show.
Peter Van Doren: Apparently I’m on the top of the hit list.
Trevor Burrus: That would be the most of any guest. Today we’re going to be talking about kind of environmentalism, how it intersects public policy and science. So the first question is sort of the big question we’re discussing today which is, “Why are environmental policy conflicts so intractable?”
Peter Van Doren: That’s – as with all—or many—intellectual thinkings, that’s not how I thought about this when I first tackled the problem. Instead I was puzzled by the following stylized facts, which is if you’re libertarian or if you’re market‐oriented, I found it puzzling that science was invoked by both sides of the political spectrum in policy conflicts, but it had little to do with anything in markets.
So think about Whole Foods. Think about organic lettuce or organic anything. So if you’re libertarian, should you have to justify your preferences as being based on something that is scientifically true? So for example, does it matter to the owners of Whole Foods whether or not anything they sell actually improves health or life expectancy or anything else that the customers imagine such consumption does? The answer is no, nor do the – now the consumers think that it is true.
But do they have to show studies to the owners of Whole Foods that if they take fish oil or if they eat organic lettuce or if they – if they can see the picture of the guy who raises the eggs, that they consume, do they have to show evidence from a scientific journal that that is shown – has been shown in a clinical trial or by econometric methods that that consumption does something good for the person who consumes it?
Trevor Burrus: So another way of saying that is to say that Whole Foods’ existence is not justified by whether or not it’s scientific claims or – if you’re a free market type, at least, generally speaking, its existence is not justified but whether or not it’s correct about its scientific claims.
Peter Van Doren: And in fact, not only that. There’s a fair amount of scientific evidence that it doesn’t – that the health effects of so‐called natural medicines or the – you know, the homeopathic remedies, non‐Western – whatever. That there’s no – that there’s a surprising lack of evidence that those things actually matter for anything. But it doesn’t stop people from buying them. It doesn’t stop producers from producing them. It doesn’t stop anybody from making gains to trade.
So even though right of center people may be dubious of certain claims about the consumption of organic produce or meat or whatever, it doesn’t stop those transactions from occurring and left of center people who may – I’m using stereotypical correlations that may or may not be true. But …
Trevor Burrus: It’s probably a little true.
Peter Van Doren: If left of center people believe these things and they have a market that provides them, they don’t have to provide any evidence that in fact is – that is true.
Trevor Burrus: It’s the same for psychics, right? Or tarot card readers or all those people.
Peter Van Doren: It’s certainly in a neoclassical economics framework. Economists just start with preferences. We don’t start with – we don’t say you need scientific evidence that X works before you can buy it. That’s just not – it doesn’t come up.
In contrast, in public sector debate, both sides, both the left and the right invoke science when it’s convenient for whatever they want. As the appropriate adjudicator of whether one’s preferences – and here’s where I’m going after sort of economic indoor libertarian thought. I want to argue, isn’t it weird that right of center people say preferences can be served by market forces and can flourish in market settings? But once you enter the policy arena, we now want to make sure that what you’re asking the public sector to do has scientific basis and both sides do this in different realms.
Left of center people invoke sound science when they want to talk about climate change because they argue and believe that something called science and scientists are on their side, whatever – we can discuss what all these words mean. But right of center folks and the – the same – in the environmental policy arena also invokes sound science when it comes to conventional air pollution and they argue that there are many, many studies that show that long term exposure to X – and you fill – like particulates or SO2 or whatever does not – that is where if – in a Laffer curve way of thinking about things, we’re beyond the point of marginal – we’re in the point of diminishing marginal returns if you will in ozone and particulate matter and SO2 reductions.
We’ve cleaned up our act enough and we’re now reducing things to the point that the gains in health, whatever they are, are very hard to find and footnote, aren’t worth it. They exceed the cost per life saved maybe and it’s like, “Hmm, isn’t that so?”
Both sides want to invoke something called science as the priesthood that adjudicates whether your preferences are legitimate or not whereas again if you’re libertarian, it’s not clear to me that – let’s say – I just want the environment to be cleaner just like I want to – can’t you just want the environment to be cleaner? Does that mean you’re not libertarian? Well, no, it’s just a preference.
So should one have to scientifically justify one’s preferences? I think most of us would say no. Well, no. I mean strangely we’re schizophrenic. We sort of invoke it in the public sector and there are parts of Cato that talk about sound science all the time. Today I want to talk about why I’m not sure that’s the right way to think about things and in – whereas in the private sector context, we would never ask anyone to justify their preferences to be scientifically justified.
So I want to explore where I think all this comes from and provide what I think is an economic explanation of why environmental policy conflict is so intractable and talk about the role of science in that and then talk about the Coase theorem in economics as a way to give us insight about what this conflict is about.
Matthew Feeney: But isn’t it the fact that when we’re talking about environmentalism externalities that are sort of central to a lot of these conversations – so if I think I have good scientific basis for buying fresh foods and vegetables and someone else thinks I have good scientific evidence that I should buy ice cream and pizza and just eat that.
I can go about saying, well, I’m going to continue buying fruits and vegetables and you can do what you want because it’s not hurting me. But the difference I think when you’re talking about environmentalism is, well, it does matter if the factory is polluting and if the person running the factory doesn’t think that it’s actually polluting. So there seem to be externalities at play here. Do you think that science should play a role in determining what – how damaging these kinds of externalities are?
Peter Van Doren: Well, let me separate those two questions and say they’re different. You’ve hit on something that’s very important which is the key to a market provision of things and why we don’t require and why we don’t even think it’s culturally legitimate to ask people to have a scientific basis for the purchase of whatever weird thing they want to purchase, is that it – your purchase of something, even if you find it disgusting, doesn’t rise to the level of conflict because it’s – that’s why we have the term “private goods,” “private consumption”.
We have cultural stigma attached to people who are too nosy about other people’s stuff and although those walls are decreasing with urbanization. But …
Trevor Burrus: Well, generally, you need some sort of reason to be able to take over someone’s choices, that it has to do with …
Peter Van Doren: Right.
Trevor Burrus: So Matthew’s point reminds me of – there is I think the fruit durian. Are you familiar with the fruit …
Matthew Feeney: The fruit durian?
Trevor Burrus: Yeah. It’s called durian, D-U-R-I-A-N. It’s the smelliest fruit on the planet and like there are laws about not being able to eat them on the subway. It’s like the gooey center of a melon. It’s a Southeast Asian thing. But that – maybe – but you need the smell to be able to interfere with someone’s basic choice of what fruit they want to eat, whether that’s scientifically or not.
Peter Van Doren: So both of you have hit upon the important – an important difference and that is joint – public goods, right? Trying to figure out what level of and what kind of public consumption to have. It requires conflict adjudication between people that doesn’t exist with private goods and you point out if you’re – if the factory is consuming its – what it thinks is the appropriate level of environmental amenities which is not many and the neighborhood disagrees. Then how are we going to – what do we do about that conflict?
But again, an economist would say that – here’s where Coase theorem comes in and things like that, which is let’s talk about property rights. Who has the right to what and then when do rights interfere? And then if we disagree, can I buy out your right to do whatever it is you think you have the right to do?
The inside of Coase was – is that if there are markets for trading in nastiness, then it doesn’t matter who has the right to impose something on somebody else. What matters is, is that that right exists. That it exists, that it is recognized as legally tradable and that – then the trading can begin and if you don’t like something, you can buy out someone’s right to do whatever it is they’re doing that you don’t like.
Trevor Burrus: So let’s review that just for those who have not listened. We have some other episodes with you where we talked about the Coase theorem. But for people who haven’t listened to those episodes, we will put those links in the show notes. But to use an analogy of two neighbors or with it or loud music or runoff from someone’s yard or something like this where you’re – have an externality.
The idea here is that they can bargain and it doesn’t matter who has the right initially, that they can bargain about, “Oh, this is how much it’s worth to me to play loud music and I will pay you,” and everyone is happy. It doesn’t matter who actualy has the right to play loud music. That’s basically Coase’s point, correct?
Peter Van Doren: That if rights exist and they’re easily tradable and the initial assignment of rights is not such a large portion of one’s wealth portfolio, that the demand for and/or the supply of that right alters one’s willingness to pay, that as long as the thing in question is at the margin and not – it doesn’t change everything, then it doesn’t matter who owns the initial rights for the eventual efficient equilibrium, how much noxious, whatever is present once we come to a final bargain.
All that matters is that if you have rights, you are wealthier than if you don’t have right, i.e. payments flow from the person who doesn’t have rights to the person who does have rights or in the alternative, it flows the other way around.
But in the end, the same amount of odor of melon or sparks in the air or music you don’t like or whatever that’s publicly‐consumed in the environment, that equilibrium outcome of stuff is identical. That’s the strong version of the Coase theorem. Again, it’s not a claim. It’s not a positive claim about how the world really works. It’s rather a logical exercise so that if the real world doesn’t seem to be that way, you then can infer that you must be violating one of the assumptions of the Coase theorem and that’s – and therefore instructs you as to what’s going on.
So let me give you an example of where sound science that were initial rights didn’t matter and the eventual outcome was the same and it was a policy struggle and no one in – no one commissioned Cato or Brookings or anyone else to find out what science said was the right allocation, initial allocation.
So before the current digital phone, cell phone system, there was a duopoly in every city. So very early cell phone technology was expensive and bulky and there were only two franchises per city. OK? Two.
The rights, believe it or not, the rights to those franchises in each city were given away by the FCC in a lottery.
Trevor Burrus: Do you know about the electromagnetic spectrum rights? Are you saying some portion of the spectrum?
Peter Van Doren: There were two franchise frequency rights per city pre‐1990 and the rights to those were given away in a lottery run by the FCC and anyone could participate. I mean anyone. I mean people read the federal register and then they had everybody send in little postcards or whatever.
Trevor Burrus: So like Mrs. Anne Mable …
Peter Van Doren: Grandmothers …
Trevor Burrus: … could participate just like the Power Ball.
Peter Van Doren: Exactly! And some non‐telecom entities won initial rights to the duopoly cell phone franchise rights in major cities. But no one then invoked sound science to say that, “Oh my god, that will alter the fate of human history and we won’t have cell phones because we’ve just given the rights to operation of this thing to someone who doesn’t know how to operate a cell phone company.” The people who won who weren’t companies, you know what they did?
Matthew Feeney: Sold them.
Peter Van Doren: They sold them to the companies. So that’s an example of the Coase theorem working where government decided initial rights randomly and then allowed transfers and the market worked and we had cell phones.
One person was wealthier and the telecom company was poorer and there’s some rent seeking that goes on to sort of – to try to rig these initial – well, now we have auctions and now there’s sometimes – there’s little set aside.
So there’s a little politics left. But basically now, we just have cell phone auctions and people bid. Grandmas don’t win the bids. They don’t have – it’s just not worth their time to try to, right?
So contrast that with anything in the environment. Like, should we drill in ANWR or should we – whatever. Should we have a CO2 tax or not? Or any of these conflicts. Notice we – there are conflicts. Most people don’t realize they’re actually about the initial allocation of rights to do stuff.
I think – and here’s where the positive part of my talk comes in. This is Peter’s explanation of why conflict – across policy venues, the venues that have the most intractable conflicts are those that where some aspect of the Coase theorem is violated.
The one thing that I think is violated in the environmental area is that the participants believe that whoever gets initial rights then won’t trade them.
Matthew Feeney: Well, I can imagine a lot of environmentalist at this point in this discussion thinking, well, no amount of willing donations or some sort of environmentalist fund will ever be able to compete with BP or Exxon Mobil. If they discover oil in a beautiful part of a rainforest, they’re worth billions of dollars. No amount of environmentally‐friendly $10 donations is going to add up to compete with outbidding rights to that area. So what’s the response here? Is it …
Peter Van Doren: You’re right. Well, what you’ve discovered is that the good student always figures everything out before I can say what it is. The public – we’re back to joint – so the – whatever deal – so remember Trevor’s initial discussion of the Coase theorem was a two‐person discussion.
There are no public good characteristics to the bargain if only two parties are involved. If many parties are involved, then we have the classic – so the Coasean bargain in that context itself has enormous public good characteristics.
If you didn’t contribute to the fund for the purchase of the rights from the entity that you wanted to purchase the rights from, if you didn’t contribute but the bargain still took place because lots of other people gave to a crowdfunding source and raised money to buy out the Koch brothers or if you’re – whatever. If all of that took place and you didn’t contribute, you could still enjoy whatever benefits ensued from the bargain without paying. Since everyone in equilibrium …
Trevor Burrus: So it’s not – there are benefits of like just knowing – it’s there. Aside from clean air, would you – could have real benefits from …
Peter Van Doren: Now can exclude whatever benefits arise from any true changes in exposure that make your health better if it’s conventional or no environmental damages from CO2 – if you don’t participate in – as Matt said, if you don’t give to the fund, but the fund still raises enough money to buy out some refinery’s rights to product fossil fuels, you still benefit from that bargain and that’s the free riding problem.
So what I’m trying to do here is hone – make everyone much more precise about what it is we need to think about in environmental policy, which is – so we just need to have a more robust market for the trading of stuff but recognize that even if that exists, only those with intense preferences who are willing to pay and hope that others benefit and they don’t mind – in other words, they want the world to change so much that they’re willing to pay even though they know that free riders – notice the same thing is true now.
Think of political contributions. So the fight that could be an explicit rights trading regime in a Peter world, instead of directly having a regime in which strong environmentalists and strong pro‐pollution people, if I could describe them in that, in effect use their extensive wealth to buy out the rights of the other that they don’t like, instead they all now contribute to political campaigns to have the same struggle.
Matthew Feeney: Yeah, I think hearing this …
Peter Van Doren: Even though the benefits that – Tom Steyer, is that his name on the pro‐environmental …
Trevor Burrus: It’s Tim or Tom.
Peter Van Doren: Tom? And then people on our side for the opposite point of view. Whatever world they create with their political contributions, you and I get to enjoy without – I’ve never contributed to a political campaign but I get to enjoy or not like whatever world is created by that political fight.
So I’m – again the economist in me says that libertarians, instead of having this proxy political fight over what is the distributional wealth matter, just have rights exist and have them traded even for public goods because the free rider problem existed – I mean if you take it seriously, I don’t know why there are any political contributions, right?
Trevor Burrus: In what way? Because …
Peter Van Doren: If …
Trevor Burrus: I thought you just explained why there would be political contributions because they can’t …
Peter Van Doren: No! I can – in other words …
Trevor Burrus: Oh, because everyone can free ride.
Peter Van Doren: There are very wealthy people supporting both the left and the right.
Trevor Burrus: But only sizable political – I mean a lot of people can free ride on sizable political contributions. So there would be –
Peter Van Doren: I can free ride on Bernie – if Bernie Sanders wins, I will consume whatever policy outcomes he creates even though I have not given to his campaign.
Trevor Burrus: But when you said you didn’t know why there are any political contributions, I mean on one level, I thought –
Peter Van Doren: In a very econ public goods oriented way of looking at the world, it’s not clear why people give to things where the enjoyment of the benefits cannot be restricted to those who are giving.
Trevor Burrus: Well, let me rephrase this. Maybe I’m misunderstanding. So one thing I took from the question that Matthew asked about, the fear of like – what would happen if the oil people were allowed to just drill wherever. One way you could interpret this is one of the reasons why environmentalists in particular perhaps want to move something from a market question to a political question is basically because they think they will lose the market question.
Peter Van Doren: Well, they think if – the following. Jerry Taylor and I once wrote an op‐ed about why not give in more to the Sierra Club.
Trevor Burrus: Yeah.
Peter Van Doren: Give it. Just – but they own it. They have property rights to the Alaska National Wildlife Refuge. Why do people on the right say, “Oh my god, that would be just horrible. Don’t do that. Peter and Jerry, you’re crazy”?
We got lots of hate mail on this. We said that means you think they won’t ever trade off any initial ownership of anything they view as sacred for any amount of money at all. Then flip it.
Trevor Burrus: Make them choose basically.
Peter Van Doren: And flip it, which is – let’s have – oil companies have property rights to ANWR and if people are that – I mean ignoring the public goods problems. We’re talking about couldn’t you – couldn’t you start the social media chatterbox in saying, “Let’s buy out the evildoers who own …”
Trevor Burrus: The Kickstarter.
Peter Van Doren: Whatever crowdsourcing to raise money. A small contribution from enough people, Bernie Sanders style, can raise a lot of money, right? If everyone kicks …
Trevor Burrus: But so –
Peter Van Doren: You’re right. Both sides think that …
Trevor Burrus: Or at least the environmentalist who might have politicized this first. I mean in some way, I guess the initial allocation was. But …
Peter Van Doren: Both sides …
Trevor Burrus: So then they choose a different method of distribution that they think they have more influence over the pure market distribution which would be the political method of distribution. Then they give contributions because they think they can influence that more than being able to buy it out.
Peter Van Doren: Even though to Matt’s point, both politics and raising money to buy out rights, both of those have public good characteristics. That’s all I –
Trevor Burrus: They’re free riders. It’s what you’re saying.
Peter Van Doren: One –
Trevor Burrus: Or they can be.
Peter Van Doren: Non‐participants consume whatever outcome happens regardless of whether they gave or not.
Trevor Burrus: So are you – it does seem like environmentalists in particular speak about – I mean it kind of could upset economists. They speak as if things have unlimited value and that they don’t want to participate in any sort of trading because the act of trading …
Trevor Burrus: … the world and all these things like this, which is just aggravating from an economic standpoint because then you don’t – then they’re really just using political power to try and advance their purposes, which – I mean how much they want to participate in politics is their own tradeoff. You say, “Look, how much do you really like ANWR?” You’ve never been …
Peter Van Doren: Wouldn’t you sell off some of the rights for money so you could do – you could create an endowment for environmental causes as opposed to having no money and just a mission? Well, there is one – the Audubon Society did own – they were private wildlife bird refuges – refuge …
Trevor Burrus: Refugees? It’s not refugees. Refuges, that’s it.
Peter Van Doren: Wildlife areas in Louisiana. We will look up the correct pronunciation afterwards. They owned – they were privately owned in effect bird and wildlife environmental provision and they then also quietly sold drilling rights to natural gas producers in Louisiana. Well once right of center people exposed this apostasy, they shut it down.
Trevor Burrus: Which is very unfortunate.
Peter Van Doren: Well, yeah, I wanted – you thought I might say that they were willing to sell. But once it was publicized because of the outrage of their primary core supporters, they found that economic style tradeoffs, a whole lot of money for a little bit of our land in return for money, the major constituents of the Audubon Society were outraged by this and shut it down. So that does not bode well for my dream of let’s explicitly have trading of public good emission rights and let things fall where they may.
Matthew Feeney: I’m glad that you brought up birds because before this podcast, I was thinking about environmentalists particularly concerned about particular species and of course species move. So whales and birds might migrate thousands of miles and I do hear sometimes that these sorts of questions have to be answered internationally. A skeptic might think of the Van Doren solution as impractical because how could property rights be allocated among whale pods and flocks of birds and things like this. So if I want to save the whales, how does Peter Van Doren help me?
Peter Van Doren: Well, there are ITQ. I mean there are fishing quota rights regimes but they are run by nations. But these nations, Iceland in particular, has the most famous – they have 200‐mile zones, but that’s for fish that are catchable, not for fish that are – that are deemed to have – what’s the right word? Characteristics that humans value so much, that there’s –
Trevor Burrus: Biodiversity.
Peter Van Doren: That there is strong normative shunning if you will, if you –
Trevor Burrus: Like dolphins or something like that.
Peter Van Doren: Well, the seal killings by native Canadians and also Japanese whale hunts.
Trevor Burrus: Being cute is a very good adaptation of that regard because jellyfish don’t get a lot of supporters, but dolphins …
Peter Van Doren: Nor insects.
Trevor Burrus: Yeah, nor insects for that matter.
Peter Van Doren: Yeah. So we – I’m not surprised. I mean we shouldn’t – so the – but yes, Matt is right. That is certain things that transcend nation states then create – then you need the UN to have – but again, no one wants to have the right amount of whales and then kill them, right? No one is – I mean it’s just – but for commercial fish, there are nation state regimes with – where biologists determine the “optimal harvest” each year given what they think they know about reproduction rates and sustainability.
Then those fishing rights are owned by people and then they can be sold in secondary markets. Then once the catch is – once you’ve taken your catch, then the fishing stops and the race to the commons is ended and overfishing ends and things.
So certainly Regulation, my journal has published many articles on fishing transferable quota regimes and how they do and don’t work. The United States is rather backwards in that regard. Iceland is the primary …
Matthew Feeney: So your last comment made me think, “Well, wouldn’t fishermen know a thing or two about overfishing and allowing fish to reproduce or are fishermen just particularly shortsighted?”
Peter Van Doren: Well, it’s that there’s a – it’s that …
Trevor Burrus: Take as much as you can.
Peter Van Doren: I mean the New England Cod Fishery is not of – if you think that through voluntary normative behavior within a small community that could restrain the fishing to equal reproduction possibilities, the data don’t seem to support that.
Matthew Feeney: Right.
Peter Van Doren: The cod are gone and they’ve appealed politically to – when Barney Frank, I mean – that was his – he represented the fall of river fishermen and he was always trying to make sure they weren’t hemmed in by these kinds of schemes that I’m describing. Then finally it all just played out and now they’re – they’re no more. They’re gone.
Trevor Burrus: Well, I wanted to go back to the science question because we’re talking about why and when should science enter public policy debates and …
Peter Van Doren: So as an – so here’s again a positive claim by me. So I’ve asserted that – what I observe is that science is invoked as an adjudicating thing in those policy conflicts where I think the parties believe that initial allocation of rights, as you’ve said, determines the eventual outcome. Thus instead of having an explicit discussion about the distribution of wealth and who ought to have it and why, we instead have a science discussion which is a backdoor way to not talk about wealth and outcomes.
Trevor Burrus: Well, is this a different way of saying – so maybe we’re saying the same thing. But I’ve always thought that especially when it comes to environmental preferences, that you have a very interesting problem of – throughout the world, preferences will butt heads. Someone will say, “I like tigers this much,” and “I like tigers as a beautiful, majestic thing running through the forest,” and someone else says, “I like tigers as rugs on my floor.”
Peter Van Doren: Right.
Trevor Burrus: And then the question of how do you adjudicate these disputes. Now one thing that we often do in public policy debates is we try to make other people’s preferences our own in some way. We try to say – or sorry, we try to change their preferences …
Peter Van Doren: To our own, right.
Trevor Burrus: So we try and say, well, you know – because on one level, if you just say tigers are cool and that’s like saying red is my favorite color. So you’re saying, “Well, it doesn’t really work.” So I need something more than tigers are cool. If I want only – if I’m the only person on the planet who thinks tigers are cool, so I’m trying to fight against the whole rest of the world and people are killing tigers for rugs. I’m the only one who thinks they’re cool. But I don’t have that much money to actually pay or get people to be convinced to preserve the tigers.
So even if I try to put my money where my mouth is, I can’t save the tigers. So my next thing is to try and change their preference for tigers. This is how important tigers are. They’re not just cool animals. They’re really important to their biodiversity. The whole world will suffer if there’s a problem because there’s the apex predator and there will be a problem in the food chain.
So other things that you care about will be undercut unless we protect tigers. So – my next goal, if I can’t actualize myself in the market, is to act politically and then override – try to override all their preferences in some way. That’s where the science can come in to change from tigers are cool to tigers are really important and here’s my science for why. Are we saying the same thing about …
Peter Van Doren: Five hundred years ago, kings and queens had wizards and priests that …
Trevor Burrus: Wizards? Really?
Peter Van Doren: Or whatever.
Trevor Burrus: I mean Peter is the smartest person I know. So if he tells me wizards existed, I want to go back …
Peter Van Doren: They had entities to whom they asked advice and expertise about when to go to war and when to do X and when to do Y. We invoked god as a reason.
So elites need things to get masses to go along with whatever it is they want to do and in my view, science has become an opaque thing that most people don’t really know how it works. They – it’s important. It was the courses that they didn’t do well in, in high school or college and – think of it following two stories, right? Which is environmentalist tries to raise money to buy out the rights of fossil fuel producers to produce.
Story number two, scientists say – as you said, we are doomed if we don’t stop this. Well, those are two different narratives, same result. The econ way sounds slimy and weird and we don’t like them. Why should we have to buy out, blah, blah, blah? I’m saying in the FCC auction, it was pretty weird who got the rights. But we didn’t – no one said let’s invoke science to say grandma shouldn’t have initial allocation of telecom rights and therefore we shouldn’t have to buy her out.
So I am just struck as an observer that we have these different normative moral criteria about what is or isn’t slimy depending on the policy venue. I am intrigued by that and my normative prescription is I think we could lower the temperature and I also think this misuse of – I think science has nothing – not nothing. But it is a necessary input, but never a sufficient input to any policy question of any kind. In the end, everything is cause and benefits.
Trevor Burrus: Well, that’s still science.
Peter Van Doren: Why are we doing – no. Science …
Peter Van Doren: Science is I am – if we continue to emit in this way, life expectancy will go down by three years.
Trevor Burrus: And then you add the cause and benefits.
Peter Van Doren: How do I want to think about that? Well, if – whatever I’m doing is really – so think of smoking. To many people, smoking makes no sense. To smokers – some smokers regret, right? But many smokers say, yeah, it’s going to – I’m going to reduce my life expectancy but I actually get something out of this, right? Or it’s worth it or – so the demographics – I mean David Bowie’s death and then other – I mean the Eagles – I mean it looks like the worst thing, the worst occupation to go to. If I’m a parent, what don’t you want your kids to do?
Trevor Burrus: Rock star?
Peter Van Doren: Yeah, rock and roll. That is that. Just like the song – I mean …
Trevor Burrus: It’s better to burn out than fade away.
Peter Van Doren: But you see what I’m – so, talk about the thing that reduces life expectancy the most. If I read the newspaper correctly lately, it’s not anything – it’s not anything we’re talking about. It’s everything that stereotypical movies about this 50s and 60 – the …
Trevor Burrus: The Blackboard Jungle.
Peter Van Doren: The movies were right. This is going to lower your life expectancy by a lot! OK. So no one invokes – I mean do you see what I’m saying? Which is – so I think the answer to everything because I’m hyper econ‐oriented is to have rights for everything and to have trading for everything, including things that have public good aspects to them.
Then the conflicts direct, i.e. we are fighting over what collective outcome we are enjoying and let’s not do it through politics. Let’s in effect try to see how much everyone can raise to have what kind of environment and so I want the right to make the planet dirtier as well as cleaner and then let – have people put their money where their mouth is.
The diversion of all this money into – to having political fights is an indirect way to create our future which is what level of pollution do you really want. I just find odd and frustrating.
Matthew Feeney: So what’s your take on what I sometimes call the ignorance narrative, which is people who are pro‐environment who will often say – because you’ve discussed preferences is that people can’t make an accurate decision about their own preferences because they’re ignorant.
If someone says, well, look, people don’t know what high fructose corn syrup really does to them. People don’t know what smoking cigarettes really does to them. If I was able perhaps through a legislation to inform people, then we can maybe have a discussion. But the fact is that people are ignorant and don’t know enough to make the right choices.
Peter Van Doren: I mean I could go into a rant but I won’t. I mean …
Matthew Feeney: I mean feel free.
Peter Van Doren: No, no, no. You are correct that it is a common comment. Then we’re back to science having to adjudicate what one’s preferences are and actually, let me give you – I’m thinking on the fly here. Kip Viscusi is Dr. Risk. He spent his entire life – his dissertation was about risk. He’s the guy …
Trevor Burrus: Who’s that? Vanderbilt or …
Peter Van Doren: He was at Harvard Law School and now he’s the professor of everything at Vanderbilt and he has spent his entire life – he’s the person who created what we now call the cost per life saved metric and literature that follows.
We’ve talked about that on a podcast. Basically he infers from risky job data how much people need to be paid to accept known risks. Then infers from that what – how much the government should spend on publicly‐provided risk prevention ranging from guardrails, i.e. very cost‐effective, to certain kinds of OSHA things in the workplace where we reduce exposure to things that really probably don’t change life expectancy, i.e. cost per life saved of billions of dollars.
So you end up with this number, which is – it looks like from market data that people value a statistical life. It’s somewhere between $8 to $10 million. So Viscusi is then interviewed. We know from epidemiological data of what the life reduction is for smokers. We know it’s somewhere near four to six years.
Then Viscusi has interviewed smokers. What is the consequence of your behavior? The average estimate from smokers is 20 years.
Trevor Burrus: So they really like cigarettes is what we can …
Peter Van Doren: Well, yes! Yes! So in a – I mean so we’ve had what? Since – my entire lifetime, we have had – I’ve been exposed to smoking is stupid, right? Public service – dah, dah, dah. So we’re now down to a population of smokers that is rather residual and clearly they are intensely into it because there are social negatives to do it and all that and yet they still do it.
So when they’re interviewed by people like Viscusi, that’s what they – they come up with – they think the consequences of their behavior are actually much more destructive than they are. This is on average. There’s a huge variance. So some smokers die at 15. Some smoke – my wife’s uncle is 84 and smoking in the hospital and he smoked since he was 16. I mean that doesn’t imply that – anywhere near the population average, but big variance.
So if there’s a – at least an anecdotal policy venue where the claim that people involved don’t understand how dangerous the thing is, that we need to protect them from. If anything, they seem to be overly concerned.
Matthew Feeney: Whenever I hear this, I think that these people seem to imagine that people have a goal to live a zero risk life. The fact is that people like smoking and like eating the occasional doughnut and like playing dangerous sports and all the rest of it and that even fully informed people can make bad decisions. Well, subjectively my judgment would be that they’re bad decisions.
Peter Van Doren: We did have – I ran an article in Regulation several years ago on not externalities but internalities. The internalities of smoking.
Trevor Burrus: Is this – all right. I’m going to guess at this one. Is this treating future selves as different people that you’re putting cost on, that you’re not familiar with about what that future self is? That’s super philosophical and it’s nifty. I like that.
Peter Van Doren: OK.
Trevor Burrus: Peter is nodding.
Peter Van Doren: Jonathan Gruber is the health economist at MIT.
Trevor Burrus: The famous Obama …
Peter Van Doren: Right, calculated that the appropriate tax on cigarettes was a dollar – gee, I’m going to – I can’t remember. A dollar a cigarette? That wouldn’t make sense, right? Yeah, much, much …
Trevor Burrus: Pretty high.
Peter Van Doren: Very high. Or was it a dollar a – no, it has to be a dollar a cigarette. I have to go back and look at the …
Trevor Burrus: It’s 20 bucks a pack.
Peter Van Doren: Maybe we will put that in.
Trevor Burrus: Yeah.
Peter Van Doren: And we had Gruber and then we had response by Viscusi and then we had Tom Firey who was trained in philosophy, the Managing Editor of Regulation, respond about what Matt is saying and Trevor, which is the younger self that’s risk‐taking and then people my age who are saying, “Oh, when I was young, I was stupid.”
So the older self want to impose on the younger self some wisdom that younger self didn’t exhibit and then Tom wrote about which is truer. Which is – should older selves have any rights over younger selves, even the same person?
Trevor Burrus: Yeah.
Peter Van Doren: And now that’s – I don’t – that’s outside of my league and …
Trevor Burrus: But that does get us into the question which – this would be a different podcast that we have actually. We’ve done an episode on this with Bill Glod who’s a philosopher on libertarian paternalism. But I think that we’re getting very close to this, not to open up a huge bag of worms as we come to the end here. But basically, one of the science things – and maybe this tells us a lot about actually where public policy is now. New paternalism which is now to tell you that your preferences are wrong because I have now sort of scientific explanations for why your preferences are wrong and saying that everyone says they want to quit and they don’t actually quit.
So therefore we infer that they really do want to quit even though revealed preferences say that they’re not quitting. So now we’re going to do things to them to engineer their choices to make sure that they quit smoking or eating cheeseburgers or exercise more, donate their organs or all this sort of things.
That seems also like an element of science in this that could be useful for public policy making.
Peter Van Doren: So early – because I’m so into economics, what you’ve – the reason I sort of huffed initially at Matt’s question was because everything in my bones say you start with people’s preferences. Now, behavioral economics of course is the whole raison – the French word, right? The whole guts of behavioral economics is exactly what Matt said, which is it looks like – in a variety of settings, venues, whatever, that people don’t seem to know what’s good for them.
They can’t maximize the financial markets. They think they are dealing with risk but they don’t have life insurance. They just …
Trevor Burrus: Make bad investments …
Peter Van Doren: Yeah. So …
Trevor Burrus: Let’s help them out.
Peter Van Doren: Smarter people need to help them out, whatever that is. So people like me saying, “Oh man, that’s just …” We don’t do that. But it’s not a good – I mean I – we need to deal with that in a whole another discussion.
Trevor Burrus: Yeah. But it is true. Peter is sitting here in this chair but he visibly quakes when you ask him about anything that says that maybe preferences aren’t the real preferences, which I do too. So it does seem very paternalistic.
Peter Van Doren: But I have to admit that the – I’m not – I mean the anomalies that the behavioralists have discovered, I have to admit exist as a positive scientist. I can’t say, “Oh wow, savings rates are really high.” No, they’re not. So the – but I don’t think – just as I say, nothing comes from science. I think nothing comes from behavioral economics in the following sense.
There’s no policy therefore, which is – if we see under savings, therefore what? Well then we need separate normative discussion about whether changing the default condition of a 401(k) sign‐up, which I – basically in the hallway, if you ask me, “Is there anything wrong with making people automatically sign up for saving and then they have to opt out if they don’t? Is there any horrible mischief in that?” and the answer is no, probably not. That’s OK.
Trevor Burrus: Something else, yes. We will book right now our future episode with Peter Van Doren about behavioral economics. But to wrap up this episode and finish up on the environmental question, what’s the takeaway here do you think?
Peter Van Doren: Well, the – my message is, is that whenever one hears sound science being invoked, I want you to realize that that to me indicates the possibility of large gains to trade.
When a side says, “My studies show what you want to impose on me is way too expensive relative to what it’s worth,” oh, Peter says, “Ha‐ha!” Then OK, then buy them out. Whenever someone says they’ve got scientific studies on their side, you will just open up your checkbook and you say, “If you imposed your regulations on me, because of your sound science, it would cost me a gazillion. Can I pay you anything less than a gazillion to go away and be happy?” That’s the bottom line I want people to think of from our talk today.