Common Tragedies

Thoughts on Environmental Economics

Archive for the ‘Public Goods’ Category


Posted by Daniel Hall on June 20, 2008

Several bloggers that I like and respect are mocking this Gregg Easterbrook piece about asteroids in the June Atlantic Monthly. But I am going to go against the grain and defend the article.

First off, however, I’ll acknowledge that the headline tag — “The odds that a potentially devastating space rock will hit Earth this century may be as high as one in 10.” — is overblown.* This has been the subject of the most vigorous objection (see Brad DeLong) so in this sense the critics are right. But I’d argue they’re missing the forest for the trees: the specifics of Easterbrook’s argument may be oversold, but the question he poses in the second half of the headline tag — “So why isn’t NASA trying harder to prevent catastrophe?” — is exactly the right one to ask.

The critics miss two key things: First, the ‘expected value’ calculation for an asteroid impact could show a very large cost indeed, even if the vastly most likely outcome is no cost at all (i.e., no asteroid). And second, we must consider both benefits AND costs… if preventing asteroid impacts is very cheap, it may well be worth doing.

Regarding the first point, let’s do a simple back-of-the-envelope calculation. We’ll assume the value of a statistical life (VSL) is a (very conservative) $1 million. An asteroid impact that killed 100,000 people would thus cost $100 billion. Easterbrook’s tagline seems to imply that in any year there is about a 1-in-a-1000 chance of such an event, which would imply we should be willing to spend $100 million per year for “asteroid defense”. This would be true even though there was a 90% chance we’d reach 100 years in the future and that money would have been a total waste every single year. Meanwhile, an expert in Easterbrook’s article thinks the whole asteroid diversion thing could be done for $400 million — total.

Now you may disagree with the numbers in my example (e.g., you think such an event is far less likely) but the specific example is not the real point. The important intuition is that one large catastrophe can dominate your expected value calculation.

Of course the actual calculation you would want to do is a full expected value calculation — the sum of all possible futures (their probabilities times their costs). This means counting up all the very likely worlds with no asteroids, the very unlikely worlds with asteroids that wouldn’t be so bad, and the one-in-50-million type asteroids that could cause mass extinctions. But just dismissing the problem out of hand because it hasn’t wiped us out yet strikes me as irresponsible.

The second mistake some critics have made is comparing asteroid impacts to other types of disasters without considering whether we have leverage over these disasters and what this leverage costs. This guy, who mercilessly shreds the article, is quite guilty of this:

Easterbrook is panicked by the thought that maybe-once-a-century event like Tunguska could occur over the negligible percentage of Earth’s surface which is covered by dense cities. He writes:

The blast had hundreds of times the force of the Hiroshima bomb and devastated an area of several hundred square miles. Had the explosion occurred above London or Paris, the city would no longer exist.

A comparable destructive energy can be expected from a good-sized hurricane or typhoon, which have a tendency to strike coastal areas, a popular location for cities. … Or, if you don’t like that analogy, you can also get a much larger, and similarly rapid, yield from an 8.0+ earthquake, of which we get about one a year. Localized disasters of this sort happen hundreds or thousands or times more frequently than similarly-powerful asteroid/comet impacts, and yet somehow we don’t characterize them as the deadliest threats ever.

… There have been extinctions of large numbers of species in Earth’s history – we have an idea of when they happen, and how big they are – and some of them may have been precipitated by some kind of catastrophic extraterrestrial impact. How does this threat compare with the expected results of human-caused climate change?

The widely-accepted science on global warming, much like the highly speculative situations Easterbrook is fantasizing about, would have similar effects on the planet – mass extinction, starvation, disease, and massive physical destruction. According to a 2004 study in Nature, mid-range estimates for global warming could cause the extinction of 15-37% of all plant and animal species. The last extinction event which even approaches this magnitude was 33.5 million years ago, which may or may not have had something to do with some kind of extra-terrestrial impact. Sixty-five million years ago we have a mass extinction likely caused by the impact of one (or many fragments of an) asteroid, wiping out perhaps 30% of all species. Before that, we have to go back 200 million years. So, a survey of the last 200 million years tells us that at most we have extinctions from all causes on the order expected from global warming every 60-70 million years.

I have a couple of responses to this:

1. Yes, earthquakes and hurricanes are more likely than asteroid impacts but we don’t have a good way of stopping or diverting them. (Not that we shouldn’t be researching this.) This means we must either pay the (very large) opportunity costs of not inhabiting hurricane- or earthquake-prone areas, or pay the costs of building more resilient infrastructure and rebuilding destroyed infrastructure. (Anyone remember what Hurricane Andrew cost? Maybe we shouldn’t have rebuilt Florida but the fact that we did gives you at least a hint about the opportunity cost.) Paying for asteroid defense, by comparison, looks cheap.

2. Yes, climate change is far, far more likely to be a problem than asteroids but you have to compare the proper counterfactuals. For asteroids we are talking a world with a very tiny risk of asteroid disaster versus a basically identical world ($400 million is nothing) with zero risk of asteroid disaster. For climate change, unfortunately, we are talking about a world perhaps warmer by 6-8 degrees Centigrade versus a world that is perhaps only warmer by 3-6 degrees but where we have literally spent trillions of dollars to do this. There is no free lunch. This doesn’t mean I don’t think some level of climate protection could well be the best lunch we ever buy, but let’s be honest about what we’re spending and what we’re getting.

My ultimate point is that the article has value because it highlights our screwy priorities when it comes to spending money on space. Why does almost all our $17 billion NASA budget go to getting humans in orbit and bases on the moon and Mars? We need a more Earth-centric NASA. It could be doing far more good developing enhanced Earth monitoring systems — satellite data is going to be invaluable to understanding climate change in the next century — and yes, protecting us from space debris. Anyway, I think Easterbrook’s article is thought-provoking and you should read it.

*Although I’d suspect Easterbrook would fall back on the definition of “potentially”.

Posted in Climate Change, Public Goods, Space | 8 Comments »

Alex Tabarrok gets shot

Posted by Daniel Hall on November 12, 2007

The flu shot, that is. And so did I. And so should you. Alex explains:

People who have the flu spread the virus so getting a flu shot not only reduces the probability that I will get the flu it reduces the probability that you will get the flu. In the language of economics the flu shot creates an external benefit, a benefit to other people not captured by the person who paid the costs of getting the shot.

Hooray for public goods!

Update:  Lynne Kiesling, in a very smart post about externalities, posits that the private benefits to Alex of vaccination well outweigh his costs.  His decision is thus inframarginal and a public subsidy for his vaccination would be a wealth transfer but not improve behavior.  I would say this illustrates a public good created by families and other tight social networks — they encourage citizens to act selflessly.  I would also say that surely someone out there is on the margin about a vaccination decision, and it would make sense if we could target a subsidy at them.  Off-hand I would guess that this group would include the poor and uninsured — although that might primarily be a problem of access and information — and the young, single, and socially mobile, since they are less likely to have compelling reasons to act selflessly.  And, let’s face it, they are frequently lazy.  I rarely got a flu shot when I was in my early 20s; I knew it was a good idea in theory, but just couldn’t be bothered.

Posted in Public Goods, Public Health | 4 Comments »

The Law(lessness) of the Sea

Posted by Rich Sweeney on November 6, 2007

Much has been written of late about the Law of the Sea Treaty (MR, CS Monitor, Matthew Yglesias, NYTimes). These commentaries have tended to focus on the potential navigational and natural resource discovery implications, which are probably the main issues of contention. The New Yorker, however, ran an odd but fascinating piece on a different sort of conflict that has resulted from the current suboptimal governance of our planet’s waters: the rise of vigilante environmental pirates.

Read the rest of this entry »

Posted in Government Policy, International, Public Goods, Water Resources | 1 Comment »

My cup spilleth over

Posted by Daniel Hall on October 27, 2007

Ezra Klein is in awe of the technological wonders that Google hath wrought:

Google’s like the brain I never had, the knowledge I never acquired. Its continued existence seems utterly implausible. But so long as it’s around, I don’t need to really read anything. I just need to catalogue the existence of things I might one day read.

Free Exchange picks up this thought and brings it round to one of this blog’s favorite topics, public goods:

It is… clear that vast amounts of information are available cheaply and easily to anyone with an internet connection. …

All of this general, outsourced, readily-accessible knowledge is a public good. It’s non-rival and, with a few exceptions, non-excludable. It may be hard to feel sorry for Google these days, but it seems certain that the vast majority of the surplus created by the tech giant is uncapturable. …

Of course, one of the common features of public goods is that they’re underproduced by the market.

I have two comments. The first is rabid agreement about the spillovers generated by Google. My latest exhibit is Google Reader, which just in the last couple weeks is revolutionizing the way I interact with the web. I highly recommend trying it out. It creates your own personal inbox for the web, bringing everything you’re interested in to you, without all that tedious mucking about in hyperspace.*  It’s astounding that something so mind-bogglingly useful is available for free.

The second comment concerns Free Exchange’s observation that public goods are underproduced by the market, and the subsequent implications for technology policy. As noted on this blog previously:

… the social return from R&D is around 4 times greater than the private return, suggesting that there are large under-incentives for private firms to invest in the socially optimal level of R&D.

This has big implications for long-term global problems like climate change. While we need a price on emissions (cough, cough), both to start reducing emissions now and to spur some technology development and deployment, there is also significant scope for technology policy to help achieve the socially optimal level of R&D. We should have significant support for climate technology R&D — the positive spillovers generated by such support will amply justify the costs.

*Special prize to the first commenter to name that reference — without using Google.

Posted in Climate Change, Public Goods, Technology Policy | 7 Comments »

Tragedy of the art commons

Posted by Daniel Hall on October 13, 2007

I recently read Tyler Cowen‘s new book Discover Your Inner Economist. (Short review: Thought provoking, life affirming, and funny. Read it.) In a chapter on appreciating culture, he notes the dangers that overexposure poses to our appreciation for great art:

…honestly I don’t know how good the Mona Lisa is, and I don’t even know how I could know.

I am not invoking postmodern skepticism about the arbitrariness of objective value standards. … When it comes to the Mona Lisa, it is hard for any American or European today to look at the picture with fresh eyes. …

Economists call this phenomenon “the tragedy of the commons.” A tragedy of the commons occurs when individual actions, taken together, destroy the value of an asset or resource.

Tragedy of the commons problems arise among common pool resources, whose defining characteristics are that they are non-excludable (everyone has access to them) and rivalrous (my use of the resource diminishes everyone else’s ability to use it). Fisheries are a classic example: they are an open-access resource which anyone can take from, but the more fish I take, the less there are left for you to take (and, what’s worse, the less there are left for everyone (both you and me) next year when the now-reduced population can’t produce as many offspring).

Read the rest of this entry »

Posted in Books, Culture, Public Goods | Leave a Comment »

Here’s 5 bucks–why don’t you just do it?

Posted by Evan Herrnstadt on October 4, 2007

Tim Haab cites a study that displays some interesting patterns in public opinion on various potential carbon-saving policies. Basically, subsidies for solar panels and energy efficiency and a 20 percent RPS (amounting to a tax/rate hike of $5-8/month) get around 70% support, while a gas tax of similar magnitude gets a paltry 36%.

Perhaps people perceive the first three as higher taxes that encourage society to go out and get something new (renewable energy or cheaper home improvements) while the gas tax simply means one is paying more for the same thing, with intent that we’ll actually consume less than we did before. I guess we do love buying shiny new toys (weeeee!) more than changing old habits (boring).

So we would notice $5/month at the pump, but not on our tax forms. Is this the result of some sort of collective loss aversion? Or is it temporal separation?  Would we really notice that extra 10 cents/gallon (incidentally, this is basically the relevant effect of a $10/tCo2 price)? If one could give gasoline a big hug, would Americans do so?

Most importantly: Can we really not boil behavior down to the intersection of two lines on a graph?

Posted in Behavioral Economics, Climate Change, Government Policy, Public Goods | 1 Comment »

Wow [update]

Posted by Daniel Hall on October 1, 2007

If you want to know what a public good sounds like, please check out Okkervil River.

I just got back from hearing them blow the doors off Rock and Roll Hotel. Amazing.

Update: More public good-ness from they webcast last night’s show live, and you can listen here.

Posted in Culture, Public Goods, Random | Leave a Comment »

The NY Times is now free, and ethanol (for cars) is still a bad idea

Posted by Daniel Hall on September 19, 2007

The New York Times editorial page celebrates its newly decreed non-excludable status by noting what a bad idea corn-based ethanol is:

American corn-based ethanol is expensive. And while it can help cut oil imports and provide modest reductions in greenhouse gases compared to conventional gasoline, corn ethanol also carries considerable risks. …
The distortions in agricultural production are startling. Corn prices are up about 50 percent from last year, while soybean prices are projected to rise up to 30 percent in the coming year, as farmers have replaced soy with corn in their fields. The increasing cost of animal feed is raising the prices of dairy and poultry products. …
Meanwhile, the environmental benefits are modest. A study published last year by scientists at the University of California, Berkeley, estimated that after accounting for the energy used to grow the corn and turn it into ethanol, corn ethanol lowers emissions of greenhouse gases by only 13 percent.

What’s actually better news than the opening up of the editorial page is the opening up of the archive.
Read the rest of this entry »

Posted in Government Policy, Humor, Public Goods | Leave a Comment »


Get every new post delivered to your Inbox.

Join 32 other followers