19 September 2010

More on the "Iron Law" of Climate Policy

In The Climate Fix, I discuss an empirical reality that I summarize as the "iron law" of climate policy.  The "iron law" simply states that while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits.  Such limits may fall at different thresholds for different places at at different times.  The iron law seems so common sense that I am always surprised when I hear objections to it.

It shows up on the front page of today's NYT, in a comment by Elke Weber at Columbia University:
“Most Americans want to do things that are good for the environment, but not everyone wants to pay the price”
Here is a thought experiment that you can conduct to see if you too follow the "iron law":  Imagine some environmental objective, such as reducing greenhouse gas emissions.  Would you agree to pay $1 to achieve that objective?  Most everyone would say, "sure, why not, it is just a dollar."  OK then, would you agree to pay $1 million dollars to achieve that same objective?  Most people would say, "I don't even have a million dollars, and if I did, I could probably find other uses."  

If you are like most people as I've characterized them above, then you have a preference function that runs between $1 and $1,000,000 which shows a decreasing willingness to pay as the price goes higher.  Certainly in the aggregate such a function accurately characterizes public opinion.  A decreased willingness to pay might be because of competing values (you'd rather send your kids to college than pay for environmental objectives) or because of means (your ability to pay is financially limited). 

Such a preference function using actual public opinion data is illustrated in Figure 2.4 of The Climate Fix, which draws from the bottom panel of the figure at the head of this post, for the US in 2009.  The Figure show support for a "climate bill" decay rapidly as a function of annual household cost.  The implications of the "iron law" for both climate policy and politics will be the subject of later posts.

12 comments:

Sharon F. said...

Your discussion of the social science of environmental behavior reminds me of an excellent book called "Environmental Problems and Human Behavior" by Gardner and Stern. I have the first edition, and not the second edition which is currently available. Many of the examples in the first edition were about energy reduction from the previous Energy Crisis. I remember one discussion of why one of the authors (Stern) did not take the Metro to work despite his environmental inclinations. To anyone who is interested in this topic, (of what people say and how it relates to their behavior vis a vis the environment) I highly recommend this book. It would also be illuminating for current students as it tells the story of the last time this country tried to do energy conservation(if it still has these sections).

Remember that Santayana quote "Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it."

We did try the whole energy conservation and alternative fuel effort once before and I'm sure there are numerous lessons to be learned.

Len Ornstein said...

Roger:

Your formulation of your "Iron Law" is almost useless:

The way people respond to a cost is by estimating their perceptions of its associated risks and benefits. So the only way to get a meaningful response is by presenting the costs along with the risks/benefits.

And as you well know, it's the differences is perceptions about the magnitudes of the risks (and to whom; themselves; their heirs; or just 'others') that largely decide what individuals believe they are willing to pay!

Roger Pielke, Jr. said...

-2-Len Orenstein

I agree with this:

"The way people respond to a cost is by estimating their perceptions of its associated risks and benefits. So the only way to get a meaningful response is by presenting the costs along with the risks/benefits."

And it is exactly this thinking that has led to some of the more hyped-up overstatements of climate science in public discourse, and the downplaying of uncertainty.

You are not going to overcome the iron law by trying to scare people. In fact, the evidence suggest that exactly the opposite has occurred (see Figure 8.1 and related discussion in TCF).

Look at the graph above -- a majority of people in the US at the time of the poll thought global warming to be "very" serious and caused by humans, and yet the preference function in the third panel still exists. Do you really think that converting the other 25% who are unconvinced in the poll will change the shape of that preference function?

Mike Smith said...

Roger,

You are 100% correct about the "iron law." But, I believe peoples' logic about this encompasses more than just global warming.

Lets assume for a moment that, for me, my environmental "tithe" (i.e., incremental dollars I'm willing to spend to improve the environment) is $100/year.

There is an excellent article in the new "Wired" (October, 2010, p. 33) about Tata Group's new $26 water filter that requires neither electricity nor running water. It only requires 2-3 $6 filters per year (depending on family size).

Assume for a moment a reputable charity was set up to distribute these filters and train families to use them asked me for a $100/year donation.

Now assume the U.S. government proposes to set up a carbon tax that would cost me $100/year.

The way I see it, the water filter would bring immediate, tangible benefits.

The carbon tax MIGHT have a beneficial effect (i.e. after all tax dollars are fungible, who knows how that $100 will actually be spent) on something that MIGHT be a problem in the FUTURE.

For me, an absolute "no brainer" as to where I would want my hard-earned money to go.

Mike

Mark B. said...

So here's exactly my problem with Roger's repeated claim that people are in favor of doing something about global warming. The statement is simply not correct. When asked in a survey if they are in favor of doing something, a majority may say yes. That has nothing to do with whether they are actually willing to pay out of their own pockets a given amount to do something. Call it the Surveyer's Folly. People will give answers to anonymous callers for many different reasons. When you assign an explicit cost - like the cost of shutting down every coal-fired plant in the country, and the elimination of all but the tiniest cars, then reality sets in and people start telling the truth. The vast majority of Americans are strongly against Jim Hansen's solution of global warming, and millions would get out their guns if it came down to it. I'm entirely serious here - you'd have violent revolution in the streets if you tried to do what the scientific consensus demands. Good luck with that.

Harrywr2 said...

Roger Pielke, Jr. said... 3

"Do you really think that converting the other 25% who are unconvinced in the poll will change the shape of that preference function?"

20% of the US Adult population smokes.

Polls show 21% of drivers admit to having consumed alcohol and driven in the last year.

I drive a moped as my primary transportation, which quadruples my chances of being involved in a fatal accident.

Clearly within society we have a broad range of opinions as to what constitutes an acceptable risk.

Mike M. said...

I would not pay one penny to reduce greenhouse gas emissions. I do not believe an effective enough case has been made that we are experiencing unique warming or that we have such a comprehensive understanding of all natural forcings that we can rule them out. I would join an organization dedicated to electing like minded representatives who would prevent our government from engaging in such pointless tomfoolery.

Wait, I already did that!

http://www.teapartyofwmi.org/

Does that help,Roger? :)

Roger Pielke, Jr. said...

-7-Mike M.

What'd you think about the Hartwell Paper?

Mike M. said...

I cannot agree with the basic premise of your paper regarding co2, but I applaud your efforts and that of the Breakthrough Institute. I'm astonished that Alarmist zealots routinely spit and sneer whenever your name comes up.

If a tax were designed to specifically develop a new (not wind or solar) form of energy even stingy Tea Partiers like myself would support it. I'm talking something like the Brussard reactor that landed in the Navy's lap. Good grief, quantum computers are now just 5 years away. Cheap, abundant energy is the key to achieving ALL of our goals, including enriching those impoverished nations with the highest fertility rates. Lift them out of poverty and give them good government and you will solve your population problem, too.

Back spasms and three children to put to bed preclude me from saying more. Keep up the good work, Roger.

Professor Pizzle said...

Roger, you are spot on with your ‘Iron Law. This is how normal people think.

However, and forgive me if you've already thought of this, it's not how a lot of those in the environmental movement think.

The green version of your Iron Law would run something like this: Would you be prepared to pay up to $1 million – of somebody else's money – to fix this problem?

It's a rather fundamental difference of approach, and reveals the fundamentally Marxist worldview that underpins a lot of climate change activism.

PaulM said...

#2 Another factor this doesn't take into account is ability to pay. To some people, say, a professor with a good salary and book royalties, $100 a year is nothing, but to other people, $100 a year is quite a lot of money.
So the bottom graphic could just be interpreted as a measure of disposable household income rather than a measure of environmental concern - for 30% of people, $175 a year would make very little impact, etc.

Sam said...

I think it is a misnomer that a formulation of an unquantified aggregate cost/benefit preference curve is termed an "Iron Law." Add to that the fact that the curves for different societies and different individuals within those societies are all themselves different, and you might understand some of the push-back I and other have given you on the term. It might sound nice, like the Kaya Identity, but is too strong of a term for what it represents. I completely agree that there are bounds and ranges on personal commitments to mitigating climate change, and that convincing everyone that it is a problem won't ever happen, and probably would not help much if did happen. But terming it an Iron Law that people aren't willing to pay much for protection of a commons asset is not particularly new news, nor in keeping with a "law". The tragedy of the commons illustrates a socio-economic principle, but cannot be formualted exactly as a law. I agree with your characterization of the aggregate relationship as a snapshot of public commitment, and I think that social theory commenting on the tragedy of the commons is quite relevant. I also think that in addition to differences in competing interests and means, that differences in assessed risk, commitment to common goods, and access to information will have significant effects on how much individuals are willing to pay for mitigating climate change impacts.

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