Download Public goods

Policy Making as
“Rational Choice”
Assumptions: 1. Rational D-M process increases probability of
obtaining desired result 2. D-M judged by process not
outcomes
1.Problem recognition and definition
2. Goal selection
3. Identification of alternatives
4. Choice
• Cost-benefit calculations – “values”
• Risk * Harm calculations - Katrina/Cal – levees
• Unintended v. undesired v. unanticipated consequences
• Crisis D-M = catastrophic event, compressed time for D,
imperfect information.
CBA: To WAR! or not TO WAR!
(That is the Question)
Costs
• Lives
• $
• Opportunity Cost
• Blowback
Benefits
•Access to
oil
•WMD
•Dictator
•Spread
Democracy
If C>B then don’t do, If C<B then do
When is action/response demanded?
Risk * Harm/Probability* Impact
Sorenson’s Eight Steps
1. Agree on the facts
2. Agree on the policy objective
3. Precisely define problems
4. Consider all possible solutions
5. List possible consequences of all solutions
6. Recommend one option
7. Communicate the selected option
8. Provide for the execution of the option
(9. Bundenthal Addendum: Feedback and adaptation)
Impediments to Rational Choice
• Bounded rationality – Simon: constraints on objective
rationality
• Satisficing – 1st option that meets minimally acceptable stds
• Cognitive dissonance – Rejecting information that conflicts
with pre-existing strongly held beliefs.
• Prospect theory – Levy: tendency toward valuing “bird in
hand.” “sunk-cost fallacy” = cling to failed policies to
minimize fallout.
• Muddling through – Lindblom: “incrementalism” trial and
error DM
• Janis: “Grouthink”
Janis: Groupthink
•
•
•
•
Groupthink = fear of saying the “King has no clothes.” Janis divided the
pressures into three groups:
Type I - overestimation of the power and morality of the group. Ironically,
this can lead to ignoring the ethical or moral consequences of decisions. It
manifests itself in vilification of the enemy and couching the conflict only as
a battle between good and evil.
Type II is closed mindedness. This includes stereotyped views of enemy
leaders as too evil to warrant genuine attempts to negotiate, or as too weak
to counter whatever risky attempts are made to defeat the groups'
purposes. The result is known as a "risky shift" to more dangerous policies.
Type III -Pressures toward uniformity, including direct pressure on those
who express arguments against the group’s consensus, and the emergence
of "mindguards" who protect what information is disseminated in and to the
group.
Public goods (finiteness)
• In economics, a public good is a product or service
• A “public good” is a product or service which benefits everyone
in the community but often is not feasible or efficient to provide
without the effort of the community (or some aggregation of
interests above the individual – ie, a “group”).
– The number and critical nature of PGs has increased due
to modernization and complex interdependence. Roads,
Defense, Schools, Air, Water, Health are all PGs
– Is non-rejectable, non-rivalrous, and non-excludable.
• Non-rivalrous means that the consumption of the
good by one individual does not reduce the amount
of the good available for consumption by others.[1]
For example, if one individual eats a cake, there is
no cake left for anyone else; but breathing air does
not significantly reduce the amount of air available
to others.
• The term public good is often used to refer to goods that
are non-excludable as well. This means it is not possible
to exclude individuals from the good's consumption.
Fresh air may be considered a public good as it is not
generally possible to prevent people from breathing it.
• Non-rejectable – cannot refuse the impact/effect
•
Paul Samuelson
• Mancur Olsen The Logic of Collective Action: Public Goods and the Theor
, he theorized that “only a separate and ‘selective’
incentive will stimulate a rational individual in a latent
group to act in a group-oriented way”; that is, only a
benefit reserved strictly for group members will
motivate one to join and contribute to the group. This
means that individuals will act collectively to provide
private goods, (BECAUSE they are rivalrous and
excludable) but not to provide public goods.
• THUS, public goods are often underprovided
Externality
•
Is a cost or benefit from an economic transaction that parties
"external" to the transaction receive. Externalities can be either
positive, when an external benefit is generated, or negative, when an
external cost is imposed upon others. It is a form of side effect though
not necessarily an unintended consequence.
• Every decision made by a decision maker (economic agent)
will not only have an impact on the decision maker himself
but will also have an impact(s) on the other members of the
society which are known as externalities.
•
An externality occurs when a decision causes costs or benefits to third
parties (stakeholders), often, though not necessarily, from the use of a
public good (for example, production which causes pollution may
impose costs on others, making use of the public good air). In other
words, the participants do not bear all of the costs or reap all of the
gains from the transaction. As a result, in a competitive market too
much or too little of the good may be produced and consumed from
the point of view of society, depending on incentives at the margin and
strategic behavior.
Free rider problem
• Are actors who consume more than their fair share of a
resource, or shoulder less than a fair share of the costs of its
production.
• A common example of a free rider problem is defense
spending: no person can be excluded from being defended
by a state's military forces, and thus free riders may refuse
or avoid paying for being defended, even though they are
still as well guarded as those who contribute to the state's
efforts. Therefore, it is usual for the government to avoid
relying on volunteer donations, using taxes and conscription
instead.
• Socialized Risk/Privatized Profit
• “The owners, employees and creditors of these institutions are rewarded
when they succeed, but it is all of us, the taxpayers, who are left on the
hook if they fail. This is called private profits and socialized risk. Heads, I win.
Tails you lose. It is a reverse-Robin Hood system.”
David Einhorn Greenlight Capital
• Apple locating in Reno, although HQ in Cupertino, ERs for HC
Government as Promoter of
Economic Interests
1. Theoretical Background
2. Policy Approaches
3. Environmental Issues
4. Globalization
Conflicting Goals?
• Promoting Business
• Promoting Labor
• Promoting Agriculture
GDP = C + I + G + (X - M)
• Where:
C = household consumption expenditures
/ personal consumption expenditures
I = gross private domestic investment
G = government consumption and gross
investment expenditures
X = gross exports of goods and services
M = gross imports of goods and services
• Note: (X - M) is often written as XN, which
stands for "net exports"
Adam Smith
One of the main points of The Wealth of Nations is
that the free market, while appearing chaotic and
unrestrained, is actually guided to produce the right
amount and variety of goods by a so-called "invisible hand". If a
product shortage occurs, for instance, its price rises, creating
incentive for its production, and eventually curing the shortage.
The increased competition among manufacturers and increased
supply would also lower the price of the product to its production
cost, the "natural price".
Smith believed that while human motives are often selfish and
greedy, the competition in the free market would tend to benefit
society as a whole anyway. Nevertheless, he was wary of
businessmen and argued against the formation of monopolies.
• Smith vigorously attacked the antiquated government
restrictions which he thought were hindering industrial
expansion. In fact, he attacked most forms of government
interference in the economic process, including tariffs, arguing
that this creates inefficiency and high prices in the long run. This
theory, now referred to as "laissez-faire", influenced
government legislation in later years, especially during the 19th
century. However, Smith criticized a number of practices that
later became associated with laissez-faire capitalism, such as
the power and influence of Big Business and the emphasis on
capital at the expense of labor.
• Caveat Emptor – buyer beware
• Sympathy v. Self Interest - Theory of Moral Sentiments
• THE TRUTH IS: THERE IS NO FREE MARKET UNLESS THERE IS
GOVERNMENT REGULATION OF THE MARKET.
• Without government regulation, “Caveat Emptor” means people
die.
Karl Marx
•
Das Kapital 1867 – Marx argued that a
free market system is exploitative because
producers, through their control of markets, can
compel workers to labor at a wage below the
value they add to production and can force
consumers to pay higher prices for goods than are
justified by the cost of production.
• Not an advocate of authoritarian/command
economy
• History/economics is defined by struggle
between classes over power
David Ricardo – Iron Law
• In economics, the subsistence theory of wages states that
wages in the long run will tend to the minimum value needed
to keep workers alive. The justification for the theory is that
when wages are higher, more workers will be produced, and
when wages are lower, some workers will die, in each case
bringing supply back to a subsistence-level equilibrium.
• The subsistence theory of wages is generally attributed to
David Ricardo, and plays a large role in Marxist economics.
Most modern economists dismiss the theory, arguing instead
that wages in a market economy are determined by marginal
productivity. (but flat wages in US since 1980 are because
wages have NOT increased with Productivity.)
• (Abortion, birth control, immigration)
•
•
•
•
•
American CEOs saw their pay spike 15 percent last year, after a 28 percent pay rise
the year before, according to a report by GMI Ratings cited by The Guardian.
Meanwhile, workers saw their inflation-adjusted wages fall 2 percent in 2011,
according to the Labor Department.
That's in line with a trend that dates back three decades.
CEO pay spiked 725 percent between 1978 and 2011, while worker pay rose just
5.7 percent, according to a study by the Economic Policy Institute released on
Wednesday. That means CEO pay grew 127 times faster than worker pay.
Income inequality between CEOs and workers has consequently exploded, with
CEOs last year earning 209.4 times more than workers, compared to just 26.5
times more in 1978 -- meaning CEOs are taking home a larger percentage of
company gains.
That trend comes despite workers nearly doubling their productivity during the
same time period, when compensation barely rose.
Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour
basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank
of St. Louis.
Meanwhile, workers saw their inflation-adjusted wages fall in recent years as
corporations postponed giving raises while adding to their record corporate
profits.
John Maynard Keynes
• (pronounced Kayns) (June 5, 1883 – April 21, 1946)
• An English economist whose radical ideas had a major
impact on modern economic and political theory as well as
on Franklin D. Roosevelt's New Deal. He is particularly
remembered for advocating interventionist government
policy, by which the government would use fiscal and
monetary measures to aim to mitigate the adverse effects
of economic recessions, depressions and booms. He is
considered by many to be the founder of modern
macroeconomics.
Keynes (often contrasted to Friedman or Hayek)
• Keynes's theory suggested that active government policy
could be effective in managing the economy. Rather than
seeing unbalanced government budgets as wrong, Keynes
advocated what has been called counter-cyclical fiscal
policies, that is policies which acted against the tide of the
business cycle: deficit spending when a nation's economy
suffers from recession or when recovery is long-delayed and
unemployment is persistently high -- and the suppression of
inflation in boom times by either increasing taxes or cutting
back on government outlays. He argued that governments
should solve short-term problems rather than waiting for
market forces to do it, because "in the long run, we are all
dead." (when your house is on fire, you have to worry about
paying the firemen later)
Galbraith
• In his most famous work, The Affluent Society (1958), which
became a bestseller, Galbraith outlined how post-World War II
America was becoming wealthy in the private sector but
remained poor in the public sector, lacking social and physical
infrastructure, and perpetuating income disparities.
• Galbraith also critiqued the assumption that continually
increasing material production is a sign of economic and
societal health. Because of this Galbraith is sometimes
considered one of the first post-materialists. In this book, he
coined the phrase "conventional wisdom."
USA annual real GDP from 1910–60, with the
years of the Great Depression (1929–1939)
highlighted
Unemployment rate in the US 1910–1960, with the
years of the Great Depression (1929–1939) highlighted.
What is Gov’t supposed to do?
Control Inflation and Unemployment
• Inflation – a general rise in the Price of goods and
services
• “Too much money chasing too few goods”
• 2-3%? 5%?
• State control of money supply:
Fiscal – G tax and expenditures
Monetary – money supply, % rates, discount rate,
reserve requirement
• Hyperinflation
• The “Fed” Alan Greenspan, Ben Bernanke Janet Yellen?
Employment
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•
•
•
•
•
•
Definitions? Had job, seeking job
Natural rate: 5-6%? 10%?
What is role of state?
Connect back to Maslow
Transitions in global economy
Agricultural
industrial
service
Outsourcing, ISI, WTO
????
Phillips Curve
• A supposed inverse relationship
between inflation and
unemployment. The British
economist A.W. Phillips
observed an inverse relationship
between inflation and
unemployment in the British
economy in the century up to 1958
-- when inflation was high, unemployment was low, and viceversa. As seen to
the right, when drawn on a graph with the inflation rate on the
vertical axis and the unemployment rate on the horizontal
axis, the relationship between the variables showed a
downward sloping curve, the Phillips curve (PC).
Supply-side economics
•
•
•
•
(Friedman, Hayek, Chicago School)
A school of macroeconomic thought which emphasizes
the importance of tax cuts and business incentives in
encouraging economic growth, in the belief that
businesses and individuals will use their tax savings to
create new businesses and expand old businesses, which
in turn will increase productivity, employment, and
general well-being.
While all macroeconomics involves both supply and
demand, supply-side economics emphasizes the
importance of encouraging increases in supply.
Reaganomics - - Voodoo Economics (Pres. Bush)
Trickle down v. Rising tide
Supply-side economics
• Principally a response to perceived failings of
Keynesian ideas that had steadily risen to dominance
following the Great Depression. In particular, the
point of disagreement was the question of the
stagflation of the 1970s, and the failure of Keynesian
policies to produce growth without inflation, and the
failure to provide a clear solution for the series of
recessions which occurred in the wake of the oil
crisis in 1973.
• Effect of Wars?
Government as Regulator of the Economy –
Which Value do we want?
• Efficiency Through Government Intervention
• Equity Through Government Intervention
Fiscal Policy: What Congress/Pres do
Monetary Policy: What the “FED” does
Managing distribution to address
inequality: Is this a task of government?
• Regressive v. Progressive tax
Pro= as income increases, % tax increases
Reg= as income increases, % tax decreases or
same amount/% regardless of income
• People in US end up paying about equal to the
difference in wealth. IE, someone who makes 250k
pays about 5* someone who makes 50k
• Almost 50% end up not paying income tax
( AGI/ CGI < 33k)
• equality of outcomes v. equality of results?
2010 income brackets and tax rates
Marginal
Tax Rate[5]
10%
15%
25%
28%
33%
35%
Single
$0 –
$8,375
$8,376 –
$34,000
$34,001 –
$82,400
$82,401 –
$171,850
$171,851
–
$373,650
$373,651+
Married Filing Jointly or Married Filing Head of
Qualified Widow(er)
Separately Household
$0 –
$0 – $16,750
$0 – $8,375 $11,950
$8,376 – $11,951 –
$16,751 – $68,000
$34,000
$45,550
$34,001 – $45,551 –
$68,001 – $137,300
$68,650
$117,650
$117,651
$68,651 –
–
$137,301 – $209,250
$104,625 $190,550
$209,251 – $373,650
$373,651+
$104,626 – $190,551 $186,825 $373,650
$186,826+ $373,651+
Historical marginal income tax rates for Married Filing Jointly at stated
income levels.[3]
Year
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966 - 1976
1980
$10,001
6%
10%
11%
11%
11%
14%
38%
41%
38%
38%
38%
42%
38%
26%
26%
26%
26%
23%
22%
18%
$20,001
10%
16%
19%
19%
19%
28%
55%
59%
56%
56%
56%
62%
56%
38%
38%
38%
38%
34%
32%
24%
$60,001
21%
36%
37%
39%
39%
51%
75%
81%
78%
78%
78%
80%
78%
62%
62%
62%
62%
56%
53%
54%
$100,001
25%
56%
56%
62%
62%
62%
85%
92%
89%
89%
89%
90%
89%
75%
75%
75%
75%
66%
62%
59%
$250,001
25%
58%
58%
68%
68%
68%
88%
94%
91%
91%
91%
92%
91%
89%
89%
89%
89%
76%
70%
70%
47%
• The Laffer curve is
used to illustrate the
concept of Taxable
income elasticity, the
idea that government
can maximize tax
revenue by setting
tax rates at an
optimum point. The
curve was
popularized by Arthur
Laffer though it had
been widely
postulated by
economists.
Bush tax cuts
•
The tax cuts have been largely opposed by American economists, including the
Bush administration's own Economic Advisement Council. [10] In 2003, 450
economists, including ten Nobel Prize laureates, signed the
Economists' statement opposing the Bush tax cuts, sent to President Bush
stating that "these tax cuts will worsen the long-term budget outlook... will
reduce the capacity of the government to finance Social Security and Medicare
benefits as well as investments in schools, health, infrastructure, and basic
research... [and] generate further inequalities in after-tax income." [11]
•
…there is a broad consensus among even conservative economists (including
current and former top economists of the Bush Administration such as
Greg Mankiw) that the tax cuts have had a substantial net negative impact on
revenues (i.e., revenues would have been substantially higher if the tax cuts had
not taken place), even taking into account any stimulative effect the tax cuts
may have had and any resulting revenue feedback effects. [13]
• The Tax Policy Center reported that the various tax cuts under the
Bush administration were "extraordinarily expensive" to the
Treasury:[30]
• The congressional Joint Committee on Taxation calculated a score,
or revenue change, for each of the seven major tax cut bills passed
during the Bush administration: their combined cost sums to over
$2.0 trillion from 2001-17. Extending these tax cuts into the future
would carry a similar cost: the Congressional Budget Office (CBO)
recently estimated the cost of extending them through 2017 at $1.9
trillion, not counting the costs of debt service, and not counting the
cost of indexing the alternative minimum tax (AMT) to inflation to
prevent it from undoing much of the cuts...if one takes into account
the direct effects of the tax cuts, extra interest payments, and the
extra "interaction" cost of reforming the AMT while extending the
Bush tax cuts, the combined cost of extending the tax cuts through
2017 adds up to $2.8 trillion.
• Medicare Plan D= ?
• GWOT = 3 + Trillion
The velocity of money is the average
frequency with which a unit of money is
spent in a specific period of time.
If, for example, in a very small economy, a
farmer and a mechanic, with just $50
between them, buy goods and services from
each other in just three transactions over the
course of a year:
Farmer spends $50 on tractor repair from
mechanic.
Mechanic buys $40 of corn from farmer.
Mechanic spends $10 on barn cats from
farmer
-then $100 changed hands in course of a year,
even though there is only $50 in this little
economy. That $100 level is possible because
each dollar was spent an average of twice a
year, which is to say that the velocity was 2 /
yr.
Globalization and the Environment
Important Concepts
• Scarcity and Excess
• Carrying capacity: the maximum biomass that
can be sustained by a given territory
• Tragedy of the Commons – William Foster
Lloyd – Garrett Hardin
– rationally self-interested behavior may have a
destructive collective impact
– overgrazing of animals on the village green
– applies to human behavior and ecological systems
Ecopolitics
• Politics of scarcity: scarce resources can
undermine security and lead to military
conflict
• Environmental security: environmental
threats can be as important as military threats
• Sustainable development: economic growth
that does not deplete the resources needed to
maintain growth
Population Growth
• Annual population growth rate:
– 2.2% (maximum) in 1964
– currently 1.3%
• >7 billion people
• ZPG
•
•
Growth highest in Global South
– 95% of total growth
– often unable to deal with social, economic and environmental problems of larger
population
Demographic transition model:
– high death and birth rates replaced by first by low death and later low birth rates
– Europe and North America 1750-1930
– a part of modernization
– however, Global South has high birth rates and low death rates, with minimal
modernization
The Rule of 70
The Rule of 70 is useful for financial
as well as demographic analysis. It
states that to find the doubling time
of a quantity growing at a given
annual percentage rate, divide the
percentage number into 70 to obtain
the approximate number of years
required to double. For example, at a
10% annual growth rate, doubling
time is 70 / 10 = 7 years.
Similarly, to get the annual growth
rate, divide 70 by the doubling time.
For example, 70 / 14 years doubling
time = 5, or a 5% annual growth
rate.
The following table shows some
common doubling times:
Growth Rate
(% per Year)
Doubling Time
in Years
0.1
700
0.5
140
1
70
2
35
3
23
4
18
5
14
6
12
7
10
10
7
Malthusian Catastrophe
• Essay on the Principle of Population: population growth would
eventually outrun food supply. This prediction was based on
the idea that population, if unchecked, increases at a
geometric rate, whereas the food supply could only grow at
an arithmetic rate. Mathematically, any increasing geometric
sequence (e.g. 2,4,8,16) will eventually overtake all arithmetic
sequences (e.g. 1,2,3,4). The resulting decrease in food per
person will eventually lead to subsistence-level conditions.
According to Malthus, the catastrophe can only be prevented
by self-restraint or vice—which for him included
contraception and abortion.
• For every person saved today (from starvation, disease, war,
etc. – earth’s natural controlling mechanisms) X people will
die in the future. 5 times? 10 times?
Ecopolitics of Energy
• United States has highest per capita oil use
• Kyoto Accord
– Established targets for signers’ reduction of greenhouse gas emissions
– Bush refused to sign in 2001
– McCain supported it
– Warsaw 2013? Battle between Rich and Poor nations
• Organization of Petroleum Exporting Countries
(OPEC)
–
–
–
cartel that sets production quotas/prices
monopoly power
high oil prices lower economic growth
The Potential for Renewable Energy to Supply
the
World’s Energy Needs by the Year 2100
SOURCE:
Adapted
from Crump
(1998), 193
(left) and
223 (right).
Climate Change Muller
• Greenhouse effect – science and stewardship
• US = 4% of world pop, 25% of greenhouse gases.
China = 75% from coal
• World temp. to rise 3.6 degrees C by 2100 (unless
action is taken?)
• Sea level: 3-foot rise
• Increases in severe weather
• Shifts in rainfall patterns and regional climate
• Destruction of entire ecosystems
IPCC 4th Report
•
•
Working Group I dealt with the "Physical Science Basis of Climate
Change." The Working Group I Summary for Policymakers (SPM) was
published on 2 February 2007[7] and revised on 5 February 2007[8].
There was also a 2 February 2007 press release[9]. The full WGI report[10]
was published in March. The key conclusions of the SPM were that [11]:
Warming of the climate system is unequivocal.
• Most of (>50% of) the observed increase in globally
averaged temperatures since the mid-20th century is very
likely (confidence level >90%) due to the observed increase in
anthropogenic (human) greenhouse gas concentrations.
•
Hotter temperatures and rises in sea level "would continue for centuries"
no matter how much humans control their pollution [12], although the
likely amount of temperature and sea level rise varies greatly depending
on the fossil intensity of human activity during the next century (pages 13
and 18)[13].
• UPDATE: Confidence level now 95%
IPCC 4th Report
•
•
•
•
The probability that this is caused by natural climatic processes alone is
less than 5%.
World temperatures could rise by between 1.1 and 6.4°C (1.98 and
11.52°F) during the 21st century (table 3) and that:
– Sea levels will probably rise by 18 to 59 cm (7.08 to 23.22 in) [table
3].
– There is a confidence level >90% that there will be more frequent
warm spells, heat waves and heavy rainfall.
– There is a confidence level >66% that there will be an increase in
droughts, tropical cyclones and extreme high tides.
Both past and future anthropogenic carbon dioxide emissions will
continue to contribute to warming and sea level rise for more than a
millennium.
Global atmospheric concentrations of carbon dioxide, methane, and
nitrous oxide have increased markedly as a result of human activities
since 1750 and now far exceed pre-industrial values over the last
650,000 years
Precautionary Principle
• A phrase first used in English circa 1988, is the idea that if the
consequences of an action are unknown, but are judged to
have some potential for major or irreversible negative
consequences, then it is better to avoid that action. The
principle can alternately be applied in an active sense, through
the concept of "preventative anticipation" [1], or a willingness
to take action in advance of scientific proof of evidence of the
need for the proposed action on the grounds that further delay
will prove ultimately most costly to society and nature, and, in
the longer term, selfish and unfair to future generations. In
practice the principle is most often applied in the context of the
impact of human civilization or new technology on the
environment, as the environment is a complex system where
the consequences of some kinds of actions are often
unpredictable.
Costs
• What is the real/actual cost of things?
– The true “cost” of a car? Etc…
The actual costs of much of modern society are not paid on
usage, instead being deferred to some point in the future
We do not know what those actual costs are.
We will eventually have to pay them.
Are we trapped in an arrested adolescence where we refuse
to consider the implications of our actions and take
responsibility for them?
Rising Average Global Temperatures at the
Earth’s Surface since 1867
SOURCE: Vital
Signs 2002, p. 51.
Copyright © 2002
Worldwatch Institute.
www.worldwatch.org
Map 10.2 Global Warning about Global
Warming
SOURCE: From TIME, April 9, 2001, p. 30–31. Copyright © 2001 TIME,
Inc. Reprinted by permission.
Counter points?
•
•
•
Muller WSJ
Chevron
Himalaya
• There are Scientists that contest the view
that humanity's actions have played a significant role in
increasing recent temperatures. However, uncertainties do
exist regarding how much climate change should be
expected in the future, and a hotly-contested political and
public debate exists over what, if anything, should be done to
reduce or reverse future warming, and how to cope with the
consequences.
The Role of Uncertainty
The projected
temperature increase for
a range of stabilization
scenarios (the colored
bands). The black line in
middle of the shaded
area indicates 'best
estimates'; the red and
the blue lines the likely
limits. From the work of
Working Group III.
Other Environmental Challenges
• Acid precipitation
• Ozone layer destruction
– 1987 Montreal Protocol and CFCs
•
•
•
•
•
Deforestation
Desertification
Biodiversity loss
Cost v. Benefit / Risk * Harm
Collective Goods and Free Riders redux
Origins and theory
• The substance of the precautionary principle is not really
new. The essence of the principle is captured in
cautionary aphorisms such as 'An ounce of prevention is
worth a pound of cure', 'Better safe than sorry', and
'Look before you leap'.[3] The precautionary principle
may be interpreted as a generalization of the ancient
medical principle, associated with Hippocrates, of "first,
do no harm".[4] It may also be compared with the
"beyond a reasonable doubt" standard of proof often
used in criminal law, which may be seen as the
application of the precautionary principle to the
assumption of "innocent until proven guilty" (because
society sees convicting the innocent as far worse than
acquitting the guilty).
Origins and theory – “Fram”
• In economics, the precautionary principle has been
analyzed in terms of the effect on rational decisionmaking of the interaction of irreversibility and
uncertainty. Authors such as Epstein (1980) and Arrow
and Fischer (1974) show that irreversibility of possible
future consequences creates a quasi-option effect which
should induce a risk-neutral society to favor current
decisions that allow for more flexibility in the future.
Gollier et al (2000) conclude that "more scientific
uncertainty as to the distribution of a future risk — that
is, a larger variability of beliefs — should induce Society
to take stronger prevention measures today."
You can pay me now or pay me later
A penny saved…
An ounce of prevention..
Mitigation of global warming
• Mitigation of global warming involves taking
actions aimed at reducing the extent or
likelihood of global warming.
• Adaptation to global warming involves taking
action to take advantage of the
positive effects of global warming while
preventing or minimizing the
negative effects of global warming.
• The increasing scientific consensus on global warming,
together with the precautionary principle and the fear of
non-linear climate transitions [1] is leading to increasing
action to mitigate global warming.
• The European Union has set a target of limiting the global
temperature rise to 2 °C compared to preindustrial levels, of
which 0.8 °C has already taken place and another 0.5 °C is
already committed.
• The 2 °C rise is typically associated in climate models with a
carbon dioxide concentration of 400-500 ppm by volume; the
current level is 379 ppm by volume, and rising at 2 ppm
annually. Hence, to avoid a very likely breach of the 2 °C
target, CO2 levels would have to be stabilised very soon; this
is generally regarded as unlikely, based on current programs
in place to date. [2].
Mitigation
• There are four categories of actions that can be taken to
mitigate global warming:
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Reduction of energy use (conservation)
Shifting from carbon-based fossil fuels to alternative energy sources
Carbon capture and storage
Carbon sequestration
• Strategies for mitigation of global warming include
development of new technologies, wind power,
nuclear power, renewable energy, biodiesel, electric or hybrid
automobiles, fuel cells, and energy conservation,
carbon taxes and carbon sequestration schemes.
Globalization
• “the increasingly close international
integration of markets both for goods and
services and for capital” --IMF
• makes state boundaries less important
• global dissemination of Western culture
• increased interdependence
• global village: rapid communication
• provokes strong reactions pro and con
The Next Milieu
Rosenau and Etzioni