Download Germany`s abrupt decision to phase out nuclear power: the method

Germany's abrupt decision to phase out nuclear power:
the method in the madness
The shock waves of Fukushima have provoked an overreaction that has put an
end to the megatrend of downplaying the risks of nuclear power
In these post-Fukushima weeks, it takes considerable courage to question the German government's decision to phase out nuclear power. If you dare to openly ask whether this decision
was rational and to suggest that it was hasty and ill considered, you will meet a tsunami of
indignation as violent as the one that hit the coast of Fukushima. Nuclear power is the devil's
work and if you haven't realized as much after Fukushima, you are beyond help.
Viewed dispassionately, there is, in fact, not the slightest reason to immediately shut down all
nuclear power plants because of the Fukushima disaster. The German government already
knew last autumn that extremely unlikely events can occur. The Fukushima disaster has not
changed the probability of events that occur too rarely to be included in risk analyses. The
probability that a meltdown will occur in a German nuclear power plant is the same as it was
before Fukushima. The analyses on which last autumn's decision to extend the operating lives
of nuclear power stations was based have lost none of their validity. Based on these analyses,
Merkel's government overturned the Schröder government's previous decision to abandon
nuclear power and decided to extend the operating lives of Germany's nuclear power stations.
Why this sudden overreaction? It is evidently an attempt to catch up with the voters. Whether
this is really politically wise remains to be seen. The election result in Baden-Wuerttemberg
shows that voters cannot be taken for granted. Why do even diehard CDU-FDP coalition voters want an immediate nuclear exit after Fukushima? Studies on the psychology of decisionmaking point to a simple explanation: people tend to overestimate extremely small probabilities and the likelihood of extreme losses. When assessing available options, neither the objective probability nor the actual extent of the potential loss are the decisive factors. The decisive
factor is, on the one hand, the subjective weight given to a probability—which is always excessively high in the case of extremely small probabilities—and, on the other, the fact that big
losses are always dramatized. These are the findings of psychologists Daniel Kahneman and
Amos Tversky, whose work earned Kahnemann the Nobel Prize in Economics in 2002. The
Fukushima disaster was a combination of the two: a catastrophic loss and an extremely small
probability. This shock was more than the angst-ridden German soul could take. The reaction
of German voters to this shock is therefore not surprising.
The decision to phase out nuclear power in the near future is evidently irrational but it makes
sense nevertheless. For the overestimation of major traumatic shocks has a flip side: the
downplaying of megatrends. Megatrends consist of a long series of minor losses that occur
with a relatively high probability. The megatrend associated with the operation of nuclear
power stations consists of a long series of incidents that are reported again and again and that
will continue to be reported unless nuclear power is phased out. This megatrend comprises all
operational and technical risks associated with the operation of nuclear power plants. Because
such risks are underestimated, for too long the mainstream majority simply stood by as nuclear power plant operators got on with business as usual.
Moreover, unresolved long-term issues such as the problem of how to permanently dispose of
nuclear waste are not taken seriously enough. This is an underlying and unavoidable problem
of nuclear power which is as old as nuclear power itself. Nonetheless, the current benefits
derived from the operation of nuclear power plants were always thought to outweigh the unresolved future problem of permanent disposal. Such present-biased preferences are frequently
seen in parliamentary democracies with four-year electoral cycles, according to the motto, "If
an option is politically or economically useful today, what do I care about any problems that
may be associated with it the day after tomorrow."
The response of many conservative politicians to the decision to phase out nuclear power
shows that they had long thought that a phaseout was necessary. But instead of speeding up a
phaseout, politicians kept putting off this far-reaching decision. Why? For this "procrastinitis"
there is also a simple psychological explanation: hyperbolic discounting. The here and now is
assigned a higher value than the future and future events are discounted much more heavily
than is the case with rational time preferences. Although decision makers know that the future
benefit of a particular option is greater than its current costs, when it comes to the crunch,
they decide against the option because the current costs suddenly outweigh the future benefits.
If the "heavy" decision to phase out nuclear power is put off just a short time into the future, it
suddenly seems much less heavy. The decision taken by Angela Merkel's government in the
autumn of 2010 to extend the operating lives of nuclear power stations is a perfect example of
procrastination. A politically and economically uncomfortable decision that was known to be
unavoidable was further delayed because of short-term costs. Had it not been for Fukushima,
a couple of years down the road, the operating lives of nuclear power stations would most
likely have been extended again.
The traumatic shock of Fukushima has put an unexpectedly abrupt end to the megatrend of
downplaying the risks of operating nuclear power plants. That's a good thing. Without the
shock of Fukushima, Germany's energy policy would have continued to muddle along for a
long time to come.
Hans Wolfgang Brachinger is Professor of Statistics at the University of Fribourg, where he heads the Center for Research in
Economic Statistics (CEStat.CH). He is president of the Commission for Federal Statistics.