When specificity is a roadblock

For today, I will just quote a passage that I came across in the remarkable book, Steady -State Economics: The Economics of Biophysical Equilibrium and Moral Growth (1974), by the ecological economist Herman E. Daly. Please let me know what you think.

Why do we insist on ignoring the ethical character of so many major economic decisions? Why this compulsion to substitute mechanical calculation for responsible value judgment? Perhaps it's because our mechanistic paradigm has reduced values and ethics to mere matters of personal taste, about which it is useless to argue. Quality involves difficult judgments and imposes self-definition and responsibility. Quantity involves merely counting and arithmetical operations that give everyone the same answer and impose no responsibility. Thus university deans make promotion decisions by counting words published and number of citations rather than by attempting a qualitative judgment about the true worth of a scholar's work, which is bound to cause some disagreement. Counting is an easy way out--a retreat from the responsibility of thinking and evaluating quality.

An especially important role in the quantitative short-circuiting of responsibility is played by randomness. Randomness is, in fact, an excellent moral scapegoat. Consider that some 50,000 Americans are killed annually by the automobile. Suppose that the specific identities of these people were known in advance. To save 50,000 specific individuals, we might lower speed limits drastically and return to bicycles for local transportation. To save 50,000 unknown, randomly determined individuals, we do nothing. If a soldier kills specific women and children at close range with a rifle we are horrified; if a bomber pilot kills many more women and children, whose numbers are predictable but whose identities are unknown before the fact, we are only vaguely upset...'Thou shalt not kill thy specific identified brother, but mayest murder random persons at will, in order to achieve thy 'progress,' however shallowly defined.' How much economic growth is based on this expanded version of the shorter, less sophisticated commandment?...We cannot throw responsibility for such collective existential decisions on to the moral scapegoat of randomness with its phony numerical calculations.

The way in which these phony calculations work is via "economies of ignorance and scale," as John U. G. Adams ("...And How Much For Your Grandmother?" Environment and Planning, Vol. 6, 1974) has scathingly illustrated. Consider what happens when we apply the concept of Pareto efficiency to the cost-benefit analysis of a project involving the predictable loss of life. Let Vj be te compensatory money payment to individual j to make him indifferent to the proposed project. That is, if j is to be hurt by the project, then Vj is what he must be paid to accept it, and it carries a minus sign.; if j is to be benefited, Vj is what he must be paid to forgo the project, and it carries a plus sign. If the algebraic sum for all individuals is positive, then there is a potential Pareto improvement; that is, the winners could compensate the loser and still be better off.

Suppose now that individual j would be killed as a result of the project. Consistency with the Pareto criterion requires that he be compensated for the loss of life according to his own valuation. Since most people would put a very high or even infinite cash value on the remaining years of lives, the result is that any project involving predictable loss of specific lives would fail the test of Pareto improvement and could not be justified by cost-benefit analysis. This is so even if more lives are saved than lost by the project, since there is no way for those saved to compensate those killed, and any cancelling out by the analyst of lives saved against lives lost violates the Pareto rule of no interpersonal comparisons.

It is obvious that many projects justified by cost-benefit analysis do result in the predictable loss of life. This is true for any projects that increase air or ground traffic, radiation exposure, or air pollution, for example. What allows cost-benefit analysts to "justify" such projects? It is essentially the fact that we never know in advance the identities of the specific people who will be killed. Th result is that we never have to compensate anyone for his certain loss of life but instead we must compensate everyone for the additional risk to which he is exposed as a result of the project (E. J. Mishan, "Evaluation of Life and Limb: A Theoretical Approach," Journal of Political Economy, July/August 1971). If the population is large, the individual risk becomes very small, perhaps below the minimum sensible, so that everyone is indifferent to such a negligible risk and no compensation at all is required, and the project passes with honors.

Note that in theory we have passes from a case requiring infinite compensation to a case requiring zero compensation, simply by throwing away information, that is, by remaining ignorant of the specific identities of the victims. This is odd, to say the least. In practice, of course, we never have the specific identities of victims beforehand, but that fact does not resolve the theoretical anomaly. The population subset most at risk could often be specified but usually is not, so that the risk often appears more diluted than it really is.

A response to Larry Summers from The Economist

Below is the response of The Economist magazine to Larry Summers's memo to his colleagues at the World Bank, which I posted yesterday. I will write my thoughts in response to both Larry Summers's memo and The Economist's response to the memo in my next post.

If Mr. Summers is wrong, why is he wrong? Many greens would say his premise is false. They appear to believe that the only acceptable amount of pollution is zero--or which looks more sensible, but almost as daft--that all pollution above some arbitrarily low threshold must be stopped. This cannot be right. Controlling pollution is expensive (and many third world countries can ill afford the expense), and the benefits (especially when levels of pollution are already low) may be small. Greens and eco-sceptics may disagree about these costs and benefits, and thus about where the proper balance should lie. But the notion that such a balance should in principle be struck--and that, as a result, the "right" level of pollution is greater than zero and varies according to circumstances--ought to be uncontroversial. Without that idea, intelligent discussion of environmental policy is impossible.

But then Mr. Summers makes a further, crucial assumption. He supposes that the value of a life, or of years of life-expectancy, can be measured by an objective observer in terms of incomes per head--in other words, that an Englishman's life is worth more than the lives of a hundred Indians. This is naive utilitarianism reduced to an absurdity. It is so outlandish that even a distinguished economist should see that it provides no basis for World Bank policy.

Suppose then, that the Bank of and the other multilateral institutions regard the life of an African peasant as equal in value to the life of a broker on Wall Street--as they self-evidently should. What remains of Mr. Summer's arguments? The answer still is: more than most environmentalists care to admit.

The greatest cause of misery in the third world is poverty. This must guide the priorities of poor-country governments and aid donors alike. If clean growth means slower growth, as it sometimes will, its human cost will be lives blighted by a poverty that would otherwise have been mitigated. That is why it would be wrong for the World Bank or anybody else to insist upon rich-country standards of environmental protection in developing countries. Often, policies that favour growth (such as setting world-market prices for energy and other resources) will lead to a cleaner environment, too; such policies should be vigourously promoted. But when a trade-off between cleaner air and less poverty has to be faced, most poor countries will rightly want to tolerate more pollution than rich countries do in return for more growth.

So the migration of industries, including "dirty" industries, to the third world is indeed desirable. Not because life there is cheap; if anything, for the opposite reason. Those who insist on "clean growth everywhere" must either deny that there is ever a trade-off between growth and pollution control--or else argue that imposing rich-country standards for clean air worldwide matters more than helping millions of people in the third world to escape their poverty.

Environmental policy is immensely complicated. The debate over Mr. Summers's memo is ignoring many issues altogether: global, as opposed to local, pollution; the links between trade policy and the environment; the opportunities to promote growth and a cleaner environment at the same time; and so on. In working through all this, economic method--the weighing of costs and benefits--is indispensable. Mr Summers's morally careless arguments, intended seriously or otherwise, must not be allowed to discredit it.

There is no single answer

We are possessed by and at the mercy of the powers of centralisation and absolutism. The way many of us think of and frame problems is in the hope that there is some definitive outcome at the end. "The answer is forty-two!" we would like to hear. When we are interested in the outcomes of a policy option, we ask, How many people will this give cancer to? or, How many people will this save from cancer? This is the way policy-making is done--through some sort of quanitfication of outcomes, through cost-benefit analyses, through some sort of Pareto optimisation. Unfortunately, this is a massive mischaracterisation of the problems that face us, and of the way we need to be addressing them.

Engineers like to think about energy, and most of the engineers that are interested in sustainability and ecological issues tend to focus on the issues through the lens of energy. If you were ever to go to a talk on the energy "future" given by some engineer, you will inevitably here this statement: There is no silver bullet. When it comes to where our energy ought to be coming from (in all actuality we should be using less, in conjunction with a move away from extremely ecologically degrading sources), there are advantages and disadvantages to each kind of energy, be it coal, solar, wind, hydroelectric, nuclear, petroleum. Some are more "convenient" than others, some are more "easily produced" than others, some are more ecologically degrading than others, some are backed by more powerful interests than others. We must have the right "portfolio," some might say.

That being said, I want to tie together a few posts and themes that have emerged over the past months, which I have written about in, for example, The right, the wrong, and the other, Traveling at home, and What if you don't live in Ann Arbor?. I have realised that there is no definitive way in which I, or anyone else for that matter, can address the myriad of socio-environmental issues in existence. Issues are specific to time and place. However, what is true is that they have been influenced by a common ethic of domination, violence, greed, disrespect, hegemony, and carelessness. Such an ethic expresses itself differently in different places.

The desire for absolute, definitive answers masks the messiness of complexity, makes us simplify debate in terms of "right" and "wrong," "us" versus "them," and moves us no closer to a much-needed introspection of social norms. This was brought together beautifully, although in a slightly different context, by David Remnick, writing about what we have and have not learned since 9/11, in the September 12th issue of The New Yorker.

A decade later, we also continue to reckon no only with the violence that [Osama] bin Laden inflicted but with the follies, the misjudgments, and the violence that, directly or indirectly, he provoked--the acts of government deception, illegal domestic surveillance, "extraordinary rendition," "enhanced interrogation," waterboarding. The publication of Dick Cheney's memoirs is the latest instance of Bush Administration veterans serenely insisting that they "got it right," that the explosion of popular discontent that began in Tunisia last December and spread through the region is the direct result of the American-led invasion and the occupation of Iraq. This is as dubious as it is self-serving...Ten years after the attacks, we are still faced with questions about ourselves--questions about the balance of liberty and security, about the urge to make common cause with liberation movements abroad, and about countervailing limits. Only absolutists answer these questions absolutely.

There is nothing absolute when it comes to dealing with social or environmental problems, because each place is unique. This we must understand. What works here doesn't work there. Solar power in cloudy regions doesn't work, but it may in sunny regions. Damming rivers nonchalantly doesn't take into account the specificities of seismic activity. Building a bridge in the name of "economic development" at the expense of community, consequently disenfranchising a group of people, just isn't sustainable. On the contrary, empowering people knowledgeable about the place and watershed they live in, a thoughtful education of the interconnectedness of the local and the global, and a sincere understanding and acceptance of the differences that define us, can lead to more sustainable, more respectful outcomes. If we have a fertile foundation upon which our actions can bloom, we will be much better equipped in dealing with the uniqueness of place and time.