Environmental Disaster: Is the Right being reasonable? by Matias Bulnes, NYC

The fear of an environmental disaster is here to stay. What was once perceived as the murmur of a handful of oversensitive hippies has become a resonating alarm. Despite skeptics global warming will likely keep on escalating positions on the list of high-priority political issues. For every new piece of evidence scientists collect that we are on the verge of a climate change draws more attention to the unforeseeable risks that can result from it. Moreover this is a perfectly rational response for we have been shaped by the evolutionary process to live in the Earth as it is now and we do not know if we’ll be able to survive in a different planet Earth. So if evolutionary biologists are right and the species is the central evolutionary unit, remaining passive on the face of this environmental danger may well run counter to our nature and hence be irrational.

In fact, the situation is doubly dangerous. For not only is it dangerous to suddenly find ourselves in a world unsuited for us, there is also the danger that we will not be able to react before we find ourselves thrown headfirst on an irreversible process leading to that unbeknown scenario. Important scientists have warned us about this so-called tipping point after which the climate change will be irreversible; yet skeptics, oftentimes less scholarly, remain politically strong. This raises an important question: why do non-experts (e.g. politicians) have so much say on this issue? We’ve seen the Bush administration playing down the ecological agenda for years pace the scientific community and this calls for reflection. But also there is an important related question: why has the issue been parted along the political spectrum? Why do we see mostly the Right playing down the problem? Don’t they care for the human species?

They do care. I disagree with those activists that want to demonize right-wingers as selfish, unconscious individuals. If Evolutionary Biology is correct, we cannot but care. We are set up to care or to at least behave in ways that foster our species. Had we not, we would have already extinguished ourselves. On the contrary, I think the answer lies on some foundational political views associated with the Right. I want to argue that it’s the Right’s libertarian ideals that prevent them from seeing the ecological danger looming. In particular, it’s their blindfolded belief in raw free-market Economics that blurs their view. As a corollary, I think this is yet another powerful sign that raw free-market Economics is flawed.

What I call raw free-market Economics is the modern version of Adam Smith’s doctrine of the invisible hand. The central idea is that the market acts as an invisible regulator of the burdens and incentives in society and that it does as good a job as it can be done. As a consequence, no human intervention in the market is necessary, for the invisible hand is a far superior decision-maker than our best policy experts. In modern Microeconomics this doctrine has found further support on the well-established thesis that in an idealized market satisfying more or less plausible hypotheses about human psychology, absence of intervention will maximize efficiency. To give a day-to-day example, the idea is that how many tomatoes a society should produce will be determined by how many people want tomatoes and how many tomatoes they want. Should we need less tomatoes than we currently produce, some tomato companies won't be able to sell enough, will begin to lose money and will eventually leave the market reducing the number of tomatoes produced. Again, no governmental intervention is called for in order to regulate the production of tomatoes.

Of course, the thesis ranges much further than the production of commodities such as tomatoes and different politicians and intellectuals subscribe to it to various degrees. But, to whatever extent, no doubt this is an ideal widespread especially among right-wingers. At its extreme, the doctrine claims competence in all areas of society. Health and Education (to mention two controversial examples) are said to be better regulated by the market ultimately leading to more prosperity. And so does it claim competence in deciding how and when to deal with environmental problems. As the environment staggers, so the story goes, either consumers will become conscious of the danger and punish the companies responsible or resources will become scarcer and this will force companies to produce in sustainable manners on pain of jeopardizing their long-term chances. One way or another, no governmental intervention is necessary: the market will do the job for us.

I want to propose this blindfolded reliance on the market as an important reason why the Right has been so oblivious to the environmental alarm. Their reasoning is that if the market hasn’t reacted appropriately to environmental problems then environmentalists and activists must be exaggerating the problems. I believe this to be a plausible explanation for why, on the face of scientific evidence pointing to an environmental catastrophe that will harm them and their heirs, most right-wingers react skeptically. To posit egotistical intentions in them is to incur in extravagant conspiracy theories that do not foster mutual understanding and agreement.

But even if their failure is more theoretical than moral, all the same they may still be leading us to an irreversible environmental disaster. On the one hand, in dismissing scientific opinion on the environmental problem, they are favoring a hypothesis highly controversial even within the economic science. In the light of the magnitude of the risks involved this doesn’t seem a reasonable bet. It would seem much more reasonable to set manmade regulations on the market to prevent a potential environmental catastrophe even if it were true that the market would have prevented the catastrophe by itself. On the other hand, there are good reasons to doubt that the market will react to the environmental downfall on time and hence prevent a potential environmental catastrophe by itself. Developments in Game Theory have shown scenarios where the market either does not regulate the burdens and incentives in ways furthering prosperity or it takes too long in so doing. I end by arguing that the current environmental scenario is one of them.

Free-riding is an economic phenomenon where the collective good opposes the individual good. Free-riding is to be expected when, even though there is some collective bad resulting from the workings of a certain market, agents in the market have incentives to keep on acting in ways that can perpetuate the bad for a long time. Situations like this are usually illustrated with a variant of the Prisoner’s Dilemma, but the issue can be made clear enough by considering the current environmental scenario that concern us. There are many industries producing emissions of greenhouse gases which are usually pointed to as mainly responsible for global warming. The industries’ owners are aware of these accusations and, as any human being, have grounds to be worried about the consequences of continuing emissions of greenhouse gases. They know that these emissions may be jeopardizing the collective well-being in the long-term, but they have short-term incentives to “ride free” on this collective evil. For, should they change their productive process in order to stop their emissions, their costs would likely rise and the prices of their products would rise with them making them less marketable. At the end of the day, they could get crushed by other less-conscious industries that still produce at the lower costs. They have incentives to hold on to their current productive process for as long as possible.

The problem is, of course, that given their ignorance of climate phenomena, what industry owners deem “possible” may end up killing us all. Whether or not this is a flaw in raw free-market economics, at the very least it sounds irrational for a society to leave these decisions to individuals who are publicly known to have incentive to underestimate the danger (not to mention their lack of knowledge on the subject matter).

The Bush administration has emphasized how little our scientific understanding of climate phenomena still is. But rather than giving us reasons to relax, this should serve as a remainder that we are playing with fire, that we are dealing with a danger whose magnitude we can’t fully anticipate. It is a responsibility of the federal government and congress to listen to the scientific community and create whatever regulations are necessary to turn things around before we arrive at the tipping point after which any efforts will be useless. Waiting for the market to save us from an environmental disaster is not only theoretically myopic but morally wrong.