Ready! Fire! Aim!
Bush Administration EPA Administrator William Reilly once quipped that his agency’s standard approach when faced with a policy decision could best be characterized as "Ready! Fire! Aim!" The Clinton Administration’s approach to global warming demonstrates that nothing much has changed in environmental policy.
This "act first, think later" bias is encouraged by the media’s tendency to highlight the environmental risks of global warming while neglecting the risks of global warming policies designed to curtail energy use. The goal of CEI’s recent conference on climate change policy, "The Costs of Kyoto," was to bring some balance to this critical public debate.
The key policy question is how does one act in the face of uncertainty. Mankind’s use of energy might be warming the earth. That warming might constitute a catastrophic risk to life on our planet. Governments might be able to reduce this risk through some form of highly imaginative, globally-coordinated, energy-use restrictions. Finally, the costs of such a Prevention Policy might be less than the cost of a Resiliency Policy – a policy aimed at freeing society’s entrepreneurial and technological talents to increase generalized wealth and knowledge and society’s overall resilience to any potential threat, human-generated or otherwise. By becoming smarter and wealthier, civilization could be more able to ride out the risks of global warming, assuming they are real.
But how do we know? As some of you know, I started my career as a mathematician and statistician. Statistical decision theory suggests one approach: Hypothesis testing. Mankind might be warming our planet; it might not be. The risks might be high; they might not be. In such a situation, one collects data and tests sequentially whether that data is or is not supportive of the initial hypothesis. At each stage in the process you have three choices: You can accept the global warming catastrophe theory and act accordingly, you can reject it, or you can collect more data.
There are risks associated with each course. The risks of doing nothing and of collecting more and more data are obvious. But there are both Type I and Type II risks. The Type I risk – that the world is facing catastrophe and we fail to act upon it – has been made very clear to everyone. Vice President Gore’s book, Earth In the Balance, argues that our earth might be devastated unless we soon curtail our promiscious energy use. The movie "Waterworld" portrays a world under the sea due to warming-induced melting of the polar ice caps. Most recently we have been warned by a cohort of ecologists that the science of global warming is dispositive and we must act now.
But there is also the Type II error – the risk that we impose costly limits on the use of energy and either the catastrophic theories of global warming prove not to be true or the policies prove ineffective. The risks of political restrictions on energy use are quite real. The cost of everything from heating a home to running a factory will increase, reducing living standards around the world.
One must balance these two risks against one another – compare the risks of an energy restriction policy against a policy of encouraging resiliency via rapid economic and technological growth. This risk-risk perspective is critical as we think about policy actions in the face of uncertainty, for we will never know the future.
We must act in the face of uncertainty, but the question is whether our actions take the form of imposing massive restraints on the use of energy or encouraging more resilient and robust institutions. Is it better to resist change or to seek to become better able to adjust to it? Is it better to slow down economic and technological change or to accelerate it? The choice between a Prevention and Resiliency strategy was a key issue at our conference. The resolution of this debate remains in doubt.