Freakonomics again: How does a government solution seem so appealing to fans of the free market?

In the discussion of the attention-grabbing “global cooling” chapter of the new Freakonomics book,some critics have asked how it is that free-market advocates such as Levitt and Dubner can recommend climate engineering (a “controlled injection of sulfur dioxide into the stratosphere”), which seems like the ultimate in big-government solutions? True, the Freakonomics recommendation comes from a private firm, but it’s hard to imagine it would just be implemented in somebody’s backyard–I think you’d have to assume that some major government involvement would be necessary.

So what gives?

Based on my reading of their blog over the past several years, my impression is that the Freakonomics authors (a) tend to be skeptical of government solutions, and (b) are interested in what the data have to say on any given issue. I’m certainly not suggesting that they automatically oppose all government programs or that they support all private enterprise. For example, their blog has recently support to gas taxes and opposition to private farmer’s markets. And they’ve also written about abortion and crime, which is not really a government-vs.-business issue at all. (They’ve also argued that driving a car is good for the environment, which is just silly–but we’re all allowed to be silly now and then, I guess.) I’ve earlier argued that they enjoy pissing off liberals, but I don’t think that’s their main motivation by any means; it seems much more likely to me that they come to their conclusions in an unbiased way, conditional on the data they happen to look at.

That said, I think it’s fair to describe Levitt and Dubner as pro-market rather than pro-government (in the present U.S. context) and I doubt that they would object to this characterization (with the condition, as noted above, that this general leaning would not determine their position on any particular issue). So, to get back to the original question above, whassup with their support for georengineering? How does this fit into their general position of skepticism about government, concerns about unintended consequences, and so forth? Sure, they learned about this particular geoengineering idea in a visit to a private firm, not a government lab, but any large-scale implementation would still be done publicly.

A quick answer is to say that Levitt and Dubner’s position is perfectly consistent, as they view geoengineering as, yes, a big government program, but a much smaller government program than alternatives such as carbon capture, wind farms, solar-cell arrays, and the like. I don’t quite buy this theory, though, as these other activities could be viewed pretty clearly as private enterprise (in the same way that running a coal mine and a coal-burning plant can be seen as private), bounded and facilitated by government rules (as with the coal mine etc.) but run by private organizations.

My theory (about how geoengineering fits into the skepticism-about-government perspective) is that the plan most favored by the Freakonomics authors is the ultimate private-enterprise solution: do nothing until pushed by circumstances (i.e., prices).

Don’t forget, Levitt has “said he does not believe there is a cooling trend,” Dubner on the blog has featured the view that future trends are “virtually assuring us of about 30 years of global cooling,” and the Freakonomics sequel states, “While the drumbeat of doom has grown louder over the past several years, the average global temperature during that time has in fact decreased.” So things don’t seem so urgent as all that!

From this perspective, the key point is not that geoengineering is a government program–with all the pluses and minuses that this entails–but rather that its existence enables the status quo (as we say in political science) to continue unmolested. This is sometimes presented as “an excuse to pollute” (see discussion here)–but, if you think that global warming isn’t actually happening (at least not for the next 30 years), when maybe an excuse to pollute isn’t such a big deal.

Unlike Levitt and Dubner, I’m under no obligation, implicit or otherwise, to state my own views on climate change. (Like Levitt and Dubner, I’m no expert in the topic, and so I will defer to others on this one.) Once you realize it’s the potential of the geoengineering program that is being supported, not the actual program itself, it all makes sense. My guess is that if Levitt and Dubner believed that climate change was a big problem already, they would not be so supportive of a big-government program such as geoengineering, but since they’re not so worried about the problem (at least for the next couple of decades), the calculations go differently.

P.S. In writing this, I’m not making any claim on behalf (or in opposition) to logical consistency in one’s political positions. It’s just that, as someone who writes about statistical analysis and politics, I like to have a sense of where people are coming from ideologically, and this one confused me for awhile until I came up with the above explanation.

P.P.S. And, yes, this discussion doesn’t just apply to Levitt and Dubner. One could similarly look, for example, at Paul Krugman’s advocacy of big stimulus spending and ask how this fits with 1990s-era disparagement of government-managed industrial policy. (I’m sure Krugman would have a good answer for this one, just as I think the Freakonomics authors have a good reason for their apparent inconsistency. This sort of thing is not a game of “gotcha!” but rather an attempt to untangle some of the motivations and assumptions underlying a politicized debate.

17 thoughts on “Freakonomics again: How does a government solution seem so appealing to fans of the free market?

  1. Doesn't this issue illustrate nicely the hazard of either having an ideological stance or characterizing others in that way? In the case of Krugman, for example, there is no inconsistency at all between being Keynesian (a macro view) and being against some particular form of industrial policy (a micro issue) [if those are his views].
    Of course there are people who will be against both macro and micro interventions (Friedman & his followers being the most obvious) (or for, for that matter) but they are not logically connected. There is no substitute for the hard work of examining individual policies on a case by case basis: ideologues are just intellectually lazy.

  2. Sounds about right.

    But the fundamental dialect isn't government v.s. market. No, it's about who gets control of the power of government to effect the economy's shape. Large economic actors v.s. smaller ones. Or to put it in more snarky terms Democrats distribute the spoils in jobs that nominally maintain public goods and the Republicans distribute them by privatizing public goods.

    If we entertain that as the real polarization then geo-engineering makes perfect sense, it benefits the large economic actors that would implement it and the owners of related IP.

    Given a large social problem what needs solving the left's preferred solution is tends toward enlisting & empowering small actors while the rights tends toward enabling and licensing large actors. The efficacy of these alternatives is secondary.

  3. "it seems much more likely to me that they come to their conclusions in an unbiased way, conditional on the data they happen to look at."

    I doubt they are any more capable of coming to conclusions in an unbiased way than the rest of us. It's always about the data you happen to look at, or you want to look at. I really don't know that much about them (didn't read the first book, but have read some chapters), but my reaction to your description of their work is that they draw way too many conclusions to be doing a good job of it. That's their game, but it's mostly a game (profitable one, too), seems to me from what you say.

  4. "Unbiased" is an unachievable ideal, like they told me back in Catholic school about not thinking about sex.

    In this case, L&D got a lot of attention (and book sales) for taking a controversial position. If you put that into an economic context (and why not!), there's clearly sufficient motivation.

    They might be right, they might be wrong, but only the ignorant are unbiased.

  5. My theory is that they needed a controversial topic to generate attention and sell books. They had already used abortion in the first book. Global warming is the issue of the day.

  6. Most economics don't think in terms of pro-market or pro-government though it may look like they lean strongly one way or the other. The bottom line for them is a kind of cost-benefit Coasean analysis. A super short summary is that: markets tend to work the best, but when they don't, it is possible that government solutions will have more benefit than cost. In the end, it depends on an economist's evaluation of these costs / benefits.

    The problem with the global warming debate is that it is extremely difficult to quantify these costs and benefits given uncertainty and lack of knowledge.

  7. My comment is simple: they aren't climate scientists and yet they toss off an extremely dense and complex subject as though it were a simple issue. The insult is to climate scientists, geoscientists, etc. If they were to argue that something in your field was actually easy to solve when all the intelligent people in your field know it is not, then wouldn't you be pissed. Levitt has said in interviews that this is not a hard problem to solve and we should move on to other things. All I can say is "I wish you were kidding."

    Secondary point: Levitt's responses – more than Dubner's – are "I'm being persecuted by the true believers." I'm sorry but that's what crackpots say. They advanced ideas and when called on them say they're being persecuted and that is just plain wrong in academic argument.

    Tertiary point: I've read the chapter. If the chapter actually said in clear words that they believe a solution will come along which will make conservation look dumb, that would be fine. But I can read and it doesn't say that.

  8. What Admiral said — most economists support the free market in general, but they were the first ones to notice where it doesn't work, such as when there are externalities (pollution, national defense, etc.).

    So I don't see any inconsistency, unless Levitt & Dubner had said they were so free-market that they didn't believe that government intervention could help the problem of pollution, provide public goods, etc.

  9. Agnostic: I don't see any inconsistency either–given my interpretation that Levitt and Dubner view an actual climate emergency as being highly unlikely, thus the geoengineering solution is a massive government intervention that is unlikely to happen. My guess is that if they really thought climate change was a serious concern, they'd be more skeptical about geoengineering, for the usual reasons of unintended consequences, etc. It's easier to support a big idea like climate engineering if you don't think it's actually going to be needed.

  10. If you want something to work, you provide a market based solution. If you don't, if your alternative is to debate, defer, delay, and deny, you emphasize a government solution since it offers more possibilities in this regard.

  11. I do think that the consistency issue for Levitt and Dubner is much less the gov't vs. market question (where I don't think they have a firmly stated position) than the unintended consequence question.
    As many others have noted, the idea that someone who believes in a "law of unintended consequences" would respond to the problem of ocean acidification – which Levitt acknowledges – by stating "well then we just pour base into the ocean" – is pretty mindboggling.

    I think the gov't vs. market inconsistency is a problem for the conservative pundits, who have of course taken up the whole debate, such as Jonah "libera-fascism" Goldberg

    P.S. Andrew: I have read the global warming chapter now – I don't think I'll read anything else of the book – in spite of reading a lot of the criticism beforehand, I was shocked by how bad and sloppy the chapter is. I kind of expected a lot of the criticism to be the result of very one sided reading. It really isn't.
    Still optimistic about the Freakonomics-the-book-Levitt?

  12. Again, I think the "unintended consequences" issue is less of a concern if, as Levitt and Dubner apparently believe (at least, that's my impression of their belief, given the quotes above), global warming isn't really happening anyway.

  13. but that has been part of the initial wave of criticism – i.e. that they are essentially advancing "climate skeptics" arguments – and they have repeatedly and quite aggressively disputed that, essentially calling people who argue that liars and slanderers.

    Take this (Levitt):

    Like those who are criticizing us, we believe that rising global temperatures are a man-made phenomenon and that global warming is an important issue to solve.

    This (Dubner)

    To think we are “deniers,” would obviate the chapter’s central point: if we weren’t convinced that global warming was worth worrying about, we wouldn’t have written a chapter about proposed solutions.

    You can find many more examples in their various talkshow appearances and in the book – the fact that they are not "deniers" nor "skeptics" has been one of the key lines of their "rebuttals" to critics.
    So where I think they're making a very poor, inconsistent argument, the implication of your rationalization of their argument is actually much worse: That they are fundamentally disingenuous.

  14. "One could similarly look, for example, at Paul Krugman's advocacy of big stimulus spending and ask how this fits with 1990s-era disparagement of government-managed industrial policy."

    Well, I don't know what disparagement you're referring to, but anyway, this can easily be explained when you remember that when in a liquidity trap, (New) Keynesians like Krugman advocate fiscal stimulus. The 1990s was not a liquidity trap (in the US at least), so what his views were on government policy then were, are irrelevant.

  15. Alex: It's not just what Krugman wrote about this, it's also how he wrote it. In a book such as Peddling Prosperity, Krugman was pretty negative about J. K. Galbraith and other economists who have recommended activist government policies. On the specifics, though, I imagine you're right; as I noted above–and I was completely serious on this–"I'm sure Krugman would have a good answer for this one." I know nothing about macroeconomics and am completely willing to believe that, from an economics perspective, Krugman's views are perfectly consistent. From a political perspective, it's a different matter. Again, though, my point was not to slam Krugman but just to illustrate how just about any public figure can end up making statements at different times that have different political implications.

  16. Admiral and Agnostic have it right: we economists are not pro- or anti-government for ideological reasons, but for practical ones. Markets generally work to maximize value, and most government intervention is motivated by special interest value-grabbing, so the default position is that regulation is bad. That default is easily and often rebuttable, however, because there are well-recognized situations of "market failure". In those cases, ideal government intervention is desirable, though one must also ask whether real government intervention will just make things worse.

    Thus, Levitt believes that global warming is a problem of externalities that warrants government intervention, if the intervention is cheap enough. Geoengineering is far cheaper than, for example, cap and trade. Also, unlike emissions control, it doesn't have to started 20 years before the feared warming starts to cause damage, so if in 15 years it turns out we were wrong to be afraid, we haven't sunk the remediation cost.

    Similarly, Krugman believes the free market works in general, and industrial policy is not motivated by any of the accepted market failure scenarios. He is a liberal, though, so he supports big government spending programs. Also, he is a Keynesian, so he believes that deficit spending is an effective way to get positive externalities of spending in a temporarily depressed economy.

  17. Eric: It's my impression that economists have two ways of thinking that sometimes contradict:

    The first approach is to look at efficiency, with the idea being that, for some reason (perhaps due to externalities, misplaced incentives, transaction costs, blockage of information, or whatever), some aspect of the world is not as it should be. The economist's solution is then to reveal some truth and perhaps provide a mechanism to move slowly (ideally in a Pareto-optimal sense or nearly so) from current inefficient point A to the more desirable, more efficient point B. In that sense, the economic researcher's goal is to figure out what this point A actually is, and the economic policy analyst's goal is to figure out how individuals or society can build a bridge from A to B (for example, by setting up a market for a good that was not previously freely tradeable).

    The second thing that economists do is to think about unintended consequences; a quick but not extremely inaccurate parody of this approach is the claim that anything you try to do will make things worse. Related to this is the argument that whatever people happen to be doing is the right thing for them to do.

    To state it in brief: Argument #1 is that something that you think is reasonable is actually stupid (for example, real-life example sof the sunk-cost fallacy or perverse incentives that lead people to do dumb things). Argument #2 is that something you think is stupid is actually reasonable (this includes examples such as the perennial favorite, "Why do people pay so much for candy at the movies?")

    The trouble is, it's never clear when a pop economist is going to use Argument #1 and when he's going to use Argument #2. For example, people shouldn't be doing X because of the sunk-cost fallacy. Or, conversely, everybody thinks, "X is dumb because of the sunk-cost fallacy," but actually if you look at it carefully, people are behaving rationally just as an economist might predict. You can see this sort of tension in Levitt and Dubner's discussion of prostitution, for example: do they want to argue that this is "ordinary" economic activity that prostitutes and their customers are following using some approximation of rationality and optimal decision making, or do they want to argue that more women should be prostitutes, if only they understood the economics better?

    I wrote about this issue in more detail here.

    To get back to the global warming question, again, it seemed to me that Levitt and Dubner had two choices: they could go with Argument #1 and see geoengineering as an efficient technical solution (just as they had an efficient way for detecting the cheating of sumo wrestlers) or they could go with Argument #2 and say that geoengineering is a bad idea because of all the potential unintended consequences, both physical and economic.

    I would've expected for Levitt and Dubner to have taken position #2 here and be skeptical of this ultimate big-government program.

    But, as I noted above, Levitt has "said he does not believe there is a cooling trend," Dubner on the blog has featured the view that future trends are "virtually assuring us of about 30 years of global cooling," and the Freakonomics sequel states, "While the drumbeat of doom has grown louder over the past several years, the average global temperature during that time has in fact decreased."

    Based on all these quotes, my guess is that Levitt and Dubner don't believe catastrophic global warming is going to happen. They're not so worried about the unintended consequences of geoengineering because they don't really think it will be needed.

    P.S. I'll defer to you and others on macroeconomics. I just brought up Krugman to emphasize that I was making a general point, not specific to Levitt and Dubner.

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