Policy Implications of the Ascetic Meme

I’d like to thank everyone that stuck with me for Part I and Part II. Now we get to the punch line, which is very simple: because of the Ascetic Meme, we cannot trust our instincts when it comes to environmental policy.

Note that I am not saying anything about your personal consumption and conservations decisions. If it makes you feel better to buy a hybrid, install photovoltaic panels, or rip out your lawn, more power to you. Sure, we could have a detailed economic argument about whether any of these measures are cost-justified. But even if there happen to be theoretical economic losses, the practical psychological gains are likely to outweigh them.

No, what I’m saying is that we can’t trust our instincts when it comes to determining the laws and regulations that we impose on everyone. As I hope I’ve demonstrated, the Ascetic Meme can be a powerful psychological force. It operates below the threshold of conscious thought. Basing policy on our instincts creates a fertile ground for mistakes and abuse. There’s just too much emotional energy that can generate momentum in a negative direction or be harnessed for someone’s personal gain. An example of the former is clear cutting entire ecosystems to plant biofuel feedstock. An example of the latter is rich oil men lobbying for subsidies to fund renewable energy projects.

It’s not enough to recognize these problems and say, “Now that I know there may be side effects, I’ll just take them into account.” That isn’t the way human brains work. Back at Stanford, I took a class from Amos Tversky about the effect of cognitive biases in decision making. He had a great analogy between cognitive biases and perceptual biases. A classic perceptual bias is that objects appear closer on clear days and farther away on hazy days. However, knowing this fact doesn’t help people judge distance any more accurately. Similarly, simply understanding how cognitive biases affect your thinking doesn’t automatically give you better decision making ability. While the Ascetic Meme isn’t precisely a cognitive bias, it operates in a similar way: by subconsciously guiding your thinking. Even Tversky’s partner in seminal cognitive bias work, Daniel Kahneman, falls prey to these biases.

Even worse, the principle of cognitive dissonance means that your core beliefs will conform themselves to fit your actions and statements (this is a primary tool in interrogation and brainwashing). So if the Ascetic Meme tricks you into thinking that harsh conservation is necessary and then you start conserving more and exhorting your friends to do the same, your brain will modify your beliefs so that you believe even more strongly in conservation, regardless of any new evidence that comes your way! The logical fallacy here is that you start confusing instrumental values with terminal values. This explains how a previously professional scientist can, over time, come to believe that people who disagree with him are evil.

No, you can’t just wish away the Ascetic Meme. Like the influenza virus, it wouldn’t be so prevalent if it weren’t good at surviving. Rather, we need to employ tools and procedures in our environmental policy making that minimize the impact of the Ascetic Meme.

Unfortunately, unlike perceptual biases, there is no obvious way to improve accuracy by a few orders of magnitude. So you can’t just make the equivalent of a laser range finder and be done with it. Environmental policy is at the frothy frontier where two complex systems meet: natural environment and human politics. Therefore, any prescriptions are necessarily squishy. But I’ve got some ideas.

My cardinal rule of environmental policy is show restraint. Government gives men the power over other men. History teaches us that men do not always use altruistic judgment in the exercise of such power or relinquish it readily when it no longer serves the good of society. So I believe we should give the government only the minimum amount of power necessary. A good rule of thumb is to take the powers that you think your side should have and then imagine that the other side is given them instead. If you really don’t like the projected result, you’re asking for too much power.

Applying this general rule to the environment gives me a three step escalation process in the types of policy mechanisms I think we should employ:

(1) Facilitate market transactions. This approach works best in cases where the underlying problem is the allocation of scarce resources such as water or land. I know I’ve mentioned Davide Zetland’s Aguanomics before, but it has some great examples of how to apply this rule for water including a relatively new post on a specific mechanism design. You could imagine doing the same thing for land to promote habitat preservation. We could put worldwide treaties that create strong property rights for land in sensitive ecologies like rainforests. Then environmental groups can simply buy up the land. I think we should always try this route first because it gives the government no lasting power and lets the market sort out the efficient allocation.

(2) Targeted, rebated Pigouvian taxes. This approach work best in cases that I call “diffuse externalities”: a very small amount of expected harm is done to a lot of people. Carbon emissions are the primary example I have in mind. The way this works is that you set a Pigouvian tax on the behavior you want to discourage that is equal to the expected harm it does. The market will then figure out the most efficient level of that behavior. I think taxes are much better than cap-and-trade because it doesn’t create a valuable initial allocation of credits that everyone wants a piece of. However, I add two qualifications. First, I think the tax should be targeted as specifically as possible on the harm you want to avoid. In the case of carbon emissions, if you want to reduce the threat of anthropomorphic global warming (AGW), you tie the carbon tax to the AGW warming “signature”, which is the topical troposphere warming more than the Earth’s surface, aka the T3 Tax. If you’re also concerned about ocean acidification due to CO2 emissions, tax the pH of the ocean. The second qualification is that you rebate the tax to consumers. That’s right. At the end of the year, you give all the money collected back to the people according to either a per-head, pro-rata income, or other fair-seeming formula. This caveat reduces the temptation for the government to try and direct the proceeds for their own gains, while still reducing the targeted behavior to economically efficient levels.

(3) Direct regulation. This approach works best in cases that I call “concentrated externalities”: a significant amount of harm is done to a small group of people. Good examples are toxins like heavy metals and PCBs. I don’t see any way around having something like the EPA directly regulate such toxins. I would add two qualifications. First, they should apply strict cost-benefit analysis using explicit value of a statistical life calculations. This is necessary to avoid actions like worldwide banning of DDT which is great for the environment but bad for all those people that die of malaria. Second, the department evaluating and enforcing such behaviors should be as independent as possible. I actually think the EPA does a decent job, but they would do any even better job if they were free from political influence. It would be nice to make them more like the Federal Reserve than the Department of the Treasury. I’m not sure how to enforce the desire to make this option the last resort, though. Witness the attempt to get CO2 regulated as a pollutant.

Yes, I know that these tools aren’t perfect. There are almost certainly special cases where they may not work. They can almost certainly be abused in some fashion. But they’re better than going off half-cocked every time someone shouts that we should start depriving ourselves of civilizations’ comforts because the sky may be falling.