Denying Scarcity Is Not an Option

This post turns out to be one of my longer ones. The tl;dr is that (1) a good policy is one that makes lives better, (2) the best policy is the one that makes lives better the most, (3) even the best policy can’t give people everything they want, and (4) it’s unrealistic to deny point 3.

Greg Laden has a post criticizing Bjorn Lomborg’s position on the effects of sea level rise on Bangladesh. Lomborg is arguing that Bangladesh could adapt to changes in sea level with a system of protective dikes, similar to the Netherlands. Laden and commenters on his blog respond that sea protection in Bangladesh would be much more difficult because it’s low and flat, there’s much more water, a much larger area, and many times the population.

As I understand it, a certain amount of sea level rise is inevitable at this point. Historic evidence indicates that the equilibrium sea level for current CO₂ levels is higher than the sea is now, which means it’s going to rise. Apparently, a good guess is that we’ll get three to six feet by the end of the century. According to Laden, that will inundate about 10,000 square miles of Bangladesh.

To prevent further losses from sea level rise in Bangladesh (and elsewhere) we can try to bring the Earth’s atmospheric CO₂ under control. The obvious way to do that is to cut down on industrial CO₂ emissions by switching our civilization to a clean energy source — something other than fossil fuels.

If I understand correctly from the Bjorn Lomborg interview, Bangladesh is planning to build clean energy generation plants, possibly with funding from the developed world. Lomborg is arguing that there are better ways to spend the money:

Focusing on global warming instead of focusing on getting nutrition to small kids is quite frankly I think almost immoral to small kids whom you could help so easily and cheaply. So my point here is again, yes there is a problem, yes we should tackle it smartly, but the way to typically do it, we end up spending lots of money badly, we end up polarising everyone and we forget about a lot of other things that could do much much good to these kids and pretty much everyone else.

Essentially, Lomborg is making the common argument that countries should prioritize their expenditures to maximize the welfare of their population. He’s also making the more controversial argument that the extra cost of switching to green energy is not welfare-maximizing for Bangladesh at this time. That is, they’d be better off focusing their efforts on something else.

Laden disputes this, arguing that Bangladesh is so helpless against a rising sea that even a small rise is a disaster. Laden also makes an argument about the historic sensitivity of sea level to CO₂ levels. If we keep adding CO₂ to the atmosphere, temperatures will keep rising, ice will keep melting, and the sea will keep rising. It will happen slowly over many years, but the longer we delay the transition away from fossil fuels, the worse the end state will be.

(From what I’ve read, even if we freeze CO₂ at the current level, the sea level will continue to rise for centuries until it reached equilibrium at about 25 feet higher than it is today. And if we don’t stop dumping CO₂ into the atmosphere, the planet will warm up enough to melt all the glaciers over the next thousand years or so, raising sea level by about 200 feet. It’s not Waterworld, but it’s enough to drown all the coastal cities. And it won’t be our only problem.)

Lomborg and Laden both seem to agree on the broad scope of global warming, but they differ on strategies for Bangladesh (and the world) over the near term. Lomborg says that reducing greenhouse gas emissions is not currently as important as other more urgent problems such as hunger, but Laden says the eventual cost of continued greenhouse gas emissions is so high that any delay has a huge cost.

I haven’t been following the climate change science very much, but the issues under dispute between Laden and Lomborg are fascinating and important. Unfortunately, Greg Laden ruined it by going a step too far:

In his interview, as well as in a brief Twitter exchange we had, Lomborg made another error, one we often seen made by lesser informed people engaged in the climate or energy conversations. Lomborg seems to think that there is a fixed amount and class of resources and that one problem must be addressed at a time. But that is not how it works.

Actually, that kinda is how it works. The problem isn’t that we have a fixed amount of resources. The problem is scarcity. Whatever amount of resources we have, it’s not enough: We can’t fulfill our limitless desires. We have to make choices. This is not a particularly controversial idea.

First, there are resources primarily available for one thing such as public health, while other resources may be more generally applied. Also, we can in fact address more than one problem at once.

It’s not literally one problem at a time, but there are always tradeoffs, and we make those tradeoffs at the margins. Whatever we’re spending our money on, there comes a time when we have to decide whether it’s time to do something else. That’s what Lomborg is talking about.

Imagine that you are lost in the desert. It’s been days, you’re all out of supplies, you’re thirsty, hungry, hot, and tired. Finally, you stumble on a well-supplied camp full of people. You quickly agree to do some work around the camp in exchange for which, at the end of every hour of work, they agree to let you have one of:

• A glass of water.
• A bowl of food.
• A nap in the shade.

At the end of the first hour, recognizing that dehydration is the greatest danger to your health, you choose a glass of water. At the end of the second hour you’re still thirsty, so you have more water. By the end of the third hour, you’re no longer thirsty, but you want to make sure the thirst does not return, so you have one more glass of water.

After the fourth hour you figure you can do without water for a little while, so you have some food. The fifth hour is also food, and then because you’re kind of full but it’s been a while since you had a drink, you have water for the sixth hour. That gives the food time to go down, so you have another bite of food after the seventh hour. By the end of the eighth hour, you’re well fed and no longer thirsty, but you’re exhausted, so you decide to take a nap.

This is a very simple example of efficient decision making under scarcity — stripped of the complications of savings, investments, imports, exports, and innovation. Under this model, there are two rules to making good decisions: (1) Use your resources to solve the most important problem first, and (2) when you’ve made enough headway on the most serious problem that it stops being the most serious problem, switch your efforts to solving the new most important problem.

The goal is to always apply the next batch of resources where they will do the most good. In the terminology of economics, the goal is to always apply your resources in a way that maximizes their marginal utility.

I asked Professor Michael Mann, climate scientist, what he thought about Lomborg’s interview, and he told me, “Bjorn Lomborg is a master of the false choice, often claiming that dealing with climate change will somehow detract from our ability to deal with other societal problems. In reality, we can walk and chew gum at the same time. We can and must work on solving numerous societal problems. […]”

Sure, we want to work on solving numerous social problems, but we don’t have the resources to solve all social problems instantly. Given our limitations, we need to decide how hard to work on each problem. Often some problems will dominate, and others will have to be postponed, and it’s not inconceivable that climate change is one of the problems that can be postponed.

(Mann does go on to actually address Lomborg’s argument when he says, “[…] In reality, climate change exacerbates most of those problems. It is a threat multiplier. Lomborg conveniently ignores that!” That addresses the tradeoffs rather than pretending they don’t exist.)

Perhaps this seems a bit crazy to you. After all, in the real world governments work on multiple problems all the time. And even as individuals, all of us have more than one goal in life. How does this decision-making model apply to any of that?

On an individual level, even when we appear to be multitasking, it’s usually just one thing at a time. As I sit here typing this, I’m wrapping up dinner at Chipotle’s, and I’m thinking of refilling my Diet Coke, and I’ll go to the bathroom soon, and my wife and I have been discussing our plans for the rest of the evening. Eventually my thirst or my bladder will get the best of me, and my wife might interrupt me, and eventually we’ll leave to do something else. But for the moment, I’m just typing.

In a larger sense, when we see people working on multiple problems at the same time, there’s usually one of three things going on.

The best case is that we’re actually seeing the crossover between problems. Several problems are at the same level of urgency, so we’re essentially (at least in theory) switching back and forth between them.

In the desert camp, on an hour-by-hour basis, we started with the most important problem, thirst, and only after beating that back a bit did we start working on hunger. And not until both of those were abated did we move on to addressing the problem of needing sleep. On the other hand, if we look at the day as a whole, we worked on several serious problems at the same time.

This kind of rapid switching between problems is actually pretty common because of an interesting consequence of how the rules play out over time: If we keep grinding away on whatever problem sticks out the most, eventually all our problems will be ground down to about the same level of urgency. We still keep balancing between them, but no problem really seems more urgent than any other.

In the real world, this decision-making process is obscured. For one thing, we can anticipate how our problems will respond to future expenditures of resources, which allows us to anticipate our needs and stockpile resources. So instead of living hand-to-mouth and switching off constantly between problems, we work at jobs to earn money, and we plan our budget so we can fill our refrigerator with food and drink, and pay our monthly rent.

Furthermore, when we’re talking about an entire society it’s far more efficient to split the work between us. The underlying back-and-forth movement happens at the level of individual workers changing jobs or working on different projects, and specialization allows individuals to stay productive at tasks.

The underlying marginal decision-making nevertheless becomes visible again whenever our resources change enough to cause us to rethink our priorities. If our boss gives us a 10% raise, we have to decide whether to buy a new refrigerator, a new washing machine, or new tires for the car. On the other hand, if our boss cuts our work hours by 10%, we have to look at our budget and give up the least important thing we’re spending money on — buy canned vegetables instead of fresh, wear our clothes longer before replacing them, or move to an apartment with lower rent.

On the national scale, an unexpected war or a natural disaster can consume resources intended for other purposes and force a society to make tough decisions about how to allocate resources. Prosperity gives us easier decisions, but we still have to make decisions.

The worst case for doing many things at once is that we are confused about how the world works, or aren’t pursuing the goals we think we are. For example, someone trying to pay down loads of credit card debt may feel better when they see declining balances on all their credit cards. But it would be more efficient to send all available money to the card with the highest interest rate and make only minimum payments on the others.

When you see someone paying off more cards than they should, you might conclude that they’re confused about how credit cards work. But there’s another possibility. It could be that rather than trying to improve their personal finances, their true goal is to improve how they feel about their personal finances, and seeing all the balances go down makes them feel better.

The flip side of paying off the credit cards is making donations to more than one charity. If you’re truly trying to be as altruistic as possible with your money, your most efficient course of action is to pick the one charity that will do the most good and give them all the money you can. Why waste your money on second- and third-best charities when you know it would do the most good at the best charity? Giving to multiple charities is therefore a sign that you’re doing it for some other reason than pure altruism — perhaps because it makes you feel better, or because you’re using the donations to make a statement about what’s important.

It looks like the Bangladesh economy is growing about 6% per year, and now they’re trying to decide whether to use the additional resources to contribute more to the fight against climate change, or whether they should apply it all to fighting problems like childhood malnutrition. It might seem like a good idea to split it — 3% to fight hunger, 3% to fight climate change, say — but that’s only true if both problems just happen to be at a point where they benefit equally from the additional funding. Otherwise, it would be better to use all additional resources on whichever problem would benefit from them the most.

When entire societies split their efforts across multiple problems, it’s probably not because it’s most efficient or because people are confused. The middle ground between equilibrium and confusion is politics.

If one group wants to fight climate change and another wants to fight childhood malnutrition, the political process may resolve the conflict by doing a little of each. That doesn’t mean it’s the right solution — each faction would no doubt prefer that more attention be given to its own agenda — but it is the solution that is possible.

Perhaps this is what Laden and Mann have in mind. It’s not that they believe it’s a good idea to pursue both goals — or that the resources to do so will somehow magically appear — but that they are willing to split resources across both goals in order to make sure that green energy gets at least some of the resources. Could be, but it’s not quite what they’re saying.

Laden seems to have no trouble understanding scarcity when it suits his argument. For example, here he is explaining why the engineers who protect the Netherlands from the sea may not be able to help in Bangladesh:

In case it is not obvious, let me note that as sea level rise threatens Bangladesh, it also threatens The Netherlands, which might keep the Dutch rather busy in their own homelands.

And then why Bangladesh might have problems protecting themselves from the sea like the Dutch did:

During much of this time, The Netherlands was a major player in the European economic theater, acting as a center during the development of the world economic and colonial systems of the 17th and 18th centuries. To suggest that somehow Bangladesh can do what the Dutch did while the entire world is also busy adapting to sea level rise is absurd.

When it’s Bangladeshis choosing between feeding children and developing green energy, Laden thinks they could address more than one problem at once, but when it’s Dutch engineers choosing between building dikes in Bangladesh or maintaining their own, he understands that there are limitations. When it’s world-wide competition for sea protection, he understands that all the problems cannot be tackled at the same time.

The question we’re really trying to answer is, if Bangladesh is contemplating spending, say, $5 billion on green energy, is that the best way to use a $5 billion to improve the welfare of the Bangladeshi people?

There is a sense in which switching to green energy should almost never be a priority. Bangladesh has only about 2.5% of the world’s population, which means that in the long run (assuming all countries eventually reach the same levels of industry) they will only ever control about 2.5% of the Earth’s energy production.

If everyone else switches to green energy, and Bangladesh continues to burn fossil fuels for another century, it won’t make much difference in the long run for the planet. On the other hand, if Bangladesh switches to green energy, and no one else does, all the glaciers will melt, and Bangladesh’s green energy still won’t make a damned bit of difference. The benefits of green energy are spread out all over the world, and Bangladesh is only about 1/40th of the world.

The upshot is that Bangladesh’s decisions about green energy won’t have much effect on the welfare of Bangladeshis, and what payoff there is will be delayed for decades. On the other hand, using the money to feed children produces an immediate benefit, and all the benefits stay in Bangladesh. Unless spending $5 billion dollars on green energy pays off as well as spending $200 billion on food, Bangladesh would be better off doing something other than investing in green energy.

The problem with that argument is that it applies to every other country as well. The benefits of green energy (in terms of climate change) go to the world , but the costs are borne by whoever builds the green energy systems. So until green energy becomes cheaper than fossil fuels, there will always be pressure to do something else with the money. All of which goes a long way toward explaining why we’re in this predicament in the first place.

The only way we’ll avoid a more serious global warming disaster is by looking beyond our personal, local, and even national concerns and coming together for the good of all humanity.

That doesn’t really sound like us, does it?