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In Praise of Uncertainty
Writing in the comments, David R. Henderson asks me to list three policy areas where my views are uncertain. Since this blog (or at least this author) has been streaming uncertainty for over four years, this strikes me as an odd request. But perhaps it is useful to have such a list in one place, so here goes:
1. We must address the looming crisis in medical care costs but how? I am uncertain as to how much means-testing Medicare will ease future budgetary pressures. I do favor means-testing, mostly through lack of better ideas, but it is a) notoriously difficult to enforce, b) often unfair (do we measure income or wealth? current or lifetime?) and c) an implicit hike in marginal tax rates. And if you could talk me out of means-testing, I am not sure which recommendation would come next.
2. I favor further experimentation with school vouchers, but to what extent? There are many good school districts that probably would not be improved much if at all, and the resulting political hand-wringing would be costly and also could give vouchers a bad name. Should vouchers be isolated experiments or implemented on a near-universal basis? Near-universal vouchers run the risk of becoming the new middle class entitlement.
3. I don't see a Social Security "crisis" in the numbers, but I do believe we should be fiscally conservative with the program, most of all because of forthcoming Medicare expenditures. Yet this view would be wrong if the growth rate of the economy exceeds the real rate of interest. We could then spend as much on Social Security as we wanted to. (Growth-optimistic conservatives rarely emphasize this conclusion, I might add.) I do not expect such a result, but I give it a probability of about 30 percent.
4. I am uncertain how much the United States should "move first" with costly anti-global warming measures, assuming that China and other nations are not very cooperative.
5. To what extent is the ongoing loss of biodiversity a very serious problem? I suspect in the long run this will prove a more important issue than global warming, but I am not sure. I also don't know what to do about it; property rights and better quotas for fishing is a good idea but that only dents the larger problem.
6. I favor legalizing or decriminalizing many drugs, but I am not sure how far this process can go when so many actual and potential drug customers are under eighteen years of age. Can we really sell crack cocaine in the 7-11, provided there is an ID check for every buyer?
7. I am pro-immigration relative to either current policy or the median voter, but I am uncertain how many immigrants the United States could take in. I'm not just whinging about not knowing where the decimal point goes. More generally, we don't know when the social and political fabric will start to crack in counterproductive fashion.
8. I am highly uncertain about most of the major questions in foreign policy, for a start try Pakistan or the Koreas or nuclear proliferation. Even if you think we shouldn't have gotten involved in the first place, that doesn't mean immediate withdrawal is our best option. And while I know more about economics than foreign policy, I find that the more I learn about a given foreign policy area, the more uncertain I become.
9. Virtually any question in water policy. This is a good, complex area for shaking up policy preconceptions.
That's a lot of uncertainty. I could go on, but that's already most of the major policy issues today. Don't forget this: even if your view is the one "most likely to be right," in absolute terms your view, like mine, is probably wrong relative to the sum of competing views.
In other words, it is hard for me to see why, in these and many other areas, we should be highly certain of the views we hold.
At some point I'll give you my take on "What I Think We Should Be (Nearly) Certain About." But I am not yet sure what should go in that post.
Addendum: Here are Arnold Kling's certainties and uncertainties.
Posted by Tyler Cowen on December 30, 2007 at 07:07 AM in Economics | Permalink
Comments
Wow, I'm on-board with number five, loss of biodiversity, but I thought that outside of environmental circles that was unheard of. (FWIW, I think it inter-relates with global warming in important ways, but agree that ocean management is more pressing.)
Posted by: odograph at Dec 30, 2007 8:15:34 AM
Wow, that's much less ideological than I would have expected, and quite similar to my own liberal views. Refreshing!
Aren't you worried that you'll be denounced by libertarian purists?
Posted by: Mike Huben at Dec 30, 2007 8:16:46 AM
While I will claim to have no more certainty than you, I think that #4 could be cleared up a little by looking at the efforts of Interface, Inc, a leading carpet manufacturer. They are working to become fully sustainable, and even hope to be restorative by 2020, and despite the money spent on sustainability upgrades, the company is growing and prospering.
While I'm not certain that it will work for every company in every industry, there's no reason to automatically assume that spending large amounts of money on protecting the environment won't pay dividends in the long run. Especially if it means we can avoid the predictions in the new report titled The Age of Consequences", just released by the Center for Strategic and International Studies and the Center for a New American Security (read about it with a link to the actual 130 page report here: http://www.realclimate.org/index.php/archives/2007/12/the-forecast-in-the-streets/#more-518 )
Even the conservative "expected" consequences by 2040 are very bad, which means that we shouldn't be worrying about who should "move first", we need to just do it, especially since per capita America is one of, if not the, worst polluter globally.
No one living in the year 2208 will care what the quarterly profits of 2008 were if our species is facing extinction.
Posted by: Harlan at Dec 30, 2007 8:49:16 AM
In my mind I have thought of you and the GM Econ School as Austrian. Your areas of confusion appear to reflect a trust in government action that I did not believ was reflected in the Austrian School. Especially 2,4,5,6,and 7. On water policy I could not pull up any comments on #9. Where am I misinformed?
John
Posted by: John McConnico at Dec 30, 2007 9:17:36 AM
2: If vouchers are simply an alternative channel for existing education expenditure it's hard to see how that becomes the "new middle class welfare". Perhaps you could describe the scenario you have in mind when making that comment?
4: Start with a (small) carbon tax with the possibility that if the (economic) case becomes clearer it could be raised. There are probably sufficient other benefits in terms of various externalities associated with energy use (especially gasoline) to justify at least a small tax regardless of what other nations do or what the long term prognosis on climate change is.
6: Don't fall into the trap of letting the perfect be the enemy of the good. Just because we don't know how to solve 100% of a problem, doesn't mean we don't know how to solve 80% of it. Sure, there's a problem with making sure intoxicants don't get into the hands of minors (a problem we largely manage to deal with in terms of alcohol and tobacco, undermined only by our stupidity in telling adults under 21 that they can vote and die for their country but can't have a beer). But wouldn't a great big slice of the problems caused by the "war on drugs" go away even if we moved to a sub-optimal solution like distributing drugs through the equivalent of state liquor stores?
7: US society seems to be coping with current levels of immigration including illegals so perhaps that would be a good starting point for a new level of legal migration.
Posted by: Dan Hill at Dec 30, 2007 10:25:00 AM
#1 -- I'm not sure how this plays out either except possibly that if a universal state insurance system is created, it may be able to say 'no' in ways that for-profit insurance companies simply cannot. Private insurance companies have to worry much more about a reputation for fairness and generosity than government health systems do.
#2 -- I agree with Arnold Kling that vouchers are unlikely to produce dramatically improved educational results -- innovations in instruction are very difficult to carry out. But I do see vouchers as having the potential to produce equal or better results much more cost effectively than is currently the case. I also see the potential for a schools -- freed from the joint grip of teachers unions and school-system bureaucrats -- to become more meritocratic and attractive places for smart people to work. And more responsive to the concerns of parents and students.
"Near-universal vouchers run the risk of becoming the new middle class entitlement."
But how is that different than the middle-class entitlement that is our current public education system?
#4 -- The U.S. making serious reductions without China seems A) politically unfeasible in the U.S. and B) poor strategy. The latter because China has been the largest emitter since 2006 and is pulling away at a rate of nearly 10% annually. By the time the next round of accords are negotiated, China will exceed the emissions of the U.S. by 25-50%. It's unlikely that the U.S. could cut fast enough even to offset China's increases.
#6 -- Legalizing doesn't mean treating all drugs equally. Alcohol and tobacco already have different age restrictions, and beer and wine are often handled differently than liquor. It seems to me that it would make sense for pot to be about as tightly regulated as beer and wine, with cocaine more tightly controlled.
Posted by: Slocum at Dec 30, 2007 10:54:44 AM
About #6:
So, what's the economic or public-policy benefit of legalizing drugs, anyways? I was wondering how that made it to the list.
Posted by: Raul at Dec 30, 2007 11:03:00 AM
The odds overwhelmingly favour there not being a Global Warming problem. So bin that and attend to water and, perhaps, biodiversity, as the environmental worries. Vouchers: look upon them as the only chance to improve education while, eventually, cutting its preposterous costs. Medical care: good luck! Immigration: pious believers in the Precautionary Principle say that you must stop it immediately, I presume?
Posted by: dearieme at Dec 30, 2007 11:28:34 AM
That's a good list and all are worthy of comment. In the interest of space, let me focus on #4:
Why shouldn't the US "move first" on global climate change if China et al. don't cooperate? I think of three possible arguments:
1. Because the net marginal benefit of our efforts s less at lower levels of Chinese efforts.
2. Because of spite -- why should we help if they won't help?
3. Because of a game-theoretic story. By refusing to help we make it more likely that someone else will help.
Well, #1 seems very unlikely. Almost surely the net marginal benefits of efforts to mitigate climate change are decreasing with effort, and at some point reach zero. The net marginal benefits of our efforts are only greater if the Chinese do little.
#2 is clearly unworthy of you, although sadly I get the sense that is may be the predominant motivation of many voters and the policy makers that respond to them.
#3 Is plausible, but requires a good deal more explanation. In particular, it seems just as easy, if not easier, to make the opposite case. Also, your phrasing of your thinking doesn't really line up with a game-theory story, if that's what you were intending.
Incidentally, since the post is on "uncertainty", it's worth noting that for any given mean level of climate change, greater uncertainty only strengthens the case for earlier and greater action today. Because of increasing marginal costs of climate change for each degree of temperature change, a 50-50 chance of extreme change or zero change is likely to be much more costly, in expected value, than a certain outcome of moderate climate change. Hence, the common argument that "we don't know for sure" what the outcome will be is no argument for waiting.
Posted by: A student of economics at Dec 30, 2007 11:46:51 AM
Raul: So, what's the economic or public-policy benefit of legalizing drugs, anyways? I was wondering how that made it to the list.
Uh, more freedom? More liberty?
Prohibition didn't work in the 1920s and 1930s, and it isn't working today.
Posted by: chug at Dec 30, 2007 12:03:09 PM
No one living in the year 2208 will care what the quarterly profits of 2008 were if our species is facing extinction.
What can the person who made this comment above be thinking? There is no even remotely credible scientific basis for thinking that anthropogenic climate change will be extreme enough to threaten human extinction. Such comments increase my belief that much of the popular support for action on climate change is essentially a form of religious devotion, much like concern about hell fire in fundamentalist Christian circles. Of course, this says nothing directly about the actual extent to which we should be worried about climate change, and take action, except that the tendency of supposedly responsible scientists to let such rhetoric slide by without any strong refutation makes one wonder about the objectivity of their views as well.
Posted by: Radford Neal at Dec 30, 2007 12:16:52 PM
Chug: True! So are there any items a libertarian advocates prohibition on? I'm just curious of how a libertarian draws his lines.
Posted by: Raul at Dec 30, 2007 12:17:44 PM
Dear Tyler,
Thanks. You gave more than I asked for.
Best,
David
Posted by: David R. Henderson at Dec 30, 2007 12:27:55 PM
8. I find that a lot of "bad" foreign policy being propagated by non-expert sources has much to do with misconceptions about the use of military force, and what it is capable of.
Right-wingers tend to think that we could demolish entire countries with impunity, and point to instances like the Persian Gulf War. The Persian Gulf War, was a very specific situation, and is not applicable to, say, China, where we would probably deplete our entire supply of smart bombs in a few weeks. And conventional bombs don't do as much damage, certainly not enough to stop an organized enemy.
Left-wingers seem to have an obsession with Vietnam, forgetting that we effectively turned South Vietnam from a nation on the brink of a destruction to a formidable military power that held out against a Chinese- and Soviet- supplied North Vietnamese army for a good while.
And libertarians have this belief that "bad states" will collapse on their own and that "revolutions" are likely to succeed, while ignoring the fact that the Soviet economy was effectively in a state of war from 1941 to 1990, or that revolutions are often miserable failures. See: Myanmar, Uzbekistan.
Posted by: Robert Olson at Dec 30, 2007 1:21:23 PM
Regarding global warming and "going first," the hard fact is that neither China nor India will
do anything unless the US goes first. We have done nothing so far, except this just-passed bill
and are thus viewed universally as the bad guy on this issue. It may be that we will get shafted,
but more likely by India than by China, where environmental issues are being taken seriously by
the political leadership. But, without us going first, they will do nothing, period.
Regarding China as world's largest emitter, there is uncertainty about the amounts, but it certainly
has not been since 2006, and the most reliable sources have the US still as top dog, although China
certainly will be top dog shortly.
There certainly are uncertainties about the degree of anthropogenic effect. But the claim that "odds
are that global warming is not a problem" looks pretty ludicrous.
Regarding social security, congratulations on actually looking at the numbers, Tyler. So many do not,
including some of the Dem candidates. I find it bizarre to watch Obama denouncing Hillary because she
has not provided her plan to "fix" social security. Gag.
I also find it interesting that while you focus on uncertainties, always a wise way to go, Arnold seems
to be full of certainties. Oh well, glad he knows so much for so sure...
Posted by: Barkley Rosser at Dec 30, 2007 1:39:29 PM
I'd add a special area of concern related to #1 for mental health. The problem of involuntary treatment for people who are potentially dangerous to themselves and especially to others is not trivial. Perhaps the deinstitutionalization movement went too far?
Otherwise, these are the things that I think are difficult problems, too. It's notable that many are related to population pressures and a few to increasing wealth, so is that Garrett Hardin's ghost I hear?
Posted by: Eric H at Dec 30, 2007 2:50:23 PM
"...we don't know when the social and political fabric will start to crack in counterproductive fashion."
Look at the history of places where immigrants have had large impacts.
Milwaukee used to be majority German-speaking (the figure I've seen is 78%; I don't know how that was determined.) Boston and some other New England cities went from being very Protestant to political domination by Catholics. Some rural areas have been dominated by immigrants and their descendants.
Posted by: Dan Goodman at Dec 30, 2007 3:11:28 PM
Raul: So, what's the economic or public-policy benefit of legalizing drugs, anyways? I was wondering how that made it to the list.
Right now we spend tons of money on drug enforcement, which some people consider is not working. This coupled with the observation that in alot of places people can get incarcerated fairly simply, might not be the most efficient way to work.
It takes something like 30000 tax dollars to incarcerate 1 prisoner a year, not counting money spent on legal procedures or the actual enforcement process.
If it were taxed then, not only would the money not be lost on "pointless" enforcement, but we would gain revenue from the tax.
We also might be able to relatively reguate the demand or the certain drugs by the tax.
But a major problem is that a somewhat stable black market is in place for alot of the drugs, and it may continue unless somehow they could be integrated into the market as well.
I imagine it would be much easier to do this with a drug that would not stir as much of a public outcry, such as marijuana; cocaine, i feel, might not work out in the long run, due perhaps to one or two health issues. :)
I would love feed back
thanks
Posted by: at Dec 30, 2007 3:55:23 PM
Tyler writes:
"I am pro-immigration relative to either current policy or the median voter, but I am uncertain how many immigrants the United States could take in. I'm not just whinging about not knowing where the decimal point goes. More generally, we don't know when the social and political fabric will start to crack in counterproductive fashion."
Since we don't know when "the social and political fabric will start to crack," why take the risk of continuing to allow massive unskilled immigration? When you weigh the risks and the opportunity costs against the minor benefits, how can you justify your stance other than on sentimentalism, ideology, and whim?
This is essentially and admission that you've lost the running debate with your commenters on immigration on empirical/rational grounds. I'd be fascinated to see a frank discussion of the non-rational motivations you have for sticking by your prejudice on this issue.
Posted by: Steve Sailer at Dec 30, 2007 4:16:16 PM
"7: US society seems to be coping with current levels of immigration including illegals so perhaps that would be a good starting point for a new level of legal migration."
Is "US seems to be coping" a new level of argument?
And it should be a starting point for a new (much increased?) level of legal immigration?
Are we supposed to take new huge risk that immigration will not work out in the end, all based on "seems to be coping"?
Posted by: mik at Dec 30, 2007 4:31:00 PM
Steve,
Dan Goodman provides Boston and Milwaukee going from majority Protestant to majority Catholic
as being examples of the "political and social fabric cracking in unproductive fashion." Really?
Did we have riots in the streets? Is life miserable or awful, wracked by street wars or other
upheavals in those places?
I would say that you are way overstating it when you say that Tyler has not held his own against
some of the commenters who have been on bloviating hysterically about immigration. You folks make
a lot of noise, but the evidence of all kinds of horrible things happening or impending has not been
remotely shown.
Posted by: Barkley Rosser at Dec 30, 2007 4:44:49 PM
The threat of global warming is massively overstated. There seems a moderate probability of some moderate negative effects. So the climate will change over the course of centuries and humanity will adapt, as it always has. It's just not a big deal.
The enviro doom-mongers seem like so many Left Behind believers. Talk of human extinction is, quite literally, insane.
As to biodiversity, our current policy response is good at protecting large and cute species like mammals and birds. But the main benefit of biodiversity is the potential for new drugs and biochemical pathways.
We can get most of the benefits of biodiversity by cataloging and preserving bacteria and insects. Otherwise, having 10% more or less biodiversity doesn't provide much human benefit. And keeping cute mammals and birds has nothing but sentimental and cultural value (which does count, but there is not any material benefit to mankind).
The benefits of biodiversity are more often assumed than rationally argued. A simple example being croplands, which have minimal biodiversity. There are risks of disease, but the farmers of the world have managed that problem. Dramatically more biodiversity in our crops would be a bad thing since it would lower output and living standards.
Posted by: jim at Dec 30, 2007 4:53:39 PM
Re: #6
Raul: The opportunity cost of keeping drugs illegal is that the most violent people on the planet reap huge profits from artificial price supports that the drug laws create.
In regards to legalization, I think a better education policy in the school system would go a long way towards curbing use of hard drugs among youth. Rather than sentencing drug users who've run afoul of the law to AA or NA, send them to health awareness classes in grades three and up. Let the kids see the alcoholics, meth addicts, or crack addicts terrible appearance and demeanor up close. Let the kids hear their stories of hardship. That ought to be enough for any rational child to see that drugs aren't healthy.
Posted by: Kyle B at Dec 30, 2007 5:09:59 PM
Steve- The benefits of unskilled immigration are not minor, they are enormous. That most of these benefits accrue to non US citizens does not change this fact.
If an American citizen is impressed by the benefits immigrants receive and votes to liberalise immigration, what empirical error is she making?
Posted by: stuart at Dec 30, 2007 5:19:27 PM
“More generally, we don't know when the social and political fabric will start to crack in counterproductive fashion.”
Try getting out some time and you will discover that counterproductive “cracks” are already dangerously evident.
1. A nation that was once united by a common language is now divided by “press 1 for English, press 2 for a new president”. With essentially once exception, no nation has long endured the linguistic divisions America has imported. The list of nations that have fallen to multilingualism is long indeed.
2. The life prospects of ordinary Americans have fallen dramatically since mass immigration resumed around 1970. Wages peaked in 1973 and have fallen substantially since. Of course, inequality has soared along with ever greater social divisions.
3. The core of the American Dream, an affordable home in community with decent schools and a reasonable commute is now a fantasy in the areas of the United States most ravaged by Open Borders. California was once the embodiment of the American Dream. Now it is the American nightmare with even illegal aliens fleeing the horrors of mass immigration.
4. Public education is now in deep, perhaps irreversible decline as a consequence of mass immigration. Each successive cohort of high schools students going forward will be less educated than their processors as a consequence of mass immigration. We are already producing a vast domestic surplus of unskilled labor. Yet, the Open Borders lusts for even more.
5. We have imported a large population that demands, gets, and evidently needs racial quotas. How this could ever make sense is beyond me. How anyone can justify admitting people who will demand quotas requires a level of logical legerdemain that I am incapable of.
6. There is little prospect of the transportation system of the United States keeping up with mass immigration in the future. Sadly, it hasn’t done so to date. The gridlock of California is becoming a national norm.
7. We are importing high crime populations. If anyone doubts this, take a look “Seeing Today’s Immigrants Straight” by Heather Mac Donald. Of course, she enumerates a long list of tragically imported social woes as well.
Of course, this is just a subset of the woes of Open Borders. The complete list would fill pages. Mass immigration has no upsides for ordinary Americans. Time for a change.
Posted by: Peter Schaeffer at Dec 30, 2007 6:03:00 PM
