Let me point out that I didn't accuse anyone of "misusing" the term. And let me suggest that we not lose sight of what got this discussion going - empirical evidence that people prefer the joint pursuit of mitigation and CE, as opposed to geoengineering by itself.
Josh On Thu, Sep 23, 2010 at 3:39 PM, Martin Bunzl <[email protected]> wrote: > Excuse me but I did not defend the term's use - I merely characterized its > use in policy discourse. > > > > MB > > > > From: Lane, Lee O. [mailto:[email protected]] > Sent: Thursday, September 23, 2010 12:38 PM > To: [email protected]; [email protected]; Ken Caldeira > Cc: [email protected]; geoengineering; David Keith; Montgomery, > David > Subject: RE: moral hazard > > > > The posts by Professors Bunzl and Socolow convince us more than ever that > injecting the term 'moral hazard' into the debate about climate engineering > (CE) is a mistake. Professor Bunzl defends the term's use. He writes that > moral hazard results when "...a policy intended to offset a state of > affairs > will also have an unintended effect of also exacerbating that state of > affairs." Yet if we had analyzed CE correctly and found it to be viable, it > would lower the risk of harm from climate change -- not 'exacerbate' it. > Thus, although Professor Bunzl's terminology seems quite vague to us, it > still does not stretch 'moral hazard' wide enough to subsume the case of > CE. > > > An analogy might help to draw out some important distinctions. Consider > highway accident risks. Auto collision insurance can create a moral hazard. > There is a dispute about how big the effect is, and the advantages of > insurance may outweigh the harm from moral hazard, but collision insurance > does have the features that can lead to moral hazard -- risk shifting and > asymmetric information. Thus, it is easy to see how insurance might cause > accident costs to exceed optimal levels. > > In contrast to the insurance example, an effective auto collision avoidance > system would not cause moral hazard. It would simply lower the risks of > driving. To be sure, drivers may well take some of the welfare gains in the > form of more trips, faster trip speeds, and less mental effort applied to > the task of driving. This has been the common result of past improvements, > but the efficiency gains are no less real for taking forms other than fewer > accidents. > > CE presents a close analogue to collision avoidance. If it works and if it > does not produce unacceptable side effects, it would allow society: > > * to lower the future harm from GHG emissions, or > * to keep the same level of harm with lower abatement costs, or > * to do some of both. > > How much of the hypothetical CE efficiency gain should take one form rather > than another depends on the shapes of the GHG marginal abatement cost and > marginal damage curves. > > Some people, though, like some extremist highway safety advocates, want all > of the hypothetical efficiency gains from CE to be used to lower risk. They > fear, rightly we suspect, that society, if offered a choice, would select a > level of climate risk that might be lower than that which would prevail > without CE but one that would also be higher than that which would obtain > if > all of the gains from CE were used to reduce risk. Somehow this chance that > society might treat CE in an economically quasi-optimal way has been > conflated with moral hazard. > > Josh Horton may well be right that this misuse of the term 'moral hazard' > and the opprobrium that it conveys springs from some kind of "land ethic". > Or perhaps we are right, and the misuse merely arises from a failure to > take > proper care in drawing analogies among concepts. The two notions are not > mutually exclusive. > > Either way, the CE debate would be far better off without the resulting > confusion. First, the term as a description of the pros and cons of CE is > simply inaccurate. Second, its use biases the discussion. 'Moral hazard', > by > definition, implies a loss in welfare, and there is nothing in the concept > of CE that entails any such result. Third, the term 'imperfect substitutes' > offers an accurate and value-neutral framework for discussing the choices > among GHG control, CE, and adaptation; so there is no need to use > inaccurate > and biased language. > > Lee Lane and David Montgomery > > > > > > > > > > _____ > > From: Martin Bunzl on behalf of Martin Bunzl > Sent: Sun 9/19/2010 8:35 PM > To: [email protected]; Lane, Lee O.; 'Ken Caldeira' > Cc: [email protected]; 'geoengineering'; 'David Keith' > Subject: RE: [geo] Re: Fwd: NERC Geoengineering dialogue report published > today > > In the context of public policy as opposed to economics, 'moral hazard' is > used informally to refer to the degree to which the implementation of a > policy intended to offset a state of affairs will also have an unintended > effect of also exacerbating that state of affairs. The classic case is an > amnesty for illegal immigrants (or tax evaders). From the point of views of > policy (as opposed to morality), the crucial question is the relative > balance of gain over loss from the implementation of such a policy. > > > > Martin Bunzl > > > > From: [email protected] > [mailto:[email protected]] On Behalf Of Robert Socolow > Sent: Sunday, September 19, 2010 1:37 PM > To: [email protected]; 'Ken Caldeira' > Cc: [email protected]; 'geoengineering'; 'David Keith' > Subject: RE: [geo] Re: Fwd: NERC Geoengineering dialogue report published > today > > > > Let me give this a try. Moral hazard, yes, is a kind of market failture, > but > one rooted in psychology. We desperately want there to be low-cost > solutions > to climate change. So, each time a "solution" arrives that looks like it is > low cost, we embrace it and are not adequately critical. That's just how > we're wired. Moral hazard captures the tendency to self-deception. If we > assessed low-cost proposals with appropriate skepticism, there would be no > problem. The arrrival of each new "solutions: should lower our level of > effort on what we are already getting ready to do, but we allow these > "solutions" to distract us -- we systematically overvalue them -- and thus > we lower our level of effort more than we should. We know thjis is one of > our own weaknesses, and we are trying to warn ourselves. > > > > We need cognitive psychologists here to frame these issues better than I > have. > > > > Rob > > > > _____ > > From: [email protected] > [mailto:[email protected]] On Behalf Of Lane, Lee O. > Sent: Saturday, September 18, 2010 2:39 PM > To: Ken Caldeira > Cc: [email protected]; geoengineering; David Keith > Subject: RE: [geo] Re: Fwd: NERC Geoengineering dialogue report published > today > > Dear Ken, > > > > A good suggestion. The list that you provide is a reasonable one. I would > add that my understanding is that moral hazard refers to a specific kind of > market failure. It is not just risky behavior. A simple definition that I > think corresponds quite well to the way that the term is commonly used Is: > > > > "The risk that the existence of a contract will change the behavior of one > or both parties to the contract, e.g. an insured firm will take fewer fire > precautions. " Asymmetric information between the contracting parties is a > typical feature moral hazard problems. The insurer or principal knows less > than the insured or agent about the latter's behavior or state. > > > > Climate engineering is not such a case. It's a policy choice by government. > There is no contract. There is no information asymmetry. True, risk is > involved, but GHG control also implies accepting some risks in order to > curb > others. Nobody argues that emission limits entail moral hazard, and no one > should. People can agree or disagree about the prudence of either or both > approaches. As you know, I would buy some of both, but neither of the > policies has much in common with insurers' or share owners' options as they > try to align the incentives of the insured or their firm managers' with > their own interests. > > > > These just seem to me to present issues that are quite different from the > optimization problems under uncertainty entailed by climate change. And as > my previous post suggested, trying to force climate policy into this mold > seems to me to invite misunderstanding of the issues at hand. > > > > Lee > > > > _____ > > From: [email protected] on behalf of Ken Caldeira > Sent: Sat 9/18/2010 12:23 PM > To: Lane, Lee O. > Cc: [email protected]; geoengineering; David Keith > Subject: Re: [geo] Re: Fwd: NERC Geoengineering dialogue report published > today > > Lee, > > It would help in this discussion to provide a clear definition of "moral > hazard" and then say why or why not that definition is relevant in this > context. > > If you look on the web, you can get quite a range of definitions: > http://www.google.com/search?q=define%3A+moral+hazard > > The first definition that comes up is: > > Moral Hazard (economics) the lack of any incentive to guard against a risk > when you are protected against it (as by insurance) > > The UN Capital Development Fund defines it as follows: > > Moral Hazard arises from the incentive of an agent holding an asset > belonging to another person to endanger the value of that asset because the > agent bears less than the full consequences of any loss. > > So, the question is "Why are these definitions not relevant to climate > intervention?" > > By the way, most but not all definitions of "moral hazard" do not imply > that > "moral hazard" has anything to do with morality. > > Climate intervention seeks to diminish risk and not simply transfer risk, > which is one distinguishing factor. > > Here is a little parable: > > Let's say that people think you should change farming practices to slow > runoff to decrease flooding downstream. Let's further say that people > downstream build dikes to prevent flooding despite poor upstream land use > practices. Would we say that a moral hazard of building dikes is that it > will relieve pressure on people living upstream to improve their land use > practices (which could have other co-benefits, such as limiting nutrient > runoff)? > > [The analogy is that CO2 emission reduction gets at fundamental cause of > problem, has other co-benefits (e.g. w.r.t. ocean acidification) but that > climate intervention may really reduce risk and not just transfer risk.] > > Anyway, Lee, it would be nice if you would provide what you think is a good > definition for "moral hazard" and then clearly explain why you think it > does > not apply in this case. > > Best, > > Ken > > PS. David Keith may want to chime in, as I think he was one of the first to > use "moral hazard" in this context and now wishes he had been more precise > with his language. > > ___________________________________________________ > Ken Caldeira > > Carnegie Institution Dept of Global Ecology > 260 Panama Street, Stanford, CA 94305 USA > +1 650 704 7212 [email protected] > http://dge.stanford.edu/labs/caldeiralab @kencaldeira > > On Sat, Sep 18, 2010 at 8:56 AM, Lane, Lee O. <[email protected]> wrote: > > Dear Josh, > > > > I would suggest that in the future we would all be better off without the > term "moral hazard". Moral hazard, as I suspect you know, is a kind of > market failure. The concept is perfectly useful for describing a class of > problems that arise in insurance markets and other kinds of risk-spreading > contracts. It does not, I would argue, fit the case of climate engineering > (CE) at all well. > > > > The relative priority of climate engineering and GHG control is a matter of > public policy. It does not involve insurance markets or contracting. The > asymmetric knowledge, so typical of moral hazards, does not obtain. > > > > In fact, if CE works and does not cause unacceptable side effects, it would > lower the expected damage from an adding a ton of CO2 to the atmosphere. As > a result, optimal carbon tax rates or emission allowance prices would fall, > and the optimal pace of controls would slow. > > > > True, even if CE works well, it may exhibit diminishing marginal returns, > and it does not combat ocean acidification. Thus, controls retain some > value; so does adaptation. The three approaches, as Scott Barrett has often > noted, are imperfect substitutes. (Doing more of one implies doing less of > the others, but there is a limit to how far that substitution can stretch.) > Each of the three is likely to encounter rising marginal costs; hence, > relying over-much on any one of them will lower over-all cost > effectiveness. > > > > In this context, the term moral hazard adds nothing but confusion. Its > misuse can be taken to imply that sole reliance on GHG control is somehow > the correct response. Indeed the naïve may take it that controls are the > only "moral" response. The more we think, speak, and write in these > evocative but misleading terms the harder it becomes to see that climate > policy should entail finding the most cost beneficial mix of strategies for > dealing with a compound challenge in the face of uncertainty. > > > > Josh, I suspect that you know all of this; indeed, you could probably write > it more articulately than I have. My guess is that you use the term merely > as a convenience. Its misuse has seemed to take root in the debate about > CE. > Maybe it is too late to expunge it. Still, I would urge that we at least > avoid sowing further confusion-even if it involves taking a little extra > trouble to explain. > > > > Best regards, > > > > Lee Lane > > > > > > > > > > One of the more interesting findings pertains to the "moral hazard" > argument against geoengineering, that is, people will embrace > geoengineering as an excuse to avoid emissions reductions, and current > levels of fossil fuel consumption will persist if not increase. Moral > hazard has emerged as one of the principal arguments against climate > engineering, despite the fact that geoengineering advocates generally > support aggressive mitigation as the preferred option, and are quick > to note the limitations of specific strategies, such as continued > ocean acidification and the so-called "termination problem" in the > case of stratospheric aerosol injections. > > Evidence from the public dialogue summarized in the NERC report > indicates that participants viewed mitigation and geoengineering as > complementary policies, not as mutually exclusive alternatives. > Stakeholders saw a link between geoengineering and emissions controls, > and preferred a suite of mitigation and geoengineering measures to > reliance on any single approach. "This evidence is contrary to the > 'moral hazard' argument that geoengineering would undermine popular > support for mitigation or adaptation," notes the report. While this > study represents only one set of empirical data gathered in one > particular sociocultural context, it is to my knowledge the first time > the moral hazard argument has been tested, and demonstrates little > support for this proposition. > > Josh Horton > [email protected] > http://geoengineeringpolitics.blogspot.com/ > > > On Sep 9, 10:45 am, Emily <[email protected]> wrote: > > best wishes, > > Emily. > > > > Dear Colleague, > > > > NERC has published the final report of Experiment Earth? , our public > > dialogue on geoengineering. It can be found > at:http://www.nerc.ac.uk/about/consult/geoengineering.asptogether with a > > short leaflet summarising the findings and recommendations from the > report. > > > > The latest issue of NERC's Planet Earth magazine also contains an > > article about the public dialogue, which can be found > here:http://planetearth.nerc.ac.uk/features/story.aspx?id=744 > > > > Regards, > > > > Peter > > > > Peter Hurrell > > > > Stakeholder Liaison Officer | Policy and Partnerships Team > > > > Natural Environment Research Council (NERC) > > > > Putting NERC science to use: find out more through NERC s Science > > Impacts Database <http://sid.nerc.ac.uk/> > > > > -- > > This message (and any attachments) is for the recipient only. NERC > > is subject to the Freedom of Information Act 2000 and the contents > > of this email and any reply you make may be disclosed by NERC unless > > it is exempt from release under the Act. 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