August 27, 2008
Consider the two most challenging environmental problems of our time—the depletion of the earth’s protective ozone layer, and global climate change. The first one, writes Harvard Law School Professor Cass Sunstein ’78, “has been essentially solved, whereas very little progress has been made on the second.”
For Sunstein, explaining that difference involves law and economics, behavioral science, psychology and even philosophy. Lately, he has been focusing on how leaders and citizens should assess dangers—ranging from climate change to terrorism—and react in ways that best protect present and future generations.
Willful inaction in the face of possible harm is obviously perilous, Sunstein writes in a recent book, “Worst-Case Scenarios” (Harvard University Press, 2007), but overreaction can sometimes be even more dangerous, especially if it leads to unintended consequences and the squandering of resources that might have been deployed to prevent other catastrophes.
For example, the financial costs incurred by the U.S. in Iraq and Afghanistan have far surpassed the total estimated costs of implementing the 1997 Kyoto Protocol on climate change. At the time the decision was made to invade Iraq, Sunstein writes, “perhaps the public believed that significant reductions in the risk of terrorism could be undertaken at a reasonable cost—in light of the perceived immediacy of the threat—and perhaps people [did] not think this [was] true of steps to limit climate change.”
So, Sunstein argues, when we make assumptions about risk—and especially when we then choose to assume particular risks—we should do so with as much information as possible.
That means thoroughly identifying and quantifying the foreseeable consequences of alternative courses of action. It means wading into the waters of valuation and discounting, including the awkward pricing of human life. It means calculating the probabilities of particular scenarios and then running the numbers through the mill of cost-benefit analysis. These tools, despite their shortcomings, are indispensable, Sunstein writes.
So far, he suggests, we have hardly overreacted to our most ominous environmental threats. If anything, we have not reacted enough. But in the ozone case, he says, we got it right. In 1987, not long after the discovery that chlorofluorocarbons were destroying the ozone, 183 nations (including the U.S.) ratified the Montreal Protocol for the phase-out of CFCs, which have now been reduced by 95 percent. By 2060, the ozone layer is expected to return to its natural state. The Montreal Protocol, writes Sunstein, “is the most stunning success story in the history of international cooperation.”
Compare that to the Kyoto accord on climate change, which, despite being ratified by more than 130 nations, has languished. “It has been firmly rejected by the United States,” Sunstein notes. “It does not impose restrictions on emissions from the developing world, though China is now the world’s largest greenhouse gas emitter.”
The “monetized benefits” of the Montreal Protocol were rightly perceived as dwarfing the monetized costs, Sunstein writes. But the potential harms of climate change are still too abstract for most people to fear, and the costs of reducing carbon emissions are widely perceived as excessive. “The task for the future,” he writes, “is to devise an international agreement that resembles the Montreal Protocol in one critical respect: Its signatories, above all the United States and China, [must] have reason to believe they will gain more than they will lose.”
The clear implication is that if the cost-benefit analysis of climate change has thus far been myopic, it is because we haven’t yet undertaken the kind of risk assessments Sunstein advocates. Moreover, he argues, those assessments should involve more than just numerical values. They must also involve moral values—including a “principle of intergenerational neutrality” that ensures that “the members of any particular generation should not be favored over the members of any other” in shouldering the costs of a fix.
For a generation that is already accustomed to passing off its debts on its grandchildren, that principle may be tough to swallow.
-- Robb London (adapted from an article in the Harvard Law Bulletin)
NOTE: Professor Sunstein is also the co-author—with Professor Richard Thaler of the University of Chicago Graduate School of Business—of the recently-published “Nudge: Improving Decisions About Health, Wealth, and Happiness” (Yale University Press 2008). In that book, the authors demonstrate how “choice architecture” can be designed to nudge people in beneficial directions without restricting their freedom of choice.