Orangutans v biofuels

An interesting discussion at Grist where Peter Madden asks whether those concerned about the environment are too obsessed with climate change?

There certainly are trade-offs between tackling different environmental issues. And with a limited pot of money, other important areas can suffer. Policies can be in conflict, too. Remember the catalytic converter in the 1980s: good for tackling pollution, but bad for fuel efficiency. And bad for biofuels today, which may be good news for tackling climate change; but if poorly sourced, is very bad news for orangutans.

How should we go about sorting our environmental priorities? The problem is one of weighting entirely different environmental impacts. We'd all like to see climate change reduced and pollution fall and more orangutans, and, for that matter, better healthcare, lower crime rates and all the rest.

In the absence of systematic weighting, or explicit consultation, these decisions are made (or fall out of) the political process. Unfortunately, rationality and the society's wishes or even our best interests are poorly served. More potent as policy drivers appear to be lobby groups on behalf of vested corporate and bureaucratic interests, and events for which there is video footage that can be shown on television.

There are genuine difficulties with weighting the diverse, competing demands for society's scarce resources, but a large part of the problem is that we have little idea of how much solutions to our diverse problems will cost.

Social Policy Bonds could be the answer. They have an advantage over most other instruments in that the cost of achieving the targeted outcome is minimised and capped. And it is the market that decides on how much the solution to a targeted problem will cost. Bonds aiming to increase climate stability, for example, would convey extremely valuable information to the public and policymakers about the actual cost not only of achieving the targeted degree of stability, but about how much extra increase in stability will cost. The market for the bonds is elegantly efficient in conveying information about the cost of achieving objectives and, crucially for policymakers, how this cost varies with time and circumstances. This information is immediate, upfront, and available to all. It is determined not by a handful of so-called experts, but by competitive bidders who have incentives to get it right.

Immediately, then, half of the policy conundrum is resolved: we have best estimates of the costs of, say, protecting orangutans and increasing climate stability. We could say that raising climate stability by 1 percent will cost $x, while maintaining current numbers of orangutans will cost
$y. We could say that raising literacy rates by x percent will cost the same as reducing air pollution by y percent. (My post here discusses information markets, which, as far as I can tell, generate the same sort of information as Social Policy Bonds but do not seek to modify behaviour.)