20 August 2009

Doing something, achieving nothing

Regardless of what you might think of Richard Courtney's suggested solution, his summary of our response to the possibility of catastrophic climate change is accurate:
Developing countries say they will not limit their emissions, and industrialised countries have problems reducing theirs. China releases more of the emissions than any other country, is industrialising, and says it is entitled to the same emissions per head of population as the US. So, China says it intends to increase its emissions more than four fold. India says the same. The US is having problems adopting a ‘Cap and Trade’ policy that would harm American industries and force industries from America to China. The EU adopted a ‘Cap and Trade’ policy that collapsed and has not affected the EU’s rising emissions. The Australian Parliament has recently rejected a similar policy.

Politicians have been responding to the failure of the Kyoto Protocol by showing they are ‘doing something’. They have adopted pointless and expensive impositions on energy industries, energy supplies and transportation. And the public is paying the large costs of this in their energy bills.

The Copenhagen Conference will provide a decision because it has to, but that decision will have no more effect than the Kyoto Protocol. And this will put more pressure on the politicians to be seen to be ‘doing something’ with further cost and harm to peoples and to industry. Richard S. Courtney, 17 August
As with climate change, so with nuclear proliferation or any number of other possible disasters. We shall never know for certain, until it's too late, whether threats are potential or actual. Our default position then, is as described by Mr Courtney: to do nothing. There's something to be said for that: it costs very little. In particular, it avoids the payment of large upfront costs for uncertain future gains.

But the threats might turn out to be real, in which case today's inaction is criminally negligent. What is a genuinely concerned individual - politician or not - to do?

I can't think of a better solution than Social Policy Bonds. Governments or groups of concerned people could issue bonds that would reward the avoidance of anything they don't want to see: from a rise in regional unemployment to a global catastrophe. They wouldn't have to decide how likely is the disaster they wish to avoid; nor would they need to know how best to avoid it. Those decisions would be taken collectively, by investors in the bonds. These investors would have powerful incentives to explore, research and implement the most efficient ways of avoiding calamity. Importantly, they would also have incentives to terminate failed experiments. They would also bear the risks of failure.

Social Policy Bonds with the aim of avoiding disasters might not forestall all calamities. But they would be much, much better than our current efforts.

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