Topic: Regulatory Studies

The Sun: Attracting Global Warming Complaints?

Would you believe the sun’s magnetic field is a culprit? 

According to a new study from the Danish National Space Center, cosmic rays created by the explosions of distant stars play an important role in cloud formation in the earth’s lower atmosphere. Those clouds have a cooling effect on the planet. The sun’s magnetic field, however, interferes with this process to some degree, and that field has doubled for some reason in the 20th century. 

According to the Space Center’s website:

The resulting reduction in cloudiness, especially of low-altitude clouds, may be a significant factor in the global warming Earth has undergone during the last century.

Grist for the mill. I’m sure it will only be a matter of time, however, before someone claims that the Danish National Space Center is secretly on the Exxon take.

Debating Darwin

Michael Shermer, a leading skeptic and bestselling author, will speak at Cato on October 12 on his new book, Why Darwin Matters: The Case against Intelligent Design. Providing highly critical commentary will be Jonathan Wells, author of The Politically Incorrect Guide to Darwinism and Intelligent Design. Shermer, once a creationist himself, argues that evolutionary theory is the foundation of modern biology. He concludes, “Darwin matters because evolution matters. Evolution matters because science matters. And I liked this line: “Of the three intellectual giants of that epoch–Darwin, Marx, and Freud–only Darwin is still relevant for the simple reason that his theory was right.” Join us next Thursday, or watch it on the web.

Dust in the Wind

For those of you still under the impression that federal environmental regulators are sober-minded professionals who cooly and reasonably guide regulatory policy in the public interest with both emotional detatchment and common sense, I offer you this story, which reports that farmers will now be required to control the amount of dust kicked up from their fields.

Iowa Senator Charles Grassley was quick to tag the rule profoundly “idiotic.” While I agree, it’s hard to muster much sympathy for farmers given the economic assault they have launched on non-farmers via federal and state ethanol subsidies and consumption mandates. So in this case, I root for mutually assured destruction.

White Coats Über Alles

Last week, a group of scientists announced the formation of a new coalition – Scientists and Engineers for America (SEFA) – to campaign for politicians “who respect evidence and understand the importance of using scientific and engineering advice in making public policy.” While the group professes to be nonpartisan, “the group will discuss the impact the Bush Administration’s science and technology policies have had in their fields and the need for voters to consider the science and technology policies by candidates in this year’s mid-term elections.”

I imagine that most people would agree that, in the words of SEFA, “Scientists and engineers have a right, indeed an obligation, to enter the political debate when the nation’s leaders systematically ignore scientific evidence and analysis, put ideological interests ahead of scientific truths, suppress valid scientific evidence and harass and threaten scientists for speaking honestly about their research.” But there’s more than a whiff of the sentiment here that Americans should just shut up and let the guys in the white coats run the country.

What irks me about the increasing bossiness of the self-appointed guardians of “science” is the lack of humility about their own profession.

First, there is disagreement among scientists about many of the issues they are concerned about – like global warming – and it’s not clear even to scientists exactly what is going on in the atmosphere. Assertions to the contrary are simply dishonest.

Second, scientists of all people should know that scientific truth is not determined by a show of hands. Theories stand or fall on hard data and evidence, not majority votes within politicized professional bodies. Virtually every single thing that the scientific “consensus” believes today was once a fringe minority perspective. Would we ever have arrived at our present intellectual location had minority dissenters been run out of town on a rail or burned at their professional stake? Scientific theories demand criticism to fulfill their promise. Scientists should welcome a public “kicking of the tires” and not try to punish those who engage in it.

Third, scientists might be able to better inform society about the facts of various matters, but they should not be allowed to dictate to society how it deals with those facts. The judgment of scientists regarding the proper trade-offs between this or that set of policy options is no better than yours or mine. In short, they have a lot less to contribute to the policy world than many people apparently think.

Finally, asking scientists to settle our policy problems for us inevitably politicizes science and corrupts the entire endeavor.

So to SEFA, I say “zip it.”

Feariness about Data Loss

In the spirit of Stephen Colbert’s “truthiness,” here’s another useful term for the pop lexicon:

fear i ness (fir’ e-nes) n. The quality of being feared, even though logic and/or evidence indicates there is little to fear.

A prime example of feariness right now is data loss — the loss of control over confidential information that could lead to violation of a person’s privacy, identity theft, and fraud. This feariness has been fanned by the recent thefts of government and corporate computer hardware containing important data files.

Though privacy violations and fraud are worrisome, an article in today’s New York Times explains that much of the alarm over data loss is just feariness:

The veterans’ laptop episode underscores the crucial distinction between data loss and malicious data theft — a distinction that has often been glossed over or ignored in the recent wave of alarming disclosures of data breaches at government agencies, universities, companies and hospitals. In most cases, the consequences — financial and otherwise — of the data losses have been slight.

But while high-profile data breaches are common, there is no evidence of a surge in identity theft or financial fraud as a result. In fact, there is scant evidence that identity theft and financial fraud have increased at all. Even when computer networks are cracked into, and troves of personal information intentionally stolen, fraudsters can typically exploit only a tiny fraction of it.

Readers of Cato’s Regulation Magazine already know this story. In last spring’s issue, Tom Lenard and Paul Rubin describe how the incidence of data theft–inducing fraud is fairly stable, how most of that fraud is the product of the theft of old-fashioned paper statements instead of electronic information, and how the response to data loss (including government-mandated response) is far more costly in aggregate than any resulting fraud.

Public Health & Economic Literacy

My former research assistant is now pursuing a master’s degree in public health at Harvard. She recently blogged about her economics course:

During econ class today, the professor explained in great detail the ways in which the federal government tinkers with agricultural output, like price floors and crop restriction and so forth. A lot of my classmates were genuinely surprised at the extent to which government messes with food production to placate the farm lobby, and that, in turn, surprised me. I thought most people — or most well-educated grad students and medical residents, who make up my class — knew all about concentrated benefits/diffuse costs, and why we probably pay more for milk than we should. At one point, a student from India, astonished, said, “You mean the government actually sets aside these funds every year for this purpose?” Professor: “Of course not. We run deficits.”

Again, these students made it all the way to Harvard without any exposure to such things. Makes me wonder if any research has been done on the economic literacy of the public health profession. (E-mail me mcannon [at] cato [dot] org" href="mailto:mcannon [at] cato [dot] org">here if you’re aware of any.)

Let’s just hope that Adrienne’s econ class is a required course.

How I Learned to Stop Worrying and Love Behavioral Economics

Peter raises the threat that behavioral economics poses to free market policy. I’m less concerned about this movement, in large part because its teachings can be turned against central regulators. 

Here’s law professors Stephen Choi and Adam Pritchard, from the conclusion to their excellent 2003 article Behavioral Economics and the SEC (from the Stanford Law Review; working paper version available here):

Regulators are vulnerable to a wide range of behavioral contagion. Regulators may suffer from overconfidence and process information with only bounded rationality. Heuristics play a large role in how regulators make decisions. Even with expertise, regulators may misapply heuristics across the spectrum of different regulatory problems. Regulators may also suffer from confirmation bias, supporting prior regulatory decisions whatever the wisdom of the decisions.

And in groups the decisionmaking of regulators may decline rather than improve. On the one hand, groups and organizational structures may help alleviate some of the mistakes that derive from individually biased decisions. Studies of group decisionmaking provide evidence that the total can indeed be greater than the sum of individuals in enhancing the accuracy of decisions. But cognitive illusions may grip entire groups. Groupthink may also lead to an uncritical acceptance of regulatory decisions.

If both investors and regulators operate under the influence of behavioral biases, the value of regulation in correcting these biases comes into question. If regulators are not well equipped to determine whether regulation will counteract the biases facing investors, regulation may well do more harm than good. Worse still, SEC regulators may suffer greater behavioral biases than securities market participants. Investors that perform poorly will either learn (and perhaps put their money into an index fund or otherwise hire expertise) or exit the market. Private institutions face similar market pressures to serve the interests of their client-investors or perish. Although some types of biases may give institutions a competitive edge, the magnitude of such biases is limited by the cost that they impose on investors. The market may not function perfectly, but regulators under the present regime face no such pressures.