Monthly Archives: June 2004

6 – Climate change and scaremongering

Climate change is in the news again, thanks to the new movie “The Day After Tomorrow”. It seems that the consensus is that the movie is scientifically inaccurate, but will be effective in changing people’s attitudes to the issue. People involved in the climate change industry seem to think that this is OK, or even good. I think it is appalling. How can it be alright to use inaccurate scaremongering to drive public opinion? I guess it is only different by degree to the existing public debate on climate change, which is full of scaremongering and distortions.

No doubt the people involved with the issue are earnest, but some of them do seem to have difficulty understanding what might constitute prudent and responsible public policy. My favourite recent comment from a climate-change scientist, which I heard on ABC radio national, is that although the official scientific projections don’t look that scary, they are full of unknowns, and we need to worry about those, especially the unknowns we don’t even know about — the unknown unknowns! Apparently we should be willing to spend billions in order to combat these unknown unknowns. I’m sure he was serious.

On another matter, there is a fascinating controversy currently brewing about one of the key papers underlying the position of the Intergovernmental Panel on Climate Change on greenhouse; Mann et al. 1998. A geologist (McIntyre) and an economist (McKitrick) have tried to reproduce the results of their stats, and in the process found lots of errors in the basic data and worries about the stats. When they redo the analysis, they get a radically different result. Mann et al. found that temperatures have been pretty stable since 1400, until they shot up at the end of the 1900s (described as the “hockey stick” result). Using the same data and methods, but with errors removed, M&M found that the late 1900s are pretty unremarkable and that the 1400s came out as quite a bit warmer! Mann got defensive and kicked out, without addressing any of the concerns raised by M&M about his own work and seemingly dodgy scientific practice, especially his unwillingness to disclose data and methods. In the process it looks like he may have just dug a bigger hole for himself, though time will tell. The M&M paper is accessible on the web (it’s very readable, although necessarily very detailed about the errors). It will be fascinating to watch it all play out. Read the details on M&M’s site at:

http://www.uoguelph.ca/~rmckitri/research/trc.html

David Pannell, The University of Western Australia

5 – Genetically modified organisms

Fear of the unknown can be a powerful force. I didn’t quite appreciate how powerful until I listened to an interesting experiment on national radio.

ABC Radio National has a program called Bush Telegraph, which last year ran “Grow Your Own”. A producer of irrigated cotton offered one of his fields to be managed according to popular vote of listeners, with the aim of educating the public about the trade-offs and complexities involved.

The program ran over the whole growing season for a crop of cotton. There were a number of interesting outcomes but the vote on whether to use GM or conventional cotton was stunning. Up to that point, the listeners had tended to vote for “green” management practices. For example, they voted for manure rather than synthetic chemical fertilizers, which in truth would probably have minimal benefits to the environment, if any. It was explained that GM cotton would allow the number of applications of chemical pesticides to be dramatically reduced but the majority of voting listeners still preferred non-GM.

They were prepared to put up with a technology that has well quantified, well understood, immediate, adverse impacts on the environment, as well as imposing health risks on the farmer, for what gain? For the gain of avoiding some low probability of bad outcomes from a technology which, in the case of cotton, has been grown for years on large areas with no known adverse impacts of any sort. One could imagine that there might be some sort of nasty surprise down the track, with unanticipated negative consequences from growing GM cotton, but they would have to be dramatic to justify this decision, wouldn’t they? Remember, the choice is between:

  • an unknown but probably small chance of some unknown adverse outcome at some unknown future time, and
  • the certainty of a well understood adverse outcome, immediately.

Economists are prone to assume that people are rational, but there is scant evidence of it in this example. The choice most people voted for seems to me to be strongly against their own preferences for protecting the environment.

It is interesting to speculate what is going on here. It is well established in the research on risky decision making that people tend to give undue weight to outcomes that are small-probability but extreme. Perhaps they are imagining catastrophes, and considering them to be more likely than they really are.

Even if they get the probabilities right, people do have a natural tendency to give more emphasis to negative outcomes than to positive ones. Most of us are “risk averse”. But not usually to the extent implied by this voting pattern.

Lack of trust in science may also be part of the problem. These days, reassurances from experts don’t carry the weight that they once did.

Finally, ignorance clearly plays a big part. There is a lack of knowledge of even the basics of genetics and DNA. In a 1998 international survey, 60 percent of people responded that they do not eat any foods containing DNA!! The mind boggles. I wonder if they would be alarmed to learn that they each have DNA in every cell. Would they think it got there through eating contaminated foods?

To further confound an understanding of Australian community attitudes to GM, there seems to be an acceptance of GM products in medicines, such as relenza (for treatment of influenza) or insulin (replacing production of insulin from pigs’ livers).

It seems to me that it can’t just be the “unknown” aspect of GM that is driving public attitudes. There are plenty of other scientific and environmental issues that the public knows little about which don’t generate such a confounding and apparently irrational set of responses. Somehow, opponents have successfully imbued the subject with a sense that it is unnatural and almost evil. The fact that all domesticated plants and animals (i.e. the ones you eat) are much more different from their wild “natural” ancestors than from GM varieties is apparently not an equivalent concern.

I don’t think it can last. The radically different attitudes of most consumers in North America and the acceptance even in Australia of GM medicines suggests that although Australians don’t yet feel that the benefits outweigh the risks, they will accept GM plants eventually.

Of course we need to continue to be careful with GM, as with any new technology. The CSIRO sums up the issue quite well:

“Gene technology is a new and powerful technology; it offers potentially enormous benefits, but is not without risks. Gene technologists can’t provide an iron-clad guarantee that the new technology is completely safe, nor can they predict all its health, environmental, economic or social consequences – good or bad.” (http://genetech.csiro.au/)

It is a matter requiring care, but also balance.

David Pannell, The University of Western Australia

4 – Farmers adopting new practices

It was very windy in Albany one day last week. We went out for a walk and got sand blasted skin and dust in the eyes. It reminded me of dust storms I saw in the wheatbelt in the early 1980s. Dust storms are much less common in the wheatbelt now, largely thanks to widespread adoption of reduced tillage practices. Compared to most practices intended to reduce the degradation of farmland, the level of adoption of reduced tillage in Western Australia has been remarkable.

This has occurred despite conflicting with some of the simple “rules” about what makes a practice adoptable. According to one list that is often trotted out, adoption ought to be inhibited if an innovation is more complex, if the observability of its results is poor or delayed, if there are any difficulties in trialing the innovation or if it is incompatible with existing practices. Arguably, reduced tillage is a rather complex technology with major flow-on effects for the farming system, with poor immediate observability of production benefits (so that a short-term trial is not fully informative), with relatively poor observability across farm boundaries, and, in some ways, with incompatibilities with what used to be traditional farming practices and machinery.

Nevertheless, it is now standard farming practice, because most farmers believe that it has advantages that clearly outweigh these problems. The advantages are apparent and large enough to overcome the sort of “barriers” that might have been expected to hold it back.

Clearly the concept of “barriers to adoption” is far too simple. It actually doesn’t work like that. A negative characteristic of an innovation does not act as an absolute barrier to its adoption. Rather, farmers will weigh up the negatives and positives and make an overall decision.

I regularly emphasise the importance of the long-term profitability of an innovation as a strong influence on its adoption. Increasing profitability isn’t the only driver of adoption in agriculture, but it is certainly an important one. It may be the main one over which we can have any influence. “Profitability” in this context means net profits in the long term, and it encompasses aspects like complexity and compatibility, since these affect the benefits and costs of the innovation.

I am not saying that farmers need to be making a profit over their whole farm to adopt conservation practices – the old “you can’t be green if you are in the red” argument. I think that’s oversold, and misses the main point. Having resources available doesn’t hurt, of course, but the key thing is the profit advantage of the innovation. I believe that if this is high enough, even resource-stretched people will try to find a way to adopt it.

A frustrating but frequent spectacle is people involved in natural resource management or the environment bemoaning the lack of adoption of farming practices they would like to see adopted, and saying that we need to better understand adoption. Sometimes it can be helpful to better understand the adoption of specific practices, but the influences on adoption in general have been studied intensely and are very well understood. Researchers on the topic have included sociologists, psychologists, economists, extension specialists, market researchers, and health researchers. Although they all use different language to describe their results, the findings from well-conducted studies are broadly consistent.

So, rather than more research into adoption, we mainly need to apply what is already well known in the adoption literature(s).

One implication is that if a practice is not adopted in the long term, it is because the farmers are not convinced that its benefits sufficiently outweigh its costs.

A consequence of this is that we should avoid putting the main burden for adoption onto communication, education and persuasion activities. This is all too common, but is destined to fail if the innovations they are pushing are not sufficiently attractive to the target audience. The innovations need to be “adoptable”. If they are not, the communication and education activities will simple confirm a farmer’s decision not to adopt.

The real challenge is to find or develop innovations that are not only sustainable, but also economically competitive with the practices they are supposed to replace. If they don’t already exist, we should look at developing them. If they can’t be developed, there is no point in falling back onto communication. Promoting dud technologies will only lead to frustration all around.

David Pannell, The University of Western Australia

3 – “The cost of …”

Some people seem to think that a good use of economists is to estimate “the cost of” things. Particularly in the realm of environmental impacts or natural resource degradation, we often see very large numbers bandied around as estimates of “the cost of” this or that. Most recently, large estimates of “the cost of” weeds in Australia (around $4 billion per year) have been released, and compared publicly with the smaller “cost of” salinity, with implications that relative levels of public funding are inappropriate.

This is unfortunate. There are a number of problems with “the cost of …” concept that make it not very relevant to policy making . The three main problems are:

  1. “The cost of” X looks at only one side of the ledger. It provides hints about the benefits of taking action to remove the problem, but no information about the costs of taking action.
  2. No matter what action is taken, the problem, typically, will not be eliminated entirely. How far you can reduce the problem through practical management or policy actions is a key consideration in deciding what to do, and the degree of mitigation will vary widely between different issues and different actions. “The cost of” X can be quite misleading as it relates to an unattainable, mythical world where the degradation problem costlessly disappears.
  3. From the point of view of guiding government policy, focusing on “the cost of” ignores the question of whether there is any market failure to justify governments taking action. Is it a fully private issue, where benefits and costs are borne by the same people, or an issue with “public good” dimensions; that is, where an action by one person affects others through externalities or where there are free-rider problems? Economists argue that it is usually not appropriate for governments to get involved in fully private issues. A large estimate for “the cost of” X would not affect this argument. It would be up to private individuals to judge whether the benefits to them of reducing X outweighed the costs.

For all these reasons, “the cost of” X relative to “the cost of” Y, provides no evidence whatsoever about whether X is more or less deserving of government attention or funding. A big “cost of” provides no evidence that there is any issue worth responding to.

In my view, economists should resist calculating “the cost of” anything, unless it is done as part of a broader analysis considering the costs and benefits of taking specific actions, and considers whether there is market failure to justify a government response.

In the case of both weeds and salinity, there are some aspects that are fully private, and some that are partly or fully public. In both cases, there are plenty of examples where “the cost of” a particular weed or salinity impact is very high, but the cost of repair or eradication is even greater. There are, of course, also cases where benefits of taking action outweigh the costs. A sensible decision on relative levels of public funding would require an unpacking of these issues for each case. It is not obvious to me which would “win”.

David Pannell, The University of Western Australia