Book Review: Cool It by Bjørn Lomborg

EconTalk is one of the podcasts I regularly listen to during walk/jog sessions. Though the podcast is supposed to be focused on economics, host Russ Roberts routinely interviews authors/professors from various disciplines who have made an interesting contribution that can be viewed from an economics angle. When I heard him talk to Lomborg about his book titled Cool It - The Skeptical Environmentalist's Guide to Global Warming, my curiosity was piqued enough to order the book and read it. Bjørn Lomborg  is a Danish author/professor who is also running a think tank called the Copenhagen Consensus Center. Do check out the site.

In this short, easy to read ten year old book, Lomborg argues that approaches like the Kyoto Protocol trying to address climate change by drastically trying to reduce carbon emission are total non-sense. Before readers start to look at him with disgust, he clearly states that there is absolutely no question that the planet is getting warmer due to human beings and the resulting effects need to be addressed. Having repeated this statement multiple times, he then veers off as to how the effect should be addressed.

Current common wisdom is that the carbon emission that gets into the atmosphere is warming the planet and so we need to drastically curtail the emission to reverse its effect. Though this is the politically correct statement to make these days, even the ardent supporters of this notion concede that the extent to which this one knob needs to be turned back to correct all the ill effects of global warming makes it exceedingly difficult to pull it off. Still most argue that since doing x amount of carbon reduction will be inadequate, the solution is to move ahead with 2x, 3x or 10x reduction, costs be damned. But we all know this is not going to work since even x amount of reduction is hard to achieve in reality.

Instead of that approach, Lomborg goes about methodically listing out what are the bad effects that we need to address and then looks for other means of addressing those effects at about 1/100th of the cost. Here are some of the ill effects of global warming he considers with proposed solutions:

- Polar bear population is dwindling: If we really dig into the numbers, actual polar bear deaths due to global warming is apparently in the dozens while about 800 polar bears get killed by hunters each year. So, simply reducing the number of hunting permits given to shoot polar bears will do lot more to revive the population.

- There will be major floods & hurricanes: He points out that Haiti & Dominican Republic that are right next to each other in the island of Hispaniola and experience the same hurricanes come out looking strikingly different each time. Haiti is an impoverished, poorly managed country, while DR is comparatively better off. So, in one year when DR that has better hurricane shelters and evacuation procedures in place came out with 10 hurricane related deaths, its next door neighbor Haiti saw a death toll of 2000. Investing in better hurricane management infrastructure in Haiti will be much faster/cheaper/effective than hoping to turn the carbon dial down worldwide to save those 2000 lives. Same idea applies to floods, and so for example, simply by avoiding development in flood prone areas you can save lot more lives and property.

- Famines/Starvation: The dire projections presume people/countries don't react to changes and simply continue living exactly as they did before. In reality, how many people go hungry will depend a lot more on demography, income, and specific locations on the planet. Since production of food in the planet is continue to increase for several decades, managing and distributing it well will easily feed lot more people lot more efficiently. 

After similarly considering water stress, poverty, diseases, he takes up things such as HIV/AIDS epidemic, micronutrients that are not considered part of the climate change equation but can be effectively addressed and argues that we will get much better bang for the buck solving those problems the world over if we want to improve the quality of life for the planet's inhabitants. I took a picture of one simple table found in the book (see attached) that compares feel good initiatives vs. effective solutions. He does repeatedly say that in an ideal world, we'd like to do everything found on both columns of the table. But in the real world where resources are not infinite, we need to do things that will actually address the problems on hand. He really goes after Al Gore in the book, dissecting many of his "An Inconvenient Truth" presentation points and arguing as to how Gore's data is either not complete (e.g. Gore's presentation saying penguin population is dwindling shows reduction in just one island while population is increasing in other islands) or how the carbon reduction solutions won't make a big impact. He also criticizes Gore for brushing aside anyone with differing ideas as stooges of the fossil fuel industry. Lomborg also points out as to how politicians like Tony Blair that are ostentatiously supporting carbon reduction initiatives, signed on to goals that his successors have to meet decades later, while he gets the credit now and simultaneously pushed back on any annual goals that his administration has to meet right away as it will have a negative impact on the British economy under his watch. :-)

Being the skeptic, I didn't want to buy Lomborg's arguments in the book without some fact checking. So, looked around and found pages like this one that pushes back his writings. http://www.lse.ac.uk/GranthamInstitute/news/bjorn-lomborgs-lukewarmer-misinformation-about-climate-change-and-poverty/. But beyond generally complaining that Lomborg is aiding climate deniers and making exaggerated claims, I didn't find any clear explanation as to why he is totally wrong. So, I came away thinking that instead of endlessly saying we should reduce carbon emission and then not really doing much, approaching individual issues separately to find the most efficient solution will be far better and will actually work. We should continue to move towards less dependence on fossil fuel, technologies that will reduce our impact on climate change, etc. But unless we make the needed changes economically attractive, needle won't move much despite everyone making noises or doing small things to make themselves feel better while letting the problems grow endlessly. Though not mentioned in the book, I personally find the "Save the Planet" arguments implying we are doing something good and helping the planet earth very amusing. The planet or universe doesn't really care whether we live or perish. So, if we are fixing things, it is to help human civilization, not really to help the planet. However we address or not address global warming, it will be there humming along long after we are gone. :-)

Do check out the book, author's talks/videos on YouTube and/or the EconTalk interview in which he covers the same material. Let me know what you think and where you stand.

Book Review: Thinking Fast and Slow by Daniel Kahneman

This book published in 2011 is already considered a classic by many. Daniel Kahneman is a Psychologist who did a lot of work with his partner Amos Tversky in the areas of decision making pertinent to economics. For his trailblazing work, he received an Economics Nobel in 2002 (since Tversky passed away in 1996, he didn't get one). Their work questioned the traditional models of economics and subsequently lead to the formation of behavioral economics as a field. 

The model used by traditional economists envisions human beings, and by extension the market place, to be perfectly rational entities devoid of emotions. They believe that even if humans are emotional beings, their behavior will be very logical and rational when it comes to how they evaluate, price, purchase products and services in life. So, they presumed/expected the market on the whole to be perfectly balanced, bringing out the true value of any entity it evaluates. Those who don't agree with this view have opined that traditional economists didn't know how to model and study the vagaries of human behavior and so they conveniently chose a model that works well mathematically to study. Reminds you of the Streetlight Effect. :-)

Kahneman's thesis elaborated in this book is that we all possess two systems inside us. There is System 1 that uses a lot of instincts, very quickly evaluates any give person, product, scenario and comes to a conclusion. This is thinking fast. Then there is System 2 that takes lot more time & effort to properly analyze and estimate the value/effect of things. This is naturally thinking slow. Since working with System 2 takes more effort, we often tend to depend on System 1 to get by. But if pushed, System 2 will kick in and provide a more rational evaluation. Nowadays this idea is fairly well understood and accepted. The field of behavioral economics is an extension of this notion that explains all the irrational, inconsistent, emotional behavior often seen in the way individuals act or the market place behaves. The value of this understanding cannot be overstated and Kahneman has dozens, if not hundreds of experiments to explore this idea and put together results and literature. But as you read through the book, it feels like the same idea is explained over and over and over with minutely differing situations. Individually each one is interesting for the researcher and is useful to add additional material to the field. But for a reader to read it in a book, it is not so useful or interesting.

Book is segmented into five parts. First one titled Two Systems explains the System 1 & System 2 model that maps to the title of the book. This part is good and useful as it summarizes the main thesis of the book. Part 2, titled Heuristics and Biases discusses how our opinions get skewed due to our personal experiences, perceptions and anecdotal evidences though contradicting data may be sitting right in front of us. Part3, titled Overconfidence deals with incorrect and very optimistic predictions and estimates we repeatedly make. This often leads to disastrous consequences. Most large public sector projects (like the Big Dig in Boston) can serve as good examples. Kahneman cites his own experience as an embarrassing example of this over confidence when he headed a committee to design a new text book. His committee estimated that they could get the book out in about three years, while the industry standard is about seven years. In the end it took them more than eight years, despite the fact that he and his committee members were aware of this overconfidence notion. Part 4 titled Choices discusses notions like Prospect Theory (loss aversion) and Endowment Effect where you tend to associate a larger value to something you own (from real estate to coffee mugs) though you know the market price of the item is far lower. Part 5 titled Two Selves tries to tie the ideas together again with System 1 & System 2 summary.

I think any give ten pages of the book will make an interesting article that gives unintuitive insights into human psyche or organizational behavior. For a simple example, a case of a large company with 20 subdivisions is considered. Each subdivision chief can either choose to do a project or reject it that is offered to them. Each project has a 50/50 chance of success/failure. In case of success, the division will make a million dollars in profit. Failure will result in half a million dollar loss. In this scenario individual division chiefs tend to pass the opportunity since half a million dollar loss sounds too big to take up at 50% chance. (This one event choice, one person view is referred to as Narrow Framing.) But the company CEO can easily see that if all 20 division chiefs take up all the 20 projects, even if half of them fail and result in 5 million dollar loss, the successful half will yield 10 million profit resulting in a safe 5 million total profit for the whole company (referred to as Broad Framing). Gaining these insights and being able to nudge individuals and organizations in the right direction to make the right decision in subtle ways can thus have enormous positive impact. Gaining such understanding can be put to use for nefarious purposes as well. These takeaways are very good. But in a 450 page long book, successive sections feel like a repetition of the same ideas stated via different experiments. May be if there had been a ruthless editor that had halved the size of the book, it might have become a much more interesting piece of work. Richard Thaler's book on behavioral economics titled Misbehaving can be considered sort of a sequel to this book. That one was lot more fun to read.

Packing Energy and Civilization: A History by Vaclav Smil for a vacation read. Will see how it turns out. :-)