I'm Jonathan Tompkins from the University of Illinois. So we have many different possible environmental policy approaches. How do we decide whether these policies approaches are worth implementing, that they're worth doing? Well, there's a number of approaches that policy experts use when assessing policy. We're going to examine the major classes of those in this lecture. We're going to be looking at Cost Benefit Analysis, the Precautionary Principle, and Risk Management. In Cost Benefit Analysis, we compare the social benefits of a new piece of legislation with the social cost. So this is similar to when we did that. Net benefit calculation in the last lecture. But in this case, of course, we're considering the total society. So, if the benefits outweigh the costs, then we can say a policy is worth doing. Cost benefit analyses are usually done in currency, like in dollars here in the United States. So we try and get a dollar figure to the benefit of a piece of environmental legislation. And we compare that with, cost in dollars of that, of enacting that legislation. You can immediately see there are some potential problems with this approach. Firstly, even if you concede that most things can be measured in dollars. And I think that's already a difficult stretch for a lot of situations. It can be difficult to get an accurate assessment of how much an environmental good is really worth in terms of dollars. Let's take an example. In the United States in 1983. There was a choice in environmental policy circles between lowering lead in petrol or removing lead all together. Now for long time, cars ran on petrol that had a lead add- lead additive in it to help the engines run smoother. So this lead creates a benefit, right? It makes this engines more efficient. But lead also has a cost. By putting in petrol, we're meting it into the environment and lead creates neurological impairment. So, for any new policy then. The costs, of, of, removing lead from gasoline, would be that we'd have to redesign our engines. We'd have to retool the refineries. So, there would be some technological costs and there would be a loss in, in the efficiency of how this cars were designed to run, at least in the short term. But the benefits would be as that we'd no longer have this lead pollutant going on into the enviroment. And from a practical point of view, if you're looking at a good example of how lead is bad, is that lead is tought to reduce the intelligence of children. So how do we value that? Well, even if you accept, say, the IQ system, how much is an IQ point worth? In fact, people doing a cost-benefit analysis actually included this in their calculations. They estimated the value of an IQ point to be between one and 8000 dollars. In the end, a lot of these cost benefits calculations weren't really used in the final legislation, which did ban lead in gasoline; which is widely being seen as a positive legislative step. But no less you can see, using cost benefit analysis, although in principle goes straight to the heart of the equation that we looked at, at the start of this weeks series of lectures. That is, we're looking at the total net social utility of welfare. In practice, it has many, challenges. And if you look in the text book, you'll see some of the ways that, policy makers and environmental economists have tried to get over those challenges. And make those estimates. Risk management is really a subset of cost benefit analysis. In cost benefit analysis, the cost is always clear. We have this given effect that is negative. In risk management, there might be a negative event that doesn't happen every time. There's just a chance of a negative event. So, for example, if you smoke, you know that there is a chance that smoking will cause a negative event, right? You might get cancer from it, you might get emphysema and so on. But that's not for sure. That's not a given. That's not inevitable. So we have to make judgements in our own lives all the time. When the dangers of the risk are outweighed by the benefits of taking that risk. Similarly, good policy needs to make those same calculations. In this case, we would say the benefit is worth doing if it's greater than the chance of risk multiplied by the magnitude of that risk. And again, like cost-benefit analysis, this can be difficult. Firstly, we have to have a good estimate of the cost of that risk. So if we go back to the example of a nuclear plant meltdown. How much, damage will it do if there is a meltdown, right? That can be a difficult calculation to make. Then, secondly, what's the odds of that happening? And especially for rare occurrences, that can be very hard. This is also difficult for people, as we're not very good at statistics. And so, some sort of risks are much more solid in our minds than others. As an example, some people are terrified of flying cause the risk of crashing, whereas of course, flying in a plane is seen as less risky than being driven in a car. Nevertheless, if we are examining a policy that will impact on the probabilities of some failure or some risk. We do, do need to use a risk management approach if we're to have even a chance of accounting for that risk correctly. Finally, as we saw in the genetically modified organisms lecture, another approach is to consider the precautionary principle. This is quite a popular approach in some places, and is used in many places of legislation. For example, coming out of Europe. In the strong form, as we spoke about last time, the precautionary principle would require that, if there is any level of risk at all, right, if scientists have not said this is completely safe then we should not be allowed to go for, whatever that situation is. In some ways this is of course absurd, this would mean that you and I can never cross the street if we applied the precautionary principle, because after all we might get hit by a bus. But in its weak form, you can be a little bit more forgiving, and, you can use it when we don't know the level of risk. In some sense, we have a, we can calculate how risky it is to cross the street. But it's not so straightforward to figure out how would you even approach calculating how risky it is to release a new genetically modified organism into the environment. And as we saw with genetically modified organisms, there are potential problems with this tool. For example, it might mean that we file to enact a policy or use a technology that would actually bring about a benefit so we miss out on the chance to improve things. This brings us to another idea, which is how to asses whether or not a policy has filed. Policies don't always work. Cane toads were introduced to Australia as a biological control on cane beetle populations. Cane beetles eat cane sugar and so were having a negative impact on local farmers. Cane toads didn't turn out to be a very good choice as a biological control. Not only do they fail to control the cane beetle, they're also a poisonous animal. And as they spread out throughout the large parts of Australia, they caused the deaths of large numbers of native animals that tried to eat them. We want to avoid enviromental policies like this. Of course, sometimes the biggest failure is to do nothing. This is called a policy failureof our mission. Before 1956 for example, thousands of Londoners died because there was no policy in place prevent the buildup of toxic smoke. That was a failure of policy. Another example, you might argue, is that an effort in the 1990s in the United States to increase federal fuel taxes in proportion to the carbon dioxide emitted, failed. If we were to say this is a good policy because it's mitigating Carbon Dioxide emissions. Why might it not have been passed by the legislative body, in this case, Congress? We can think of many reasons, it could be susceptible to policy interference. If regulators are heavily influenced by lobbyists or an industry, the standard might not get through our political process. So, clearly, just as we've always seen in this course, governments are just like people, their judgments are not always correct and not every law passed is a good one. I mentioned lobbyists or industry, there's actually a term for this. It's called mobilization bias. It could exist in any type of political system. In a kingdom, or a dictatorship, imagine that you're the brother or sister of the person who rules the country. Clearly you'll have more of a voice on how that country gets run, than the average person on the street. Similarly in a democracy. We have lobbyers and people who are close to those who hold political positions, and these people can have more of a voice about what goes in to legislation than the average person on the street does. In the United States for example. Lobbyists locate in DC, not in, say, downtown Kansas City. That's because they want to be close to the people who make the, make the laws, make the policies, that will affect their industries. This is called mobilization bias, because some groups are more mobilized than others, and even if, you know, democratic system in principle one person equals one vote, groups that are more mobilized are more likely to see the legislation enacted in their favor. Industry subject regulation have lots of incentive to modify the policy process. So for example, to water down a polluter pays principle or to remove mandates on how much pollution they're allowed to emit, they are concentrated interests, to use another political science term, and as they are concentrated, they can mobilize to stop or change legislation in a way that diffuse interests, that is perhaps the country as a whole cannot. This uneven access can result in lopsided policy. On the other hand, environmental groups can form their own lobbying organizations and their own concentrated interests. And so sometimes they could be a balance between political groups and environmental groups. Again, however, the average citizen who is not one of these concentrated groups has a weak role in the policy process. Political systems are run by people and people are flawed. So even if we agreed on environmental goal, we might not come up with the best way to solve that problem to meet that challenge. As individuals, we have our biases. It's actually very natural for us to look for evidence that supports our currently held positions than makes us change those positions. And people in government, and political parties in government are just the same. So although it's possible that governments might use science, be it natural science or social science to support their views on a piece of legislation. They're not being unbiased in the way they use that scientific evidence. An example might be biofuels. In some ways. It would be excellent if we were able to move away from fossil fuels that create carbon dioxide pollution and instead use a renewable bio-fuel energy resource. But as we've seen in, in previous lectures, the mandate in the United States that a certain amount of bio-fuel gets used in transport has had some significant negative effects. In the first place, it's not currently technologically feasible to produce enough bio-fuels to meet the mandates. Secondly, as we increase our bio food production were also reducing the amount of farmland being used to produce all the things. And many observers think that world food process have been pushed up by this mandate. And this means that by requiring biofuels in American cause we might be reducing the amount food available in developing countries. Policy failures are very serious. Governments are just like individuals. They have limited amounts of time, resources, attention, money, to address the problems. If we spend all of our efforts on inconsequential problems, we could miss our chance to move to a sustainable future, because we ignored those problems that were truly important. Given finite resources. Is there a framework in which we can try and figure out whether or not we're doing the right thing? It turns out that there is a way of trying to understand whether or not we're efficiently allocating our resources where they can do the most good. And we'll be looking at this in the next lecture. Produced by O.C.E. Atlas Digital Media at The University of Illinois Urbana Champaign.
