Very nice reflection from the Property & Environment Research Center.
“Confronted with social problems, we often call for policy solutions. Problems are not always problems, however. Sometimes they are natural facts, and resistant to human made laws.
“The case of sex discrimination is illustrative. According to the economist Victor Fuchs, “substantial gender inequality” persists after decades of “major antidiscrimination legislation” and “massive social change.”
“Fuchs offered this observation almost 25 years ago, suggesting that the subject of his study is especially resistant to policy solutions. In a recent peer reviewed article, I asked how much of this persistence might be explained by biological forces. This study suggests that a consequential proportion of male-female differences in winning promotions can be rationalized by a sex difference in risk taking. The article does not dismiss discrimination. Rather, it highlights how even well intentioned policies can constrain economic opportunity when they try to change laws that may be more firmly grounded in nature than human-made institutions.
“Conversations about whether climate variation is increasing may be ignoring a related conundrum. In his recent book, the Nobel Prize winning physicist Robert Laughlin argued that whether we exhaust carbon-based fuels over 50 or 500 years doesn’t matter for climate change when considered in terms of geologic time. Any such period, according to Laughlin, constitutes “the bat of an eyelash as far as the earth is concerned.”
“Scientific studies by Laughlin and others suggest that environmental benefits from clean energy policies are much smaller than is frequently assumed. In these models, rather than being a problem that human-made laws might solve, climate change is largely a fact of economic and natural laws. Laughlin observes that, “the earth doesn’t care about any of these governments or their legislation.”
“Facts do not bend to policy. When policies nevertheless try, they create considerable risks for social welfare. And when those risks are realized, winners of a lose-win proposition can double down on impotent solutions. The politics of clean energy may be producing more votes than value, damaging both the economy and environment by diverting scarce resources to unsustainable activities.
“Markets can do better. According to David Riker, founder of the New York-based Storm Exchange Inc., when “volatility is the issue, nothing is better than financial markets at valuing the risk and spreading it out.” Insurance markets, for example, can diversify exposures to climate variability while encouraging people to move out of harm’s way in an economical manner. In both cases, insurance can help us adapt to a planet that may have a climate mind of its own.”