Home > economics of climate change, The Economics Profession > Dear National Science Foundation . . .

Dear National Science Foundation . . .

from Julie Nelson

The Directorate for the Social, Behavioral, and Economic Sciences of the National Science Foundation recently issued a call for white papers about “next-generation research challenges.” They invited submitters to outline “grand challenge questions” that “reflect deep issues that engage fundamental assumptions behind disciplinary research traditions and are transformative.” The following are lightly edited excerpts from the white paper I submitted along with Dr. Evelyn Fox Keller of the Program in Science, Technology and Society at MIT.

            How can we integrate the role of values and ethics in economic analysis of climate change without sacrificing the positive aspirations of that science? 

            It is not hyperbole to say that this generation’s major challenge is climate change. What we do about it will have larger consequences for future human well-being—or future human suffering—than our actions on any other issue. As the findings of climate science gather increasing scientific support, attention shifts to the question of how we can effect the transformations in our economies required by the expected changes in climate. For this, economic analysis is indispensable.

            Unfortunately, however, the economics profession in the United States is in large part failing to meet its responsibilities in this area.  Trapped in an outmoded view of science as an enterprise that must eschew discussion of values in order to preserve detachment, the analyses of our most prominent. economists lend themselves to a critical undermining of responsible policy responses. This was acutely apparent in the response of economists such as William Nordhaus and Gary Yohe to the  British Treasury’s Stern Review on the Economics of Climate Change. The Stern Review’s choice of a near-zero discount rate, was, they claimed, evidence of unjustified moralizing.  By contrast, claiming the high status of science and rationality for their own work, they ignore the morally preposterous implications of its results.

            Significant strides have recently been made in the understanding of both the inadequacy and impracticality of a fact/value dichotomy in scientific research, but many in economics seem to continue to adhere to outmoded (and now clearly inappropriate) images of science.  The belief that mathematical formalization combined with rigorous empirics automatically provides value-free results remains a foundational assumption of the contemporary mainstream discipline. But as many have pointed out, such techniques give one only, the assurance that someone else starting from the same assumptions and data will reach the same conclusions. Nordhaus’s rationale for using a market rate of interest as a discount rate, for example, is based on the intuition that such a rate might in principle be observable by anyone. (That there actually is no such single market rate on which economists agree, however, obviously weakens Nordhaus’s argument.) Yet this way of attempting to achieve unbiased research actually leads to a pronounced bias–a bias in favor of the status quo: evaluation of most meaningful changes requires the sort of explicit ethical reflection that is being avoided.

            It is often supposed that any alternative to such methodology-based objectivity implies a rejection of science and a slide into relativism and unfounded emotion-based claims.  Indeed, views such as Nordhaus’s have given ammunition to those who argue that economic analysis is worse than useless, and should be entirely abandoned in favor of exercises in, for example, visioning and participatory methods. Both sides of that debate, however, remain entrapped by the same fact-value dichotomy.

         There is, however, another solution, which involves recognizing the inescapable intertwining of fact and value, while continuing the systematic search for reliable knowledge. Amartya Sen has called this “transpositional” objectivity.  This (in fact more exacting) standard of objectivity requires that the viewpoints and values underlying the analysis be brought out into the open and subjected to scrutiny. Because viewpoints may be shaped by factors such as nationality, class, race, gender, status, generation, and habits peculiar to particular professions, this requires being able and willing to articulate the reasoning behind one’s research in ways that can be understood by a larger community than the one composed of one’s closest peers, and an openness to dialog with such larger communities. In the case of climate economics, the perspective of future generations, while it cannot be actually brought to the table, cannot be neglected.

            Re-evaluating the role of ethics in economics challenges assumptions that are deep-seated in the mainstream of U.S. economics. Accordingly, improving economic analysis of climate change will require a multi-pronged effort…The rising generation, given their energy and larger stake in the outcomes of  climate change policy, should be a key part of this transformation…Building the capacity for graduate students to think competently about the relation of ethical questions to their work would require  special interventions such as summer institutes and innovative teaching materials, since in many cases current faculty are largely unprepared to take this on…The climate change questions are of such urgency, however, that we cannot wait for the the outflow from such a new pipeline of training…The NSF could intervene in an important way in…professional systems by examining its own funding priorities. Actual dollar awards for ethically-sophisticated work would help persuade economists through extrinsic incentives, while the imprimatur of NSF approval of such research would reinforce investigators’ intrinsic motivation to act in accord with our important values.     

            Fortunately, there are rich resources that can be inform a better understanding of the relationship of ethics and knowledge…The fact/value dichotomy has been well explored—and exploded—by economist Amartya Sen and a number of those who work in his wake. Philosophers of science Evelyn Fox Keller (author) and Phillip Kitcher, as well as philosophers Martha Nussbaum and Hilary Putnam, give rich and convincing arguments on the subject. A number of critical or heterodox groups within economics, including Institutionalist, socio-, ecological, feminist, and evolutionary economists, have also developed analyses which challenge the fact/value distinction and pioneer innovative methodologies. While recent research in behavioral economics, cognitive psychology, and social psychology have greatly advanced our understandings of topics including human motivation toward ethical action, much of economics, oddly, still retains the assumption that economic investigators are ourselves untouched by emotional motivation, cognitive bias, or social mores. So, along with discussions from the philosophy of science, some of the results from these disciplines could be drawn on to enrich the discussion.     Also worth mention, for their potential contribution to better economics, are the works of environmental philosophers including Stephen Gardiner, and Dale Jamieson, and Karen Warren. Within climate economics,  a number of economists, including those involved with Real Climate Economics are already pursuing economic analysis with an explicit goal of valuing human well-being.

       Given the singular importance of climate change as an issue that must be faced by our generation, and the damage that is being done by ethically irresponsible research, we hope that the SBE program will keep two questions in mind when evaluating the results of this request for white papers. First, do the suggestions deal with issues of importance for the well-being of humans (and other species)? While a great many projects may be intellectually fascinating, it is a fundamental economic insight that devoting resources to any one project involves the opportunity costs. Choices have to be made. The issue of values is therefore at the very center of what science in society is about. We believe that the urgency of the need for effective climate policy, demands that the projects in this area be given priority. Second, do the suggestions deal adequately with the issue of ethics and knowledge?…

            We applaud the SBE for launching this request for input on “grand challenge questions that are both foundational and transformative.” The need to transform climate economics is a “next-generation research” challenge in more ways than one: It requires the creation of a new generation of economic analysis, to try, to the extent still possible, to create a livable environment for the generations to come.

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  1. Peter Radford
    November 18, 2010 at 7:01 pm | #1

    I agree that so many of society’s responses to the challenges of the next few decades will be debilitated or defeated without a thorough revision to mainstream economic theory. Propagating the errors of “positive” economics throughout the analytical community working to meet those challenges is a collective ethical failure of the economics profession. Thus, we must take collective blame for this failure. It is on our watch that the rise of orthodoxy was allowed to occur. We have a responsibility to future generations to respond by constructing an economic theory that engages the real world and its problems, rather than passing along a thinly veiled ideological worldview masquerading as an “scientific” economic theory.

    Our world is not utopian. Our economics should not be either.

    I applaud your submission to the NSF.

  2. Dave Taylor
    April 1, 2011 at 2:21 pm | #2

    Good for you, Julie.

    Peter, I get sick of people who follow Marx in maligning More’s Utopia without reading (or in any case, understanding) it. It may not be realistic for me to run a four minute mile, but without accepting that sort of challenge I might never better five minutes.

    The supposedly Christian England of 1516 had become a land where “sheep ate men”. Utopia challenged it to act humanely and reasonably instead of turfing people off the land to make way for sheep, then hanging them for stealing bread for their kids. More, a future Chancellor of England, was not so stupid as to imagine it would ever be perfect.

  3. charlie thomas
    May 30, 2011 at 9:48 pm | #3

    admirable beginning to address the ethical malevolence of some parts of economic behavior …

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