Environmental Economics

Jane, stop this crazy thing

Senator Vitter (R-LA) has read Hausman (2012) and the news is not good:

Today, U.S. Sen. David Vitter (R-La.), top Republican on the Environment and Public Works Committee, sent a letter to Jonathan B. Jarvis, Director of the National Park Service (NPS), regarding the NPS's intention to use a controversial survey method in order to assign a monetary value to increased "visibility" at national parks and wilderness areas. Instead of actual scientific data, the results from the public opinion survey would be used in cost-benefit analyses by the U.S. Environmental Protection Agency (EPA) in future rulemaking under the Clean Air Act (CAA), including the regional haze rule.

"This survey is just a ploy that won't benefit park goers - it only benefits the EPA's ability to make more rules," said Vitter. "The survey could ask if people want the sky to be more blue when they go to a park, and how much they would be willing to pay for that. The surveyed person can answer $100, or some arbitrary amount they'd hypothetically be willing to pay, but could not even have any intention of visiting the park. This method doesn't make sense and obviously lacks credibility and scientific value, and it could lead to significantly more control over air rules for the EPA."

The willingness-to-pay survey is based on what people would say they would do in a hypothetical situation, as opposed to what they actually do in practice. According to economists cited in the letter, these types of surveys frequently yield inflated and inaccurate values.

via www.epw.senate.gov

Hausman (2012) is cited in footnote 2 of the letter. Here is what I said in a letter to Sen. Vitter:

Senator Vitter:

I have read your letter to the NPS director about the use of the contingent valuation method and would like to try to make you aware of some other research on the issue. Hausman (2012) was written as part of a three article symposium in the Journal of Economic Perspectives. The other two papers are much more supportive of the ability of the contingent valuation method to accurately measure economic values that the public may hold. In response to Hausman, Tim Haab, Matt Interis, Dan Petrolia and myself wrote a response that pointed out that Hausman (2012) ignores much of the scientific literature concerning the method.

This is our summary: Hausman “selectively” reviewed the contingent valuation method (CVM) literature in 2012 and failed to find progress in the method during the 18 years since Diamond and Hausman argued that unquantified benefits and costs are preferred to those quantified by CVM. In this manuscript, we provide counter-arguments to Hausman's claims, not with the intent to convince the reader that the debate over CVM is settled in favor of the method, but rather to argue that the intellectual debate over CVM is ongoing, that dismissing CVM is unwarranted, and that plenty of work remains to be done for the truly curious researcher."

The paper was published in Applied Economic Perspectives and Policy. I would be happy to send you a copy of this paper if you think it might be helpful.

Sincerely,

John C. Whitehead
Department of Economics
Appalachian State University

You can send your own letter here: http://www.vitter.senate.gov/contact/email-senator-vitter and here http://www.epw.senate.gov/public/index.cfm?FuseAction=ContactUs.ContactForm.

Hat tip: Robert Joshi via the twitter

Be quiet, I order you!

Paul Krugman is talking about Niall Ferguson but it strikes a chord with me during this new round of the goofy CVM debate:

One of the odd things about the debates we’ve been having over economic policy since the financial crisis is how many people on one side of these debates — the side I’m not on, as it happens — believe that they can win arguments by pulling rank. Critics are dismissed as just bloggers, which supposedly disqualifies them from pointing out errors and untrue statements; ideas are dismissed (wrongly, as it happens) as not part of what anyone has taught graduate students , as if this removes any possibility that the ideas might nonetheless be right. ...

What a lot of people — academics, I’m sorry to say, in particular — don’t seem to understand are the limits to what credentials get you, in principle and in practice.

Basically, having a fancy named chair and maybe some prizes entitles you to a hearing — no more. It’s a great buzzing hive of commentary out there, so nobody can read everything that someone says; but if a famous intellectual makes a pronouncement, he both should and does get a listen much more easily than someone without the preexisting reputation.

But academic credentials are neither a necessary nor a sufficient condition for having your ideas taken seriously. If a famous professor repeatedly says stupid things, then tries to claim he never said them, there’s no rule against calling him a mendacious idiot — and no special qualifications required to make that pronouncement other than doing your own homework.

Conversely, if someone without formal credentials consistently makes trenchant, insightful observations, he or she has earned the right to be taken seriously, regardless of background.

One of the great things about the blogosphere is that it has made it possible for a number of people meeting that second condition to gain an audience. I don’t care whether they’re PhDs, professors, or just some guy with a blog — it’s the work that matters.

Meanwhile, we didn’t need blogs to know that many great and famous intellectuals are, in fact, fools. Some of them may always have been fools; some of them are hedgehogs, who know a lot about a narrow area but are ignorant elsewhere (and are, in many cases, so ignorant that they don’t know they’re ignorant — a variant on Dunning-Kruger.) And some of them have, for whatever reason, lost it — I can think offhand of several economists, not all of them all that old, of whom it is common to say, “I can’t believe that guy wrote those papers.”

And let me add that believing that you can pull rank in this wide-open modern age is itself a demonstration of incompetence. Who, exactly, do you think cares? Not the readers, that’s for sure.

True, it’s now a rough world for people who do sloppy work, and are counting on their credentials to shield them from criticism. Somehow, though, I can’t seem to muster any sympathy.

via mobile.nytimes.com

When a highly credentialed economist makes a strong statement, especially one that is consistent with the knee jerk reaction of most economists who'd rather not think much about a subject (they know GARP and WARP, thanks Varian!, but there is no general axiom of stated preference [GASP] or even a weak axiom [WASP]), then it is so easy to accept whatever the credentialed economist says without a hint of regret (as the NBER seems to have done). 

My PhD is from the University of Kentucky and I work at Appalachian State. My co-authors are aggies (enough said? but at least they have graduate students). I'd venture that many economists would count that as being "without formal credentials" (as Krugman does above, but probably doesn't realize it :) and easily dismissed.  I think we did our homework with this comment that is forthcoming in AEPP (an aggie journal, sigh) but am happy to let the "bloody peasants" be the judge.

In case you missed it, I couldn't stop thinking about this scene while writing this post: