Last week at the Society for Benefit-Cost Analysis’s annual conference, I had the opportunity to listen to Catherine Wolfram speak on carbon pricing in the United States. Dr. Wolfram is an economist from MIT who previously served as the Deputy Assistant Secretary for Climate and Energy Economics at the U.S. Treasury.
As an economist who worked in government, Dr. Wolfram spoke not just about the economics surrounding carbon pricing, but also went into a lot of detail talking about the politics surrounding this question. This was a unique moment during this conference, where speakers often appear agnostic about politics, despite addressing very politically charged questions.
The interesting thing about this talk in particular was not the claim that carbon pricing has become a polarized topic, we need only look at the past administrations’ social cost of carbon to see that clearly. The talk was interesting because most economists try to avoid the fact that they are talking about political issues.
On one hand, avoiding politics allows economic analysis to remain more objective. While every analysis is biased by the analyst's context, at the end of the day math is math and presumably a well-done study should yield the same results regardless of who is performing it.
However, the goal of policy analysis is to inform public policy decisions, and in a democracy, public policy decisions are largely made by politicians. If there isn’t any political will to explore a policy option, then a policy analysis might not be worth the effort. It could be the case that policy analysis will be used to help create political will for a project, but we don’t want to waste time on projects that have no chance of being informative.
Another reason policy analysis is sometimes overlooked in the decision making process is that not everyone agrees that economics is the most important tool for evaluating impact.
One question posed by Dr. Wolfram during her talk was whether the importance of economists and policy analysis has actually been a hindrance to the advancement of environmental policy. Her argument for this was that while economists have debated over the fine points of carbon pricing, trying to figure out the best solution to an extremely important issue, climate change has kept progressing. Perhaps, this is a situation where great has been the enemy of good.
Another point she made was that people who specialize in other disciplines dislike the importance that economics has in policy decisions. It is a little strange to them that some of the most important environmental policy decisions are being influenced by economists and not ecologists.
All of these points led me to the same conclusion: economics is an excellent tool for understanding public policy, but it is not the only perspective that matters. While a well done cost-benefit analysis might rely on the most recent biology or psychology research, to create the best public policy, we need to involve biologists or psychologists.
It is not enough to do an economic policy analysis, and pass it along to the policymakers. When possible, the opinions of other experts and decision makers should be included. By collaborating more frequently, we can get closer to the ultimate goal of improving public policy.