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Frank Ackerman

Frank Ackerman is the Director of the Research and Policy Program at the Global Development and the Environment Institute at Tufts University.

 

Ackerman received a Ph.D. in Economics from Harvard University and a B.A. in Mathematics and Economics from Swarthmore College. His current interests include the economics of materials, waste, environmental health, energy and climate change and their relationship with the environment. Ackerman was the co-founder and editor of Dollars & Sense magazine and has also studied the economics of energy and environmental policy at the Tellus Institute in Boston.

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What the stock market and environmentalists could learn from each other

It's no surprise that financial disaster has pushed environmental problems out of the news of late. But it's too bad that they can't get together somehow; the two areas of crisis, and the needed solutions, have a lot in common. The common thread is...
It's no surprise that financial disaster has pushed environmental problems out of the news of late. But it's too bad that they can't get together somehow; the two areas of crisis, and the needed solutions, have a lot in common. The common thread is that both involve risks of rare, catastrophic events. In both cases, the prudent response is to focus on insurance against worst-case risks, rather than cost-benefit analysis of the most likely outcomes. The stock market and other financial markets are in the throes of the worst crisis since the 1930s. As Treasury Secretary Henry Paulson recently said, "We are going through a financial crisis more severe and unpredictable than any in our lifetimes... There is no playbook for responding to turmoil we have never faced." In fact, there used to be a playbook - a system of banking regulations, enacted in the wake of the Depression of the 1930s, which restricted the types and amounts of investments that banks could make. Deregulation of banking, a process that has been accelerating since the 1980s, allows banks to make riskier investments, which boost their profits as long as the good times keep rolling. Every once in a while, the good times stop, as they did this year - and the meaning of "risky" investments suddenly becomes all too clear. Something similar applies to environmental crisis. It's not that the worst possible outcomes of climate change are sure to happen any time soon; it's just that this could happen. Like a financial meltdown, a complete melting of the Greenland ice sheet is unlikely but possible (and it becomes more likely as the world warms). The IPCC projects that sea levels are likely to rise by about one meter by the end of this century; the loss of the Greenland ice sheet could raise sea levels by seven meters (23 feet). Should we spend just enough to protect coastal communities from one meter of sea level rise? Or should we act as swiftly as possible to limit global warming and reduce the risk of a catastrophic seven meters of sea level rise? Preparation for the worst case is why people buy insurance; your house is extremely unlikely to burn down next year. If you cancel your insurance and spend the premium on something more enjoyable, there's a very good chance you'll get away with it. But no one does. This insurance approach, sometimes called the precautionary principle, responds to the dangers that are most important. It's why we should ignore cost-benefit analysis based on the most likely outcomes, and instead adopt environmental policies based on protection against worst cases. And it's why it was such a bad idea to spend the last 30 years deregulating the banking system in order to boost short-run profits. In my recent book, Poisoned for Pennies, I discuss the economic theory behind the precautionary principle, as well as its application to many specific issues involving toxic chemicals. With uncertain but ominous risks to our health at stake, why should we accept potentially dangerous chemicals in order to win small economic gains? That's as dumb an idea as deregulating the banks. What do you think? Leave us a comment. ———- Frank Ackerman is an economist who has written extensively about the economics of climate change and other environmental problems. His new book is Poisoned for Pennies: The Economics of Toxics and Precaution.
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2009 - The end of an error?

My favorite quote from the recent campaign was the statement in Obama's acceptance speech at the convention in Denver. Speaking about the United States, he said, "We are better than these last eight years."
My favorite quote from the recent campaign was the statement in Obama's acceptance speech at the convention in Denver. Speaking about the United States, he said, "We are better than these last eight years." Nowhere is this more accurate than in our anti-environmental policies of recent years. (Well, okay, it's actually a tie between numerous strong contenders, including the shredding of civil liberties, destruction of countries that never harmed us, and too many others to name.) No one, of course, came out and said that they didn't much care for public health and the natural environment, so they were going to roll back useful protective regulations. But in the guise of supposedly sound economic analysis, the Bush-Cheney administration achieved the same thing: again and again, cost-benefit analysis was used to bolster the claim that we couldn't afford to, or shouldn't, maintain sensible, effective regulations. The results of such bogus economic calculations inspired the title of my recent Island Press book, Poisoned for Pennies. The amounts of money actually at stake in protecting ourselves, our children, and our surroundings are often trivial. Matching the Japanese testing requirements for mad cow disease, the international gold standard in that field, would add six or seven cents per pound to the price of beef. Atrazine, a potent herbicide used on most of the U.S. corn crop, is a known carcinogen and a suspected endocrine disrupter, turning frogs into hermaphrodites at incredibly low concentrations. One of the best substitutes, an apparently much safer and equally effective herbicide sold by the same company that makes atrazine, would add perhaps three cents per bushel to the price of corn - which has recently been around $6.00. Again and again, objective calculations demonstrate why one of the chapters of the book is called "the unbearable lightness of regulatory costs."  REACH, the new chemicals policy adopted by the European Union last year, is far more ambitious than anything under serious consideration in the U.S. It requires all manufacturers and importers of chemicals to carry out a range of toxicity tests in order to continue to sell their products in Europe. In a study for the Swedish government (included in Poisoned for Pennies), I demonstrated that REACH will raise the average cost of chemicals sold in Europe by one-sixteenth of one percent. Numerous estimates of the potential benefits of REACH are much, much larger than that. Why, exactly, isn't the U.S. considering adopting such a cost-effective, inexpensive measure? We are better than the last eight years, in environmental policy and in so much else. I look forward to an administration that may at last realize that it's time to stop poisoning ourselves for pennies, to take a fresh look at the low cost of doing the right thing for health and the environment. What do you think? Leave us a comment. ---------- Frank Ackerman is an economist who has written extensively about the economics of climate change and other environmental problems. His new book is Poisoned for Pennies: The Economics of Toxics and Precaution.