Sunstein on Discount Rates
You hear sometimes that Cass Sunstein would be a likely candidate for a high-level post in an Obama Administration. I have no idea whether or not that’s true, but if it’s something he’s interested in then co-authoring poorly reasoned AEI papers whose conclusions support the idea that we shouldn’t take action to curb the risks of climate change seems like a weird way to go about it.
But in addition to the points John Quiggin raises about these methods, I’d like to make the point that while I think GDP is a better proxy for well-being than Robert Kennedy thought in the domestic US context, it’s an exceeding poor metric for looking at a global problem. Some places are much poorer than others — putting all of Bangladesh under water and killing its entire population wouldn’t have an especially noteworthy impact on global GDP numbers but that would still be a terrible turn of events.
22 Responses to “Sunstein on Discount Rates”
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August 22nd, 2008 at 12:11 pm
If nothing else, that haircut should rule him out for a high-level position.
August 22nd, 2008 at 12:15 pm
Separate from the larger issues about the appropriate action on climate change, Quiggen’s argument that the bond return is the appropriate metric rather than the equity return is dead wrong.
August 22nd, 2008 at 1:02 pm
I also recall Cass having some less-than-optimal views on the torture issue. Can anyone back me up on that? I have a vague recollection of reading something of his during grad school on torture, and being disgusted by it.
August 22nd, 2008 at 1:03 pm
Maybe I’m missing the subtle irony here. In case I’m not missing anything:
The GDP sucks as a measure of anything other than…money spent.
http://innovationproductivity.typepad.com/my_weblog/2007/08/redefining-gdp.html
http://www.env-econ.net/2005/07/from_the_answer_1.html
http://www.rprogress.org/publications/2007/GPI%202006.pdf#search=%22gdp%22
Of course, developing a reality-based position might require a little bit more than tossing off a lofty “I think GDP is a better proxy for well-being than Robert Kennedy thought in the domestic US context” without saying why.
August 22nd, 2008 at 1:10 pm
I remember Bill Bennett getting into trouble for a similar comment about black babies.
And why Bangladesh, Matt? Is it because that’s where McCain’s black baby is from?
Racist.
August 22nd, 2008 at 1:11 pm
Oh pray tell Petey, enlighten us with a discussion of the proper rate of discounting. I’m looking forward to it.
August 22nd, 2008 at 1:25 pm
Economics has enough problems without trying to figure out what discount rate to apply to human lives.
August 22nd, 2008 at 1:34 pm
Sunstein’s a hack. He recently professed the importance of passing the FISA “compromise” bill on Democracy Now. Chalk that up to being political and sticking with a friend. Fine.
But he also supported Bush’s suspension of Habeas Corpus, using his “liberal” legal impramatur to lend credence to the illegalities of the administration.
Recently, the always thoughtful John Turley smacked his ridiculous FISA arguments, as did Greenwald–who made Sunstein look very pedestrian on legal issues.
August 22nd, 2008 at 2:01 pm
His views on climate change are largely irrelevant to his hopes for a Supreme Court appointment, which is, make no mistake, what he’s angling for. His FISA and torture views are marginally more relevant, but as to the former, I doubt he’ll be disqualified for taking the same position Obama did.
He’s about the right age, and he’s well-respected within academic circles. Those two factors alone make him a strong contender. The counterargument is that his whole minimalist framework was calibrated for a Clinton-type nomination situation, in which a Democratic President is faced with a closely-divided or Republican-controlled Senate. In point of fact, Obama would probably have 57 Democrats in the Senate (yes, counting Lieberman–he hasn’t moved away from the Dems on domestic issues or judicial nominations), and wouldn’t have much trouble swinging Specter, Collins, and Snowe to get cloture. That means going with an easy consensus pick like Sunstein would really rile up the liberal interest groups (NARAL, NAACP) who are at the height of their influence when Supreme Court vacancies occur.
August 22nd, 2008 at 3:31 pm
Yes, the fact that the guy’s friend is running for president may be contributing the fact that I’m discovering that he’s a lighter weight intellectually than I thought he was. Call it the Richard Posner/ Martha Nussbaum rule. It’s easier to become a public intellectual if you’re a law prof.
August 22nd, 2008 at 6:16 pm
Matt, GDP is a bit of a red herring here. The ethical framework in which Stern is working is utilitarian,as is the positive theory of the determination of interest rates, so the assumption is that average utility is maximised not average income (GDP has even more problems as you note). With the assumptions in Stern, a dollar of extra income to someone in Bangladesh with an income of $500 is valued the same as $100 of extra income to someone in the US with an income of $50 000. So that favours quite a lot of weight on the poor compared to maximizing GDP. I cover this in more detail here (PDF)
Petey at #2 – at least your bare assertion (for which I’ll be interested to see a defence) is more of a contribution on the issue than offered by Weisbach and Sunstein.
August 24th, 2008 at 5:39 am
Dave in #1: A stunning blow-dry hairdo hasn’t hurt the credibility of Jean-Claude Trichet or the euro he runs. Trichet’s predecessor, Wim Duisenberg, went even further so it’s beginning to look like a professional ECB qualification. Compare the decline of the dollar under the baldies Greenspan and Bernanke.
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