The COVID pandemic has wreaked havoc across the world. But despite the widespread devastation, this experience might help us do better in our fight against climate change.
As of August 8, 724,000 people have lost their lives to COVID-19. Of the 17,700,000 others infected by SARS-COV2, many might suffer as yet undetermined long term consequences. Countless more have lost their jobs, have been rendered homeless and are facing an uncertain future. We are already six months into the pandemic, and we do not yet know for how much longer its spectre will hang over the world. But even in its enormity, its scale pales in comparison to that of climate change. A challenge to which our response has not been adequate or proportional to the threat, at least in part due to our inability to comprehend or adapt to problems of this magnitude. Therein lies the silver lining of our current struggle. The threat posed by the virus has made choices starker, by fast-tracking the relationship between cause and effect. Making policy choices in an uncertain, dynamic environment might help us better appreciate, and become more efficiently adaptive to the challenges posed by climate change.
In my profession of teaching young adults, a real-life training wheel is a godsend. In the last four months, the pandemic has proved to be exactly that, providing many case studies in individual and institutional decision making. It has humbled Presidents, super-star scientists and newspersons alike, forcing us to reevaluate everything from our relationship with science and the state to our perception of risk. I am sure educators around the world are scrambling to incorporate the various learnings into their courses. But my present concerns are limited to the pandemic’s usefulness in understanding two simple Economics 101 concepts: Externalities and Time Discounting.
Consider a simple example of trade between a buyer and producer of shoes. The price of the shoe is paid by the buyer to compensate the producer. The process of making the shoes pollutes the air and water, and thereby also imposes a cost on the people living around the factory. However, these people do not get any compensation. This is a prototypical externality. Now imagine this at a global level, a factory in China imposes costs on people in Panama. Should I think of every affected person in the world when buying a shoe, or my next meal or driving my car? Can I? The world is full of people, most of whom I will never know or meet. Our minds, that can barely keep up with the goings-on in our neighborhoods, struggle with such impersonal decisions based on abstractions of the world.
Now think of the same problem in the context of the current pandemic. My choice to not wear a mask might impose a cost (externality) on the people around me. People who I love and care for might be infected and may lose their lives if I do not think of them when making decisions. I might go to a Corona party even if it poses a risk to me, but if going risks my mother’s health, I might reconsider. The train of thought is much simpler than the one required to save the planet from warming. Abstractions become real when consequences are simpler to track and observe. Of course, not everyone who understands externalities on the training wheels of the pandemic will extend it to climate change, but the experience will make it easier.
Present vs a month in the future
I love pizza. I am also not old enough to stop caring about my waistline, such as it is. Nonetheless, I cannot stop myself from having just one more slice. It is not that I am unaware of the calories it contains, it is just that I, like everyone else, discount the future. The future is not as valuable as the present, and so the taste of pizza in the present is more compelling than a slimmer waistline in an uncertain future. Nobel prize-winning behavioral economist, Richard Thaler, identified this as a systemic bias in our thinking and suggested that it would be best to remove the pizza from the room (nudge). In the absences of such nudges, this bias leads to bad decisions in many different circumstances and has been a difficult obstacle in our struggle to moderate climate change. The predicted impact of a slowly warming planet is uncertain and far into the future, implying that it will be heavily discounted by both policymakers and common citizens. However, the cost of addressing these future problems are to be incurred in the present, and by all accounts are quite steep. So here we are, decades after the warning bells were first sounded, still gorging on our collective equivalent of a pizza.
Similar problems have emerged in our struggle with the current pandemic. But the timeline is much shorter, making it easier to observe the consequences of our bias for the present. The lives vs livelihood debate, however flawed, captures the tradeoff between the present and the future. A lockdown today might ensure more people survive at the end of six months; but the cost of that brighter future might be starvation in the present. A similar debate on government support and debt is raging in economics and finance. A crisis this significant requires government intervention in the here and now. But any state action will create problems for the future, debt that will have to be serviced, inflation that might creep up on already suffering citizens etc. So far, it seems that the immediacy of the present has triumphed concerns for the future around the world. But as the consequences become clear in the coming months, we might better understand the future cost of current actions.
Classroom teaching of these concepts tends to devolve into archaic graphs and equations that do not percolate into individual decisions. Policy discussions are dreary and often limited to people in the know. Documentaries are visual delights to be enjoyed, not acted on. And activism is bereft of the nuance that persuasion requires. Everyday lived experience is possibly the most accessible tool of education and a much-needed complement to the other means of getting millions of people on board.
“People tend to think in stories”. Our current predicament provides the best possible story to appreciate the grand challenges of decision making in a complex environment. We would all be slightly better economists if we knew the relevant bits of our unfolding stories to keep track of in the months to come.
The author is an Assistant Professor of Public Policy at the OP Jindal Global University.