COLUMN-Science, economics should be separate from policy: Kemp

Tue Dec 20, 2011 8:36am EST

By John Kemp

LONDON Dec 20 (Reuters) - The Environmental Protection Agency's draft report blaming hydraulic fracturing for contaminating drinking water in Pavillion, Wyoming, has triggered a furious pushback from the industry questioning the robustness of the agency's conclusions.

In an angry press release, the local gas field operator, Encana, blasted the conclusions as "irresponsible" and complained "many of the EPA's findings from its recent deep monitoring wells ... are conjecture, not factual and only serve to trigger undue alarm".

Encana has raised a series of technical questions about the methods employed by EPA investigators, which were reproduced at length in a frack-friendly article by the Wall Street Journal on Tuesday ("The EPA's Fracking Scare").

The frack storm centred on Pavillion is a good example of why both science and policymaking suffer when they get too close to one another. It is a microcosm of the bigger controversy about climate science and emission controls. The same problem is also apparent in macroeconomics.

When scientists and economists become policy advisers, advocates and makers they lose much of the necessary scepticism and openness that is the characteristic of Popperian scientific method. They become less good as scientists and economists.

On the other side, when policymakers hide the distributional trade-offs involved in many policy decisions behind scientific and economics studies, implying they have found the unique correct answer, the quality of the debate suffers and the science itself is discredited.

OBJECTIVITY COMPROMISED

Both the EPA and Encana have framed the issue in scientific terms, offering competing views of the scientific evidence, and trying to discredit one another's findings.

"Encana is especially disappointed that the EPA released its draft report, outlining preliminary findings, before subjecting it to qualified, third-party, scientific verification," according to a statement on the company's website ("Why Encana refutes U.S. EPA Pavillion groundwater report").

Despite the language, the debate is not really about the science but the policy implications that might be drawn from it.

Encana's Executive Vice President Eric Marsh explains "Safe and responsible natural gas development is vital to North America's energy security, and hydraulic fracturing is an important, necessary and safe part of natural gas development," which is a good point, though it does beg the question about whether fracking is safe.

The Wall Street Journal concurs: "The safety of America's drinking water needs to be protected, as the fracking industry itself well knows. Nothing would shut down drilling faster, and destroy billions of dollars of investment, than media interviews with mothers afraid to let their kids brush their teeth with polluted water."

Encana's self-interest in the case is obvious. But the Journal also questions the objectivity and credibility of the EPA, noting, with some fairness, "the agency is dominated by anti-carbon true believers, and the Obama administration has waged a campaign to raise the price and limit the production of fossil fuels."

RAWLSIAN VEIL OF IGNORANCE

To maintain objectivity, the function of providing technical advice should be strictly separated from the responsibility for taking a decision based on it. In practice, strict separation of technical advice and decision-making is difficult to achieve. But in too many areas the "scientization" of policymaking has led to a dangerous blurring of the two.

The San Francisco and New York Feds, both of which have been headed by prominent supporters of quantitative easing, have issued a string of research papers showing QE is effective in lowering interest rates, boosting growth, and has no adverse impact on inflation or commodity prices.

Other regional Feds, headed by sceptics, have produced papers showing the opposite. It is not clear whether some or all of these papers are really economic research or advocacy.

In the United Kingdom, Bank of England researchers conveniently released a research study showing "QE asset purchases have had economically significant effects" in September 2011, just as the central bank was contemplating and building a public case for another round of large-scale asset purchases. The Bank's researchers concluded the first round of QE purchases cut average gilt yields by 100 basis points.

The research paper provided much of the justification for launching a second round of QE a month later, and was cited by the governor and other officials as evidence that a second round would work.

But researchers for the Bank for International Settlements, which is highly respected and had no interest in the outcome, concluded QE cut government bond yields by only 27-74 basis points, far less than the Bank of England's own assessment. It remains unclear which of these economic assessments is right.

Britain's central bank has also been widely pilloried for the poor quality of its inflation forecasts, which some have blamed on conflicts between objective technical assessments and policy decision-making.

The problem is that when technical advisers (whether scientists, economists, lawyers or accountants) know how their technical advice is likely to affect outcomes, that knowledge is apt to colour their findings, as they try to ensure the advice supports their preferred outcome.

As far as possible, scientific research, economic research and technical advice should take place behind a "veil of ignorance" like that described by philosopher John Rawls.

BETTER DECISION-MAKING

In the case of fracking, it is important to separate the question of whether contamination occurred at Pavillion (a scientific question) from broader policy debates about the desirability of fracking, production of fossil fuels and global warming (which are political questions).

Both Encana and EPA have recognised it would be inappropriate to generalise from the unique conditions at Pavillion, which are not typical of fields across the United States. But opponents and supporters of fracking want to do just that.

No one knows yet what really happened at Pavillion. It would be surprising, however, if fracking did not result in contamination of drinking water at some locations at some point in the United States. It is only a matter of time.

But finding some (inevitable) instances of contamination says nothing about whether fracking should be banned or restricted. All energy production involves trade-offs between risks and benefits. Scientists and other technical experts can illustrate what those risks and benefits are, but they cannot make a decision on how to balance them. Only voters and their representatives can make those choices.

The same problem bedevils climate science and monetary policy. The more scientists and professional economists have taken a central role formulating policy rather than just offering technical advice, the more their objectivity and the underlying science and economics themselves have come under attack from those with different views.

Climate scientists and economists like Paul Krugman complain bitterly their opponents are distorting the science/economics, and argue science and economics should be reserved for those with appropriate technical training. That is true, but only in the narrowest sense. The philosopher Plato might have said the same thing.

Krugman, Fed Chairman Ben Bernanke or the U.N. panel dealing with climate change are entitled to a good deal of deference when offering a technical view about how the climate will evolve or the economy works.

But when they offer a view on how far to limit emissions, or how to balance price rises and unemployment, and allocate loses from the financial crisis among taxpayers, bank shareholders, borrowers and savers, those are distributional questions to which there is no one right answer. Their views are no more valid than those of anyone else.

Some commentators have celebrated the rise of technocrats, for example the installation of technocratic governments in Greece and Italy during the crisis, and the rise of "independent" central bankers.

But confusing technical advice with policy decision-making has damaged both. It has stifled legitimate political debates about distribution, while undermining the credibility of the technical advice.

Rather than celebrate technocracy, it is time to aim for a much clearer division between those who provide scientific, technical and economic advice and those charged with responsibility for acting on it and taking decisions with political and distributive consequences.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.