Student Blogger - Global Warming: Valuing Foreign Civilizations

United States' cost-benefit analyses on global warming do not currently account for any loss Americans would feel if global warming harmed foreign countries. This may cause policymakers to underestimate the potential costs of global warming to American citizens. But including them raises a couple of problems. How do you figure out how much Americans value foreign civilizations? And if you could figure that out, what do you do if they aren't the results you hoped for (i.e. Americans just don't care that much)?

Professor David Dana explored these issues in a recent paper (downloadable here). The paper urges policymakers to consider the potential losses to American citizens if foreign countries were harmed by global warming. These costs may be some type of intangible companionship, or more tangible values, such as the enjoyment of a nice overseas vacation. To the extent foreign losses are excluded, these cost benefit analyses may underestimate the potential losses, causing us to spend too little to stop global warming. And since a large portion (disproportionate even) of global warming's effects are expected to occur elsewhere (countries with little inland area), we may be grossly underestimating the costs.

How do we determine the value that American citizens place on foreign civilizations? The dominate method in cost-benefit analysis is to figure out how much Americans would pay to save foreign civilizations, termed "revealed preferences." Attempts have been made to do so by looking at foreign aid and private charitable donations. We reveal how much we care about foreign civilizations by donating money. These studies suggest Americans do not value foreign citizens very highly (1/8th to 1/2000th of an American citizen). Professor Dana argues there are problems that make these figures inaccurate. Americans may lack information on foreign conditions or may fear their money is being wasted due to foreign corruption. And of course, this is the classic free-rider problem: Why should I donate? Other people will.

Instead of using inaccurate revealed preferences, Dana suggests that stated preferences—just asking people to place a value on foreign civilizations—is the next best method. These surveys present their own problems. When it isn't your own money, it's easy to give it away to foreign countries. People may state an amount that they feel is socially expected, but that bears little resemblance to the value they would privately give.

Professor Dana's paper presents a couple stated preferences surveys on how much people would donate to save foreign countries from disasters. The results show that people would donate roughly $20-$30 to save a US city from floods and $10 to save an Asian city. But like most stated preferences surveys, it's hard to unpack the meaning of these results. One potential improvement over the typical stated preference survey may be to perform an experiment where the subjects are given a hypothetical budget and must allocate that budget to various causes, such as saving a foreign city from a flood, or cutting taxes.

Even if we could confidently determine the value people currently place on saving foreign civilization from the potential effects of global warming, it may not tell us much. If Professor Dana is correct and one of the main obstacles to revealed preferences is a lack of information, changing the available information would change people's valuation of foreign countries. This may lead to a perverse result where some people would engage in publicity campaigns to change the outcomes of cost-benefit analyses. Those who want to take no action to prevent global warming would spend money to cause people to care less about foreign civilizations. Or on the flip side, if policymakers viewed US citizens as not caring enough, they may publicize global warming so that people care more. Of course this problem exists in any type of cost-benefit analysis. But global warming may be distinct situation because people are especially reliant on outside sources of information to form opinions regarding the costs and benefits of global warming. Their preferences are especially malleable.

However, stated preference surveys may have value outside of their use in cost-benefit analyses. Moral theorists could use them to refine their efforts of encouraging a more activist approach to global warming. If the surveys show people place little value on foreign countries, then moral theorists should focus less on publicizing the effects of global warming and more on changing people's fundamental world outlook. On the flip side if the surveys show people care greatly about foreign countries, then activists would want to focus their approach on informing people about global warming, or ensuring them that their contributions are meaningful. Effective activism cannot be divorced from the prevailing public sentiment.