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Spreadsheets of power: How economic modelling is used to circumvent democracy and shut down debate | The Monthly
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"Most people think it is hard to put a dollar value on a human life, but they’re wrong. It’s easy. Economists do it all the time.

Most people think that all human lives are equally valuable. And most think economic modelling is boring, irrelevant to their busy lives, and unrelated to how our democracy is functioning. They’re wrong about those, too.

About ten years ago, a lawyer rang to ask if I would do some (economic) modelling. “It depends,” I said. “What’s the job?”

“We want you to put a dollar value on the life of a dead mother,” said the lawyer. “We are suing a doctor for medical negligence, and the insurance company wants to value her life at zero because she wasn’t working. She had no future earning potential. Can you estimate the value of the housework she would have performed?”

I still feel sad when I think about it: for the family, for myself, and for a society in which asking such a question is not only acceptable but also necessary. The dilemma for the widower and the lawyer, and for me, was that if someone didn’t put a dollar value on the love and care that a mother gives her children, the father would wind up with even less money to care for the kids he would be bringing up by himself.

Of course, economists have no real way to value love and affection, so I valued ironing, laundry and child care instead. I got my hands on data about how mothers with three kids use their time. I found data on the price of buying individual household services like ironing, and the price of live-in maids and nannies. I forecast the age at which the kids would leave home. My forecast was based on a meaningless average of kids who do go to uni and kids who don’t. My spreadsheets were huge, complex, scrupulously referenced and entirely meaningless. Like all good forecasters I estimated the “value” of her life to the cent, and as happens in all good negotiations, the lawyers ultimately settled for a nice round number. The only good thing about the number was that it was bigger than zero.

The topsy-turvy “morality” of economics is built in to models that politicians, lawyers, economists and lobby groups use to persuade the public, in all parts of public life: models that say, for instance, that we can’t afford a price on carbon; that life-saving medicine for some people is “too expensive”; or that the loss of an entire species is justifiable if woodchip prices remain above $100 per tonne.

Everyone who uses economic models to excuse the inexcusable wants you to believe that the models are boring. The last thing they want you to do is to pay attention.


Many economists have calculated that it will be cheaper for the world to endure climate change than to prevent it. The models they use to draw this bizarre conclusion are built on thousands of assumptions about everything from the value of human life to the willingness of consumers to buy smaller cars if petrol becomes more expensive. If any one of those assumptions is wrong, the answer will be wrong. If hundreds of the assumptions are out, the answer becomes meaningless. (Some economists then argue that if hundreds of the assumptions are wrong then the errors might cancel each other out. Seriously.)

Imagine you were asked to model the costs of dangerous climate change. Imagine you were in possession of the likely number of people who will die as a result of storms, floods and droughts. Imagine you knew what countries they would die in, and how many years into the future. Would you value all of their lives equally? Would you assume that a Bangladeshi and an American life were “worth” the same? Would you think that the death of a child in 20 years’ time was worth as much as the death of a child in 50 years’ time?

In our democracy, these ethical questions are usually answered by economists, to two decimal places.

Most economic modellers do not assume that all human lives are equal. Bjorn Lomborg, for example, one of the world’s most famous climate sceptics, uses modelling that assumes the lives of people in developing countries are worth a lot less than the lives of Australians or Americans. While the US Declaration of Independence may declare that all men are created equal, most economic models assume that all men (and women) are worth a figure based on the GDP per capita of their country.

Late last year, Bjorn Lomborg asked to meet me, and I wondered whether talking to him would be good fun or a waste of time. It was neither: it was scary and illuminating. After 15 years as the smiling face of climate inactivists, Lomborg had raised his sights. His new mission was to ensure that governments also deliver inaction on global poverty alleviation, public health and gender inequality.

When we met, Lomborg proceeded to explain how his team of economists at the Copenhagen Consensus Center had decided that a number of the United Nations’ Millennium Development Goals weren’t worth pursuing. His tool of choice for defending such a position? Economic modelling.

You probably didn’t know economists had an assumption about humanity’s primary goal, did you? No wonder developing countries think that the developed countries don’t really care about their suffering as much as our inconvenience. We don’t.

Assumptions such as those made by Summers sit at the heart of the economic models that are regularly used to oppose carbon taxes, support free trade agreements and prevent the introduction of environmental regulations or more generous welfare safety nets.

Much of the power of economists is based on the public’s (understandable) lack of desire to read reports written in algebra. That’s why we like to use algebra.

In 2011, Denmark’s general election saw its centre-right government tossed out of power, to be replaced by a minority centre-left coalition led by the country’s first female prime minister, Helle Thorning-Schmidt.

Bjorn Lomborg’s Copenhagen Consensus Center was one of the first casualties of the change of government. When it was announced that its more than $1 million in funding would be cut, Lomborg visited the new prime minister, urging her to reconsider the government’s decision. “I’d love to show you how the Copenhagen Consensus is a good idea,” he was reported as telling her.

“I think that probably might be right, Bjorn,” she reportedly responded to the sceptical environmentalist. “But I will just get so much more mileage out of criticising you.”

Costs and benefits can be calculated any number of ways, and the modeller’s assumptions are crucial to the end result. Lomborg had confidently assumed that the Danish taxpayer would continue to fund his work. His cost–benefit analyses had found that more effort should be put into free trade and less money spent on tackling poverty and climate change. But, as with all such efforts, garbage in, garbage out.

There is a role for economists, and economic modelling, in public debate. Its role should not be to limit the menu of democratic choices. Instead it should be to help explain the trade-offs.

Good modellers aren’t afraid of explaining their assumptions. The clients who pay best, however, don’t want the best modellers. They want people who can write a fat report to slam on the fucking table."
economics  power  democracy  control  2015  economists  ideology  modeling  morality  politics  policy  lobbyists  persuasion  climatechange  justification  capitalism  larrysummers  worldbank  welfare  humanism  humanity  ethics  neoliberalism  richarddenniss  bjornlomborg  copenhagenconsensuscenter  riotinton  consensus  petercostello  joehockey  australia  inequality  poverty  representation  environment  pollution 
april 2015 by robertogreco

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