Thursday, September 9, 2010

Dangers of Obscuring the Point

Sometimes people make arguments in what I call "shotgun" fashion. Instead of listing the key benefits of some policy or project they list all possible benefits in the hope that they'll appeal to a host of different interest and make the project sound like it makes a big difference--by killing two--or five--birds with one stone. I did this when I had to make a presentation about a project I did teaching West Africans to build cheap peanut shellers and I regret it.

I'll use a different example though because it's more illustrative. Take this pitch: "this new energy project lowers costs for individuals, creates jobs, and cuts down on deforestation. Oh, and kids benefit from the fact that the fuel is cleaning burning too!"

When I hear presentations like that is that it makes me wonder if any of those benefits are large. Are they listing many benefits because none of them alone is impressive? And doesn't having a long list obscure the original point of the project?

In the case of the energy project, limiting deforestation probably isn't important in the long run. The impact will be minimal and the environmental consequences are (to my knowledge) paltry compared to the consequences of poverty. The "lower cost" could be (probably is) as little as $10 a year for people, not exactly a kick out of poverty. And it might "create" jobs, but how many? And how many people are displaced in the competing industry? In some ways this is just another argument for trying to be quantitative when talking about benefits and for remembering to be honest about costs.

What I think is particularly interesting in this case is, though, that the added side-benefit, the one that was thrown in at the end, may well be the most important. Indoor air pollution kills millions of kids each year. If they don't die from air pollution they might live to be, say, 50. That's 45 years-of-life added, which we value at $25,000 a piece in the U.S. (roughly). So saving one kid from reducing air pollution is worth (something like) the savings from lowering costs for 11,250 people.

The example that motivated this post was Cash for Clunkers. The program was a total disaster, but many people liked it because of it's laundry list of beneficiaries. It would be progressive (help people driving older cars), environmentally friendly (get dirty cars off the roads), provide a needed stimulus and help the ail car industry. But in reality none of those objectives were achieved efficiently. If we were honest about which were important from the start we could have just designed specific policies for each--at less cost.

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