Suboptimal Climate Policy

There is a scientific consensus that human activities, in the form of emissions of carbon dioxide into the atmosphere, cause global warming. These emissions mostly occur in the marketplace, i.e., they are undertaken by private individuals and firms. Governments seeking to curb emissions thus need to design policies that influence market behavior in the direction of their goals. Economists refer to Pigou taxation as “the” solution here, since the case of global warming can be seen as a pure (negative) externality. We agree. However, given the reluctance of policymakers to agree with us, there is an urgent need to consider, and compare, suboptimal policies. In this paper we look at one such instance: setting a global tax on carbon at the wrong level. How costly are different errors? Since there is much uncertainty about how much climate change there will be, and how damaging it is when it occurs, ex-post errors will most likely be made. We compare different kinds of errors qualitatively and quantitatively and find that policy errors based on over-pessimistic views on climate change are much less costly than those made based on over-optimism. This finding is an inherent feature of standard integrated assessment models, even though these models do not feature tipping points or strong linearities.

Indonesia’s China and US Approach: Crafting Policies Out of Standard Operating Procedures

This article examines Indonesia’s perceptions, strategies and policies towards the USA and China under the presidencies of Susilo Bambang Yudhoyono (2004–2014) and Joko Widodo’s first term and early second term (2014–2020). It argues that on a strategic level, Indonesia’s behaviours are in line with structural realist principles, where it adopts a prudent approach of maintaining its strategic autonomy. However, deviations from structural realism are identified in the operationalisation of this strategy into specific foreign and security policies. This article explains such deviations by employing Graham Allison and Philip Zelikow’s models of decision-making, and argues that such suboptimal policies are driven by two domestic political factors, namely, organisational behaviour and governmental politics. Specifically, the article highlights two key tendencies: (a) that policy makers tend to stick to some a priori guidelines within their organisations, despite changes in external pressures; and (b) that policies tend to be by-products of competition between government organisations. In Indonesia–China relations, these tendencies are most apparent in Indonesia’s approach in the South China Sea, where policies and narratives articulated by the government have been largely stagnant, despite increased intensity of China’s activities in Indonesia’s Exclusive Economic Zone. With regard to the USA, these factors manifest in the lack of tangible progress in defence and security cooperation between the two countries, due to a static interpretation of Indonesia’s Free and Active foreign policy maxim.

The US Wars in Vietnam, Iraq, and Afghanistan

Because overarching policy goals are distant and open to interpretation, policy makers yield to cognitive bias by constructing policies around visible elements (salient referents). US wartime policy makers thus defined US goals in Vietnam, Iraq, and Afghanistan first to serve proximate goals; then to serve disjoined tasks; eventually to serve available US (political, economic, and military) resources; and finally to serve a fixed-exit schedule, at which point leaving became the primary objective. In consequence, they exaggerated the benefits of preferred policies, ignored their accompanying costs and requirements, and underappreciated the benefits of available alternatives. These non-rational tendencies, though pervasive in decision-making, become disabling problems in the complex environment of asymmetric conflicts. With their many interdependent parts, these demanding environments confound planning and tax resources. The result was shortsighted, suboptimal policies that failed to live up to ever-diminishing expectations.

MAJORITIES AGAINST UTILITY: IMPLICATIONS OF THE FAILURE OF THE MIRACLE OF AGGREGATION

A surprising conclusion of modern political economy is that democracies with highly ignorant voters can still deliver very good results as long as voters' errors balance each other out. This result is known as the Miracle of Aggregation. This paper begins by reviewing a large body of evidence against this Miracle. Empirically, voters' errors tend to be systematic; they compound rather than cancel. Furthermore, since most citizens vote for the policies theybelieveare best for society, systematic errors lead voters to support socially suboptimal policies. The paper then considers the case for “paternalistically” vetoing popular but misguided democratic decisions, presenting several arguments that overruling democratic decisions is much less objectionable than overruling individual decisions. In fact, since democracies routinely adopt paternalistic policies, the opponent of paternalism for individual decisions should embrace paternalism for democratic decisions. The paper concludes by considering several different mechanisms for improving upon majority rule.