171. Measuring Pollution on Parallel Earths

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Speaker 13 We all take good care of the things that matter, our homes, our pets, our cars.

Speaker 11 Are you doing the same for your brain?

Speaker 16 Acting early to protect brain health may help reduce the risk of dementia from conditions like Alzheimer's disease.

Speaker 11 Studies have found that up to 45% of dementia cases may be prevented or delayed by managing risk factors you can change.

Speaker 14 Make brain health a priority.

Speaker 20 Ask your doctor about your risk factors and for a cognitive assessment.

Speaker 22 Learn more at brainhealthmatters.com.

Speaker 23 I've long held the belief that the best way for a thoughtful, sensible economist to have a big impact is to tackle important problems that don't superficially seem like they're economic in nature.

Speaker 23 And my guest today, University of Chicago economist Michael Greenstone, is a perfect example. I was just blown away that the impact of air pollution seemed so large.

Speaker 23 And if that was news to me, and I'd been studying that for 15 or 20 years, it just felt like, well, that probably would be news to other people as well.

Speaker 24 Welcome to People I Mostly Admire with Steve Levitt.

Speaker 23 Air pollution isn't a topic you typically associate with economists, but Michael Greenstone has spent his career investigating how it impacts human health.

Speaker 23 Time and time again, he's found important and surprising results and created tools that have real-world impacts. At the heart of his work is TSPs or total suspended particulates.

Speaker 23 I started our discussion by asking Michael to explain what they are and why they cause problems in humans.

Speaker 23 So total suspended particulates. Already we're going to dive into a small segment of your audience here, Steve.

Speaker 23 When you burn fossil fuels, but especially coal and petroleum, These particles come off of them that go into the air or they're captured, but quite frequently they're not captured. And

Speaker 23 science has gone a long ways. It used to think that all of them were bad, and now there's kind of a narrowing into the really small ones.

Speaker 23 And the really small ones, which are sometimes called PM2.5 or PM1,

Speaker 23 they can get deep into your body.

Speaker 23 The bigger ones get caught, if you remember in high school biology, the cilia, those things in your lung, the hairs, those can catch the bigger ones and then you cough them out.

Speaker 23 But the smaller ones just create havoc in the body and have been shown over and over again to lead to pre-mortal mortality and a variety of illnesses and sicknesses.

Speaker 23 And this is essentially synonymous with air pollution. Obviously, there are other things that pollute the air, but more or less when you see smog, is that the particulates you're seeing in the air?

Speaker 23 Oftentimes that's ozone that you can see. Sometimes it's particulates, depending where you are.
It basically is conventional air pollution.

Speaker 23 I think half of all the benefits from all regulations in the federal government are from the reductions in particulate matter.

Speaker 23 Okay, so we know particulates are bad for people, but to actually measure the magnitude of their health impact, it's not easy because the world is complicated.

Speaker 23 So, let me ask you a question that I've heard you ask our PhD students probably 20 times over the years in academic seminars.

Speaker 23 If you could have any data you wanted to answer this question about the health impact of TSPs, what would it be? Okay, great. I love that question.

Speaker 23 What I would like to have is two worlds, two Earths, and I would like to inject one with high levels of particulates air pollution and the other relatively clean air.

Speaker 23 And then I would like people to be able to lead their lives from birth all the way to the end and maybe to move to parts of the planet that were less polluted than more polluted and engage in all kinds of behaviors that people do to protect themselves.

Speaker 23 So just as an aside, that question I just asked you about the ideal data set, what do you have in mind when you ask people that question?

Speaker 23 I'm trying to understand what question they would actually like to know the answer to because really nature or data often doesn't let us answer the deepest question.

Speaker 23 We can answer like a question that's super adjacent to the most interesting question, but it doesn't let us answer the question that we really need to know.

Speaker 23 And in the case of particulates, what we would really like to know, if you're a government who's thinking about regulating the level of particulates, you want to see what the lifetime effect of that is.

Speaker 23 And you want to also allow people to engage in all kinds of behaviors to protect themselves. And it's very hard to come up with a setting like that.

Speaker 23 So you're obviously not going to have two parallel earths and be able to inject pollution into people's lives and see what happens.

Speaker 23 But instead, what someone like you or me does is to try to find some highly imperfect data set, but one that shares a key feature with your idealized data set and that for essentially arbitrary reasons, people who are otherwise very similar happen to get exposed to very different levels of air pollution.

Speaker 23 It's what economists call a natural experiment as opposed to a randomized experiment, which is what your idealized thing was.

Speaker 23 And you and your co-authors found a really awesome natural experiment as a result of a particular policy that was instituted in China. Can you explain? Yes.
So let me just back up one step.

Speaker 23 I had long wanted these parallel planets and I couldn't make progress on that.

Speaker 23 And so what I settled on was looking at infants.

Speaker 23 And the reason I wanted to look at infants was at least I didn't have to worry about their lifetime history, which if you think about like in a cigarette smoking study, it's not that interesting.

Speaker 23 Did I smoke a cigarette today and did I die today? What you really want to know is like the cumulative exposure.

Speaker 23 And so I thought the infant solved it, but it only solved it as their exposure in utero or maybe in the first year of life. The infant simplified the problem.
They simplified the problem.

Speaker 23 Because now you could look at a window of a year or two and get your answer, as opposed to having to worry about what people have been doing for 30 or 50 years. Exactly.

Speaker 23 But you can see that's like already a branch or two down from the ultimate question of lifetime exposure.

Speaker 23 And so I'd written papers like that, and I was like, ah, these are kind of interesting, made some progress here.

Speaker 23 But man, I am leaving the big question of what is the level of particulates that government should allow for lifetime exposure unanswered.

Speaker 23 And then one day, my co-authors and I stumbled upon this policy back when China was much less wealthy than they are today.

Speaker 23 They were like, okay, there's winter and it's cold in winter, but we really don't have enough money to provide heating for everyone.

Speaker 23 And so they did, from a research perspective, this incredibly awesome thing. They just pretty arbitrarily drew a line across the country.

Speaker 23 And they said, if you live north of this line, bingo, you are getting free winter heating.

Speaker 23 We're going to build coal boilers, attach them to every single building, and we're going to give you from November 15th to March 15th, free coal.

Speaker 23 And if you live south of the line, and the line line was really this river called the Hawaii River. And if you live south of the river, you are not the winner.
You get no winter heating.

Speaker 23 In fact, it's not allowed. Okay, just as an aside, this resonates with me because I adopted my daughter, Sophie, from China, and she was from south of the river.

Speaker 23 And when we went to visit the orphanage in the foster home where she had grown up, it was winter. And it was incredibly cold.
Yes. And everybody was wearing like 17 layers.

Speaker 23 The babies were so bundled up they could barely move. We were freezing.
And this is before I knew about your study, but as soon as I saw your study, I was like, oh my God, I lived it for two days.

Speaker 23 I experienced exactly what you're talking about. Yes.
Okay. So you're one of the rare people.

Speaker 23 So I gave a lecture in Chengdu, which is in the northern part of the South, maybe not that far from Sophie's orphanage. And it was in the winter and it was cold.

Speaker 23 And all the students had on winter coats and they were taking notes, sitting in their seats, wearing winter coats. It was just the norm.
So I actually saw it as well.

Speaker 23 You should have written the paper, Steve.

Speaker 23 I didn't have the vision you had.

Speaker 23 The idea of the paper was, hey, given the migration restriction and the difference in pollution that the winter heating policy caused, if I see you in the north, I can have confidence that you had exposure to higher levels of particulates for your full life, which was getting closer to that question at the top of the funnel.

Speaker 23 And so the idea is that if it wasn't for this policy, our best guess is that the people who live to the south and the north of the river, they would have similar lives and they'd expect to have similar life expectancies.

Speaker 23 But if we see a big difference in life expectancies, the most logical thing to attribute it to is the extra pollution that's in the north. Exactly.
And so the whole paper is basically two graphs.

Speaker 23 One is, do you see a jump in pollution concentrations just as you move north of the river? Okay, and do you? You see a 40% increase in pollution just as you cross the river.

Speaker 23 And I should say, like, you and I wouldn't be talking about this if that wasn't true. That would have meant there was no policy in effect.

Speaker 23 So just to put in perspective, I'd love to hear three numbers.

Speaker 23 What the level of particulates were in the north, what the level of particulates were in the south, and what the World Health Organization or whoever sets the standards for what a safe level is, what their cutoff is for safe levels.

Speaker 23 Okay, so I got the data and I'm plotting it like degree of latitude by degree of latitude. And I know exactly where the river is.
And

Speaker 23 what jumped off of the page is that TSPs were about 100 micrograms per cubic meter just to the south of the river. And just to the north, they were like 140 micrograms per cubic meter.

Speaker 23 So you have this 40% jump. Now, I want to emphasize, even to the south, the levels are quite high.
Probably outside of our window right now, it's maybe seven or eight micrograms per cubic meter.

Speaker 23 And the WHO standard is probably right around there, maybe 10 micrograms per cubic meter. Okay, so pollution was worse.
but honestly, how much could that really affect life expectancy?

Speaker 23 I remember when I first heard your results, I was completely blown away because if I remember the results, I think people in the North were dying, what was it, an average of five or five and a half years earlier than people in the South.

Speaker 23 It was an absolutely shocking finding. Did it surprise you also? Yes, I was very surprised.
In the first paper, I wrote two papers on this, and the first paper was about five years.

Speaker 23 And then I would have Chinese students come to my office at the University of Chicago and be like, you're the Hawaii River guy. My parents say I'm going to live, you know, five years fewer.

Speaker 23 And I would look at my shoes. I wrote a follow-up paper with more recent data, and the gap had closed in terms of pollution.
And the difference in life expectancy was about three years.

Speaker 23 And what's really interesting, I like tortured that data. I looked for a jump at any other degree latitude.
So one degree south, two degrees south, three degrees south, four degrees south, et cetera.

Speaker 23 And the same thing going north. There's no jump in pollution and there's no jump in life expectancy.
It all is happening right where the river is.

Speaker 23 And it was all happening in causes of deaths that are cardiorespiratory, that are plausibly related to pollution.

Speaker 23 Yeah, that's really important because you could imagine a skeptic saying, sure, they die earlier, but they're dying from car crashes. That can't possibly have anything to do with air pollution.

Speaker 23 But literally, the deaths pile up exactly on the causes that science tells us it should be.

Speaker 23 It's a really compelling paper and it's it's shocking because of the magnitude, because mostly in research, you have some theory and in your mind it's going to be a really big effect.

Speaker 23 And then when you go over the data, it's actually tiny, but this is the opposite. Do you remember what you expected?

Speaker 23 If I'd had to guess, I would have thought it had been like a year or something like that. I didn't think it was going to be such a big deal.

Speaker 23 So I wrote the paper at the same time I was getting more and more interested in climate change. And it really changed my thinking, at least in the environmental space.

Speaker 23 Here you had what seems to me to be like the greatest external threat to human well-being on the planet, and it doesn't receive enough attention.

Speaker 23 And by that, you mean air pollution, not climate change. Air pollution.
In essence, you changed your focus away from a broad view of climate change towards, here's this man-made problem.

Speaker 23 We have the solutions right in front of us, and yet people are dying.

Speaker 23 And we're talking about the effect at this river, but when you look at the worst place on earth versus the best, the change in life expectancy must be even bigger.

Speaker 23 What's the worst place in the world to be right now, Delhi or something like that? Yeah, India and Pakistan are probably near the top of the list.

Speaker 23 But like if around the world air pollution was reduced to WHO standards, World Health Organization standards, the average person on the planet would gain about two years of life expectancy.

Speaker 23 And of course, that includes like a lot of zeros of people in the U.S. And then these very high increases in life expectancy that would occur in other parts of the world.
Yeah.

Speaker 23 So in these high places, I think they've estimated that smoking a pack a day your whole life takes maybe 10 years off your life.

Speaker 23 So right now, living in a really polluted city is like smoking half a pack a day for your entire life.

Speaker 23 I imagine the effects are more than linear. Have you been able to look at what happens if you also smoke a pack a day while living in a place like Delhi? I haven't been able to make progress on that.

Speaker 23 It's a great question.

Speaker 23 But one thing that I think happened when I did that, that was in some sense, like what I've been looking for in research is, and I want to say this very carefully, there were many things going on at the same time.

Speaker 23 The U.S. Embassy started reporting pollution concentrations in Beijing.
The Chinese government was under some pressure from people there.

Speaker 23 But I think some small part of that study helped add fuel to the fire. And the next year after that study, China declared a war on pollution.

Speaker 23 And they've made unbelievable progress in reducing air pollution in the last decade. They've done it way faster than we ever did in the United States, way faster than was ever done in Europe.

Speaker 23 I don't think they get enough credit for kind of the gift or the provision of like a healthier and longer life that they've provided to their people in such a short period of time.

Speaker 23 We'll be right back with more of my conversation with economist Michael Greenstone after this short break.

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Speaker 3 But with Zen nicotine pouches, you'll discover many good reasons.

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Speaker 6 Plus, Zin offers a robust rewards program.

Speaker 7 There are lots of options when it comes to nicotine satisfaction, but there's only one Zen.

Speaker 10 Check out Zinn.com slash find to find Zin at a a store near you.

Speaker 9 Warning, this product contains nicotine. Nicotine is an addictive chemical.

Speaker 12 We all take good care of the things that matter.

Speaker 13 Our homes, our pets, our cars.

Speaker 11 Are you doing the same for your brain?

Speaker 16 Acting early to protect brain health may help reduce the risk of dementia from conditions like Alzheimer's disease.

Speaker 11 Studies have found that up to 45% of dementia cases may be prevented or delayed by managing risk factors you can change.

Speaker 14 Make brain health a priority.

Speaker 20 Ask your doctor about your risk factors and for a cognitive assessment.

Speaker 21 Learn more at brainhealthmatters.com.

Speaker 23 So you just talked about how this study you did may have had an impact on China's policy.

Speaker 23 And I often criticize academic economists, especially economists who study the developing world, who study poor countries, because they run little research studies that show huge impacts like yours did, and then they get those studies published in prestigious journals, and then they move on to the next study rather than actually doing all the hard work it takes to try to get their solutions adopted at a large scale.

Speaker 23 And I don't blame individual economists, the incentives in our profession reward publications. It doesn't do much or anything for one's career to actually get your ideas implemented.

Speaker 23 But one thing I really admire about you is that you're really committed to turning your research findings into real-world impact so you didn't just publish that study you've since spearheaded a huge effort to develop and publicize something that you call the air quality life index could you talk about that sure so the idea of the air quality life index comes from your question which is what was i expecting the answer to be a basic tenet of economics is that there's perfect information and that people understand everything, or at least we would like that to be the case to produce optimal outcomes.

Speaker 23 And I was like, I don't think people know this.

Speaker 23 And it's wonderful that I published it in the proceedings of the National Academies of Science, which has a readership of three digits, maybe.

Speaker 23 And so I created this air quality life index, which meant to bring in a very tangible, hard-to-ignore way what the impacts of air pollution were on human health.

Speaker 23 And so it tells you how life expectancy could be extended if where you live meets some standard. And you can set it.
It's a web tool. You can set it for the WHO standard.

Speaker 23 You can can set it for your country standard. You can set your own standard.
And when we do an annual release on this, it goes like wildfire, particularly in the very polluted places.

Speaker 23 But the idea was maybe if people had better information, they could lobby or in some other way advocate for improved air quality.

Speaker 23 I mean, the insight that you translate this into units people understand,

Speaker 23 because even on the weather app I have on my phone, it talks about air quality in terms that I have no idea what it means. Okay, you're just like waving the red flag at me here, Steve.

Speaker 23 So there's something called the Air Quality Index AQI, and that's the thing that's on your phone almost for sure. And that's the thing that gets all the attention.
That is like in colors.

Speaker 23 There's brown, there's orange, there's purple, there's red. It's pretty far from the ultimate question.
It's kind of telling you, huh, it's bad in this second.

Speaker 23 But it is not providing much meat on the bone in terms of what would be the benefits of large-scale long-term reductions.

Speaker 23 Yeah, it's telling me maybe if I'm old, I'll stay in today instead of going out. But your answer is: look, this is taking three to five years off somebody's life.

Speaker 23 That means either they should think really hard about maybe moving to a different place that has better air, or they should be pushing their policymakers to actually do something to get rid of the coal plants.

Speaker 23 And you're right, the thing on my iPhone doesn't have any of that effect at all, but your AQLI really hits at it and so i'm not surprised that it's like wildfire when you release it because it actually speaks to people in a way that has meaning but i would say as hard as it was probably to pull off aqli i have to say your most recent endeavor in the air pollution space is truly off the charts when it comes to ambitious projects.

Speaker 23 It's called the Emissions Market Accelerator.

Speaker 23 And unlike AQLI, where you provide information and you hope that others are out there making the change, here you're right, Smack in the middle of the action.

Speaker 23 Could you describe the pilot study you did working with coal-breading plants in the city of Surat in India? What were they doing before you got involved? And how did your program change things? Okay.

Speaker 23 This is so dangerous and so generous of you to interview an academic, but I really want to, Steve, tell you about the 500-page version of how we got there. Okay, good.

Speaker 23 I had worked in the Obama administration in his first year because I was super suspicious that any American politician was going to be very interested in doing something on CO2.

Speaker 23 And after the election, before Obama was inaugurated, he gave this very detailed, very forceful speech about climate change. He wanted to set up pollution markets.

Speaker 23 So these would be markets run by the government, regulated by the government, where they would reduce the collective emissions that were allowable in the U.S.

Speaker 23 economy and do that in a very efficient way by allowing polluters to trade amongst themselves to find a least cost way to do it.

Speaker 23 The idea is that instead of giving very strict mandates on you must install this pollution abatement equipment or you must use this fuel, which is the standard form of regulation that's done at individual polluters.

Speaker 23 The idea of a cap and trade market is, huh, the Steve plant, they're really efficient. And they have ways to reduce pollution very inexpensively.

Speaker 23 And the Michael plant is clunky and old and doesn't really know what they're doing. But the regulator doesn't know much about Michael or Steve.
So they're in no position to really step in. Exactly.

Speaker 23 So then they just give the Michael and Steve plant the same rule. And it ends up being very, very expensive for Michael and not that hard for Steve.
And Steve probably could have done a lot more.

Speaker 23 The idea of a cap trade market is to say, forget that. I'm not going to set a standard for.
Steve. I'm not going to set a standard for Michael.
I'm going to do it for the combination.

Speaker 23 And then I'm going to let them work out through trading how to reach that lower standard together.

Speaker 23 And so, in practice, the clunky Michael plant would end up paying Steve to reduce his emissions by a little wouldn't be very painful for Steve.

Speaker 23 And the Michael plant would benefit because they wouldn't have to engage in expensive pollution abatement. And that's like the dream of economists for how to deal with pollution.

Speaker 23 And so, the key is that prices are what make this happen. There's a price on pollution.
And so, if it's easy for me to lower my pollution and it's hard for you, then We'll trade money. Yeah.

Speaker 23 And in the end, there's less pollution in the air. And it was a lot cheaper collectively for the plants to get the pollution down.

Speaker 23 And there's been a transfer made between the companies that are not good at reducing pollution. They're making a big payment to the companies that are good at reducing pollution.

Speaker 23 And that's how we get a lot of pollution reduction. So I went into the Obama administration.
to work on that because the president gave such an inspiring speech and I believe that he really meant it.

Speaker 23 And I worked on it diligently. And then about a year in, it became apparent that the efforts had passed the House, but were going to die in the Senate.
And so I left and I was kind of bummed.

Speaker 23 The first thing I did is I went back to India where I had a bunch of research projects and I totally had cap and trade on the brain and met with like the Minister of Environment and Forest with some of my colleagues.

Speaker 23 And he was so jazzed because he just announced that everyone had to install what was called continuous emissions monitoring systems. So you would know what pollution was coming out of every plant.

Speaker 23 And he was going to leave it at that. And I said, whoa,

Speaker 23 hey, that is like the foundation of doing a cap and trade market.

Speaker 23 And by the way, most of the pollution in the world is inside developing countries, not all, most, be it conventional pollutants like particulate matter, which we've been talking about.

Speaker 23 or greenhouse gases. And yet you guys are not using this really efficient tool that has proven to be effective in the United States and the UN UN places like that.

Speaker 23 And so he was totally game to give it a try. And there was a long and winding path from there, but we ended up, as you said, in the city of Seurat.

Speaker 23 And this was done with my close colleagues and collaborators, Rohini Ponde, Nick Ryan, and Anant Sudarshan. And

Speaker 23 we worked with the regulator to set up a randomized control trial. He put the names of 350 plants into a hat, and then we randomly drew those names out.

Speaker 23 And a half of them went into this new pollution market that we had designed with them with the goodrop pollution control board and a half continued to be regulated in the standard way okay you're pretty close to your ideal data here right it's not the whole world at once but for a big city and with 300 really polluting plants you're more or less doing what you'd want to do right yes it felt like the cats meow And I can't believe they did this because I've had some success where I talked to the person at the very top of a hierarchy and I propose something radical and that person is visionary and willing to take risks and say, yeah, that sounds great.

Speaker 23 But to get through the bureaucrats and the layers below that, it's always failure. And this is the kind of policy that would scare a policymaker to death.
You're randomizing. There's markets.

Speaker 23 If anything goes wrong, it's the end of their career. I can't believe you pushed this.

Speaker 23 Completely. Like we went through several heads at the Gujarat Pollution Control Board.

Speaker 23 And I fast-forwarded past probably the six years of monking around between the initial idea and the launch of the market. And it required incredible bravery from them.

Speaker 23 I think this kind of gets to your point. The way that cap and trade markets work is at the end of a period, like a year or a couple months, you know what every firm is polluted.

Speaker 23 And they have to turn in a certificate saying that they were allowed to pollute that much. And that's the thing that's traded between the firms.

Speaker 23 And so at the end of the first compliance period, there's like 150 firms or whatever in the market. 148 had exactly the right number of permits and two didn't.

Speaker 23 And of course, in hindsight, they were very big firms and they were very politically connected. And so the regulator calls me and he goes, what are we supposed to do about this?

Speaker 23 I'm going to have to certainly call my boss about this.

Speaker 23 And I said, we've been working on this for six years.

Speaker 23 If you do not follow the prescribed set of rules that we wrote out in excruciating detail for how they would be punished, we should just close it up right now because no one will ever hold the right number of permits again.

Speaker 23 And so, like, in the great man theory of history, this guy was the great man. He imposed the fine.
He deducted it from an account we'd set up of their money.

Speaker 23 And every other period, people held the right number of permits. It was just amazing.
That's awesome. So, what did you find? Did it work? Oh, it was better than we'd hoped.

Speaker 23 So, first of all, in the control group, the standard version of regulation, like at any point in time, a third of the plants are out of compliance with the law.

Speaker 23 In the market, as I said, basically 100% of the plants are in compliance because they held the right number of certificates. So, the regulator liked that.

Speaker 23 The second thing we found, and we were not expecting this, is that emissions had gone down by 20 to 30 percent in the treatment group relative to the control group. Wow.

Speaker 23 And the reason we didn't expect that is we had tried to design it so that regulatory stringency was constant across the treatment and the control group.

Speaker 23 But what we hadn't counted for was all the extra compliance. And so that led to this very large reduction in pollution.
And so that was good for people. The air was getting cleaner.

Speaker 23 And the third thing we found was that the plants, their total abatement costs, and we had really good information on this because we had all their bidding data, how much they bid to buy and sell permits, their compliance costs were down by about 12%.

Speaker 23 So pollution is down. It's cheaper for the companies who are trying to bid it.
It's exactly what economists say markets should do. So a real success.
I know such a rare victory for economists.

Speaker 23 And I like to think of using data as like the worst boyfriend or girlfriend you've ever had. Like you know you're going to be disappointed every day.
You just don't know how.

Speaker 23 And so this was an exception to that.

Speaker 23 So in true Michael Greenstone fashion, you got your great research publication out of this pilot study and you could have just walked away, but instead you've now launched the emissions market accelerator with a stated goal of helping 1 billion people by 2030.

Speaker 23 now that is an ambitious goal how's it going so far it's going pretty well so the first thing that the regulator did was move all the control plants into the market and so that made the market much larger and then the second thing they did was start a second market in the city of omnabad I don't think I could have articulated this very clearly at the beginning, but at some level, like we had all the standard RCT kind of results,

Speaker 23 but I don't think we were interpreting the project in the way that it has been seen by the world.

Speaker 23 I think the way the world has seen it is, holy smokes, this is proof of concept that pollution markets or cap and trade markets can work in developing countries that often have relatively low state capacity.

Speaker 23 It's not that the regulators in those countries don't know that there's such a thing as cap and trade markets.

Speaker 23 I just think they thought it was beyond, It was just like something that was true in Mars. It was not going to be helpful for what they were doing.

Speaker 23 And so it went from me and my colleagues knocking on government doors saying, oh, please, please, please, could you try this? To now, like, the calls are coming in faster than we know what to do with.

Speaker 23 That's awesome. And so, like, the state of Maharashtra will launch a sulfur dioxide market.

Speaker 23 What's so cool about that is the plants in Gujarat were relatively, they were international exporters, but not huge. The statewide market in Maharashtra, they're going to have power plants.

Speaker 23 Like these are the giant hulking plants that burn tons and tons of coal. Anyway, there's a lot of progress and there's a lot of momentum.

Speaker 23 And I just thought, this is what I wanted to do with my life, which was at the intersection of improving understanding about the world and making, and it sounds so horrible and corny, but like making the world a better place.

Speaker 23 And it just felt like, okay, this thing will land it here. I've got to run with it as hard as possible.

Speaker 23 And so we've set up this emissions market accelerator, which, by the way, and I know you've done things like this, is not filled with researchers.

Speaker 23 It's filled with people with real-world experience who are good at getting things done, which is often a different skill than whether or not you can correct your standard errors.

Speaker 23 So I interviewed you back in 2019.

Speaker 23 I was guest hosting on Freakonomics Radio, and the topic was preserving the Amazon rainforest. And I'm curious, in the six years since we've talked in depth about climate,

Speaker 23 are you encouraged or discouraged by what's happened in terms of public policy? Well, maybe I won't quite answer that question. I'll answer a different question.

Speaker 23 Compared to 10 years ago, we're on a completely different path in terms of how much warming we're likely to unlock.

Speaker 23 We were on track for end of century increases in temperature where there was a pretty good probability of four or five degrees C increases.

Speaker 23 Those are so large that that's where the damages really start to get very, very painful.

Speaker 23 And instead, we now seem to be on a path to maybe like three degrees C by the end of the century with very small chances of the 567, which is really where the pain was.

Speaker 23 And the change has come because global greenhouse gas emissions are flattening out and on a trend to go down. Is that the difference? Yeah.
So the trajectory has completely changed.

Speaker 23 So there's three reasons it happened. One is we got really lucky with the renewables and the batteries.
The prices of them came way down.

Speaker 23 And so that unlocked all kinds of knocking out of fossil fuels in various parts of the world. So the technology for solar and wind, we had victories there.

Speaker 23 We didn't expect that they'd be as cheap and effective as they've turned out to be. And so without any morality involved, it's just cheaper for people to use those to burn stuff.

Speaker 23 And so we're doing a lot more of the renewables. Exactly.
And we had the fracking revolution, which has made very inexpensive natural gas.

Speaker 23 And that has knocked coal out of the system in a lot of places. So we got lucky on a couple technologies.
Interesting. I hadn't realized that natural gas was kind of a net win.

Speaker 23 I really thought fracking was part of the problem, but you're saying it's part of the solution. At least in the near term, it's part of the solution.

Speaker 23 It has half the carbon content of coal and most of the progress, not all, but much of the progress that the U.S.

Speaker 23 has made has just come from natural gas knocking coal out of the electricity generating system. It's really been an amazing transformation.
Okay, great. So on the technology side, we've done well.

Speaker 23 There have been some advances in policy. I would not call them very large, but there have definitely been some advances in policy, and they have helped.
What's a policy that's been good?

Speaker 23 So the EU has, just to return to our discussion earlier, the EU has a cap and trade market for CO2. They've used that to reduce their emissions by quite a bit.

Speaker 23 We've seen signs of life of policy, like regional policies in Canada and the U.S. And in fact, I think the U.S.
is the only G7 country without a carbon price.

Speaker 23 So, there have been advances in policy, and those have been important.

Speaker 23 I would not call them earth-shattering, particularly because 80% of emissions through the rest of the century is going to come from outside the OECD. That's where the money really is.

Speaker 23 And then the third thing that we got lucky on, some climate scientists changed their mind about something called the equilibrium climate sensitivity parameter.

Speaker 23 That's like a horrible phrase, but it basically tells you how much warming we're going to get for a given amount of CO2 emissions.

Speaker 23 They had the same consensus view for three decades, and they basically changed their sense of how probable it would be that you could have these very large changes in temperature for a given change in CO2 emissions.

Speaker 23 And so that really has helped reduce the range of the trajectory of where we are for temperature increase at the end of the century.

Speaker 23 So again, that's interesting. I don't think a lot of people have heard that.

Speaker 23 I'm actually surprised that climate scientists would admit to that because climate scientists are in this difficult position of being both scientists and advocates.

Speaker 23 And if you admit that the risk of a given amount of carbon emissions is lower than we thought, then it leads people to be less interested in lowering emissions.

Speaker 23 And that's not something I thought the climate scientists were excited about doing.

Speaker 23 I think it varies from climate scientist to climate scientist.

Speaker 23 I think where the challenge has been with the climate scientists, in my view, is you will not catch me trying to say something about climate science. It's not my expertise.
I don't know it.

Speaker 23 I think they have wandered into the economics of it.

Speaker 23 And I think that's where I've been most uncomfortable with some of the statements that come out of them, where they equate changes in temperature to particular economic outcomes.

Speaker 23 And they're not very good or trained at thinking about like how people adapt and how they might change their behavior. And so some of that leads to what can be quite large predictions.

Speaker 23 Aaron Powell, Jr.: What I think about your research, it's very human-focused. You tend to measure outcomes like expected life saved.

Speaker 23 But it's probably fair to say that many climate scientists are more focused on the planet than they are on humans.

Speaker 23 I wouldn't be surprised if many climate scientists probably secretly wish that there were very many fewer humans out there ruining the planet.

Speaker 23 They might not be so excited about your policies that are saving lives and putting more people on the planet.

Speaker 23 Has that difference in views ever come up explicitly as you interact with climate scientists? Look, there's only three ways that we can affect total emissions, and one of them is population.

Speaker 23 And if we had fewer humans, then there would be fewer humans emitting, and that would reduce the rate of climate change.

Speaker 23 I think if it's a third rail, I can't believe that people are ever willing to talk about it. I assume that's a decision that people make in their families and they decide what's best for them.

Speaker 23 And I'm in no position to have a view on that. But that does occasionally sneak into it.
I think where I've had

Speaker 23 maybe my most distaste or uncomfort is

Speaker 23 this view that we should have some kind of, I call it the cruelty of climate arithmetic, which is this view that we should set some cap on how much temperature should go up.

Speaker 23 So if you want to hold warming to 2 degrees C, which I think is probably very unlikely at this point, that's effectively specifying that we're only allowed to emit a certain amount more going forward.

Speaker 23 And if you just do the raw math, given that most of the emissions are going to come from the developing countries in the remainder of the century, you're effectively telling them, hey, you have to massively, like 80, 90% cut your emissions against what they were projected to be.

Speaker 23 And that's like asking the people who are generally poor and are generally facing challenges that we don't have to face in wealthy countries to like buy more expensive energy and lead more impoverished lives.

Speaker 23 And I'm deeply uncomfortable with that, but I think that's an unexamined part of some of these global goals.

Speaker 23 I don't think the people saying it are like, hey, I want to impoverish billions of people around the planet. But I I think it's kind of lazy not to see that thinking all the way through.

Speaker 23 Yeah, especially in a world in which the richer countries have showed a real reluctance to pay, to make the transfers, right?

Speaker 23 Because the other way to solve it is to make enormous transfers, but pretty clear it's never going to happen. A hundred percent.

Speaker 23 If we cared so much, like you know this well, in economics, we have something called stated preference that says that I care about something and I want to do something in a hypothetical way and reveal preference, how much people are willing to pay for it.

Speaker 23 I'm not that interested in state of preference. I want to know how much you're willing to pay.
And to me, that's the ultimate metric of how much you care, not

Speaker 23 your virtue signaling or you think that the world should be a better place. No, what are you going to do to make the world a better place?

Speaker 23 You're listening to People I Mostly Admire? I'm Steve Levitt. And when we return from this short break, I'll tell Michael Greenstone why I think his career just might be on a downward trajectory.

Speaker 23 My age, I live with it every day.

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Speaker 23 I've known Michael Greenstone for a long time, and as you've heard over this conversation, he's an economist through and through.

Speaker 23 Fittingly, he holds the Milton Friedman chair in the University of Chicago Department of Economics.

Speaker 23 Now, Milton Friedman was a champion of free markets, and his theories fundamentally influenced the direction of our economics department for decades.

Speaker 23 But Michael's grandma was a UFC professor in psychology, and his dad was a UFC professor in political science.

Speaker 23 I can tell you, historically, The psychology and political science departments have been very adversarial towards University of Chicago economists.

Speaker 23 So I asked Michael whether Chicago economists were demonized around the dinner table when he was a kid. Oh, they were.

Speaker 23 My mom, and I only found this out recently, my mom, when she was a kid, evidently stood outside Milton Friedman's house and chanted one day after school, chanted bad man, bad man, bad man.

Speaker 23 Yeah, I would say economists and the Chicago economists were not held in the highest esteem where I grew up. But what I took from all of that was

Speaker 23 I had this dad who was like super interested in understanding the world through the lens of political science. I had this mom who was completely interested in social justice.

Speaker 23 And my dad was probably totally fine if

Speaker 23 his work ended up being a conversation between him and 10 other people.

Speaker 23 And my mom was totally fine with trying to do something good for the world and maybe not always asking like, what are the consequences?

Speaker 23 And then I had this looming Holocaust surviving grandmother who was like the toughest person I've probably ever met and gave me a C when I proudly showed her a paper that I got an A on in third grade, who was always like, you can work harder, you can be better.

Speaker 23 And so like I came to some jumbled mess of stuff.

Speaker 23 And like economics strangely came out of that blender. And in particular, using economics both to understand the world better and to try and make it a little little bit better.

Speaker 23 In the modern world, being the Milton Friedman professor of economics is a mixed bag.

Speaker 23 What was your reaction when the department chair came to you and said that they wanted to give you that title? So the department chair had told me, hey, come, we're going to give you a chair.

Speaker 23 Don't worry about it. But the university imposed a deadline on me.
And so I was like, okay, fine. I'm coming.
I'm excited to come. We'll deal with the chair later.

Speaker 23 Then like six months later, but two months before I showed up, the department chair called and he goes, Michael, this is John List, who is your friend as well.

Speaker 23 And I had been friends with John List for two decades at that point. He goes, Michael, we have the greatest news for you.

Speaker 23 He goes, you're going to be the Milton Friedman chair in the New York Chicago Department of Economics. And like my heart stopped.
I just sat there in silence.

Speaker 23 And I was like, okay, there's a left or right in front of me here. And

Speaker 23 I thought about my parents, neither of whom were alive. I thought about my grandmother.
I was like, they're going to turn over in their grave. And

Speaker 23 I said, John, that's wonderful news. I can't wait to start.

Speaker 23 I will say having that title, which is not something I'd ever planned on or bargained on, it has benefits, particularly when I talk about things that might run counter to what people think, particularly when you talk about environmental questions.

Speaker 23 I think people think, oh, Milton Friedman didn't care about that at all.

Speaker 23 And of course, by the way, Milton Friedman understood very well and articulate this very well that pollution is an externality and that there's an obvious solution for that, which is to tax it.

Speaker 23 I'm only a couple of years older than you, and it's been really interesting for me watching your career trajectory and how it contrasts with my own.

Speaker 23 Because being totally blunt, my own interest in academics has been steadily waning going back at least 15 years and probably longer.

Speaker 23 I really just lost the magic that I once felt about academics pretty early in life. But you, on the other hand, I feel like your work just keeps getting better and better.

Speaker 23 It's like you've got your hands on these incredibly important problems that are actually

Speaker 23 really fundamental in helping chart the path of humanity. You've got this talent for...

Speaker 23 imagining and leading these huge projects. Does it feel to you like your most important work is still ahead of you? So you're being very kind.

Speaker 23 I think I would not be where I am today if you not thinking there was some potential when I was on the junior job market, which I don't really know what you saw, but I was happy that I had fooled you.

Speaker 23 I think I've been like desperately searching for some way to meet these two goals of improving understanding about the world.

Speaker 23 It drives me bananas, the possibility that I would have some idea about the world and it would be wrong and I would suggest it.

Speaker 23 And so like I'm desperate to find out what the truth is, at least as best as I can understand it. And then marrying that with some way to try and make the world a little bit better.

Speaker 23 I think there's probably some truth in what you're saying and that I've found my way to that. And now I feel like I have a vision for what I am trying to do.
I have things that.

Speaker 23 I'm as excited about as I've ever been with respect to research and with respect to the possibility to interact with the real world. And I don't want to stop.
I wake up up in the morning.

Speaker 23 I'm super excited to come to work. I fully believe that.
And I think great things are ahead of you.

Speaker 23 But can I say there's one piece of evidence that suggests that you're actually on the way down, that you're has been. You know what it is? My age.
I live with it every day. No, starting a podcast.

Speaker 23 Oh, yeah. Because as far as I can tell, the only people who start podcasts, me being a great example, are people who are past their prime.
And you've just started this awesome podcast called Shocked.

Speaker 23 And I really enjoy it. But I'm surprised with everything else you have on the table that you would add podcasting to it.
It's an experiment. I hope it's not a sign that I'm on the way down.

Speaker 23 I have to say, Steve, it's something I think about all the time. The age chart isn't very good.
I'm 56. That is not usually peak years for economists.

Speaker 23 And I'm desperate to get above the regression line and stay above the regression line.

Speaker 23 And I've told myself if I stop being productive as an economist, that I will quit academia and I will just do something else.

Speaker 23 In fact, I've always admired your bravery and fearlessness with respect to research and with respect to the things you've tried in your life. And it's a good model.

Speaker 23 If I feel like I am not making an important contribution, then I have vowed to myself that I will find something else to do. Maybe I'm like trying it out with podcasting.

Speaker 23 Yeah, no shock really is an excellent podcast.

Speaker 23 And I will say, truthfully, as I look back on five years of podcasting, the class of people who have been least effective in communicating their work have been economists.

Speaker 23 Obviously, they're big exceptions.

Speaker 23 And so, I think what you're doing with the podcast and with AQLI and the emissions market, all of that is a really effective form of taking economics out of the ivy tower and making it work.

Speaker 23 And I think you're doing a really good job of it. Thank you.
I don't know if I ever told you this.

Speaker 23 When I showed up in the Obama administration, basically, I had wanted to find some way to interact with public policy since well before graduate school, but I was like, okay, I have to actually know something.

Speaker 23 And so I basically put my head down and did all the academic things, published in the journals, got promoted, stuff like that. I showed up in Washington in 2009 and I thought,

Speaker 23 holy smokes, Nancy Pelosi, John Boehner, Barack Obama, they're going to be throwing rose petals on my path because they've been dying for me to show up. They have learned all this stuff.

Speaker 23 It's got to be useful. The truth, of course, is that that was completely wrong.
And on my second day in government, someone tried to fire me. Wave, why? Wait, you got to tell me the story.
Okay.

Speaker 23 My first day in government, it's very hierarchical. And so I was effectively a deputy.
So there's a president, there's principals, and then there's deputies.

Speaker 23 And so we had a deputy meeting, first meeting after the election for the climate and energy people. And

Speaker 23 the person running it just went to the Obama for America website, downloaded all the things that Barack Obama had said on the campaign trail and said, okay, well, this is what we're going to do.

Speaker 23 Here's what the president said. And you can probably imagine this knowing me.
I was like, Whoa, whoa, whoa, wait.

Speaker 23 Are we sure we want to do all these? And which of the priorities? Some of these aren't good ideas at all.

Speaker 23 And the person running the meeting was so mad. And I'm sure I didn't do it in a good way.

Speaker 23 She was so angry that the next morning when I came to work, her boss and her were in my boss's office as I arrived and were like, Michael, you're fired. It's a true story.

Speaker 23 They didn't have any authority to fire me. And fortunately, we had a chief of staff, Karen Anderson, who's super smart.
And she was like, get out of here. You can't fire him.

Speaker 23 But I had a range of experience, maybe less traumatic than that one, where I came face to face with how horrible, really terrible I was at communicating ideas because I used all of our little cool language that we developed to talk to each other efficiently in economics.

Speaker 23 And the flip side of that was it was like giving everyone else the middle finger and it just wasn't going very well.

Speaker 23 And so that was a really seminal experience because I had this goal and desire to do something for the world. And here I was screwing it up left and right.

Speaker 23 And so throughout that year and then after government, I was like, I have to fix this. I have to do whatever it takes to fix it.

Speaker 23 The podcasting. I see it as part of what I'm trying to do, which is I don't want the ideas to get locked up inside academia and podcasting as is a way to try and get them out.

Speaker 23 If you're interested in diving deeper into Michael Greenstone's work, you can learn more about the Air Quality Life Index at the website aqli.epic.ushicago.edu.

Speaker 23 And his new podcast is called Shocked. You can find it wherever you get your podcasts.

Speaker 23 So this is the point in the show where I welcome on my producer, Morgan.

Speaker 26 Hi, Steve.

Speaker 26 So as you said in the episode with Michael Greenstone, you interviewed him for a Free Economics Radio episode back in 2019.

Speaker 26 It was for an episode called The Simple Economics of Saving the Amazon Rainforest, episode number 428.

Speaker 26 And in that episode, you explored an idea that high-income countries should pay Brazil to not deforest the Amazon.

Speaker 26 The Amazon is a huge carbon sink and incredibly valuable in protecting the planet's climate, yet Brazilians are cutting down trees every year for ranching.

Speaker 26 You proposed that if rich countries paid Brazil 10 billion a year, that would give them 10 times the economic benefit that ranching gives them and the Amazon would be protected.

Speaker 26 Now recently, there's been potentially a bit of progress on this front. It's through a program called the Tropical Forest Forever Facility, or TFFF, which does not roll off the tone.

Speaker 23 They really need a better acronym. Triple F.

Speaker 26 Yeah, can you tell listeners a bit about Triple F and whether it's a step in the right direction or just idealistic and not effectual?

Speaker 23 Okay, I will.

Speaker 23 First, I want to make clear that the $10 billion you talked about, Morgan, as you introduced the program I had in mind, sounds like a big number, but when you actually do the climate math behind it, the value of avoiding the deforestation that's happening every year in Brazil is worth at least $30 billion to the world as a whole.

Speaker 23 So it's really a bargain when it comes to conservation. It's one of the single best things we could do if we could convince Brazil and other countries to stop cutting down their forests.

Speaker 23 So as I understand the TFFF, Morgan, the plan is this.

Speaker 23 Every country that has rainforests, like Brazil, let's just talk about Brazil, will get paid $4

Speaker 23 per year per hectare of existing forest with one catch. For every hectare of forest they destroy in that year, the fund deducts $400 from the payment they get.

Speaker 23 And if you really destroy a whole lot of forest that year, then they deduct $800 per hectare destroyed. So it's a pretty clever design.

Speaker 23 It's the kind of design that economists will come up with because it makes the marginal incentives really, really strong relative to the average incentive.

Speaker 26 So what you're saying is the punishment is 100 times bigger than the stipend.

Speaker 23 Exactly. And that makes a lot of sense because if you think about the Brazilian rainforest, there's a lot of it in the middle that you know nobody's going to destroy for a long time.

Speaker 23 It's really on the edges where the destruction is happening. And so if you have a program that pays really generously for every hectare, it would be insanely expensive.

Speaker 23 So what they do is they pay just a little bit, $4 per hectare. And that's a very low price.
But on the margin, you get punished a lot for everything you destroy.

Speaker 23 And that's really where the countries are operating. Brazil, for instance, is destroying maybe 0.25 or 0.3% of the forest every year.
It's not like Brazil is cutting down 25% of the forest.

Speaker 23 And so you can really... focus the program on these little destructions around the edges.
And it's exactly the way an economist would want to set it up.

Speaker 26 What's the problem?

Speaker 23 Is there a problem? I think there is a problem. There's one I'm really worried about.
The program is expensive. And so I think they haven't gotten the prices high enough.
So it sounds like a lot.

Speaker 23 It's 100 times bigger, the punishment you pay per hectare you destroy. But $400 a hectare is still a pretty low price.

Speaker 23 The last time I checked, the price per hectare of land around the Amazon rainforest for ranching was about $1,000 per hectare. But here's the problem.

Speaker 23 If I'm the Brazilian government, I can cut down a hectare and sell it to the ranchers for $1,000,

Speaker 23 or I cannot cut it down and get $400 from this program. It's pretty obvious that if that's the way the destruction of the rainforest is going, then this program isn't going to work at all.

Speaker 23 It'll just be paying Brazil to do exactly what they're already doing.

Speaker 23 And that would be in many ways the worst possible program, a program that looks like it's really helping, that's really expensive and takes a lot of resources, but doesn't do any good.

Speaker 23 But I don't want to be totally negative on the program because actually i don't think what i just described is exactly what's happening in the rainforest it's not that literally the brazilian government is making some choice it's saying let's take a bunch of rainforest let's sell it to ranchers and let them burn it down and put cows on it what's really happening is well a lot of it's illegal activity around the edges and so It's worth $1,000 to the illegal ranchers, but that's not $1,000 that's going into the coffers of the Brazilian government.

Speaker 23 So it's possible that this number is big enough because the Brazilian government would say, wait, these illegal ranchers are cutting down the rainforest and it used to not really cost us anything.

Speaker 23 It was just a little less rainforest. But now they're saying, wait a second, every time they cut down a hectare, that takes 400 bucks out of our coffers.

Speaker 23 And so it may be that even though the price, $400, is less than the value of the land to the ranchers, it may be a high enough price for the Brazilian government to go send their military out there and say, hey, ranchers, you're not going to do this anymore.

Speaker 23 And if that's the case, then this would be an excellent program, an amazing program that I could really support.

Speaker 26 So if it were up to you, would you be increasing the punishment price?

Speaker 23 Absolutely. I would make the punishment price really high.
Why not make it $2,000 per hectare or $4,000 per hectare?

Speaker 23 Just make it such that people really don't want to cut down the forest because we really think it's a bad idea.

Speaker 23 If the punishments were higher, you could also make the base payments for the forest that doesn't get cut down.

Speaker 23 You could imagine making that higher too, because now, to the extent that some people are still being punished, you are saving a bunch of money through that punishment.

Speaker 23 That would then give you more money to put back into the kiddie for the people who aren't cutting down the rainforest.

Speaker 26 Listeners, if you have a question for Steve Levitt or a problem that could use an economic solution, send us an email. Our email address is pima at freakonomics.com.

Speaker 26 That's p-im-m-a at freakonomics.com. We do read every email that's sent, and we look forward to reading yours.

Speaker 23 In two weeks, we're back with a brand new episode featuring Michael Crowe. He's the president of Arizona State University, which U.S.

Speaker 23 News and World Report has named the most innovative university of America, not once, not twice, but for 11 straight years.

Speaker 23 As always, thanks for listening, and we'll see you back soon.

Speaker 24 People I Mostly Admire is part of the Freconomics Radio Network, which also includes Freakonomics Radio and the Economics of Everyday Things. All our shows are produced by Stitcher and Renbud Radio.

Speaker 24 This episode was produced by Morgan Levy and mixed by Jasmine Klinger. We had research assistance from Daniel Moritz-Rabson.
Our theme music was composed by Luis Guerra.

Speaker 24 We can be reached at Pima at freakonomics.com. That's P-I-M-A at freakonomics.com.
Thanks for listening.

Speaker 23 I just find it useless. That's probably too strong.
Let me reel that back.

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