Super Freakonomics Part 19

So while the true believers bemoan the desecration of our earthly Eden, the heretics point out that this Eden, long before humans arrived, once became so naturally thick with methane smog that it was rendered nearly lifeless. When Al Gore urges the citizenry to sacrifice their plastic shopping bags, their air-conditioning, their extraneous travel, the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay.

Once you strip away the religious fervor and scientific complexity, an incredibly simple dilemma lies at the heart of global warming. Economists fondly call it an externality.

What's an externality? It's what happens when someone takes an action but someone else, without agreeing, pays some or all the costs of that action. An externality is an economic version of taxation without representation.

If you happen to live downwind from a fertilizer factory, the ammonium stench is an externality. When your neighbors throw a big party (and don't have the courtesy to invite you), their ruckus is an externality. Secondhand cigarette smoke is an externality, as is the stray gunshot one drug dealer meant for another that instead hit a child on the playground.

The greenhouse gases thought to be responsible for global warming are primarily externalities. When you have a bonfire in your backyard, you're not just toasting marshmallows. You're also emitting gases that, in a tiny way, help to heat the whole planet. Every time you get behind the wheel of a car, or eat a hamburger, or fly in an airplane, you are generating some by-products you're not paying for.

Imagine a fellow named Jack who lives in a lovely house-he built it himself-and comes home from work on the first warm day of summer. All he wants is to relax and cool off. So he cranks the air conditioner all the way up. Maybe he thinks for a moment about the extra dollar or two he'll pay on his next electricity bill, but the cost isn't enough to deter him.

What he doesn't think about is the black smoke from the power plant that burns the coal that heats the water that turns to steam that fills the turbine that spins the generator that makes the power that cools the house that Jack built.

Nor will he think about the environmental costs a.s.sociated with mining and trucking away that coal, or the a.s.sociated dangers. In the United States alone, more than 100,000 coal miners died on the job over the past century, with another estimated 200,000 dying later from black lung disease. Now those are externalities. Thankfully, coalmining deaths have plummeted in the United States, to a current average of about 36 per year. But if Jack happened to live in China, the local death externality would be much steeper: at least 3,000 Chinese coal miners die on the job each year.

It's hard to blame Jack for not thinking about externalities. Modern technology is so proficient that it often masks the costs a.s.sociated with our consumption. There's nothing visibly dirty about the electricity that feeds Jack's air conditioner. It just magically appears, as if out of a fairy tale.

If there were only a few Jacks in the world, or even a few million, no one would care. But as the global population hurtles toward 7 billion, all those externalities add up. So who should be paying for them?

In principle, this shouldn't be such a hard problem. If we knew how much it cost humankind every time someone used a tank of gas, we could simply levy a tax of that magnitude on the driver. The tax wouldn't necessarily convince him to cancel his trip, nor should it. The point of the tax is to make sure the driver faces the full costs of his actions (or, in economist-speak, to internalize the externality).

The revenues raised from these taxes could then be spread out across the folks who suffer the effects of a changing climate-people living in Banglades.h.i.+ lowlands, for instance, who will be flooded if the oceans rise precipitously. If we chose exactly the right tax, the revenues could properly compensate the victims of climate change.

But when it comes to actually solving climate-change externalities through taxes, all we can say is good luck. Besides the obvious obstacles-like determining the right size of the tax and getting someone to collect it-there's the fact that greenhouse gases do not adhere to national boundaries. The earth's atmosphere is in constant, complex motion, which means that your emissions become mine and mine yours. Thus, global warming.

If, say, Australia decided overnight to eliminate its carbon emissions, that fine nation wouldn't enjoy the benefits of its costly and painful behavior unless everyone else joined in. Nor does one nation have the right to tell another what to do. The United States has in recent years sporadically attempted to lower its emissions. But when it leans on China or India to do the same, those countries can hardly be blamed for saying, Hey, you got to free-ride your way to industrial superpowerdom, so why shouldn't we?

When people aren't compelled to pay the full cost of their actions, they have little incentive to change their behavior. Back when the world's big cities were choked with horse manure, people didn't switch to the car because it was good for society; they switched because it was in their economic interest to do so. Today, people are being asked to change their behavior not out of self-interest but rather out of selflessness. This might make global warming seem like a hopeless problem unless-and this is what Al Gore is banking on-people are willing to put aside their self-interest and do the right thing even if it's personally costly. Gore is appealing to our altruistic selves, our externality-hating better angels.

Keep in mind that externalities aren't always as obvious as they seem.

To keep their cars from being stolen off the street, a lot of people lock the steering wheel with an anti-theft device like the Club. The Club is big and highly visible (it even comes in neon pink). By using a Club, you are explicitly telling a potential thief that your car will be hard to steal. The implicit signal, meanwhile, is that your neighbor's car-the one without a Club-is a much better target. So your Club produces a negative externality for your non-Club-using neighbor in the form of a higher risk that his car will be stolen. The Club is a perfect exercise in self-interest.

A device called LoJack, meanwhile, is in many ways the opposite of the Club. It is a small radio transmitter, not much larger than a deck of cards, hidden somewhere in or beneath the car where a thief can't see it. But if the car is stolen, the police can remotely activate the transmitter and follow its signal straight to the car.

Unlike the Club, LoJack doesn't stop a thief from stealing your car. So why bother installing it?

For one, it helps you recover the car, and fast. When it comes to auto theft, fast is important. Once your car has been missing more than a few days, you generally don't want it back, because it likely will have been stripped. Even if you don't want your car to be found, your insurance company does. So a second reason to install LoJack is that insurers will discount your premium. But perhaps the best reason is that LoJack actually makes it fun to have your car stolen.

There's a certain thrill to tracking a LoJack-equipped car, as if the hounds have just been released. The police spring into action, follow the radio signal, and nab the car thief before he knows what's happening. If you're lucky, he may even have filled up the gas tank for you.

Most stolen cars end up in chop shops, clandestine mini-factories that remove the car's most valuable parts and sc.r.a.p the remains. The police have a hard time rooting out these operations-until, that is, LoJack comes around. Now the police simply follow the radio signal and, often, find the chop shop.

The people who run chop shops aren't stupid, of course. Once they realize what's happening, they change their procedure. The thief, rather than driving the car straight to the shop, will leave it in a parking lot for a few days. If the car is gone when he returns, he knows it had LoJack. If not, he a.s.sumes it's safe to deliver it to the chop shop.

But the police aren't stupid either. When they find a stolen car in a parking lot, they may choose not to reclaim it right away. Instead, they watch the vehicle until the thief returns and let him lead them to the chop shop.

Just how difficult has LoJack made life for auto thieves?

For every additional percentage point of cars that have LoJack in a given city, overall thefts fall by as much as 20 percent. Since a thief can't tell which cars have LoJack, he's less willing to take a chance on any car. LoJack is relatively expensive, about $700, which means it isn't all that popular, installed in fewer than 2 percent of new cars. Even so, those cars create a rare and wonderful thing-a positive externality-for all the drivers who are too cheap to buy LoJack, because it protects their cars too.

That's right: not all externalities are negative. Good public schools create positive externalities because we all benefit from a society of well-educated people. (They also drive up property values.) Fruit farmers and beekeepers create positive externalities for each other: the trees provide free pollen for the bees and the bees pollinate the fruit trees, also at no charge. That's why beekeepers and fruit farmers often set up shop next to each other.

One of the unlikeliest positive externalities on record came cloaked in a natural disaster.

In 1991, an eroded, wooded mountain on the Philippine island of Luzon began to rumble and spew sulfuric ash. It turned out that beloved old Mount Pinatubo was a dormant volcano. The nearby farmers and townspeople were reluctant to evacuate, but the geologists, seismologists, and volcanologists who rushed in ultimately persuaded most of them to leave.

Good thing, too: on June 15, Pinatubo erupted for nine furious hours. The explosions were so ma.s.sive that the top of the mountain caved in on itself, forming what is known as a caldera, a huge bowl-shaped crater, its new peak 850 feet lower than the original mountaintop. Worse yet, the region was simultaneously being lashed by a typhoon. According to one account, the sky poured down "heavy rain and ash with pumice lumps the size of golf b.a.l.l.s." Around 250 people died, mainly from collapsed roofs, and more died in the following days from mudslides. Still, thanks to the scientists' warnings, the death toll was relatively small.

Mount Pinatubo was the most powerful volcanic eruption in nearly one hundred years. Within two hours of the main blast, sulfuric ash had reached twenty-two miles into the sky. By the time it was done, Pinatubo had discharged more than 20 million tons of sulfur dioxide into the stratosphere. What effect did that have on the environment?

As it turned out, the stratospheric haze of sulfur dioxide acted like a layer of sunscreen, reducing the amount of solar radiation reaching the earth. For the next two years, as the haze was settling out, the earth cooled off by an average of nearly 1 degree Fahrenheit, or .5 degrees Celsius. A single volcanic eruption practically reversed, albeit temporarily, the c.u.mulative global warming of the previous hundred years.

Pinatubo created some other positive externalities too. Forests around the world grew more vigorously because trees prefer their sunlight a bit diffused. And all that sulfur dioxide in the stratosphere created some of the prettiest sunsets that people had ever seen.

Of course it was the global cooling that got scientists' attention. A paper in Science concluded that a Pinatubo-size eruption every few years would "offset much of the anthropogenic warming expected over the next century."

Even James Lovelock conceded the point: "[W]e might be saved," he wrote, "by an unexpected event such as a series of volcanic eruptions severe enough to block out sunlight and so cool the Earth. But only losers would bet their lives on such poor odds."

True, it probably would take a loser, or at least a fool, to believe a volcano could be persuaded to spew its protective effluvia into the sky at the proper intervals. But what if some foolish people thought Pinatubo could perhaps serve as a blueprint to stop global warming? The same sort of fools who, for instance, once believed that women didn't have to die in childbirth, that worldwide famine was not foreordained? While they're at it, could they also make their solution cheap and simple?

And if so, where might such fools be found?

In a nondescript section of Bellevue, Was.h.i.+ngton, a suburb of Seattle, lies a particularly nondescript series of buildings. There's a heating-and-air-conditioning company, a boat maker, a shop that fabricates marble tiles, and another building that used to be a Harley-Davidson repair shop. This last one is a windowless, charmless structure of about twenty thousand square feet whose occupant is identified only by a sheet of paper taped to the gla.s.s door. It reads "Intellectual Ventures."

Inside is one of the most unusual laboratories in the world. There are lathes and mold makers and 3D printers and many powerful computers, of course, but there is also an insectary where mosquitoes are bred so they can be placed in an empty fish tank and, from more than a hundred feet away, a.s.sa.s.sinated by a laser. This experiment is designed to thwart malaria. The disease is spread only by certain species of female mosquito, so the laser's tracking system identifies the females by wing-beat frequency-they flap more slowly than males because they are heavier-and zaps them.

Intellectual Ventures is an invention company. The lab, in addition to all the gear, is stocked with an elite a.s.semblage of brainpower, scientists and puzzle-solvers of every variety. They dream up processes and products and then file patent applications, more than five hundred a year. The company also acquires patents from outside inventors, ranging from Fortune 500 companies to solo geniuses toiling in bas.e.m.e.nts. IV operates much like a private-equity firm, raising investment capital and paying returns when its patents are licensed. The company currently controls more than twenty thousand patents, more than all but a few dozen companies in the world. This has led to some grumbling that IV is a "patent troll," acc.u.mulating patents so it can extort money from other companies, via lawsuit if necessary. But there is little hard evidence for such claims. A more realistic a.s.sessment is that IV has created the first ma.s.s market for intellectual property.

Its ringleader is a gregarious man named Nathan, the same Nathan we met earlier, the one who hopes to enfeeble hurricanes by seeding the ocean with skirted truck tires. Yes, that apparatus is an IV invention. Internally it is known as the Salter Sink because it sinks warm surface water and was originally developed by Stephen Salter, a renowned British engineer who has been working for decades to harness the power of ocean waves.

By now it should be apparent that Nathan isn't just some weekend inventor. He is Nathan Myhrvold, the former chief technology officer at Microsoft. He co-founded IV in 2000 with Edward Jung, a biophysicist who was Microsoft's chief software architect. Myhrvold played a variety of roles at Microsoft: futurist, strategist, founder of its research lab, and whisperer-in-chief to Bill Gates. "I don't know anyone I would say is smarter than Nathan," Gates once observed.

Myhrvold, who is fifty years old, has been smart for a long time. Growing up in Seattle, he graduated from high school at fourteen and by the time he was twenty-three had earned, primarily at UCLA and Princeton, a bachelor's degree (mathematics), two master's degrees (geophysics/s.p.a.ce physics and mathematical economics), and a Ph.D. (mathematical physics). He then went to Cambridge University to do quantum cosmology research with Stephen Hawking.

Myhrvold recalls watching the British science-fiction TV show Dr. Who when he was young: "The Doctor introduces himself to someone, who says, 'Doctor? Are you some kind of scientist?' And he says, 'Sir, I am every kind of scientist.' And I was, like, Yes! Yes! That is what I want to be: every kind of scientist!"

He is so polymathic as to make an everyday polymath tremble with shame. In addition to his scientific interests, he is an accomplished nature photographer, chef, mountain climber, and a collector of rare books, rocket engines, antique scientific instruments, and, especially, dinosaur bones: he is co-leader of a project that has dug up more T. rex skeletons than anyone else in the world. He is also-and this is hardly unrelated to his hobbies-very wealthy. In 1999, when he left Microsoft, he appeared on the Forbes list of the four hundred richest Americans.

At the same time-and this is how Myhrvold has managed to stay wealthy-he is famously cheap. As he walks through the IV lab pointing out his favorite tools and gadgets, his greatest pride is reserved for the items he bought on eBay or at bankruptcy sales. Though Myhrvold understands complexity as well as anyone, he is a firm believer that solutions should be cheap and simple whenever possible.

He and his compatriots are currently working on, among other projects: a better internal combustion engine; a way to reduce an airplane's "skin drag" and thus increase its fuel efficiency; and a new kind of nuclear power plant that would radically improve the future of worldwide electricity production. Although many of their ideas are just that-ideas-some have already started saving lives. The company has invented a process whereby a neurosurgeon who is attempting to repair an aneurysm can send IV the patient's brain-scan data, which are fed into a 3D printer that produces a life-size plastic model of the aneurysm. The model is s.h.i.+pped overnight to the surgeon, who can make a detailed plan to attack the aneurysm before cutting through the patient's skull.