The Obama Administration this week actually did something we agree with; it approved the first of several necessary permits for Shell to drill some new oil wells in the Arctic, off the coast of Alaska.
Shell has proposed drilling up to six wells within the Burger Prospect in the Chukchi Sea, about 70 miles northwest of the Eskimo village of Wainwright. The Interior Department ordered a halt to a previous drilling plan after it ran into safety problems.
But on Monday, the Interior Department determined that a revised plan “would not cause any significant impacts” to human populations, the environment, historical places or endangered species.
The decision to grant the permit has thrown environmentalists into a tizzy. Bill McKibben, who teaches environmental agitprop at Middlebury College, expressed his frustration at nytimes.com.
The Obama administration’s decision to give Shell Oil the go-ahead to drill in the Arctic shows why we may never win the fight against climate change. Even in this most extreme circumstance, no one seems able to stand up to the power of the fossil fuel industry. No one ever says no.
McKibben is correct that this victory for Shell is attributable to their political clout. And political clout involves the ability to deliver to politicians either money or votes. Shell wouldn’t seem to be able to control many people’s votes, so the source of Shell’s power must be money. By hiring lobbyists and contributing to political action committees and other pressure groups, Shell can use money to influence government policy in its favor.
This sort of influence of money on politics is what people often describe as money ‘corrupting’ politics. The idea is that without the influence of money, politicians and regulators would be free to objectively set policies that best serve the public interest. Or, in a more populist version of the theory, without money in politics, the policies enacted would more faithfully represent the will of the people. In this view, special interest money is corrupting, so the way to get better policies and governance is to remove or limit the role of money in politics. This is the argument for enacting legal restrictions on money in politics, such as so-called campaign finance ‘reform.’
The history of campaign finance laws, however, shows that removing money from politics is easier said than done. People will find ways to circumvent the laws, often with unintended and undesirable consequences. Trying to insulate politics from money is like trying to bind jello with a rubber band.
But leaving aside the practical and legal difficulties, would removing money from politics really be a good thing? Does money influence policy for the worse, or for the better?
Consider the case in question–Arctic oil drilling. In this case, it’s quite possible that the political market produced the efficient outcome. Allowing drilling is efficient if drilling produces more value than not drilling (leaving the sites untouched.) Shell was willing and able to devote resources to influencing the political market precisely because Shell expects to make money by drilling. And they expect to make money by drilling because drilling creates value.
The environmentalists also spend money on politics, and they’re willing to do so because they derive value from the opposite policy–not drilling. But in this case, the environmentalists couldn’t match Shell’s clout. Why? Perhaps because they don’t value not-drilling as much as Shell values drilling. In other words, because drilling creates more value than not drilling.
At least to some degree, the influence of money in politics makes the political system operate like a market. And markets are efficient. It follows that selling policies to the highest bidder, which most people call ‘corruption’, would generally improve efficiency.
The logic of the argument, applied to Arctic drilling, goes like this.
=> Drilling creates more value than not drilling (so drilling is the desirable policy) => Since drilling creates more value than not drilling, there’s more money available from drilling => Shell values drilling more than the environmentalists value not drilling => Shell is willing and able to spend more on influencing the political system to approve drilling than environmentalists are willing and able to spend to stop it => the greater resources on the pro-drilling side influence the political system to approve drilling => we get the efficient outcome.
The interesting thing is that, in an efficient political market, the politicians and bureaucrats who make the decisions don’t even have to know anything about the costs and benefits of the policy. All they need to know to make the efficient choice is to side with whichever party spends the most money!
Remove money, however, and the political decision makers would find themselves adrift at sea. We want the politicians and regulators to choose the efficient policy, but how would they know which policy, drilling or not drilling is efficient? To determine which policy creates the most value, the political decision makers would need to have an awful lot of information that would be difficult or impossible for them to obtain. Moreover, the policymakers would have little or no incentive to try very hard to obtain that information. And lacking the relevant information, the decision makers might easily be swayed by misinformation and political propaganda.
This same lack of relevant information would also undermine the results of direct democracy. For instance, suppose we held a plebiscite that asked the American public to vote directly on the question of whether Shell should be permitted to drill in the Arctic. In this case, the overwhelming majority of voters would possess neither the information nor the expertise necessary to evaluate the costs and benefits of drilling. Furthermore, a great many voters would be swayed by appeals based on emotion rather than logic. As a result, direct democracy would not reliably attain the efficient outcome.
Our argument leads to a startlingly counter-intuitive conclusion: opacity and special interest money can lead to better policies than can considered judgment based on transparency and open debate, untainted by money.
We don’t know the details of how, exactly, Shell went about winning over Obama’s Interior Department. That process was relatively opaque, and probably involved activities that Shell and their interlocutors in government would not brag about to their grandchildren. But that process, opaque and perhaps even somewhat sleazy, probably made the right choice on drilling.
In contrast, a freewheeling debate on drilling would likely offer up an object lesson on the limits of knowledge and human reason. For debate alone, without the influence of money, to settle on the efficient choice would require a considerable element of luck.
Opacity and influence peddling–good. Transparency, debate, and considered judgment–bad. The world doesn’t work the way most people naively think it does.