A (1:54)

I was just blown away that the impact of air pollution seemed so large. 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.

B (2:08)

Welcome to people I Mostly admire with Steve Levitt. Air pollution isn't a topic you typically associate with economists, but Michael Greenstone has spent his career investigating how it impacts human health 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. I started our discussion by asking Michael to explain what they are and why they cause problems in humans.

A (2:45)

So total suspended particulates. Already we're going to dive into a small segment of your audience here, Steve. 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 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. And the really small ones, which are sometimes called PM2.5 or PM1, they can get deep into your body. 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. But the small, smaller ones just create havoc in the body and have been shown over and over again to lead to premature mortality and variety of illnesses and sicknesses.

B (3:34)

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, oftentimes that's.

A (3:45)

Ozone that you can see. Sometimes it's particulates, depending where you are. It basically is conventional air pollution. I think half of all the benefits from all regulations in the federal government are from the reductions in particulate matter.

B (3:58)

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. 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. If you could have any data you wanted to answer this question about the health impact of tsps, what would it be?

A (4:22)

Okay, great. I love that question. 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. 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.

B (4:51)

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?

A (4:58)

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 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. And in the case of particulates, what we would really like to know is 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. 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.

B (5:34)

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. 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. It's what economists call a natural experiment as opposed to a randomized experiment, which is what your idealized thing was. And you and your co authors found a really awesome natural experiment. And as a result of a particular policy that was instituted in China. Can you explain?

A (6:19)

Yes. So let me just back up one step. I had long wanted these parallel planets and I couldn't make progress on that. And so what I settled on was looking at infants. 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. Did I smoke a cigarette today and did I die today? What you really want to know is like the cumulative exposure. 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.

B (6:53)

Life, the infant simplified the problem.

A (6:55)

They simplified the problem because now you.

B (6:57)

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.

A (7:05)

Exactly. But you can see that's like already a branch or two down from the ultimate question of lifetime exposure. And so I'd written papers like that and I was like, ah, these are kind of interesting. Made some progress here. But man, I am leaving the big question of what is the level of particulates that government should allow for lifetime exposure unanswered. And then one day my co authors and I stumbled upon this policy back when China was much less wealthy than they are today. 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. And so they did, from a research perspective, this incredibly awesome thing. They just pretty arbitrarily drew a line across the country, and they said, if you live north of this line, bingo, you are getting free winter heating. 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. And if you live south of the line, and the line was really this river called the Huai river, and if you live south of the river, you are not the winner. You get no winter heating. In fact, it's not allowed.

B (8:08)

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. 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, and everybody was wearing, like, 17 layers. The babies were so bundled up they could barely move. We were freezing. And this before I knew about your study. But as soon as I started studying, I'm like, oh, my God.

A (8:38)

I lived it for two days.

B (8:39)

I experienced exactly what you're talking about.

A (8:41)

Yes. Okay, so you're one of the rare people. 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, 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. You should have written the paper, Steve.

B (9:02)

I didn't have the vision you had.

A (9:04)

The idea of the paper was, hey, given the migration restriction and the difference in pollution that the winter heating policy costs, and 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.

B (9:21)

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. But if we see a big difference in life expectancies, the most logical thing to attribute it to is, is the extra pollution that's in the north.

A (9:42)

Exactly. And so the whole paper is basically two graphs. One is, do you see a jump in pollution concentrations just as you move north of the river?

B (9:53)

Okay.

A (9:54)

And do you, you see a 40% increase in pollution just as you cross the river? 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.

B (10:05)

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

A (10:21)

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 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. 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 is maybe 7 or 8 micrograms per cubic meter. And the WHO standard is probably right around there, maybe 10 micrograms per cubic meter.

B (10:58)

Okay, so pollution with squares. But honestly, how much could that really affect life expectancy? I remember when I first heard the 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. It was an absolutely shocking finding. Did it surprise you also?

A (11:26)

Yes, I was very surprised in the first paper. I wrote two papers on this and the first paper was about five years. And then I would have Chinese students come to my office at the University of Chicago and be like, you're the Huai river guy. My parents say, I'm going to live five years fewer. 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. And what's really interesting, I like tortured that data. I looked for a jump at any other degree latitude. So 1 degree south, 2 degrees south, 3 degrees south, 4 degrees south, et cetera. 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. And it was all happening in causes of death that are cardiorespiratory, that are plausibly related to pollution.

B (12:13)

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. But literally the deaths pile up exactly on the causes that science tells us it should be. It's a really compelling paper and 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. And then when you go to the data, it's actually tiny. But this is the opposite. Do you remember what you expected?

A (12:45)

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

B (13:06)

And by that you mean air pollution, not climate change, air pollution. In essence, you change your focus away from a broad view of climate change towards here's this man made problem. We have the solutions right in front of us and yet people are dying. 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 bigger. What's the worst place in the world to be right now? Delhi or something like that? Yeah.

A (13:37)

India and Pakistan are probably near the top of the list. 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. 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.

B (13:58)

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

A (14:14)

Yep.

B (14:14)

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?

A (14:22)

I haven't been able to make progress on that. It's a great question. 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. The US Embassy started reporting pollution concentrations in Beijing. The Chinese government was under some pressure from people there. 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. 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. 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.

B (15:21)

We'll be right back with more of my conversation with economist Michael Greenstone after this short break. People I mostly admire is sponsored by El Mayor Tequila. Here's the deal. El Mayor is made with just three ingredients, 100% blue Weber agave water and heirloom yeast. That's it. No gimmicks, no extras, just tequila made the right way with an award winning difference. You can taste what's even better. You get extraordinary quality, often at half the price of other premium tequilas. You keep it stocked and share it proudly because it's clean, smooth and always worth the pour. Think of it as your house tequila. El Mayor has been handcrafted for four generations and and today is led by Grace Gonzalez, the first female master distiller in her family. Her latest release, El Mayor Cafe Reposado, takes that same clean tequila and rests it in coffee seasoned bourbon barrels, adding subtle roasted coffee notes to the smooth agave character. It's amazing in espresso martinis and perfect for this time of year. Discover more@el mayor.com and find El Mayor Tequila at a retailer near you. Please enjoy responsibly. Jbl wireless earbuds are packed with innovation. Touchscreen, smart charging case for one touch control, instant EQ customization, true adaptive noise cancellation and a one of a kind audio transmitter to plug and play from almost any source. Plus spatial 360 sound on anything.

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B (17:31)

Volkswagen deal days claim based on US market MSRP information available at time of publication for 2025 and 2026 German engineered vehicles. So you just talked about how this study you did may have had an impact on China's policy. 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. And I don't believe individual economists incentives in our profession reward publications. It doesn't do much or anything for one's career to actually get your ideas implemented. 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?

A (18:42)

Sure. So the idea of the Air Quality Air Quality Life Index comes from your question, which is what was I expecting the answer to be? A basic tenant 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. And I was like, I don't think people know this. 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. 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. And so it tells you how life expectancy could be extended if where you live meets some standard. And you can set it as a web tool, you can set it for the WHO standard, you can set up 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. But the idea was maybe if people had better information they could lobby or in some other way, advocate for improved air quality.

B (19:48)

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

A (20:03)

Okay, you're just like waving the red flag at me here, Steve. 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, 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, but it is not providing much meat on the bone in terms of what would be the benefits of large scale long term reductions.

B (20:32)

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. 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. 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. It's called the Emissions Market Accelerator. 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. Could you describe the pilot study you did working with coal burning plants in the city of Surat in India? What were they doing before you got involved? And how did your program change things?

A (21:52)

Okay, 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.

B (22:01)

Okay, good.

A (22:02)

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. 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. 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 US economy and do that in a very efficient way by allowing polluters to trade amongst themselves to find the least cost way to do it. 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. 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. And the Michael plant is clunky and old and doesn't really know what they're doing.

B (23:03)

But the regulator doesn't know much about Michael or Steve so they're in no position to really step in.

A (23:08)

Exactly. 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. 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 and then I'm going to let them work out through trading how to reach that lower standard together. 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. 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.

B (23:48)

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.

A (23:58)

For you, then we'll trade money.

B (24:01)

Yeah. 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. 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. And that's how we get a lot of pollution reduction.

A (24:22)

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. And I worked on it diligently and then about a year in it became apparent that the efforts had passed the House. But we're going to die in the Senate. And so I laughed and I was kind of bummed. 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. 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. And he was going to leave it at that. And I said, whoa, hey, that is like the foundation of doing a cap and trade market. 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, 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 EU and places like that. 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 Surat. And this was done with my close colleagues and collaborators, Rohini Pandey, Nick Ryan and Anant Sudarshan. And 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 and a half of them went into this new pollution market that we had designed with them with the Good Drop Pollution Control Board. And a half continued to be regulated in the standard way.

B (26:09)

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?

A (26:20)

Yes. It felt like the cat's meow.

B (26:24)

And I can't believe they did this, because I've had some success where I talk 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 they say, yeah, that sounds great, 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. If anything goes wrong, it's the end of their career. I can't believe you pushed this there completely.

A (26:59)

Like, we went through several heads of the Good Rock Pollution Control Board, and I fast forwarded past probably the six years of monkeying around between the initial idea and the launch of the market. And it required incredible bravery from them. I think this kind of gets to your point. The way that cap and trade markets work is at the end of a period, a year or a couple months, you know what, every firm is polluted, 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. 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. 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? I'm going to have to certainly call my boss about this. And I said, we've been working on this for six years. 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. 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. And every other period, people held the right number of permits. It was just amazing.

B (28:21)

That's awesome. So what did you find? Did it work?

A (28:24)

Oh, it was better than we'd hoped. So, first of all, in the control group, the standard version of regulation, like, at any point in time, a third of the plants were out of compliance with the law 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. The second thing we found, and we were not expecting this, is that emissions had gone down by 20 to 30% in the treatment group relative to the control group. Wow. And the reason we didn't expect that is we had tried to design it so that regulatory stringency was constant across the treatment of the control group. 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. 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%.

B (29:23)

So pollution's 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.

A (29:31)

I know such a rare victory for economists. 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. And so this was an exception to that.

B (29:49)

So in true Michael Greenspan 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. Now that is an ambitious goal. How's it going so far?

A (30:10)

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 Ahmedabad. 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, but I don't think we were interpreting the project in the way that it has been seen by the world. 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. It's not that the regulators in those countries don't know that there's such a thing as cap and trade markets. I just think they thought it was beyond. It was just like something that was true in Mars, not going to be helpful for what they were doing. 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.

B (31:16)

That's awesome.

A (31:16)

And so like, the state of Maharashtra will launch a sulfur dioxide market. 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. 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. And I just thought, this is what I want it to do with my life, which was at the intersection of improving understanding about the world and making. And sounds so horrible and corny, but like making the world a better place. And it just Felt like, okay, this thing landed here, I've got to run with it as hard as possible. And so we set up this emissions market accelerator, which, by the way, and I know you've done things like this, is not filled with researchers, 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.

B (32:26)

So I interviewed you back in 2019. 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, are you encouraged or discouraged by what's happened in terms of public policy?

A (32:50)

Well, maybe I won't quite answer that question. I'll answer a different question. Compared to 10 years ago, we're on a completely different path in terms of how much warming we're likely to unlock. We were on track for end of century increases in temperature where there was a pretty good probability of 4 or 5 degrees C increases. Those are so large that that's where the damages really start to get very, very painful. And instead we now seem to be on a path to maybe like 3 degrees C by the end of the century with very small chances of the 5, 6, 7, which is really where the pain was.

B (33:28)

And the change has come because global greenhouse gas emissions are flattening out and on a trend to go down. Is that the difference?

A (33:37)

Yeah. So the trajectory has completely changed. 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, and so that unlocked all kinds of knocking out of fossil fuels in various parts of the world.

B (33:52)

So the technology for solar and wind, we had victories there. 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. And so we're doing a lot more of the renewables.

A (34:10)

Exactly. And we had the fracking revolution, which has made very inexpensive natural gas and that has knocked coal out of the system in a lot of places. So we got lucky on a couple technologies.

B (34:21)

Interesting. I hadn't realized that natural gas was kind of a net win. I really thought fracking was part of the problem. But you're saying it's part of the solution?

A (34:30)

At least in the near term, it's part of the solution. It has half the carbon content of coal and most of the progress. Not all, but much of the progress that the US has made has just come from natural gas knocking coal out of the electricity generating system. It's really been an amazing transformation.

B (34:45)

Okay, great.

A (34:47)

So on the technology side we've done well. 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.

B (34:57)

What's a policy that's been good?

A (34:59)

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. 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. So there have been advances in policy and those have been important. 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. And then the third thing that we got lucky on, some climate scientists change their mind about something called the equilibrium climate sensitivity parameter. 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. 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. 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.

B (36:07)

So again, that's interesting. I don't think a lot of people have heard that. 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. 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. And that's not something I thought the climate scientists were excited about doing.

A (36:36)

I think it varies from climate scientist to climate scientist. 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 area of expertise. I don't know, it's. I think they have wandered into the economics of it. 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. 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.

B (37:16)

When I think about your research, it's very human focused. You tend to measure outcomes like expected life saved. But it's probably fair to say that many climate scientists are more focused on the planet than they are on humans. I wouldn't be surprised if many climate scientists probably secretly wish that there were many fewer humans out there ruining the planet. They might not be so excited about your policies that are saving lives and putting more people on the planet. Has that difference in views ever come up explicitly as you interact with climate scientists?

A (37:50)

Look, there's only three ways that we can affect total emissions and one of them is population. And if we had fewer humans and there would be fewer humans emitting and that would reduce the rate of climate change. I think if it's a third rail, I can't believe that people 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. 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 maybe my most distaste or uncomfort is 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. 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. 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 they were projected to be. 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. And I'm deeply uncomfortable with that. But I think that's an unexamined part of some of these global goals. I don't think the people saying it are like, hey, I want to impoverish billions of people around the planet, but I think it's kind of lazy not to see that thinking all the way through.

B (39:34)

Yeah, especially in a world in which the richer countries have showed a real reluctance to pay to make the transfers. Right? Because the other way to solve it is to make enormous transfers. But pretty clear it's never going to.

A (39:46)

Happen a hundred percent 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. 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 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?

B (40:18)

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.

A (40:30)

My age, I live with it every day.

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B (42:44)

I've known Michael Greenstone for a long time, and as you've heard over this conversation, he's an economist through and through. Fittingly, he holds the Milton Friedman Chair in the University of Chicago Department of Economics. Now, Milton Friedman was a champion of free markets, and his theories fundamentally influenced the direction of our economics department for decades. But Michael's grandma was a U. Of C. Professor in psychology, and his dad was a U. Of C. Professor in political science. I can tell you, historically, the psychology and political science departments have been very adversarial towards University of Chicago economists. So I asked Michael whether Chicago economists were demonized around the dinner table when he was a kid.

A (43:30)

Oh, they were. 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. 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 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. And my dad was probably totally fine if his work ended up being a conversation between him and 10 other people. 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? 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. And so, like, I came to some jumbled mess of stuff 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 bit better.

B (44:54)

In the modern world. Being the Milton Friedman professor of Economics is a mixed bag. What was your reaction when the department chair came to you and said that they wanted to give you that title.

A (45:07)

So the department chair had told me, hey, come, we're going to give you a chair. 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. Then, like six months later, about two months before I showed up, the department chair called and goes, michael, this is John List, who is your friend as well. And I'd been friends with John List for two decades at that point. He goes, michael, we have the greatest news for you. He goes, you're going to be the Milton Friedman Chair in the University of Chicago Department of Economics. And like, my heart stopped. I just sat there in silence and I was like, okay, there's a left or right in front of me here. And I thought about my parents. Neither of them were alive. I thought about my grandmother. I was like, they're going to turn over in their grave. And I said, john, that's wonderful news. I can't wait to start. 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. I think people think, oh, Milton Friedman didn't care about that at all. 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.

B (46:30)

I'm only a couple years older than you, and it's been really interesting for me watching your career trajectory and how it contrasts with my own, because, being totally blunt, my own interest in academics has been steadily waning going back at least 15 years and, and probably longer. I've 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. It's like you've got your hands on these incredibly important problems that are actually really fundamental in helping chart the path of humanity. You've got this talent for imagining and leading these huge projects. Does it feel to you like your most important work is still ahead of you?

A (47:23)

So you're being very kind. 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. I think I've been, like, desperately searching for some way to meet these two goals of improving understanding about the world. 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. And so 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. I think there's probably some truth in what you're saying in 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 I am 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 it to stop. I wake up in the morning, I'm super excited to come to work.

B (48:26)

I fully believe that, and I think great things are ahead of you. But can I say there's one piece of evidence that suggests that you're actually on the way down, that your has been. You know what?

A (48:38)

It is my age. I live with it every day.

B (48:40)

No starting a podcast. 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, and I really enjoy it. But I'm surprised with everything else you have on the table that you would add podcasting to it.

A (49:00)

It's an experiment. I hope it's not a sign that I'm on the way down. I have to say, Steve, it's something I think about all the. The age chart isn't very good. I'm 56. That is not usually peak years for economists. And I'm desperate to get above the regression line and stay above the regression line. 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. 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. If I feel like I am not making 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.

B (49:41)

Yeah, no, shock that. It really is an excellent podcast. 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. Obviously, they're big exceptions. 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 ivory tower and making it work. And I think you're doing a really good job of it.

A (50:13)

Thank you. I don't know if I ever told you this. 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. 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, holy smokes. Nancy Pelosi, John Boehner, Barack Obama, they're gonna be throwing rose petals on my path because they've been dying for me to show up. I've learned all this stuff. It's gotta be useful. The truth, of course, is that that was completely wrong. And on my second day in government, someone tried to fire me.

B (50:58)

Wait, why? Well, you gotta tell me the story.

A (51:00)

Okay. My first day in government, it's very hierarchical. And so I was effectively a deputy. So there's the president, there's principals, and then there's deputies. And so we had a deputy meeting. First meeting after the election for the climate and energy people. And 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. Here's what the president said. And you can probably imagine this knowing me, I was like, whoa, whoa, whoa, wait, Are we sure we want to do all these? And which of the priorities. Some of these aren't good ideas at all. And the person running the meeting was so mad, and I'm sure I didn't do it in a good way. 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 we're like, michael, you're fired.

B (51:55)

It's true story.

A (51:56)

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. 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. And the flip side of that was it was like giving everyone else the middle finger, and it just wasn't going very well. 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. 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. 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 is a way to try and get them out.

B (52:57)

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 uchicago.edu. and his new podcast is called Shocked. You can find it wherever you get your podcasts. So this is the point in the show where I welcome on my producer, Morgan. Hi, Steve. So as you said in the episode.

A (53:28)

With Michael Greenstone, you interviewed him for.

B (53:31)

A Freakonomics Radio episode back in 2019. It was for an episode called the Simple Economics of Saving the Amazon Rainforest, episode number 428. And in that episode you explored an idea that high income countries should pay Brazil to not deforest the Amazon. The Amazon is a huge carbon sink.

A (53:53)

And incredibly valuable in protecting the planet's climate.

B (53:56)

Yet Brazilians are cutting down trees every year for ranching. 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. Now, recently there's been potentially a bit.

A (54:16)

Of progress on this front.

B (54:17)

It's through a program called the Tropical Forest Forever Facility, or tfff, which does not roll off the tongue and they really need a better acronym. Tfff. Yeah. Can you tell listeners a bit about TFFF and whether it's a step in the right direction or just idealistic and not effectual. Okay, I will. 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. 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. So as I understand the tfff, Morgan, the plan is this. Every country that has rainforests like Brazil, let's just talk about Brazil, will get paid $4 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. 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. It's kind of design that economists will come up with because it makes the marginal incentives really, really strong relative to the average incentive. So what you're saying is the punishment is 100 times bigger than the stipend. 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 going to destroy for a long time. It's really on the edges where the destruction's happening. And so if you have a program that pays really generously for every hectare, it would be insanely expensive. 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. 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. Brazil is cutting down 25% of the forest. 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.

A (56:49)

What's the problem? Is there a problem?

B (56:51)

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. It's 100 times bigger. The pun intent. You pay per hectare, you Destroy. But. But $400 a hectare is still a pretty low price. 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. If I'm the Brazilian government, I can cut down a hectare and sell it to the ranchers for $1,000, 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. It'll just be paying Brazil to do exactly what they're already doing. 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. 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 that literally the Brazilian government is making some choice and 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 a thousand dollars to the illegal ranchers. But that's not a thousand dollars that's going into the coffers of the Brazilian government. 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, 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. 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. And if that's the case, then this would be an excellent program, an amazing program that I could really support. So if it were up to you, would you be increasing the punishment price? Absolutely. I would make the punishment price really high. Why not make it $2,000 per hectare or $4,000 per hectare? Just make it such that people really don't want to cut down the forest because we really think it's a bad idea. If the punishments were higher, you could also make the base payments for the forest that doesn't get cut down. You could imag 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. That would then give you more money to put back into the kitty for the people who aren't cutting down the rainforest. 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 pimaeeconomics.com that's P.

A (59:51)

I M A areakonomics.com we do read.

B (59:56)

Every email that's sent and we look forward to reading yours in two weeks. We're back with a brand new episode featuring Michael Crow. He's the president of Arizona State University, which U.S. news & World Report has named the most innovative university of America. Not once, not twice, but for 11 straight years. As always, thanks for listening and we'll see you back soon. People I mostly admire as part of.

A (60:35)

The Freakonomics Radio Network, which also includes.

B (60:37)

Freakonomics Radio and the Economics of Everyday Things.

A (60:41)

All our shows are produced by Stitcher and Renburg Radio.

B (60:45)

This episode was produced by Morgan Levy.

A (60:47)

And mixed by Jasmine Klinger. We had research assistance from Daniel Moritz Rapson.

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A (60:55)

We can be reached@pimafreakonomics.com that's P I.

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M A@freakonomics.com thanks for listening.

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I just find it useless. That's probably too strong. Let me reel that back. The Freakonomics Radio Network. The hidden side of everything.

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Stitcher. Hey, guys. Back at the playground again, huh?

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Yep.

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Heck, yeah.

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And some waves so we can go surfing. Ah, love that. A redwood forest would be cool. I'm in ski slopes.

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Let's do it.

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