Your Teacher Said What?! (28 page)

“Yes?”

“What would you say if I told you that your school wanted to require all fifth graders to go to sleep at seven thirty?”

“That's not my bedtime!”

“I know. But what if Mommy and I told the school that we didn't want them to decide about your bedtime, and they told us that the best way to keep them from setting bedtime at seven thirty was for us to do it.”

“I'd say that was blackmail.”

 

The
Wall Street Journal
agrees:

Progressives are very comfortable using the courts and the EPA to threaten Congress into transforming the entire American economy—and make no mistake about that:
everything
that produces or demands power depends on burning carbon-based fuels—partly because of their fundamental inability to compare costs and benefits: Global warming is just
bad
, so asking how much it costs to eliminate it is like asking how much you would spend to save a life. But even more so, I think, it's their love for solutions that have the endorsement of elites—in this case, the scientific community.

The elevation of climate scientists—the
right
climate scientists, of course—to the position once occupied by high priests of mystery religions is sort of understandable. It's hard enough to find people with a basic understanding of physics and chemistry, to say nothing of the interdisciplinary clutter of experts needed to investigate an area like climate. Add to that the fact that none of these people's conclusions can be experimentally tested and must therefore be made using computer models and historical data (this is also true of economics— whose track record in predicting booms and busts is not exactly encouraging) and you have a very nearly perfect storm: a complicated scientific subject in which even professionals are compelled to rely on other professionals working in fields that they don't understand; in which no one can test hypotheses experimentally; and in which conclusions depend on tiny changes in the underlying data. High priests never had it so good.

On the other hand, one reason that science gets such respect in a modern technological society is the belief that it is performed by honorable people who report things the way they see them. This doesn't mean that we have to count on any individual scientist to find the holes in his or her pet theory; but it does mean that we can rely on the entire community of scientists in a given field to be critical of themselves and to report their findings honestly.

Uh-oh.

The scandal that would, soon enough, be called Climategate broke in November 2009, when a computer at the Climate Research Unit (CRU) at the University of East Anglia was hacked, and thousands of e-mails and documents written by the world's best-known, and most alarmist, climate scientists appeared on the Internet. The portrait they painted wasn't exactly the picture of honesty. Phil Jones, director of the CRU, wrote (about a request for the raw data on which he based his predictions), “I think I'll delete the file rather than give it to anyone.” Writing to Michael Mann, a like-minded researcher at Penn State, he said: “Mike, Can you delete any e-mails you may have had re AR4 [the IPCC's Fourth Assessment Report]?” Writing to Eugene Wahl of the National Oceanic and Atmospheric Administration: “Try and change the received date! Don't give those skeptics something to amuse themselves with.”

Just destroying and withholding data wasn't enough for Professor Mann, who was so disturbed by a critical article appearing in one journal that he suggested, “I think we have to stop considering
Climate Research
as a legitimate peer-reviewed journal. . . . Perhaps we should encourage our colleagues in the climate research community to no longer submit to, or cite papers in, this journal.”

The
Wall Street Journal
, quite rightly, saw this as a huge problem:

Not, however, the
New York Times
:

And when, in July 2010, Professor Mann—the creator of the famous “hockey stick” graph, which showed a steady planetary temperature over a nine-hundred-year period, followed by a sudden upward turn beginning with the Industrial Revolution—was, in the words of the
New York Times
, “exonerated” by his university (he wasn't; he was vindicated on three of the four charges—mostly on the grounds that even though Phil Jones had clearly asked him to destroy a raft of e-mails, there was no evidence that Dr. Mann ever got around to it), the
Times
wrote,

In other words, a university panel proved that Professor Mann didn't manufacture data by finding a “consensus” among other climate scientists on the same data—published in the journals that Professor Mann and his colleagues in the climate science community agreed not to boycott.

It took the
Wall Street Journal
to reveal the reason why:

Maybe, in the end, climate scientists really
do
know something about economic costs and benefits—to themselves, anyway.

What they don't know is the danger of “consensus” science. When Blake was taking a science class during the summer of 2010, one of her projects was a simple lab on cell biology, describing what she saw through a microscope. I asked her whether anyone had seen anything different, and she told me that was impossible: Everyone needed to see the same thing when they looked through the microscope. If anyone saw something different, they were just wrong. They
had
to be.

On climate change, the real difference between the
Times
and the
Journal
wasn't that they disagreed over science, or even policy. Reading the two papers' editorials with Blake in mind, I realized that what separated them was that the
Journal
took the side of optimism: that the best way to deal with the costs of global climate change, whatever they were, was to increase prosperity. The
Times
stood for fear, advocating just about anything that would even
symbolically
reduce the world's production of CO
₂
—if they had been fully implemented for ninety years, the Kyoto Protocols, a favorite of the
New York Times
editorial board, would have reduced global temperatures by only a tenth of one degree Fahrenheit—at a cost of $250 billion a year.

If you want your children to fear the future, let them read the
Times
editorials. Otherwise, well, you get the point.

 

I've noticed that people tend to believe that if there must be legislation, the legislators should be people like them. Politicians already think that politicians do a pretty good job (though, as the 2010 elections showed, nonpoliticians
also
think they would do a better one); scientists would like to see more scientists writing laws and statutes. If you know any doctors, you will, sooner or later, hear one of them bemoan the fact that “the world is run by people who couldn't get into medical school.” And this is why, against all evidence, movie stars continue to think they have something useful to say about legislation to reduce world hunger, for example.

So it isn't actually all that surprising that business professionals in general, and those in the finance industry in particular, thought that they might have done a better job at financial regulatory reform than the United States Congress managed to do with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
⁴³

The financial regulatory reform package was a predictable response to the crisis of 2008 and subsequent recession. The original objectives of revising America's financial regulation laws were

In the end the act created not just a new Bureau of Consumer Financial Protection but also a Financial Stability Oversight Council and an Office of Financial Research. If this seems contrary to objective number one, welcome to the world of regulation and please go to chapter 7.

The overriding goal was to create an early-warning system for any problems that presented a risk to the entire financial system (rather than to any one institution) and to avoid the risk of taxpayers having to bail out banks, insurance companies, and investment firms that had become “too big too fail.” The attempt, according to the summary prepared by the law firm Davis Polk on July 21, 2010, resulted in 243 new rules, required the production of 67 separate studies, and mandated the regular publication of 22 different reports.

And because this massive new law was written by politicians, there's a lot more politics in it than economics (or common sense). Consider, for example, the case of Fannie Mae and Freddie Mac—the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation—two enterprises chartered by the federal government to promote loans for the purchase of homes.

Though their histories are complicated beyond tedium and include the on-again-off-again fiction that one or the other was a sortakinda private corporation and the other a kinda-sorta government agency, the fundamental reason for both GSEs (governmentsponsored enterprises—don't you love the acronyms?) is to promote the ability of people to secure home loans. They do this by buying and selling loans in what is known as a “secondary mortgage market” (and by guaranteeing repayment in return for fees on mortgage loans that they repackage into securities).

The idea is to promote home ownership because of the widespread belief that home ownership is a good thing, making for more stable communities and more engaged citizens.
⁴⁴
However, the people who tend to need the most help in financing loans also tend to be the ones who are least able to pay those loans back.

 

“Dad?”

“Yes, Blake?”

“What's a mortgage?”

“It's a sort of loan, Blake. People who want to own houses usually don't have enough cash to just buy them, so they borrow money from someone else, like a bank, promising to pay back the money or else give up the house.”

“If the bank wanted the house, why wouldn't it just buy it?”

“The bank doesn't want the house. They want the buyer to pay back the money with interest.”

“How do they know that the buyer will pay the money?”

“Well, they're supposed to see if you have a good history of paying money back when it's borrowed. And they're supposed to make sure that you earn enough money to pay the money back.”

“
Supposed
to?”

 

Exactly. Beginning in the 1990s, both Fannie Mae and Freddie Mac were regularly and successfully pressured by the federal government to buy more of the loans given to people who didn't qualify for “prime” interest loans. Their huge investment in so-called subprime loans, more than any other single factor, led to a huge crash in housing prices; when people buy stuff they can't afford, they tend to stop paying for it, which meant that the supply of housing quickly outstripped demand. The price? In 2009 the Congressional Budget Office estimated the cost of rescuing the two GSEs from their mistakes at $238 billion.