Regulating knowledge monopolies: The case of the IPCC

Richard S J Tol, 4 October 2010

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In the olden days, the Church had a monopoly on the truth. It described how the world worked and prescribed how people should behave. The Enlightenment shattered that. Everyone was free to propose a hypothesis that A caused B, and experimentation and observation separated the wheat from the chaff. Intellectual led to explosive technological progress – which allowed you to sit in a comfortable chair in a nice office reading my words from a remote server on a flat screen.

Yet the volume of scientific knowledge is now so vast that no single person can understand more than a fraction. For the rest, we rely on experts. That is fine as long as there is a mechanism to remove charlatans. This is easy for gadgets. I do not know how to build or repair a laptop, but I do know when it is broken. For complex, large-scale, long-term problems, on the other hand, we rely on experts to design a policy – but we will not know whether we have made the right decisions until much later, if ever.

The most you can do is rely on the best available knowledge and change course if need be. Get a bunch of smart, knowledgeable, open-minded people and let them thrash out what might work. Alas, governments do not always work that way. In many cases, there is an assessment bureau, a think-tank, or a committee that, de facto or de jure, is the single provider of academic knowledge to policymakers. They hold a monopoly on the truth.

Let us consider one such monopolist, the Intergovernmental Panel on Climate Change (IPCC). I argue that it has a natural monopoly and that it therefore should be regulated rather than broken up. This carries over to other, similar organisations.

The IPCC is a joint venture of the World Meteorological Organization and the UN Environment Programme (Oppenheimer et al. 2007). It is mandated to periodically assess the academic literature on climate change, its impacts, and policy interventions. The IPCC is the sole advisor to the international negotiations on climate policy under the UN Framework Convention on Climate Change, and certain technical features of climate treaties are taken directly from IPCC reports. Many smaller countries do not have the capacity to assess climate change and policy, so they exclusively rely on the IPCC as well. In all but the largest countries, the IPCC is a very important voice. The IPCC also bestows legitimacy (in climate research) on academics and their work. The IPCC has a monopoly in some markets and a dominant position in others.

The IPCC has a natural monopoly. Its main assets are its reputation, access to policymakers, and access to academics. A new entrant would have great difficulty building up the same position. Maintaining the IPCC already puts a strain on the academic and policy communities. Duplicating the effort would be costly, and as the new entrant would assess the same literature and presumably reach very similar conclusions, the benefits would be minor.

Natural monopolies should be regulated, particularly if they abuse their position (Berg and Tschirhart 1988, Sharkey 1982). The IPCC has. Quality standards have slipped. Errors in the Fourth Assessment Report made headlines across the world, testament to the extraordinary position of the IPCC (Economist 2010, Nature 2010). The IPCC ignored its own rules (Shapiro et al. 2010). The IPCC has not innovated much over the last 20 years. The IPCC has branched out into standard setting, research funding, and primary research. In its assessment reports, the IPCC glossed over mistakes it made in the relative importance of greenhouse gases (O'Neill 2000) and in scenario development (Castles and Henderson 2003). Such behaviour is typical of a monopolist who need not care about the client. Such behaviour calls for regulation (Tol 2010).

Conduct regulation is one option. The IPCC Bureau combines both the executive and the board. It should be split. The IPCC General Assembly meets for a few days a year. It should appoint a permanent regulator to keep an eye on the procedures of the IPCC and their implementation; on the selection of IPCC authors and officials; and on the content of IPCC reports. The IPCC should withdraw from its non-core activities.

Where possible, the IPCC should be opened for competition. The all-important positions of Working Group chair should be filled through an open competition rather than the current backroom deals. Outside groups should be granted the right to publish under the IPCC brand, provided that they follow the IPCC procedures.

Competitive pressure from the outside should be increased too. Other agencies should offer independent assessments for their area of expertise (e.g., the OECD on the impacts of emission reduction). National academies should assess the literature as it pertains to their country. IPCC reports should be wikified, perhaps in two versions, one quality-controlled and one open to all comers. Most importantly, the clients – policymakers – should realise that they are getting their advice from a monopolist and that a second opinion is worthwhile.

While I focus on the IPCC, the situation is not unique to climate policy. In fact, it pervades public policymaking, including economic policy advice. The above recommendations carry over to other areas as well.

References

Berg, S and J Tschirhart (1988), Natural Monopoly Regulation: Principles and Practice, Cambridge University Press.

Castles, I and D Henderson (2003), "The IPCC Emission Scenarios: An Economic-Statistical Critique", Energy & Environment, 14 (2-3):159-185.

Economist (2010), "Science behind Closed Doors", 8 July.

Nature (2010), "IPCC: Cherish it, tweak it or scrap it?", 463, (7282):730-732.

O'Neill, BC (2000), "The jury is still out on global warming potentials", Climatic Change, 44:427-443.

Oppenheimer, M, BC O'Neill, M Webster, and S Agrawala (2007), "Climate change: The limits of consensus", Science, 317 (5844):1505-1506.

Shapiro, HT, R Diab, CH de Brito Cruz, ML Cropper, J Fang, LO Fresco, S Manabe, G Mehta, M Molina, P Williams, E-L Winacker, and AH Zakri (2010), Climate Change Assessments – Review of the Processes and Procedures of the IPCC ,Amsterdam, InterAcademy Council.

Sharkey, W (1982), The Theory of Natural Monopoly, Cambridge University Press.

Tol, R.S.J. (2010), “Regulation Knowledge Monopolies: The Case of the IPCC”, Working Paper 350, Economic and Social Research Institute, Dublin.

Topics: Competition policy, Environment, Politics and economics
Tags: climate change, information economy, monopolies of knowledge

Comments

Is the ESRI not a knowledge monopoly also?

Professor Tol's employer, the ESRI, is itself a "knowledge monopoly" -- no independent body in Ireland has remotely the same stature or level of public funding. It's difficult to see this as anything other than the continuation of his failed attacks on Pachauri by other means.
 
Whereas the IPCC's errors did not significantly impact its ultimate findings, the same cannot be said about the ESRI's Medium Term Review 2008-2015 (link) which Tol co-wrote. This work of stupefying inaccuracy stated that "the Irish economy is resilient" and "the fundamentals of the Irish economy are sound", projecting GNP growth at "an average of around 3¾ a year". The authors claimed their "analysis suggests that, even if the current downturn were to be more severe than anticipated, the economy would eventually recover more vigorously to realise the medium-term growth rate (...) The increase in wage rates (...) will continue at a significant pace". It was claimed that even if "a severe liquidity crisis in the US" were to occur (the most pessimistic scenario examined),  "the US recession would not do long-term damage to the Irish economy. In the medium term, when the global economy recovered, the rate of growth in Ireland would accelerate to return the economy to its medium-term growth path".
 
Numerous academic economists had pointed out the inevitable consequence of the disappearance of hundreds of billions of euro of wealth due to the bursting of a property bubble that had been flagged by The Economist, the IMF and the OECD amongst others. TV programmes had focussed on this exact subject. Tol et al, on the other hand, concluded that "demographic pressure will place a floor on the housing market in the medium term".
 
Tol has repeatedly called for Pachauri's resignation. That's his right, however consistency demands he do likewise himself.

From theory to practice

Richard expresses a deep frustration of working with the IPCC, widely shared (I think we have both been involved from the first assessment?). I'd like to note that the General Assembly is of the governments rather than experts--in the same way as WMO and UNEP are governed by their member states.
 
Of course there are many more forums where advice is provided and plans set afoot; where the IPCC label and stamp of approval at best is an also-ran. I'm thinking in particular in African national strategy and African negotiations: other than set pieces at COPs the real work is being done by a myriad of experts in the region.
 
More broadly, I believe we are seeing a shift from theory (where ideal solutions are thought about seriously) to practice (where what might work is tried and tested). Not quite the enlightenment--still quite a bit of chaos and confusion. What is more dispiriting is the persistence of 'IPCC' thinking in such practice. For example, on vulnerability and adaptation, the definitions and analytical frameworks in AR4 are presented as if these are the truth machines all peoples should copy. Their own experience and initiatives are submerged to the 'monopoly'.
 
A professionalisation of the IPCC, of course: open competition for key roles, a secretariat with clear capacity, accountability, separation of oversight and management. Franchising the standard practice, for some technical areas, regions, stakeholders? Defining codes of practice? Worth thinking about.
 
Are there natural limits to the monopoly? I suspect there are, something to do with practice...
Tom
 
 
 

Professor or Economics, University of Sussex; and Professor of the Economics of Climate Change, Vrije Universiteit Amsterdam