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Industry Flunkies Flunk Econ 101

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View Sam Edmondson's blog posts
01 November 2010, 3:48 PM
Economists say industry-funded studies on air rules don’t make the grade

Thousands of lives and billions of dollars will be saved every year by new air pollution rules from the U.S. Environmental Protection Agency.

Polluting industries are lining up in opposition to these life-saving controls. In attempts to kill the rules, they've commissioned "economic studies" that forecast doom and gloom if the measures to reduce ozone, mercury, lead and other dangerous air pollution are implemented. Problem is, the industry-funded studies are polluted by nonsense.

That was the conclusion reached by economics professors from Dartmouth College, the University of California-Santa Barbara and the University of Wyoming after reviewing the studies' methods.

"If I were grading this [one of the industry-funded economic studies], I would give it an F. The economics is all wrong…" wrote Charles D. Kolstad, PhD, chair of the Economics Department at UC Santa Barbara, after reviewing a study by Fisher International that claims the EPA's rule to reduce toxic air pollution from industrial boilers will damage the economy significantly. Industrial boilers are the second largest source of mercury pollution in the United States.

Jason Shogren from the University of Wyoming graded a related study commissioned by the Council of Industrial Boiler Owners similarly. Citing flawed logic and a number of unjustified assumptions used to support a conclusion that reducing pollution is bad for business, he gave IHS Global Insight, the authors of the study, a "D" for application of economic principles and an "F" for transparency of their methods. Ouch.

And Richard Howarth, a professor at Dartmouth College, concluded that a report from the Manufacturers' Alliance criticizing the EPA's proposal to set stronger standards for ozone pollution was "fundamentally flawed," relying on a method of analysis that is "scientifically unsound." Howarth gave the study a grade of "Incomplete," adding that it failed "to apply standard statistical techniques that are taught to students specializing in the fields of statistics and econometrics." It would take a whole lot of apples to change that grade.

The saddest part of this story isn't that industry economists couldn't pass Econ 101. It's that their quackenomics is being used to assail rules that are actually going to save thousands of lives and billions of dollars every year. The university professors' analysis demonstrates that the aim of these industry-funded "studies" isn't to provide sound economic data, it's to inspire fear.

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