Government actions are best when they are based on data, sound methods, and a thorough examination of alternatives. These factors do not appear to apply to current government responses to what has been labeled “climate change.”

The idea that the climate should never change has taken on what can only be called a religious fervor. The climate is something that is always changing (if it never did, the planet would be a molten ball of rock and gas). The issue at hand (whether human activity is changing particular climatic patterns) is an important one. Considering the political and economic implications, its one that should be thoroughly and reasonably examined and understood.

Earlier this month, a series of email messages was released showing some of the “sausage making” that goes on in all research activities. The fact that science is messy is nothing new or out of the ordinary. Similar messages could have been released from scientists studying DNA, engineers designing a dam, or economists examining a tax increase. The analysis of messy data is, well, messy.

What is disturbing is the reaction of advocates and pundits on both sides of the climate change “debate.” This moves the concept of climate change from the realm of science to that of religion. Those who doubt the efficacy of specific policies are labeled “deniers” who could not possibly have a meaningful point of view. Others suggest that scientists are “falsifying” their research just because they are using messy data.

Unfortunately, like most actions based on faith rather than science and observation, the response to “climate change” will likely be authoritarian rather than market based. In addition, if climate change continues even after restrictions are imposed, there will be calls for even harsher limits on emissions and economic activity. In other words, it is likely that the response to climate change will be similar to the Aztec’s response to drought – more sacrifices.

This comparison illustrates the danger of setting public policy based on faith rather than fact. Humans may well be causing the climate to change, and this change may be damaging, but it is important to understand the relationship and the effects before pursuing draconian policy solutions.

Health Reform: Avraham, Rosen, et. al., The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums, NBER Working Paper 15371, September 2009: According to the authors tort reform measures reduce health insurance premiums. They found that caps on non-economic damages, collateral source reform, and joint and several liability reform each reduce premiums by 1 to 2 percent.

Transportation: Duranton, Gilles, and Matthew Tumer, The Fundamental Law of Road Congestion: Evidence from US cities, NBER Working Paper No. 15376, September 2009: The authors found that the amount of travel increases proportionately to highways due to an increase in driving by current residents; an increase in transportation intensive production activity; and an inflow of new residents. Public transportation has no impact on vehicle miles traveled.

Banking: Veronesi, Pietro and Luigi Zingales, Paulson's Gift, NBER Working Paper No. 15458, October 2009: The authors examined the effect of government intervention in the financial sector during October of 2008 and found that it increased the value of banks’ financial claims by $131 billion at a cost of $25-$47 billion. The big winners of the plan were the three former investment banks and Citigroup.

Housing: Sinai, Todd, and Nicholas S. Souleles, Can Owning a Home Hedge the Risk of Moving? NBER Working Paper No. 15462, October 2009: The authors suggest that homeownership hedges a family’s exposure to housing market risk, because sales price are related to house prices in markets where homeowners would likely move. The authors show that the decision to own or rent is sensitive to this “moving-hedge.”

Pharmaceuticals: Kyle, Margaret and Anita McGahan, Investments in Pharmaceuticals Before and After TRIPS, NBER Working Paper No. 15468, October 2009: The authors examined the relationship between patent protection and investment in development of new drugs. They found that patent protection is associated with increases in R&D effort in high income countries, but not in developing countries.

Automobiles: Knittel, Christopher, Automobiles on Steroids: Product Attribute Trade-Offs and Techno-logical Progress in the Automobile Sector, NBER Working Paper No. 15162, July 2009: This paper estimates the technological progress that has occurred since 1980. The results suggest that if weight, horsepower and torque were held at their 1980 levels, fuel economy could have increased by nearly 50% from 1980 to 2006 (above the 15% by which fuel economy actually increased). The author also find that standards announced by the Obama administration require non-trivial vehicle downsizing."