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  • Freakonomists on Nuclear Energy

    Economists Stephen Dubner and Steven Levitt, renowned for their book “Freakonomics” and New York Times blog, have a certain knack for examining the hidden incentives, opportunity costs and unintended consequences of real-world issues using sound economic logic. They have also advocated the development of commercial nuclear energy on more than one occasion.

    In today’s Freakonomics post, they note the opportunity costs of forgoing nuclear power, highlighting the obituary of Dr. Herbert J.C. Kouts, a nuclear power safety expert. In a commissioner’s report for the governor of New York in 1983, he claimed:

    All careful analysis confirms that the risk of nuclear power is small. The chance of a large accident is very low, and consequences of such an accident would be substantially less than most people think.

    A year later, he commented on the misaligned incentives between the nuclear industry and the government. In essence, private companies investing in nuclear energy lost billions of dollars because the anti-nuclear movement convinced the government and media at large that commercial nuclear energy was too dangerous. Surely, the government wasn’t pulling for the industry to fail; after all, nuclear is a clean, affordable source of energy that diversifies the nation’s energy portfolio. Nevertheless, the incentives for the government to see the nuclear industry succeed were much lower than the actual industry itself.

    In a previous column, Dubner and Levitt discuss risk versus uncertainty when it comes to nuclear energy versus global warming. The fact that risk is calculated and uncertainty is not may bode well for the nuclear industry. They ask:

    Could it be that nuclear energy, risks and all, is now seen as preferable to the uncertainties of global warming?

    (More on risk and uncertainty here.)

    On aligning incentives for public acceptance:

    There was a time when people didn’t want new prisons built in their backyards — until they decided that the risk was relatively low and that the rewards, in jobs and tax dollars, were substantial. Will nuclear plants ultimately get the same embrace? The markets seem to think so.

    Posted in Energy [slideshow_deploy]

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