Manufacturing Doubt

In their persistent fight to affect regulation, firms have developed specific strategies to exploit scientific uncertainty. They have spent large amounts of money to generate and publicize favorable scientific findings, to discredit and downplay unfavorable ones and to shape the public’s perceptions through large-scale communication campaigns. We develop a new model to study the interplay between scientific uncertainty, firms’ communication and public policies. The government is benevolent but populist and maximizes social welfare as perceived by citizens. The industry can provide costly evidence that its activity is not harmful. Citizens incorrectly treat the industry’s information on par with scientific knowledge. We characterize the industry’s optimal communication policy. As scientists become increasingly convinced that the industrial activity is harmful, firms first devote more and more resources to reassure people. When scientists’ beliefs reach a critical threshold, however, the industry stops its efforts abruptly. We then study the impact of firms’ communication on scientific funding. A populist government may, perversely, want to support research to better allow firms to miscommunicate. Populist policies can entail significant welfare losses. Establishing an independent funding agency always reduces these losses and may lead to under- or over- investment in research with respect to the first-best.