The Climate Change Debate

Dave Roberts sketches the differences between how economists and climate scientists think about climate change’s impact on our overall future quality of life.    Permit me to state my opinion.  Climate science progress will simultaneously help us to mitigate and to adapt to the real threat of climate change.  As we learn more about what climate change will mean for different parts of the globe, political moderates will be willing to “vote green” and enact California AB32 style regulation.  Learning by doing, and California’s “Green Guinea Pig” effect will lower the financial price for buying products such as solar panels and electric cars.   Rising income will allow us to afford to purchase such non-fossil fuel products. This logic makes me optimistic that over the next 30 years that carbon intensity for our economy will sharply decline.

On the adaptation side ,  the kosher research conducted by the climate scientists will act as an “early warning” system educating the public about the specific challenges that different geographical areas will face.  Self interested households, firms and governments will respond to this information by making nimble investments that will allow us to continue to thrive.  Necessity is the mother of invention. Our nerds will step up their game and invent products that will help to protect us against heat waves, floods,  crop yield variability, and drought.    So, climate science yields crucial information that helps us to make better investments under uncertainty.    You should worry about the death toll from future natural disasters. My own work highlights that richer countries suffer much less per-capita death from such events.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

21 thoughts on “The Climate Change Debate”

  1. Climate science has been saying global warming is real for 20 years and has been fully vindicated for the last 10. Not sure why you think its going to change opinion now since the basic time inconsistency problem is still there. And the idea that we must all become richer going forward ignores the fact that if for example Arizona and New Mexico become too unbearable to be livable at current energy costs you’ll be abandoning huge swaths of capital stock.

  2. As we learn more about what climate change … political moderates will be willing to “vote green” and enact California AB32 style regulation.

    What political moderates?
    But I give you props for continuing to post on global warming. Thanks for that…

  3. It is interesting that I agree with pretty much all your assertions (except for the part where governments and households make “nimble investments”) but still don’t expect that will be enough to avoid millions of human deaths and vast species loss. It will take too long for the knowledge gained from climate science to be accepted in the face of organized deception, and the price signals will come too late.

  4. First, we assume a can opener:

    “. . . all the economic models used for this purpose share something in common: they show human beings getting richer over the next century, regardless of what the climate does.”

    The willingness of economists to propose as a serious analysis what is, in fact, nothing more than applying a straight-edge to graph paper, and drawing a line, indicts the whole discipline for its emptiness.

    Calling this empty-headedness, “the foundational faith of modern economics: a faith in human adaptability and ingenuity”, identifies it for what it is, a religion, but it doesn’t redeem it for any practical purpose.

    Climate change is happening in the not-coincidental context of generally reaching the limits of the earth’s carrying capacity. Peak oil, ocean ecology collapse, agricultural limits. Technological progress will continue, and continue to accelerate, as it has for roughly 12,000 years, but it will do so, for the first time, in a world constantly bumping up against hard limits, constantly falling off a cliff. Climate change, even at the accelerated pace we now, belatedly recognize, is too slow to attract useful anticipatory adaptation via private capital investment, and the volatility associated with repeated cliff-diving is too short. Capitalism does not do well with externalities, nor does it cope well with very long time-frames, or very deep, sudden crises — and that’s what we have in front of us.

    Dave Roberts: “Getting clear on this is ultimately going to require a lot of progress in both science and economics. But for my part, when I see scientists panicking and economists telling me not to panic … my palms start sweating.”


  5. I’m not a fan of apocalyptic alarmism, either, but not because I do not think extreme alarm is not appropriate. I think the scenarios they draw are not economically realistic.

    Peak oil, for example, has led some to speculate that prices will spike up to some unimaginable plateau and remain there, while Kevin Costner wanders around the barren landscape in a becoming loin cloth. It’s goofy.

    If economists were willing and capable of imagining that future more realistically, I think that might be useful in driving prudent policy.

    The temptation to respond to peak oil with environmentally devastating gambits (fracking, Macondo blowouts, Alberta sands) is a pretty predictable response, using standard tools of economic analysis. Are there any prominent “orthodox” economists willing and able to apply tools to that useful task?

  6. Again, I assert that stressed ecosystems cannot deliver increased ecosystem services to “increase wealth” at present human population levels and rate of consumption and appropriation of Net Primary Productivity. Wealth is derived from appropriating & exploiting ecosystem services and exploiting abiotic resources like minerals. It is not created because we thought of something. Wealth is derived from appropriating and/or exploiting natural resources. Period. End of story. Fewer resources, less wealth.

    That is: in the future under a climate change regime where temps are ~1.5-2º over Holocene baseline, only a few will be richer because ecosystems will be stressed and less resilient. Most people, as a result, will be poorer. So the prescriptions of some economists are only germane for the First World, if the poor don’t flood the first world countries and overwhelm their natural resources. If all we care about is 1.5-2B people, we are failing in our planning.

    Maybe reading about Bottlenecks from EO Wilson is in order, to relieve this naive optimism and thus faulty economic conclusions. Sit down with Ehrlich next time he visits. Bring out Les Brown. Hermann Daly. Maybe a Wendell Berry reader. Something.

  7. @Dan Staley

    The standard economic theory of production — that (maximum) final output is a function of factor input — is total crap; let’s not go there. But, the idea that technological knowledge is applied to bring a production process under control, which consumes energy and outputs goods, waste and error (risk) — that’s not too bad. Technological progress reduces error and, contingent to physical bounds, waste, increasing total factor productivity; technology is embedded in sunk-cost capital investments, and so contributes to wealth. Adam Smith was right and the physiocrats were wrong; “specialization” (improved technological control of production processes, embedded in learning, organization and tools) is limited by the extent of the market, and so, trade, can drive increased “specialization”, investment, productivity, and wealth. So, no, wealth is not simply derived from exploiting natural resources; that’s not the whole story, or the end of the story. But, it is a big part of the story, and drawing lines on graph paper does not take into account, properly, the very large extent to which it was a very big part of how the story of the industrial revolution began and continued; the Scientific Revolution was a critical part, too. The institutional apparatus of the political economy is what we have to work with; that it rests on natural and physical foundations, as well as a foundation of understanding and ideas, is important. (That last is me agreeing with you Dan.)

  8. A prominent boss at the old AT&T lab … Back when they were the most successful private r&d facility since Edison, and with more Nobel caliber folks than have toiled in economics ever . . . Used to say that they never had schedules because “you cannot schedule a real breakthrough idea.”

    But, hey, we’ve never destroyed our own ecosystem services base before, so we can assume we never will, and that “growth” will merrily continue, providing lots of cushy jobs for economagicians and others willing to join us in praising growth, growth, growth, the center of our religion.

    It is to barf.

  9. And a word on economist cognition from Voltaire’s Candide, chapter 28:
    – Eh bien ! mon cher Pangloss, lui dit Candide, quand vous avez été pendu, disséqué, roué de coups, et que vous avez ramé aux galères, avez-vous toujours pensé que tout allait le mieux du monde ? — Je suis toujours de mon premier sentiment, répondit Pangloss, car enfin je suis philosophe : il ne me convient pas de me dédire, Leibnitz ne pouvant pas avoir tort, et l’harmonie préétablie étant d’ailleurs la plus belle chose du monde, aussi bien que le plein et la matière subtile. »

  10. @Bruce:

    I agree that Technology can do things such as decrease our postharvest losses. In my view pesticides are a zero-sum in the medium- and long-term – look at our waterways. I also would like to see Technology overcome human weakness and drive fertilizer application so we have smaller dead zones. But I don’t see how Technology can cheaply make more water and transport it to places where the aquifers were depleted. Plus, we are exploiting and emitting wastes faster than either Earth can absorb it or Technology can minimize it. The rate of waste disposal that we are asking earth to absorb is simply too much.

    Some of this is our Political Economy and our Political Ecology, but most of it is our population, consumption and Technology. Affluence drives more exploitation and appropriation. EO Wilson was asked what was a sustainable population of humans on earth, and he replied along the lines of: ‘if they consume like Japan or the US, about 200 million’.

  11. > we’ve never destroyed our own ecosystem services base before

    I give you global fisheries, aquifers (ht Staley) or mostly any global resource humans like.

    If we can’t save the tuna, and we can’t, there is no reason to be optimistic about capitalism saving us from climate change. None.

  12. But, hey, we’ve never destroyed our own ecosystem services base before, so we can assume we never will

    Ah, yes. I see I’ve forgotten Diamond’s Collapse in my reading list above. Good catch wcw.

  13. @ Dan Staley:

    “The rate of waste disposal that we are asking earth to absorb is simply too much.”

    Yes, it is.

    A sound economic analysis of the trajectory of the industrial revolution would recognize that we are near a key inflection point, maybe even “the” peak.

    The technological core of our economic progress has always rested on massive sunk-cost investments; the most basic economics teaches how difficult and self-defeating it is to recover a sunk-cost investment — that we’ve relied successfully for any part of that program of sunk-cost investments on for-profit, private capitalism is a tribute to the adaptive power of feudal privilege to externalize costs and conquer new worlds.

    One way forward is neo-feudalism and soylent green. That may well be where we are headed.

  14. All of the global models attempting to predict GDP under various scenarious have a bunch of fairly showstopper-esque issues:

    1) They largely ignore distributional and local effects i.e. the fact that some people will just plain be wiped out rather than suffering a percentage loss of income
    2) They don’t really address the short-term fixed costs of running a civilization, such that a 10% drop in turnover may lead to a much larger fall in the global equivalent of disposal income
    3) They ignore the evidence of the past 5 years, in which we’ve seen a large single-digit drop in global GDP not because of crops failing or cities getting flooded or any of that stuff, but simply because a bunch of guys in suits wanted bigger bonuses. If our global economy is that frail with respect to internal shocks, it seems, um, optimistic to posit serious robustness to external ones.

  15. @Bruce:

    It can be misused and is not complete, but for me a useful policy framework and focal point for discussion is I = P x A x T. You won’t craft land-use regs because of it, but you can set high-level goals with it if you aren’t afraid of retribution from corporate interests.

    Lest I sound gloomy every time, I’m finishing a paper this week about Resilient Cities for the Resilience 2011 conference. It is not entitled “Dooooooomed Cities” nor does its thesis contain ‘we’re fraaaaaacked!!!’. It is hopeful that it is a piece of the puzzle.

  16. “Our nerds will step up their game and invent products that will help to protect us against heat waves, floods, crop yield variability, and drought.”

    While they’re at it, they could invent products that bypass the speed of light, work around the second law of thermodynamics, and give us communication bit-rates beyond the Shannon limit.
    If only we as a society had enough vision to offer them substantial enough material incentives and I’m sure all those stupid physics limitations could be obsoleted!

  17. I’m not sure there’s any point in listening to somebody who can’t distinguish between violating fundamental laws of physics, and air conditioning…

  18. I thought I correctly characterized the argument, such as it was, as products protecting us from heat waves, floods, crop yield variability, and drought, being the equivalent of repealing physical laws.

    Was there some other reason for bringing up violations of physical law in the context of air conditioning, flood walls, food storage technology, and drought resistant crops? None of which, last time I checked, had any need of FTL travel or perpetual motion machines to build. What was the connection you saw there, then? Care to explain it?

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