Cool It, by Bjorn Lomborg

by on September 10, 2007 at 6:52 am in Science | Permalink

That’s Bjorn Lomborg’s latest book on global warming.  He has good arguments against the exaggerations of others, so this book is worth reading.  I cannot, however, agree with one of his central claims, namely that the most serious economic research favors only mild remedies or sees the problem as only a moderate one.   

I would instead claim the following:

1. Policy recommendations are extremely sensitive to the choice of discount rate, and economists do not agree on this issue.  Furthermore most economists do not even know enough moral philosophy to understand the issues involved (and the philosophers don’t understand enough economics), so there is no coherent consensus one way or the other.

2. The most current economists’ word is from Martin Weitzman; he argues that the very high costs of the worst-case scenarios suggest an insurance-based case for significant worry, more worry than Lomborg suggests.  A Salon review notes:

Harvard’s Weitzman puts the current concerns of many economists
clearly. Based on the findings of the U.N. climate panel, he notes that
with roughly 3 percent probability, "we will [live in] a terra
incognita biosphere within a hundred years whose mass species
extinctions, radical alterations of natural environments, and other
extreme outdoor consequences of a different planet will have been
triggered by a geologically-instantaneous temperature change that is
significantly larger than what separates us now from past ice ages."

3. We spend too much time wondering about what is "most believable" and not enough energy worrying about the expected value of pending losses.  The major critical reviews all nail Lomborg for neglecting this point.  That said, the speed with which the negative reviews of the book move to the extreme cases is itself noteworthy, and it does not exactly correspond to the image presented to the public.

4. Given that the value of risk is context-specific, economists are bad at taking the value of insurance from market data in one setting, and then transplanting that estimate to another setting.

5. The strongest argument against significant action is not from cost-benefit analysis in the narrow sense, but simply that we are not very good at producing international public goods.  Especially when it comes to extended, intertemporal collective action problems directed against small probability events, with unclear periodic feedback, and dealing with the Chinese and the Indians, who feel they have the right to pollute as much as we did, and also with the not-nearly-as-cooperative-as-they-might-sound Europeans (how’s that sentence for a mouthful?). 

This argument sounds immoral and indeed perhaps is immoral — "we’re ruining things for others, yet if we tried to fix things we would ruin the fixing, so let’s do nothing."  Yet I do not think this issue should be disregarded.  If I can’t open up my computer, dissemble it, and then put it back together again, surely my repair plans should take that fact into account.

Here is a Jonathan Adler review of the book.  Here is a very critical Tim Flannery review.  Here are critical remarks from Chris Mooney.  Here is the Salon review.

Remember that line from Dirty Harry?:  "Do you feel lucky, kid?"

1 Russ Nelson September 10, 2007 at 8:17 am

I do have to say that any reviews of a book on economics written by non-(real-)economists is goint to be worthless given the Caplan biases.

2 David R. Henderson September 10, 2007 at 9:29 am

The line is, “Do you feel lucky, PUNK?”

3 Kieran September 10, 2007 at 10:16 am

I do have to say that any reviews of a book on economics written by non-(real-)economists is goint to be worthless

Modulo subject matter, many climatologists feel the same way, oddly.

4 Floccina September 10, 2007 at 10:29 am

Since reading about biochar/agichar/terra preta (I wish that people would settle on one name for it) I do not worry. This method would allow us to reduce the amount of co2 in the air at any point, so why not wait until we see some real non-ambiguous negatives before we act.

5 JPC September 10, 2007 at 10:34 am

Well, the biggest argument against action is…action against what exactly? There is no real evidence that our modeling can predict climate change on interdecadal intervals – no evidence at all – and in fact a lot of evidence to the contrary. For those with a numerical bent, I suggest scanning Steve McIntyre’s Climate Audit blog, where one can get a flavor for how sloppy even the most basic temperature measurement and analysis have been. The sad answer – really, really sloppy.

It’s fair I suppose that economists accept as given the risk estimates of the IPCC as a given and then fiddle with the discount rates, but what economists don’t get is that the uncertainties in the uncertainties of these models make them worthless for predicting tail risk 50 years out. So, action based on these over-fit models is not warranted.

One final point – the scientific prior would be that CO2 increases will produce modest warming on the planet, but unequally in colder, drier portions of the globe. This is in fact what is being observed. The poles show a lot of warming, the US shows zero since 1930. Absent Al Gore scenarios, do we care about that? Perhaps CO2 is stabilizing a cooling trend in the civilized portions of the world – isn’t that good, or can their only be losers here? The Canadians seem pretty jazzed by this whole warming thing, for example.

6 Slocum September 10, 2007 at 10:44 am

I think the problem with using expected value of pending losses is that as long as there’s any probability of the infinite loss of the world ending above zero, then we should devote almost all of our resources to averting it.

But there are an indefinite number of possible, non-zero probability causes of the ‘infinite loss of the world’. Shall we devote almost all our resources to detecting and preventing a catastrophic asteroid collision? Or preventing a nearby supernova? Or to preventing nuclear armageddon? Or to preventing global warming?

However, is there really ‘roughly a 3 percent’ chance that within a hundred years we will face a more severe change in climate than experienced in an ice age — as is claimed? I’m with Freeman Dyson in being skeptical of the state of climate modeling. I don’t think anybody understands the global climate well enough to make such an estimate with any confidence. And if we take history as a guide, the chances of ‘greater than ice-age’ climate change within a given century are much closer to vanishingly small than ‘roughly 3 percent’.

7 happyjuggler0 September 10, 2007 at 11:20 am

TC,

While I very much agree with number 5, you frame it in such a way as to make us think that the Chinese and Indians (and the other unnamed billions of dirt poor people plausibly moving away from poverty very soon) are a bunch of selfish, evil scum for wanting to end their poverty much like we did.

The simple fact of the matter is that the more developed countries emit an order of magnitude more GHG’s per capita than these poor countries, and these poor countries have far more capita on its way to economic growth.

If the rich countries won’t spend the money to reduce their per capita emissions 90+% below where they are today, then they are the morally culpable ones, not India, China and others. The notion that the rest of the world should morally have to stay ridiculously poor so that we don’t have to reduce our very high standard of living is absurd.

Kyoto style emissions trading would only work if everyone on the planet on an equal per capita basis gets vouchers worth the global mean average GHG emissions. This basically means a 90+% reduction in emissions overnight in rich countries, which isn’t going to happen. Alternatively it means a massive transfer of wealth from rich countries to poor countries, and that we (rich countries) trust them to keep their word that they won’t emit more in the future (ha!). This won’t happen either.

Similarly, a Pigou tax on GHG emissions in rich countries won’t do diddly either (although we definitely should transform on a $ for $ basis all energy taxes we already have into carbon taxes), because still more GHG heavy industry will move overseas into countries like China and India.

What we need is to get green technology that is cost competitive with coal, gasoline etc. otherwise the poor countries simply won’t adopt them (even then we’ll have to pay them to replace legacy infrastructure). Only the rich countries can get that to happen, not China and India.

8 aaron_m September 10, 2007 at 11:45 am

“What we need is to get green technology that is cost competitive with coal, gasoline etc. otherwise the poor countries simply won’t adopt them (even then we’ll have to pay them to replace legacy infrastructure). Only the rich countries can get that to happen, not China and India.”

This the way economists always misunderstand #5.

The argument from technology is not compelling in the two interpretations we can make of this claim.

On the first interpretation the argument is just blind faith in some new, dramatic, and unexpected technological discovery that will radically change the global collective action problem. It is faith in a technology that will be so cheap to discover, invest in, build infrastructure for, etc…, that it will be a no brainer. Those that can will just adopt it for self-interested reasons and will even be willing to pay off the huge vested interest in the existing energy system. This is faith in something we have no reason to expect to happen.

On the second interpretation the argument is a failure to understand that #5 means that we currently lack the incentive structure for investment in adopting new technologies, improving alternative energy technology, investments in new infrastructure, etc…. The global collective action problem that we face is exactly to generate the incentives for technological change.

Given what we now have in terms of alternative technology and the improvements we can reasonably expect to make through technological innovation we could clearly affect major GHG emissions reductions. But in current market conditions these technologies and reasonable expectations in terms of return on investment for improving alternative technologies do not generate significant profit based incentives for the needed transition. So it does not make any sense to say ‘well we can’t address the collective action problem, lets focus on technology instead.’

9 Chris September 10, 2007 at 12:00 pm

Is this your One Percent Doctrine?

10 mike v September 10, 2007 at 12:27 pm

“I cannot, however, agree with one of his central claims, namely that the most serious economic research favors only mild remedies or sees the problem as only a moderate one.†

Really? Here is what William Nordhaus says in an article published in the same issue of the J. Econ. Lit. as Weitzman’s paper (and BTW, how exactly does Weitzman’s paper attain the status of representing “all economists’† views??).

“How much and how fast should we react to the threat of global warming? The Stern Review argues that the damages from climate change are large, and that nations should undertake sharp and immediate reductions in greenhouse gas emissions. An examination of the Review’s radical revision of the economics of climate change finds, however, that it depends decisively on the assumption of a near-zero time discount rate combined with a specific utility function. The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today’s marketplace real interestrates and savings rates.†

Nordhaus goes on to note:

“These [the Stern Report] results are dramatically different from earlier economic models that use the same basic data and analytical structure. One of the major findings in the economics of climate change has been that efficient or “optimal† economic policies to slow climate change involve modest rates of emissions reductions in the near term, followed by sharp reductions in the medium and long term. We might call this the climate-policy ramp, in which policies to slow global warming increasingly tighten or ramp up over time.†

Other economists have made similar criticisms. Richard Tol, a leading environmental economist, had this to say about Stern:

“In sum, the Stern Review is very selective in the studies it quotes on the impacts of climate change. The selection bias is not random, but emphasizes the most pessimistic studies. The discount rate used is lower than the official recommendations by HM Treasury. Results are occasionally misinterpreted. The report claims that a cost-benefit analysis was done, but none was carried out. The Stern Review can therefore be dismissed as alarmist and incompetent. This is not to say that climate change is not a problem, nor that greenhouse gas emissions should not be reduced. There are sound arguments for emission reduction. However, unsound analyses like the Stern Review only provide fodder for those skeptical of climate change and climate policy.†

You are right that there is no general agreement among economists about discounting future costs and benefits for public policy. But Nordhaus illustrates nicely the extreme nature of the Stern Review’s “no discounting† assumption:

“The effect of low discounting can be illustrated with a `wrinkle experiment.’ Suppose
that scientists discover a wrinkle in the climate system that will cause damages equal
to 0.1 percent of net consumption starting in 2200 and continuing at that rate forever
after. How large a one-time investment would be justified today to remove the
wrinkle that starts only after two centuries? Using the methodology of the Review, the
answer is that we should pay up to 56 percent of one year’s world consumption today
to remove the wrinkle. In other words, it is worth a one-time consumption hit of approximately $30,000 billion today to fix a tiny problem that begins in 2200. It is illuminating to put this point in terms of average consumption levels. Using the Review’s growth projections, the Review would justify reducing per capita consumption for one year today from $10,000 to $4,400 in order to prevent a reduction of consumption from $130,000 to $129,870 starting two centuries hence and continuing at that rate forever after.†

Would you be willing to make this trade-off? I wouldn’t, and neither (I suspect) would most voters.

11 Slocum September 10, 2007 at 12:36 pm

If you allow for historical back-testing, current climate models do quite well.

I once heard a talk by an artificial intelligence researcher (this was 20 years ago) who had written a learning program that did a wonderful job of ‘predicting’ historical trends in the stock market. It performed so well, that he started using it to make investments. At the time he gave the talk, it had just recently failed to predict the stock market crash of 1987.

Before the late 90’s you might have built a U.S. budget deficit model that handled historical data beautifully but was completely unable to predict the dot-com driven budget surpluses. Or you might have build a population growth model that failed to predict the drastic decline in global population growth rates that would occur.

There are good reasons to be skeptical about models that are validated by their ability to predict the past. And, yes, I understand historical data is the best that scientists have to work with — but that is the problem.

12 dj superflat September 10, 2007 at 1:05 pm

i love the reverse pascal’s wager take — the potential harm is so great, even a minimal chance it occurs means we have to act now. but no one, ever, ever acts on this. why not? because there’s only a chance the potential harm is that great, and humans aren’t good with probability? or because it assumes what it’s trying to prove? e.g.:

pascal, how should i figure out whether it’s worth fighting GW?

well jimmy, let’s start by assuming the downsides of GW are so great, you’d be crazy not to address it.

um, ok. so if GW is that harmful, i should address it?

exactly, well done, jimmy.

or:

well jimmy, let’s start by assuming that the potential downside from GW is so high that any expected value calculation will show it’s worth trying to stop it.

next, let’s perform an expected value calcultion.

wait a second while i do my sums . . . . somewhat surprisingly, my expected value calculation seems to confirm that it’s worth trying to stop global warming.

hmmmmm, let me double check my math . . . . yes, that’s what it shows. so there you have it. etc.

13 Shakespeare's Fool September 10, 2007 at 1:10 pm

Since there is also a non-zero chance that we face global cooling, why aren’t we doing all we can to add CO2 to the atmosphere to prevent that possibility?
(No, I’m not suggesting we do that either.)

14 mk September 10, 2007 at 1:23 pm

ShakespearesFool, it’s a good question. I would argue that 1) we are justified in believing that harmful warming is much more likely than harmful cooling; 2) Even under uncertainty, the much-more-likely concern trumps the less-likely concern.

Also worth noting: In order to make a mathematical decision about this, you need some estimate of confidence in the climate models. Happily, the reason we are so fuzzy about the accuracy of our models is because we’ve been making such rapid scientific progress and are using techniques we have not used for very long at all. An endogenous treatment of certainty may push us further in the direction of “start with modest emissions reductions in the near term” while we wait to figure out what’s really going on.

15 mk September 10, 2007 at 1:45 pm

(Apologize for all the posts)
Just to respond to MD’s questions, first I’d like to admit that I’m just an interested citizen, I can’t claim to have any special insight about these hard problems.

To respond to the three points:
1) Nothing special to say here, to convince you that negotiation could be productive. “We” (the G8, perhaps) can prod them with the carrot and the stick. It’s not essentially different from any other major diplomatic undertaking. I agree this is a very hard sell.
2) We should offer transfers if it increases our expected utility. I agree that politics will be a hurdle here.
3) We should subsidize R&D if it increases our expected utility, regardless of free-rider problems.

16 aaron_m September 10, 2007 at 1:58 pm

“if it increases our expected utility”

We already know that acting to mitigate climate change will not increase the expected utility of the current generation. Any existing “we” that acts to address this problem will incur costs that will not be compensated by benefits over their or their children’s life times. The investment won’t be worth it compared to other uses. The compensation for the investment is incurred almost exclusively by future people. This is true because of the large time lags between mitigation efforts and the arrival of benefits in the form of avoided climate change.

(Note, not an argument for in action just an clarification of what kind of collective action problem we face)

17 Dan September 10, 2007 at 2:56 pm

Re: mike v.’s wrinkle example.

First, as already noted, there is no conceivable case where we would have anything approaching certainty about events occurring in 200 years. And it is that fact that is doing the real work of making the one-time expenditure in that scenario sound unappealing, not discount rates.

If we did have certainty about that wrinkle (or a certain estimate of its probability), then the crippling one-time expenditure would be worth it. The perpetual .1% declining rate of consumption would leave everyone immiserated after a century or two forever. The thousands of years of <$50/yr consumption people count just as much as current people. This is the moral philosophy calculus that TC alluded to in point #1. The low discount rate here does not lead to any absurd results.

18 mike v September 10, 2007 at 3:43 pm

Dan says:
“First, as already noted, there is no conceivable case where we would have anything approaching certainty about events occurring in 200 years. And it is that fact that is doing the real work of making the one-time expenditure in that scenario sound unappealing, not discount rates.

If we did have certainty about that wrinkle (or a certain estimate of its probability), then the crippling one-time expenditure would be worth it. The perpetual .1% declining rate of consumption would leave everyone immiserated after a century or two forever. The thousands of years of <$50/yr consumption people count just as much as current people. This is the moral philosophy calculus that TC alluded to in point #1. The low discount rate here does not lead to any absurd results." Point 1 is beside the point. Nordaus's example is about discounting. Assume (for the sake of argument) that we know these events would happen with certainty. Point 2: Really?? You would make this tradeoff?? A 60% decline in real per capita consumption TODAY to avoid a tiny (1/10 of one percent) decline in per capita consumption among a group that is ORDERS OF MAGNITUDE wealthier??? Do you also advocate large taxes on today's poor to benefit today's rich? If you believe in the "fairness" of the first tradeoff, you ought to believe in the fairness of the second.

19 steven September 10, 2007 at 4:16 pm

It sounds to me like Weitzman’s claims about insurance contradict the points James Annan has been making. Geoengineering could also help, especially with unlikely extreme cases.

20 Lee A. Arnold September 10, 2007 at 4:56 pm

There is not merely a 3 percent probability of mass species extinctions, however. There is a 100-percent probability that wildlife species extinctions, already in the pipeline everywhere due to habitat clearance and fragmentation, will be greatly accelerated by even moderate amounts of climate change. It is a simple deduction in ecology. I very much hope that you would prove it wrong:

Effects of climate change on fragmented wildlife ecosystems:

[i.] REGULAR CIRCUMSTANCE OF WILDLIFE ECOSYSTEMS :

(1) Ecosystems have at least a two-step-fractal CLUMPED distribution, local and regional, and at the regional level they are divided by ecotones or geographic features.

(2) “Wild genetic health† is some statistical description of regional-level species populations, usually pegmarked at over 500 individuals.

(3) (Unimportant supposition.) There is an “ecological genetics† which would describe how the condition of interacting with all the other relevant species in the rest of the ecosystem, affects the survival and thriving of wild genetic health in any single one of the populations.

(4) Normally, species populations go extinct all the time. Not the entire species, but locally or regionally an entire population. Why? A bad winter, no food, new disease, new predator, etc.

(5) The rest of the ecosystem frequently re-equilibrates to new sizes of the other populations, depending on the importance of the missing species to the food web, and other things.

(6) The missing species is returned by immigration. All ecosystems are throwing-off stragglers and adventurers always, and if a male and a female make it over the river or through the woods, –and they find each other,– they will restart the missing species.

(7) The rest of the ecosystem will then re-equilibrate to what it was before,—although not after too much time, or if other different things have happened.

(8) Most plant and animal species thrive well only within small ranges of moisture and temperature. As the climate changes, the species move to other areas. It may take several seasons to initiate a noticeable response.

(9) In the previous rapid climate changes, we may assume that the wildlife ecosystems were spread out, continuous and contiguous,—enough for many fortuitous circumstances of species preservation, in the slow-motion tumult.

(10) If and when there is a massive extinction, then there are niches to fill, and the surviving “weeds† (tough plants and animals) spread-out to evolve and re-biodiversify the whole place. Among the smaller animals, new speciation takes a period of time somewhere around the order of ten thousand generations — for each new species.

[ii.] WILDLIFE ECOSYSTEMS AFTER FRAGMENTATION BY HUMAN HABITAT:

(11) Human development now encircles all the wildlife areas, which are greatly reduced in size.

(12) This fragmentation of wildlife habitat effectively seals-off ecosystems, for many different species. They do not venture out into the human habitat due to conditions, or chemistry; or they are killed when they do so. This goes for both plants and animals. Some others are not affected at all.

(13) The Reduction in Size of the Ecosystem has an Immediate Consequence. One of the few truly reliable ordinal numerical relations in ecology is the species-area law, which finds that smaller areas have a smaller number of species, and bigger, bigger. There are different reasons for this. Consider the reason, that a fewer number of individuals in each population (fewer, because of less resources overall,) makes a local species population’s random extinction (always happening at 4) statistically MORE PROBABLE. The fact that it is more probable to lose whole species is called that area’s “extinction debt,† which gets paid in the number of species that eventually disappear from that area.

(14) The Isolation of the Ecosystem’s Borders has an Immediate Consequence. The blockage of migration, by human habitat, ends or greatly slows down the reconstitution of missing species (which would have happened at 6.)

(15) As the remaining ecosystem re-equilibrates over and over, in response to successive losses of species, larger oscillations of the simplifying food web serve to accelerate the local extinctions.

(16) The only way to correct this is to build and preserve wildlife corridors, land and river connections, between and among wildlife areas.

(17) In addition, many existing wildlife areas need to be greatly expanded. Why? Because AS THEY ARE NOW , they do not accommodate the pegmark number of individuals (at 2,) in a full interacting ecosystem (at 3,) for continued genetic health. Saving two animals in a zoo will not provide the ecological sharpness for species definition. Among many reasons for this, you can find: changes in the act of predation; density-dependent reproduction; etc.

[iii.] FRAGMENTED WILDLIFE ECOSYSTEMS DURING RAPID CLIMATE CHANGE

(18) As the plants and animals change their geographic places in response to the different moistures and temperatures (in 8,) many will be extinguished at the contact with human habitat (in 12.)

(19) This accelerates the extinction rate that is ALREADY ACCELERATED by the reduction in ecosystem size (at 13) and the isolation of ecosystems from each other (at 14.)

(20) The global warming hockey-stick graphs, whatever their cardinal inadequacies, all show a temperature change far, far beyond the comfort zone of many plants and animals. And realworld evidence abounds, that they are changing their ranges.

[iv.] CONCLUSION

(21) We have just embarked upon one of the greatest mass extinctions in history, and it is a profound and extra-millenial tragedy, and a spiritual disaster.

(22) Since humans are creative and economic growth could happen along many paths, it is an intellectual scandal, and needless.

21 MikeP September 10, 2007 at 5:35 pm

The perpetual .1% declining rate of consumption would leave everyone immiserated after a century or two forever.

Dan,

That is not a 0.1% decline year-after-year of consumption. Rather it is 0.1% hit in the consumption numbers each year. It should be applied after you apply the standard 2-5% growth of consumption that is an actual year-after-year effect. Or you can view it as a 0.1% decrease in the growth of consumption year-to-year.

Now reread mike v’s comment.

22 Jim Manzi September 10, 2007 at 6:08 pm

Steven:

Annan has built a (very impressive) Bayesian framework for GCM parameter estimation that shows that the extreme upper range of temperature sensitivity to a doubling of atmospheric CO2 in some models is highly unlikely. Weitzman is arguing that the structural assumptions of the models themselves should be questioned (both the GCMs that predict temp vs. CO2 and the economic modles that predict cost vs. temp), and that just bcause an ensemble of models produces a given pdf of potential outcomes, deosn’t mean we should accpet this as the actual pdf, especially at extreme values that are not represented in the dataset that was used to build the models.

I could not agree more with you on the second point.

23 Michael Bishop September 10, 2007 at 7:20 pm

I hope this review is posted on amazon where people are more likely to read it

24 jenny September 10, 2007 at 9:33 pm

So we have to ask our great-grandchildren: Would you rather have a world average temperature 2 to 4 degrees Fahrenheit cooler? Or would you rather have $30,000 per person per year more to do with as you please?

That’s stacking the deck, I think. If those extra 2 to 4 degrees entail the end of the world then our great-grandchildren should be grateful we averted it. That you can phrase the question as “would you rather x, or have this much money” is useless unless you know the value of x.

jenny

25 Nathaniel September 10, 2007 at 11:19 pm

Thanks Jim, that article is very useful. I’m going to need to memorize some of the points for debate, especially here in the SF bay area.

26 Tony K September 11, 2007 at 3:03 am

Many of the comments above focus on what is the right discount factor to use. I think that is an important consideration, and I also believe that the main value of Lomborg’s work is to put put GW into a portfolio framework.

He recognizes that GW is just one of many problems facing the world. Its implications are not known with any accuracy, and it appears that the time horizon of the worst damage is some generations away.

In the meantime, we have thousands of children dying everyday because they can’t get clean water. That’s happening today. I’m a lot more worried about that than ANYTHING that will happen 200 years from now. Geez, we might get hit by a big asteroid or something between now and then. Then we’ll be sorry we didn’t help the thirsty kids. How do you factor that into the perpetual 0.1% decline model?

The point is not that I’m a bleeding heart, but that time preferences are important. In a portfolio context, there also needs to be some sort of objective function, goals, and constraints agreed to by the decision makers. Of course, there is no worldwide governing decision body.

So now, the projects that get funded are the ones that have the most movie stars shouting for them.

When I’m president of the world we’ll do this better.

27 Jim Manzi September 11, 2007 at 8:58 am

Greg:

Well, as any confidence interval grows, clearly the high end of it gets higher. The big issue with climate models is that the base (or radiative) effect of CO2 would lead to about a 1C increase in global temp per doubling of atmospheric concentration; the various feedback effects are projected to drive this about 3C per doubling. The point of the models is basically to address the feedbacks, so to take an extreme case, if I said that there was absolutely no validity to the models, the natural assumption would be to center the sensitivity forecast at a much lower level (ie, 1C vs. 3C). I go into this on some more detail in the article that I reference in one of the comments above.

Nordhaus did a very detailed sensitivity analysis of the Stern report and demonstrated that the differences between Stern and mainstream economic forecasts of costs boil down to the difference in discount rates. If you use a 3% discount rate, you get nothing like the results that Stern presented.

28 steven September 11, 2007 at 10:09 am

By the way, if you take Weitzman’s thinking to its logical limit, you end up thinking about astronomical waste and existential risks. As far as existential risks go (meaning the extinction or permanent crippling of human civilization), I would doubt that climate change is among the ten most probable.

29 Jim Manzi September 11, 2007 at 11:17 am

Steven:

A few quick reactions:

One can assume that a GCM ensemble gives a Platonically perfect “pdf of possible temperature outcomes”, and still take Weitzman’s point to be that when we then convert any temperature increase scenario to a cost scenario, we have risks (e.g., ice shelf detachment) that we can not quantify accurately as part of the “pdf of possible costs.” As an aside, even the predicate of my prior sentence is not demonstrated by Annan’s (very, very smart) analysis if we question whether any one of the key underlying physical assumptions built into the GCMs will be valid for as-yet-to-observed CO2 concentrations (e.g., if we believed that all models systematically bias the prediction of cloud interactions).

I agree with your view about the limit case for Weitzman’s analysis. In my view, it is the thinking man’s Precautionary Principle.

I couldn’t agree more about the Stern Report. I have focused my reactions on the discount rate because of the focus of Tyler’s original post, but I think any fair-minded observer would agree that the second major issue with it was that he apparently applied a principle when estimating either physical impacts and their economic costs of “always take the worst plausible case”.

30 jtoour September 11, 2007 at 2:33 pm

I am tired of all these doomsday scenarios that never happen. I suggest everyone read Hoodwinking the Nation by Julian Simon. The fact is global warming is a political attack on the US by the left wingers. The bigggest polluters in the world are the thirld world countires. But no one says boo about that. Miranda was a character in Greek literature who spoke the truth but no one belived her. The Greens never speak the truth but everyone believes them. It is the reverse Miranda effect.

31 JPC September 11, 2007 at 3:19 pm

TomR:

1. Sounds like we agree that there is no evidence that these models have any out of sample predictive power.

2. McIntyre himself [and almost everyone else] agrees that the physics of increasing levels of CO2 should lead to higher temperatures, on average, all other things being equal. What is also clear is that even measuring temperature [only one aspect of climate] is difficult over long periods of time and the historical record is muddy at best.

3. It’s no contradiction at all to say that a simple physics model predicts, ceteris paribus, increases in CO2 to increase temperature, and to say that complex, regional climate models are overfit and not proven to be predictive. Unfortunately, all climate is local. We appear seeing that in the very diverse historical records across the globe.

4. Please stop using the word “denier” – your slip is showing.

32 Elliot Reed September 14, 2007 at 7:41 pm

Policy recommendations are extremely sensitive to the choice of discount rate, and economists do not agree on this issue. Furthermore most economists do not even know enough moral philosophy to understand the issues involved (and the philosophers don’t understand enough economics), so there is no coherent consensus one way or the other.

Also, if economists knew more philosophy, they’d probably be more skeptical of economic cost-benefit analysis as the sole/principal tool of public policy. There’s just no good way to shoehorn moral considerations like “everyone should count the same regardless of wealth”, “human dignity”, “there’s more to human welfare than the satisfaction of revealed preferences”, and the like into a cost-benefit calculus.

33 dan j March 12, 2008 at 10:05 pm

Bjorn Lomborg’s book, Cool It, outlines the platform of the “skeptical environmentalist.† Evolving from their previous argument denying the existence of global warming, the new age skeptics admit the occurrence of climate change and accept human impact as a cause, with Lomborg as their leader. Lomborg formulates our knowledge of climate change in a cost-benefit model to de-legitimize our emphasis on immediate drastic solutions. He proposes that in order to truly better all mankind, we should apply our resources to the solvable problems at hand, not the hypothetical threats of climate change in the future.

While Lomborg’s arguments are clear and seemingly accurate, his outlook on climate change feels limited. In determining cost-benefit predictions, Lomborg’s statistics are constraining. Building formulas by our current cost predictions, Lomborg runs cost models for the entire 21st century. However, these predictions cannot account for the vast run-away scenarios that currently are in question. For example, possible oceanic current shifts or shutdowns that would change our climate instantly and dramatically. Already in the 21st century, researchers underestimated the rate of sea-ice melt in the current decade. Lomborg’s future scenarios don’t account for the massive spectrum of potential earth feedback responses.

Along with a tunnel-vision approach towards the future of climate change, I get the feeling that Lomborg is playing the statistics in his favor. For example, in discussing a possible carbon tax, Lomborg quotes the cost of one ton of CO2 to be between two and fourteen dollars. Next, he cites “one radical report† proposing $85 per ton of carbon, and compares the costs of this proposal to the minimal two-dollar quota. By taking the extremes of these cost estimates – the two-dollar minimal projection and the radical $85 proposal – Lomborg comes up with a $38 trillion dollar cost difference. While dramatic predictions like $38 trillion dollars are certainly shocking, I question his use of statistics in this manner throughout Cool It.

Finally, Lomborg’s intentions are questionable. Acknowledging that efforts for climate change prevention are for the betterment of mankind, Lomborg sees reducing CO2 as a waste of valuable resources for this cause. However, in thinking about the current allocation of resources by the world’s superpowers, environmental legislation is far down on the list of priorities. Why doesn’t Lomborg propose taking money away from military spending or United States’ pork-barrel politics? Lomborg’s attacks on climate change prevention are aimed at the wrong target.

In all, Cool It is a fresh perspective in the climate change debate. While there are undoubtedly several holes in Lomborg’s arguments, his book brings up a good point: the need to settle our international humanitarian priorities beyond climate change. Beyond this, Lomborg’s pile of cost-benefit assessments on climate change prevention seems too shaky when the laundry list of lurking variables is brought to the table. If even one of the several possible “run-away† effects occurs in the next century, this pile will topple like a lost game of Jenga.

34 Bob March 13, 2008 at 10:51 pm

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