Jeff Sachs’s Common Wealth

by on March 24, 2008 at 7:34 am in Economics | Permalink

A few MR readers have written in and asked for a more detailed assessment of Jeff Sachs's new book Common Wealth: Economics for a Crowded Planet.  I'd like to go through some of the core chapters of the book, focusing not so much on the book itself but on whether I agree with Sachs's arguments and if not, why not.  Today we start with global warming and there's enough material here I am putting it under the fold...

Here is a good Sachs article, summarizing his views, namely that a carbon tax is not nearly enough to solve the problem.  He writes:

…low-emissions
technologies developed in the rich world will need to be adopted
rapidly in poorer countries. Patent protection, while promoting
innovation, could slow the diffusion of these technologies to
low-income countries unless compensatory actions are taken. As with
medicines, patent protection may be double edged: promoting innovation
but slowing diffusion to the poor.

Economists like to set corrective prices and then be done with it,
leaving the rest of household and business decisions to the magic of
the market. This hands-off approach will not work in the case of a
major overhaul of energy technology. We will need large-scale public
funding of research, development and demonstration projects;
intellectual property policies to promote rapid dissemination to poor
countries; and the promotion of public debate and acceptance of new
options. We will need to back winners, at least provisionally, to get
new systems moving.

While this makes a great deal of sense, I am already feeling the "yikes are we reallly up to that?" response.  Sachs also writes: 

Consider three potentially transformative low-emissions technologies:
carbon capture and sequestration (CCS), plug-in hybrid automobiles and
concentrated solar-thermal electricity generation. Each will require a
combination of factors to succeed: more applied scientific research,
important regulatory changes, appropriate infrastructure, public
acceptance and early high-cost investments to “ride the learning curve”
to lower costs in the long term. A failure on one or more of these
points could kill the technologies.

Again, this more than makes sense.  It is a sober breath of fresh air in a debate that too often looks for easy palliatives.  My worry, however, comes in Sachs’s fairly optimistic-sounding book.  He stresses that for no more than one percent of global gdp per year, we can avoid a doubling of carbon emissions, relative to pre-industrial levels, by 2050. 

I am much more pessimistic, partly for reasons Sachs already outlines.  I won’t recapitulate all of my previous writings on the topic (follow the links here), so let me give a kind of "splat" response: Chinese CO2 emissions are much worse than we had thought, China resists outside pressure, Chinese governance is often of very poor quality, China is currently subsidizing energy consumption, China thinks it is our problem to solve, China won’t automatically keep on becoming prosperous, the super eco-conscious Europeans in fact haven’t made much of a dent in the problem in terms of percentage change, the U.S. has done better on carbon emissions than most of the Kyoto signatories, the price of oil rose fivefold in a relatively short period of time without much helping, a gradual increase in carbon taxes (in a Hotelling model) can lead to more extraction today thus worsening the problem, and if the rich countries massively cut their carbon consumption the prices of coal and oil would plummet and the incentive for someone to buy and smoke the stuff will be all that much stronger.  Valuable stuff in the ground tends to be dug up and used.  And by the way, curing the ozone problem was easy and even a "simple" international organization such as WTO gets tied up in gridlock.

Did I mention that some of the world’s nations might even benefit from global warming, most of all Russia, and thus they might wish to sabotage various partial solutions and that Russia holds a permanent seat on the Security Council of the UN?  And that geo-engineering is massively risky and might be considered by some countries to be an act of war?

That’s not even all the arguments I can think of.  And no, they are not arguments for ignoring the problem but they are arguments against optimism.  As I read Sachs, the core message is: "We can solve this problem if we try."

I would sooner start with the list of these problems.  Yikes, and yes I know it might scare some people into simply letting things slide.  But if action is to have any chance of succeeding we need to understand the problem.  I’d like the book — and yes I know this is a popular book, but even popular books should advance the debate — to start with the tough stuff and tell us what to do.

Maybe the technical costs of Sachs’s fix are one percent of global gdp.  But when we consider the imperfections of institutions, I fear that the costs are much much higher.  At the end of Sachs’s article he writes:

By 2010 at the latest, the world should be breaking ground on
demonstration CCS coal-fired plants in China, India, Europe and the
U.S.; the wealthy nations should be helping to finance and build
concentrated solar-thermal plants in states that border the Sahara; and
highly subsidized plug-in hybrids should be rolling off the assembly
line. Only these steps will enable us to peer much farther down the
path of truly transformative change.

Under one meaning of the word "should," this may sound just right.  Under another meaning of the word "should," it’s further reason for thinking the proffered formula doesn’t have much chance of success.

1 Charles Young March 24, 2008 at 7:49 am

There are some odd things here. We must recall that global warming is not caused by the annual flow of greenhouse gases, but by the stock that is already there. China is responsible for a very small part of that stock, and has a justifiable case for expecting those who are responsible to bear the brunt. Even if China takes very little action early, others need to.

Also I am not sure in what sense the US is said to be “doing better” than the Kyoto nations. I don’t have the figures to hand, but I think France emits about 400 tonnes of carbon per million dollars of GDP, and the US about four times this amount.

2 William Bruntrager March 24, 2008 at 8:17 am

Can someone provide a source for the data on the CO2 output of Kyoto nations vs. United States? I know I’ve seen it somewhere but can’t seem to find it anymore.

3 Mitch March 24, 2008 at 9:36 am

France does indeed score pretty well on GDP/carbon emissions:
http://en.wikipedia.org/wiki/List_of_countries_by_ratio_of_GDP_to_carbon_dioxide_emissions

I would guess that’s because they get so much of their power from nuclear. Does anyone have a pointer to something solid on how they do so well?

4 Bill Stepp March 24, 2008 at 10:34 am

Mr. Sachs contends on the first page of the Wall Street Journal today that the world cannot sustain its current level of growth without new technologies.
And I contend that A is A. Should this be quoted on the front page too? A right-wing equivalent to Krugman would say he thought of this original idea even though Rand said it first, er, 2,643rd.

What is it about left-wing intellectualoids? Do they really think everyone else is so dumb that we can’t figure out the obvious?

5 Matt March 24, 2008 at 11:09 am

As far as I can tell, France is the only large developed country that has figured out Carbon emissions. Germany has a similar climate and political culture, yet does nearly twice as worse on the GDP/CO2 score. It would seem that the answer is overwhelmingly to go to Nuclear.

I also noticed that Canada does about 25% worse on GDP/CO2 than the US. That’s another issue here: some countries have climates which inherently require more energy consumption for temperature control. I found the UK, for example, to be very inefficient in their energy usage, yet they emit much less than America due to their temperate climate.

6 Matt March 24, 2008 at 11:38 am

Slocum, I believe McCain is against ethanol subsidies, although he’s not exactly shouting it from the rooftops.

7 Sovietologist March 24, 2008 at 12:22 pm

I looked at the book in the store just to see what Sachs says about nuclear power. I was pleased to discover that he doesn’t dismiss it, and says in a few places that it’s part of the solution. At the same time, he doesn’t really discuss it. Although I would have preferred a more thorough endorsement, I think it’s a good sign.

Things are really looking up for the nuclear industry. Barring some kind of serious setback, worldwide nuclear plant orders may return to mid-1970s levels within the foreseeable future. At the same time, the current LWR fuel cycle is inefficient and can only scale so far (it wastes nearly all of the potential energy in the uranium). Currently, there seems to be a growing consensus that the best solution to this problem is the Molten-Salt Breeder Reactor:
http://thoriumenergy.blogspot.com/2006/05/introduction-and-basic-principles.html

These reactors can combine excellent safety with the ability to breed fissile U-233 from Th-232, which is much more abundant in the Earth’s crust than Uranium. A recently discovered thorium deposit in Idaho definitely contains enough thorium to provide all of America’s energy needs at current rates for 450 years, and potentially enough for 1500+ years. The reactors can also be made from modular components and mass-produced, which LWRs cannot be. The reactors can also be designed to be exceedingly proliferation-resistant, thanks to the contamination of the U-233 with U-232. Thanks to high burnup, the waste problem is also greatly simplified- these reactors could even be used to burn current waste from the LWR fuel cycle.

Most importantly, this is not all pie-in-the-sky. A prototype reactor was built at ORNL in the 1960s and demonstrated the potential of the technology, demonstrating the negative thermal and void coefficients that make the design inherently safe.

8 Michael Martin March 24, 2008 at 12:40 pm

Small point here on Sachs’s call for looser intellectual property rights in the developing world:

Emerging economies need not implement a full-blown patent system (including examination of applications, &c.) in order to achieve many of the economic benefits of such a system. The U.S. and the U.K. did just fine for a few centuries granting patents of importation — i.e., exclusive rights to the importer of a particular new technology. The administrative costs of such a system are considerably lower; patents of importation would solve most of the concerns of the patent owners in rich countries; and granting some form of rights would probably also result in the earlier and wider dissemination of technology that Sachs wants by forging a neat political compromise between the developed and developing world — the domestic importers gets a slice to keep his incentives aligned with the foreign innovator’s desire for exclusive rights to the market; the foreign innovator gets the exclusive rights and some of the supracompetitive profits. You could probably get the curves to cross by tweaking the terms of the import deal. Then everybody gets something they want even if nobody’s happy.

9 Charles Young March 24, 2008 at 12:46 pm

To say that the US is “doing better” than the European countries seems an odd way of making the point that, though still incomparably less efficient in its use of earbon, it has slightly closed the large gap that still exists.

10 anon March 24, 2008 at 1:35 pm

I haven’t read Sach’s book, but I read his Scientific American column each month — generally he’s pretty smart about what climate change means and what needs to be done to correct. Much moreso than Al Gore. Sachs does advocate the expansion of nuclear power, along with technologies like clean coal (once they’re demonstrated & commercially viable). Basically he adopts a pragmatic approach. Any technology that can produce energy on a large scale while reducing emissions is on the table. The message he sends to environmentalists who insist on stopping emissions without coal & nuclear power is, essentially, “get over it.”

11 SteveSC March 24, 2008 at 3:40 pm

Over the last 10 years CO2 has gone up, temperature has gone down. Any effect on the global warming game?

If CO2 increases and temp increases: Scream bloody murder and SOMETHING has to be DONE!

If CO2 decreases and temp increases: Scream DOUBLE bloody murder because we HAVE to DO MORE!

If CO2 decreases and temp decreases: Oh how right we were and we have to KEEP UP the GOOD WORK!

If CO2 increases and temp decreases: Oops, that has been happening for 10 years; IGNORE that man behind the curtain!

Evidence supports a nonlinear relationship between CO2 and temperature, so any sound economic proposal has to include the scenario that human caused, CO2 based, global warming may be a big flimflam.

12 Ken March 24, 2008 at 8:32 pm

Assuming global warming is occurring is it really a problem? Do the costs of warming really outweigh the benefits? I don’t know and would like someone who knows to clue me in or give me some links to go after.

For example:

1. There are far more cold related deaths than heat related deaths. Places that have high incidents of disease because of tropical climates are due to poverty and government corruption. So it seems that warming will save lives. Is this true?

2. The warming that has occurred has been in higher latitudes, i.e., closer to the poles. Temperature differentials in the atmosphere dictate the ferocity of storms, which seems to imply that storm strength will decrease. Is this true?

3. Harvest times will be longer, allowing for more food to be grown in the course of the year. What is the magnitude of the benefits for this?

4. Since warming is occurring in higher latitudes, previously unused land will be arable. Again, this means more land to grow food. How large is this benefit?

5. How large are the costs of warming? It seems the largest cost is rising oceans. However, the level of rise seems to be modest over the next century. Most estimates put the most probable rise at just a few feet.

6. Other than 5. what are the other major costs of warming that aren’t directly related to poverty and government corruption?

7. Other than 5. what are the other major costs of warming that are directly related to poverty and government corruption?

That’s all I’ve got for right now. Does anyone have any ideas on the above?

13 jorod March 25, 2008 at 12:03 am

We are running out of oil, gas, coal. If we do nothing, we will use less fossil fuel. If we spend billions of dollars on alternatives, we will use less fossil fuel. Which way would you pick?

14 Paul March 25, 2008 at 12:23 pm

What puzzles me most about this debate is the presumtion the global warming will be costly. Is there any evidence of that being the case? I haven’t seen any. We are now three-quarters of the way towards an equivalent doubling of CO2 concentrations in the atmosphere. The result, if the extent temperature records can be believed (and there are many reasons why that might not be the case), we have experienced a 0.7 degree C warming over the last century. If global warming is going to be as costly as claimed, we should already be able to easily identify substantial costs. Instead, what we have experienced over the relevant time period is the most extraordinary increase in wealth and well-being the world has ever seen. I defy anybody to identify a single red cent lost due to increases in CO2 concentrations.

15 Daniel Reeves March 27, 2008 at 9:11 pm

SteveSC:

You’re wrong, as are most people on either side of the global warming issue (“holy crap it’s a huge problem!” or “humans have nothing to do with global warming!”).

http://www.reason.com/news/show/124393.html

Summary: there has been neither a statistically significant increase nor decrease in the last ten years.

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