by Tyler Cowen
on August 27, 2010 at 10:34 am
1. China car story of the day.
2. David Brooks on the Germans.
3. Very good post on whether ex post compensation can help much with climate change.
4. Mexico drug gang hiring pretty hitwomen.
5. Bang ye, or "exposing grandfathers."
I thought “Bang ye” was the new hip hop hit by Amish Mafia.
This is the E21 piece cited by Brooks:
Why is it that so many climate change activists are worried about imposing multi-trillion dollar costs on distant generations, while being not even remotely disturbed by a multi-trillion dollar debt that needs to be repaid one day?
In addition, you simply can’t have a discussion about the costs of climate change without considering the discount rate. How much should we discount one trillion dollars in damage that will occur 100 years from now? It’s a crucial argument because for reasonable values for future damage and discount rates similar to what we use today for long-term investment the answer is, “not very much.” But because that’s not an acceptable answer to climate activists they use concepts like ‘social discounting’ which allows them to treat damage 100 years from now as having a full net present value.
Next, the climate change models suggest that for climate change up to 2-2.5 degrees there will be a net economic benefit to the planet. And that phase comes sooner and may last for a long time. So the net present value of the benefits of climate change are a larger fraction of future benefit value than are the net present costs of future economic loss.
Finally, given the error bars around the various models, the probability that the warming will remain in the ‘net benefit’ range indefinitely or at least for a very long time is much greater than the probability of the worst-case scenario where damage comes relatively soon and is extensive. So any determination of the present value of climate change damage has to take those probabilities into account.
No one likes to talk about these issues because once you get away from the simplistic physical models of the atmosphere and start looking at the economics, it suddenly gets a lot fuzzier and the ground gets a lot shakier for climate activists. And on the other side, the climate change deniers don’t like to engage in this argument because they aren’t willing to concede that man-caused climate change is happening in the first place.
I’m a believer in man-caused climate change. But until I see the paper that suggests this year’s extreme weather events are related, I’ll be skeptical. The climate change signal is actually quite small – one to four degrees per century. The annual temperature variance due to random factors is several orders of magnitude greater. On a yearly basis, solar output variability is a larger factor, as are terrestrial events like the change in ocean currents and volcanic activity.
And somehow, I don’t think there is much of a market for papers which show that climate change has resulted in lower energy use in northern countries or longer growing seasons and that climate change activists will say, “Oh, I guess now we can lower the price of carbon taxes.” The science only seems to work in one direction. Probably because there’s only one conclusion that tends to pay off in terms of funding and prestige. There are bad incentives in the climate change economy.
Hey, I’m just following the science. You do believe in global warming science, don’t you? The UN’s IPCC report says that the primary effects of minor warming will be a moderation of nightly temperatures in the northern regions, coupled with slightly longer growing seasons and the opening up of more land in the north for agriculture.
There are other positive economic effects, such as the reopening of the Northwest Passage which will cut shipping costs and the energy required to move trade goods around.
These effects will result in a net global economic benefit, because they will offset the negative effects in the tropical zones. It’s only when warming goes past about 2.5 degrees that the extent of the damage to coastal and tropical regions will outweigh the economic benefits to the colder regions of the planet.
If you don’t like that conclusion, take it up with the UN.
Re 2: David Brooks. I believe that German response to the crisis was sounder than the US one, but in all fairness, it is the decline of US house prices that is at the core of economic downturn here. US, UK, Spain – all saw steep declines in real estate prices and suffered sharp downturn. Countries like Germany, and even Japan, did not see the home price decline and are fairing much better. So, let’s not compare apples and airplanes.
Bang ye, or “exposing grandfathers.”
Why don’t they try wearing shorts and sandals. Much cooler.
I would like to thank you for the efforts you have made in writing this article.
Article is very nicely written.
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