Wednesday, November 01, 2006

The Economics of Climate Change

A couple of days ago I wrote about the findings of the Board of Governors for the Federal Reserve that current economic policies combined with demographic realities (aging population) threaten to cost future generations 14% of their gross domestic product.

At the same time, another set of economists in England produced a 700 page report that concludes that unchecked global warming threatens to cost future generations 20% of their gross domestic product.

In both cases, we can avoid much of these future costs with current investment. Ben Beneke, the head of the Federal Reserve Board, said that a current increase in the national savings rate of 3% can reduce the future cost of current economic policies from 14% of GDP to 4% of GDP. The savings will go to investment, which will make future workers more productive, which will make them more able to pay the costs of social security, Medicare, and Medicaid that will otherwise do great harm to the future economy.

In the issue of global warming, the British report said that, if we take immediate action, we can reduce the future cost of global warming (partially by reducing global warming) to 1% of GDP.

So, we have a choice - to continue to pursue policies that threaten to destroy over 30% of the future economy, or to invest 4% of current GDP to reduce the damage to the future economy to 5%.

The Relevance of Error

Of course, these predictions are based on models that have a significant propensity to error. However, let us understand this possibility of error correctly. I hear a lot of people making the foolish claim, "Your predictions might be wrong; therefore, we should not do anything." The argue as if the possibility of error is a defense of inaction.

This is actually an example of the famous fallacy, "Argument from ignorance." It is like arguing, "There is a possibility that the mushroom you have picked is poisonous. However, you do not know for sure. Therefore, it is okay to go ahead and eat it." Or, "There is a possibility that the metal plate sitting on the stove is hot. However, you do not know for sure, so you should feel free to go ahead and grab it with your bare hands."

No . . . this type of argument is utter foolishness. If any candidate for public office uses an argument such as this, then anybody who makes a decision to vote for such a candidate is making a decision to be governed by fools. Fools have a bad habit of making some extremely costly mistakes. It is one thing for the fool to destroy his own life, health, or fortune through his actions - it is quite unforgivable to give the fool authority to destroy the lives, health, and fortunes of others.

In fact, we are making exactly this discovery with respect to global warming. For years, people (funded, for example, by oil companies who have no moral problem pursuing policies that threaten the destruction of every coastal city so long as it is profitable for them to do so) have been saying, "Your computer models are uncertain; therefore, your predictions of dire consequences are irresponsible."

It turns out that those models were mistaken. Each year, scientists are measuring results that are worse than the models predicted. For example, the ice caps are melting faster than expected to the point that model predictions of a 3 foot rise in sea level over 100 years are turning into predictions of sea level rise of between 23 to 230 feet over a few centuries.

Plus, the earlier models did not consider the possibility of global warming thawing the methane ice on the ocean floor, flooding the atmosphere with methane gas, adding yet another boost to global warming. What is the tipping point for this thawing? Well, the models are uncertain.

The only argument that can possibly be made to support the conclusion that we should not take action right away is an argument that says, "These experts are wrong. I obviously know a great deal more than they do. With my superior intellect, I predict that the effects will be far less severe, and that we do not need to take action." Ignorance is no defense of policies of inaction - only a claim of superior intellect and knowledge that these experts are wrong can defend inaction.

People who make this type of claim are engaging in a kind of intellectual recklessness comparable in scope to (and, in fact, orders of magnitude worse than) doing experiments with a highly contagious plague bacteria in their kitchen, or working on a nuclear warhead that might detonate in their basement. The level of destruction that their recklessness might unleash is that great.

No politician who is this irrational and intellectually reckless deserves a seat in anywhere in government.

Bush Administration Counter Claims

Of course, the Bush Administration protests that it is working hard to fight global warming.

Bush’s press secretary, Tony Snow, responded to questions about the report by saying, “In 2002, in February, the President committed to cutting greenhouse gas intensity, how much we emit per unit of economy activity by 18 percent. Well, guess what. The intensity declined 2 percent in 2003, and another 2.5 percent in 2004. They're ahead of goals. We're cutting back.”

Mr. Snow lied - or at bets proved a willingness to say whatever sounds good without checking to see if it is true. Initial estimates showed a decline, but final numbers released by Bush’s own energy department showed 2003 and 2004 experienced net increases in greenhouse gas emissions – following declines in 2001 and 2002.

If the Bush Administration wants to claim credit for those years of reduction, it would have to claim that it intentionally caused the economic slowdown during those years as their tool of choice for reducing greenhouse gas levels. The economic slowdown caused this reduction. Bush must either claim the slowdown as a matter of policy, or allow that the reduction happened in spite of, and not because of, the actions of his administration.

These people are liars who will say anything for a vote.

Also, I wrote just three days ago about how the Bush Administration cancelled research projects to provide information about global warming.

Perhaps Bush thinks he can come up with sound policy without data. Perhaps he thinks that all he has to do is pray hard enough and God will tell him everything he needs to know about the climate. "No, no. You don't need those satellites to determine how good our policies are. I'll pray on the issue this evening and I'll be able to tell you by tomorrow morning just how wise my policies have been."

Rational people view uncertainty with the possibility of bad consequences as a bad time to quit collecting data. Look back on the examples of eating poisonous mushrooms or picking up a potentially hot plate. Rational people respond to these situations by conducting experiments and collecting data. Given that they must eat (as we must consume energy), they test potential foods to determine what is edible. If they must move the plate, they find a way to test how hot it is before they grab it and move it.

This idea seems quite foreign to the Bush Administration who, it appears, thinks that they can learn everything from the presence and location of weapons of mass destruction in Iraq to the after-effects of an invasion to the status of the dikes around New Orleans though divine guidance.

What should we do when experts disagree?

Well, when experts disagree, we have a problem. However, neither of these issues are cases where experts disagree. The only 'disagreement' we see is the propaganda put out by public relations firms paid for by industry executives who apparently care nothing about the destruction they might cause in their pursuit of profit. It's a case of poorly funded science education going up against well-funded scientifically engineered (through the use of polls and focus groups) lies that would cease to be effective if they allowed the population to become scientifically literate.

Why are the scientific findings so poorly funded?

Because the people who we are doing harm to have no money or political power to defend themselves with. They are not permitted to vote, because they are too young (or have not been born yet). The only money they have is what they collect on their paper routes and from raking their neighbor's yard, or the $20 that they find in the birthday card they get from grandma and grandpa. Therefore, they have no power to pit their interests against ours in the political arena. The only hope that they have of having their interests considered is for those who do have money and who can vote to consider those interests.

We will be able to see by how people vote how concerned they are with the idea of possibly destroying over 30% of their children's and grandchildren's future wealth so that they can have 5% for themselves.

1 comment:

Bill said...

The Whitehouse Press Secretary was not really lieing. Emissions intensity depend on emissions, population and GDP. Emissions intensity can actually drop, with an increase in emissions, an increase in population, and an increase in the GDP, if the GDP and population is growing faster than emissions. Although, most people don't really know the difference and think the President is talking about actually reducing our emissions overall, which is not the case.

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