Wednesday-Night

August 1
Please see Can this planet be saved? by Paul Krugman
With thanks to the remarkable Foad Mardukhi [foadmardukhi@hotmail.com] for yet another excellent round-up of opinion that counts.
Foad notes “that the authors of all the pieces below are highly respected economists, including two Nobel prize winners (Schelling and Stiglitz) and two John Bates Clark Medal recipients (Stiglitz and Krugman). Stiglitz, Schelling, Krugman, Sachs, Klemperer and Posner teach at Columbia, Maryland, Princeton, Columbia, Oxford and the University of Chicago, respectively.”

NYT on conservative judge and scholar Richard Posner’s book on the economics of risk:

Posner made his name defending an economically rational approach to the law, and his new book is dense with complex calculations of the expected costs of catastrophic events, and the amount worth spending in attempts to avert them. The expected costs of a future event are the costs of that event, if it should happen, divided by the probability that it will happen. Thus, if I offer you $1,000 if a tossed coin turns up heads, the expected cost of my offer is $500. (Suppose I offer you $100,000 if a card drawn at random from a full pack is the ace of spades. Would you prefer that offer to $1,000 tied to the toss of the coin? Anyone interested in maximizing his assets would: the expected cost of that offer to me — and hence the expected value to you — is $1,923.)
…In the third and most difficult chapter of ”Catastrophe,” Posner explores ways of calculating the costs of catastrophic risks and of possible responses to them. He rebuts the claim that it is not cost-effective to do anything about global warming, an argument that invariably relies on heavily discounting disasters that will not occur for 50 or 100 years. We may wish to invest money to generate wealth rather than spending it to avert gradual global warming, but, as Posner suggests, the victims of the warming are likely to be concentrated in poor countries and will not necessarily benefit from the increased wealth generated by the richer nations. (On the other hand, abrupt, spiraling global warming that flips over into a deep freeze could kill us all, and then increased wealth will not do us any good anyway.)

FT op-ed by Oxford economist Paul Klemperer titled “If climate sceptics are right, it is time to worry”:

Al Gore says the science on global warming is clear and there is a major problem. Vaclav Klaus, Czech president, contends that climate change forecasts are speculative and unreliable. Whose claims are scarier?
Of course, Mr Klaus exaggerates (he is a politician) but if he is partly right, we should be more concerned, not less. Consider an analogy. If, like many of my neighbours in Oxford, you believe that new building exacerbates flooding, how would you feel if models that predicted bad news were discredited?
It depends. If the original models were biased, your best guess of the height of future floods is now lower. But if the models merely underestimated the uncertainty, the range of plausible outcomes is now greater, so flood defences would need to be higher for us to feel safe.
Likewise, if our understanding of climate systems is flawed, our best guess about the dangers we face may be less pessimistic, but extreme outcomes are more likely.
…How confident can we be about the way a system as complex as earth will respond to conditions it has never encountered before? Although greater uncertainty means climate change might be less bad than we fear – for example, an “iris” effect means increases in cloud cover may slow global warming – it also means it might be much worse. While the central predictions of climate change models are arguably not so much worse than many other difficult problems the world faces, the worst possibilities are far, far nastier.
Consider the “clathrate gun hypothesis” that warming seas could lead to clathrates (the frozen chunks of methane at the bottom of the sea) exploding into the air, which is what might have caused mass extinction at the end of the Permian era. Or the concern that the carbon dioxide could cause hydrogen sulphide gas to build up first in the oceans then in the atmosphere, exterminating most of life (and potentially also attacking the ozone layer, permitting the sun’s ultraviolet radiation to kill remaining life) – this, too, has been blamed for previous mass extinctions.
…The continuing scientific uncertainty about the pace of climate change should make us more concerned, not less. And it is those who doubt the climatologists’ models who should be the most frightened.

Earlier FT op-ed by Oxford economist Paul Klemperer titled “Awkward questions on behalf of our children”:

These outcomes may matter even if they are unlikely, just as the risk of your house being gutted by fire also matters. Even if the costs of mitigating climate change are not quite as small as the 1 per cent of GDP that the Stern Review on the Economics of Climate Change estimated, we might still be happy to pay them to prevent a small chance of catastrophe – just as most of us insure our houses even though we know the insurance companies make money from the odds they offer us.

Nobel economist Thomas Schelling in a column titled “Uncertainty and Action on Climate Change”:

For some, particularly the Bush administration, uncertainty regarding global warming appears to be a legitimate basis for postponing action, which is usually identified as “costly.” But this idea is almost unique to climate change. In other areas of public policy, such as terrorism, nuclear proliferation, inflation, or vaccination, an “insurance” principle seems to prevail: if there is a sufficient likelihood of significant damage, we take some measured anticipatory action.

An essay on climate change by Nobel economist Joe Stiglitz titled “The Most Global Issue”:

The world is engaged in a grand experiment, studying what happens when you increase carbon dioxide and other greenhouse gases in the atmosphere by larger and larger amounts. The scientific community is fairly sure of the outcome – and it is not pretty. The gases act like a greenhouse to capture solar energy and, gradually, the Earth warms up. Glaciers and polar ice melts, ocean currents change, and sea levels rise. It is not yet clear how long this will take to happen, but it has been taking place far faster than even many pessimists thought even ten years ago, with far more adverse consequences.If we had access to a thousand planets, then you could imagine conducting such an experiment on one, and if things turned out badly – as the vast majority of scientists worry it will – moving on to the next. But we don’t have that choice; there isn’t another planet we can move to. We’re stuck here on Earth.
No issue is more global than global warming: everyone shares the same atmosphere. So while the United States alone adds almost six billion tons of carbon dioxide to it every year, contributing to climate change, everyone everywhere else will suffer the consequences. If the greenhouse gases emitted by the United States stayed over its territory, America could conduct its own experiment to study the results of filling the air over its cities with these gases. But, unfortunately, carbon dioxide molecules do not respect borders.

Columbia economist Jeff Sachs from a recent appearance on Charlie Rose:

Because power plants last for 50-60 years, because buildings last for 50-100 years, because the automobile fleet has a 20 year turnover, we have to start now if we’re going to be able, without a cataclysm, to make the changes by mid-century to keep the amount of carbon dioxide in the atmosphere to safe levels.

Stilgitz column titled “A Cool Calculus of Global Warming”:

Still, some suggest that because we are not certain about how bad global warming will be, we should do little or nothing. To me, uncertainty should make us act more resolutely today, not less. As one scientist friend puts it: if you are driving on a mountain road, approaching a cliff, in a car whose brakes may fail, and a fog bank rolls in, should you drive more or less cautiously? Global warming is one of those rare instances where the scientific community is more fearful of what may be happening than the population at large. Scientists have glimpsed what the future may portend.
As the Stern report points out, as usual, the poor are the most vulnerable. A third of Bangladesh will be underwater by the end of this century. The Maldives and a host of Pacific Island states will disappear: our twenty-first-century Atlantis.
To an economist, the problem is obvious: polluters are not paying the full costs of the damage they cause. Pollution is a global externality of enormous proportions. The advanced countries might mean Bangladesh and the disappearing island states no harm, but no war could be more devastating.
A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.

Finally, a profile of Krugman as economist and pundit in the IMF’s quarterly magazine:

Economics made Paul Krugman famous. Punditry has made him a celebrity, famous for being famous. But Krugman aspires to be long remembered, and, in this respect, John Maynard Keynes is the gold standard. Keynes left his mark in three distinct ways: through the power of ideas, through the art of public persuasion, and through the shaping of historic changes. This last is denied to all but those who find themselves at the right place at an epochal time. But on the first two scores, at least, Krugman may well become the first person outside the field of literature to win both the Nobel and Pulitzer Prizes, the acme of achievement in academics and journalism.
…But Krugman, like James Meade, is a rare economist whose accomplishments at the highest level span both of these subfields. He opened up the study of trade under increasing returns and imperfect competition and later resuscitated the study of economic geography. And his work on currency crises and exchange rates has been highly influential. In 1991, he was awarded the John Bates Clark medal in recognition of his “significant contribution to economic thought and knowledge.” The cognoscenti know that this honor, which is awarded once every two years to an economist under 40, is a little more difficult to win than the annually awarded Nobel Prize.