John Cassidy on the Economics of Climate Change

I’m very

interested in the economics of climate change, and it’s great that John

Cassidy has an article on the subject in the May issue of Portfolio.

But I have to admit that I’m very disappointed in the tone that Cassidy decided

to take.

First, the headline – "Learning to Love Global Warming" –

is just dreadful. Global warming is not something that we should learn to love,

it’s something we should learn to fear and try to avoid.

Cassidy then leads off with a story about an unseasonably warm day in New York

this past winter:

With the temperature in the low 70s, the garden was thronged with people

in T-shirts and shorts. -After looking in astonishment at the pink blossoms

that had come out at least two months early, I did a quick cost-benefit analysis

of this presumed product of climate change.

I’m not sure who’s doing the presuming here: Cassidy knows full well that you

can’t draw a direct causal relationship between climate change in general and

a single warm winter’s day in particular. But if you’re going to take extreme

weather events and calculate their costs and benefits, it’s positively dishonest

to use a nice day in Brooklyn rather than, say, Hurricane Katrina.

Cassidy then launches into a list of the winners and losers from global climate

change. Here’s a list of the places he mentions: California’s Central Valley,

Florida, the Northeast [of the USA, which goes without saying], the Mediterranean,

Saint-Tropez, northwestern Europe, Scarborough. Here’s some of the places he

doesn’t mention: Africa. India. Bangladesh.

Any honest accounting of the effects of global climate change has to be, well,

global. And there’s simply no way that the benefits to Scarborough can offset

the costs to the 900 million people living in the Indo-Gangetic Plain, to take

just one example of an area which will be devastated by global warming.

Cassidy then quotes Yale’s Robert Mendelsohn talking about

the effects of mild global warming on countries in the polar region and in mid-latitudes,

and concluding that "warming benefits and damages will likely offset each

other until warming passes [4.5°F], and even then [the cost] will be far

smaller on net than originally thought."

I haven’t seen Mendelsohn’s sums. But it does seem that he’s taking a lot of

advantage from the fact that the world’s poor, who will bear most of the brunt

of global climate change, will also be the hardest hit. If Canada benefits and

India is severely damaged, the net effects in terms of GDP might "offset

each other", although I doubt it. But that doesn’t mean that the outcomes

are economically equivalent. After all, India has a lot more potential for future

growth than Canada does. And if you take into account the opportunity cost of

curtailing India’s future growth, I don’t think you can be quite as sanguine

as Mendelsohn appears to be.

Cassidy does dip his toe into the contentious question of discount rates, setting

up Sir Nicholas Stern on the one side and William Nordhaus

on the other. That’s fair enough, but I don’t think it’s fair to put John

Quiggin in the middle. Quiggin, as any reader of his will know, is

very much on

Stern’s side of the debate.

And although Cassidy does talk about preventing global warming as a useful

insurance policy, he does so thusly:

Statistically speaking, it is unlikely that a 40-year-old man will get run

over by a bus in a year’s time, but he takes out a policy just in case.

Similarly, there may be only a small probability that unchecked growth in

emissions would exacerbate global warming, but why take the risk?

No, John, there may not be "only a small probability that unchecked

growth in emissions would exacerbate global warming". In fact, there’s

is a pretty much a 100% probability that unchecked growth in emissions will

exacerbate global warming.

Cassidy tells us that he isn’t "secretly working for a corporate-funded

think tank that churns out skeptical studies on global warming". Maybe

he should be, if he keeps on writing stuff like this.

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