I wrote before that part of the problem for climate hawks is that even expected damages from climate change are not that large. Not zero by any means but not as high as they would like. In particular a number of folks seemed to be upset with CBO testimony on the matter. Brad Johnson writes
The failure of the economics profession to come to grip with the clear science of climate change is a scandal that far outstrips its cheerleading of the housing bubble and other financial disasters. As previously discussed in the Wonk Room, conventional economics not only fails to accurately assess the threat of global warming, but also totally misrepresents the economic impact of taking action.
There are a couple of points to be made. First, they are doing analysis as it pertains to the United States, not as it pertains to the rest of the world. There are some big differences here because the US has an advanced, Northern Hemisphere economy.
The situation is different for some parts of the world, most notably Bangladesh and the analysis is considerably more difficult.
However, absent the entire global warming, anthropogenic debate, think about what economists would say if you said that over the next 100 years, from completely natural forces, the United States was going to get substantially hotter and its coasts were going to sink.
The debate would center around three possibilities.
The non-alarmists would say that we need to build seawalls and perhaps aqueducts in case of water shortages. Yet, more or less we should expect the primary response to be a booming air conditioning industry. America will become more like Phoenix and South Texas, and that seems to be good enough for the millions of people of flocked there over the last decade.
Those who were a little more concerned would say that we should start to rethink long-term infrastructure. No rail or even perhaps even highways for Miami. Its not going to be here so why dump money into it. Maybe we should also think about building infrastructure to the West of the Eastern Seaboard as well, as people will likely backup slowly. Lastly we might want to invest in some crop research for warmer climes and perhaps some tropical infectious disease prevention.
Those pulling their hair out would be talking about how we need plans to remake the Mid-West. People are going to be flooding back and the region is unprepared. Rather than letting the infrastructure rot, we need to be putting in major projects NOW! We need to create an economic substrate on which the New America can quickly be built.
There might also be a few radicals who mused about the opportunity to start some cities from the ground up, this time putting in mass transit first and institutions designed to stop anti-density constituencies.
In any case our core observation would also be three-fold. First people can and will move. They are not likely to just sit there while their town is flooded. There is enormous migration across the United States right now , mostly from colder places to warmer. We simply would expect that to reverse.
Second, temperature variation around the United States is so great now that even large increases in average temperature are not likely to create a United States were no place is, is a place people want to live.
Even as natural disasters increase people will either decide they want to live with them or move to safer ground. Its not like those of us in the Southeast are ignorant of the existence of Hurricanes or the fact that they can kill you.
Lastly, building new housing is not something the United States finds challenging. We absorbed 200 Million people over the last 100 years and new housing is typically only a small fraction of the economy. It uses the type of labor that is increasingly in less demand and so reigniting the housing industry would not be a major cost. We would have to come up with something and it would not enter positively into our damage calculations, but the damage would be small..
Getting the result that the US would fall off a cliff due to climate change as projected over the next century is hard to produce. If someone has data on how you might reach this conclusion I would be happy to hear it.
14 comments
Comments feed for this article
Friday ~ March 18th, 2011 at 9:45 am
Brian
Don’t environmentalists place a large value on keeping the earth the way it is?
Friday ~ March 18th, 2011 at 10:17 am
Chuchundra
well, yes, the USA is a wealthy and prosperous nation we’ll likely be able to adjust to the new climate conditions. Poorer countries, not so much, and a worldwide increase in displace people, refugees, famine, disease and political unrest will have a pretty negative effect on us as well.
On the other hand, it’s not impossible that runaway global warming will make the majority of the planet unsuitable for human habitation. That will solve most of our problems for us.
Friday ~ March 18th, 2011 at 10:18 am
Baseball Coaching Digest: What Is the Most Important Adjustment in Baseball? | BFree Baseball
[...] More on Climate Change in America « Modeled Behavior [...]
Tuesday ~ May 3rd, 2011 at 10:19 pm
Takeo
Thanks for sharing. Always good to find a real exrept.
Friday ~ March 18th, 2011 at 10:43 am
mn
Climate change is more than land and temperature fluctuations. This is a very weak article about climate change looking at a very narrow view of the issues. Even in your “light” scenario you assume we’ll have the resources to build sea walls up the east coast and air condition the country. You also fail mention the impact on food supply and the implications of further squeezing of fertile land for more homes. Then we come to the ever accelerating species extinction rate and how that can disrupt systems we rely on. And don’t forget there is the national security implications when other displaced societies try to find a better place to live. The DOD spends a lot of money and time on this issue. Compartmentalizing climate change into a small box may allow for easy dismissal but it prevents adequate planning for the next 50 years.
To Brian: No, most environmentalists don’t put large value on this. Environmentalists put a large value on understanding natural processes and how they effect and are effected by human intervention.
Friday ~ March 18th, 2011 at 10:49 am
Tom Fid
Looking at damage to capital in the US misses much of point. Damage outside the US, where people and infrastructure are more vulnerable, could be substantially worse, which in turn could trigger migration, conflict, etc. Since the US is fairly dependent on materials acquired abroad, that could be an expensive economic and military situation.
Similarly, its telling that your examples basically ignore ecosystem services. The point is not to keep the earth as it is, but that extinction is a fast process, and speciation is a slow one. Impacts on natural systems will be quite severe (less than one degree is already a big deal for forests in the northwest), so if nature matters at all, it’ll take a big hit. It’s hard to translate that to $ because of limited subsitution between built and natural capital. Europe suggests that you can go somewhat further down the development road without catastrophe, but how far does that go?
Your “no place is, is a place people want to live” is off base. Sure, people live in all kinds of climates. But they have very different adaptations for those. The transition won’t be a smooth interpolation from one to another; it’ll take a lot of up-front capital, and some risk because appropriate adaptations are hard to identify in advance. Also, temperature is probably not the biggest factor; water is.
Friday ~ March 18th, 2011 at 10:55 am
Lyle
You also neglect to consider where our consumer products actually come from. Perhaps rich countries can weather the loss of their coasts, perhaps. But I’ll wager most people don’t have the faintest idea how much of their lifestyle is made possible by cheap labor in those other, poor, countries.
Friday ~ March 18th, 2011 at 11:01 am
Roland
Karl, the danger is that estimates about the impact of climate change are range estimates. Further, we don’t know the probabilities. In other words, we don’t know if future outcomes will be normally distributed around the mid point or not. My greatest concern is that very harmful possible futures are concealed within a thick tail. The climate, as a uniquely complex system, may be prone to sudden shifts in equilibria which we can’t predict and won’t like…
Friday ~ March 18th, 2011 at 11:50 am
BSE
I’m probably sounding like a broken record on this, but Karl is badly underestimating the impact of climate change on the US in a way that I had thought I cleared up. Ironically this post shows why, but it seems that Karl is still ignoring the effect.
It is not right to just look at the raw GDP impact. Consider two possible worlds, we get to choose which one we will live in. In the first one, there is climate change and we have to divert production away from more productive uses and start building things like giant seawalls, more on AC, etc. In the second, we pay higher taxes which for the sake of argument slow growth, but there is no climate change.
Which of these would you prefer? It’s not obvious. In scenario 1), GDP is higher, but GDP is going to things that you don’t really want to have to build. In the second case, GDP is lower, but there is no need for this sort of thing. The welfare effect is ambiguous.
So, even in Karl’s ideal scenario, the social planner’s problem is not so easy. Since it has fewer uncertainties, she would probably choose option 2. She knows the cost of the tax on growth, but the total resources diverted to mitigate warming is much more difficult. And that is BEFORE we get into the possibility of the loss of capital stock/lives.
Friday ~ March 18th, 2011 at 2:32 pm
IVV
I keep thinking the two choices are:
1. We have climate change, and plenty is spent adapting to the change. GDP goes up, but plenty is spent on stuff that we would rather not spend it on.
2. We set up a series of taxes and drains on the economy, but we have climate change anyway, and we refuse to acknowledge it as we keep blaming one another instead of studying precisely the mechanisms behind the climate change. GDP goes down, disasters are more common, and no one is happy.
I believe climate change is something that we must adapt to, whether or not we are responsible for it. I certainly hope and believe we are responsible, because research into climate change can lead to research for terraforming. Perhaps we can figure out how to green the Sahara again. But it’s all going to take a lot of accepting that climate change is here to stay, something that neither loud side is willing to accept.
I see climate change like puberty. Going through puberty hurts, a lot changes, things aren’t the way they used to be. But by all means, you don’t try to stop puberty. You try to make sure you don’t come out a maladjusted wreck on the other side (which is certainly possible).
Saturday ~ March 19th, 2011 at 1:18 am
Methuselah
Interesting approach, but it doesn’t seem like you’ve researched the deep bench of the multiple predicted impacts of climate change. As the comments above note, the broadest overview of the issue boils down to what would you rather spend your GDP on, but that really doesn’t do the subject justice.
It doesn’t appear that you’re familiar with the data assessing the specific regional impacts predicted for the US in the most comprehensive assessment to date. If not, see how close your ideas are to the future conditions US scientists predict: http://www.globalchange.gov/publications/reports/scientific-assessments/us-impacts/regional-climate-change-impacts/southwest
The challenge will likely be feeding 9 billion people rather than manufacturing enough AC units. Simply moving agriculture to northern latitudes will not change the angle of the sun, lengthen the growing season, or create good quality soil.
Let’s put it in personal terms — calculate how old you’ll be in 2030 and 2050, approaching or in retirement, when the impacts detailed in the report are predicted to manifest in earnest (if not earlier). All those people in less-desirable areas will likely insist on relocating, following the food and water. You may be one of them.
I’ll be long gone by then, as my handle implies, but I do wish you all the best of luck.
Saturday ~ March 19th, 2011 at 9:03 am
stickman
When it comes to disagreements over climate change and the environment, the fundamental issue IMHO is the concept of opportunity cost. For an economist, the key questions are: What trade-offs are involved in aggressive emissions policy, and where will my investment yield the biggest return?
So, it’s not that (certain) economists believe climate change won’t bring negative affects, all other things being equal…. Rather, the alternative of aggressive emissions policy could be even more detrimental by unnecessarily curbing economic growth. Thus, the fault of non-economic reasoning is to think in terms of absolute, rather than relative, outcomes.
Non-economists, for their part, might levy valid counter changes against economists. That we do not adequately value environmental systems and biodiversity, ethical norms, etc.
That being said, I believe that we are moving closer and closer towards satisfying all aspects of the issue; for both economists and environmentalists. In this light, there are at least three broad economic arguments for aggressive action against climate change:
1) Ethics (Underpinning the Stern Review, for instance… Think Bangladesh versus the US, as mentioned in the post above)
2) Fat-tail events (As espoused by Marty Weitzman’s “Dismal Theory”… Think low-probability, high-impact events like we have just seen in Japan)
3) Changing relative prices between man-made and environmental goods (About the simplest and most compelling reason, from my perspective… The idea that man-made goods and environmental goods are imperfect substitutes. As environmental goods become scarer due to climate change, their relative prices will rise next to man-made goods and crowd-out our ability to generate future wealth. Think escalating food prices due to droughts, etc. I have tried to explain this concept in more depth, as well as link to some very good journal papers on the subjecthere and here.)
o-[-<
Saturday ~ March 19th, 2011 at 9:07 am
Barry
Adding on:
“In any case our core observation would also be three-fold. First people can and will move. They are not likely to just sit there while their town is flooded. There is enormous migration across the United States right now , mostly from colder places to warmer. We simply would expect that to reverse.”
I find this interesting, because you mention this as if there were no costs associated with that – an odd thing for an economist. You’re basically saying that we should throw away large chunks of our infrastructure.
“Second, temperature variation around the United States is so great now that even large increases in average temperature are not likely to create a United States were no place is, is a place people want to live.”
This is again looking at the problem with incredibly simplicity, and carries the same problems.
Saturday ~ March 19th, 2011 at 5:15 pm
Brad Johnson
Karl needs to recognize that the scenario Stern was discussing was uncontrolled warming of 6C this century — that is to say, about 10 times as much warming as the world experienced over the 20th century.
Even ignoring (which one shouldn’t) the unpredictable consequences of the rapid rate of change in the climate system, a snapshot in 2100 sees pretty much the complete collapse of ocean life from warming, sea level rise, and acidification; the collapse of planetary biodiversity (every climax ecosystem will have been destroyed) involving the extinction of maybe half of the planet’s species; desertification over vast swaths of the planet, including the American southwest; up to 2 meters of sea level rise (by the end of the century, we’d be potentially looking at a rate of 1 foot/decade); etc. The planet would be warmer than it’s been for 30 million years.
This ain’t just about a few seawalls and aqueducts.