Paul Krugman and the non-negligible probability of utter disaster

by: Jay Stevens

Mon Apr 12, 2010 at 09:37:07 AM MST

Read it. It's one of the better single-piece story laying out the case for government action on climate change I've seen.

And here's a quote that's especially relevant to Montana:

That said, some specific rules may be required. James Hansen, the renowned climate scientist who deserves much of the credit for making global warming an issue in the first place, has argued forcefully that most of the climate-change problem comes down to just one thing, burning coal, and that whatever else we do, we have to shut down coal burning over the next couple decades.

More below the fold...

This reaction - this extreme pessimism about the economy's ability to live with cap and trade - is very much at odds with typical conservative rhetoric. After all, modern conservatives express a deep, almost mystical confidence in the effectiveness of market incentives - Ronald Reagan liked to talk about the "magic of the marketplace." They believe that the capitalist system can deal with all kinds of limitations, that technology, say, can easily overcome any constraints on growth posed by limited reserves of oil or other natural resources. And yet now they submit that this same private sector is utterly incapable of coping with a limit on overall emissions, even though such a cap would, from the private sector's point of view, operate very much like a limited supply of a resource, like land. Why don't they believe that the dynamism of capitalism will spur it to find ways to make do in a world of reduced carbon emissions? Why do they think the marketplace loses its magic as soon as market incentives are invoked in favor of conservation?

Clearly, conservatives abandon all faith in the ability of markets to cope with climate-change policy because they don't want government intervention. Their stated pessimism about the cost of climate policy is essentially a political ploy rather than a reasoned economic judgment....

It's obvious that Republican opposition to cap-and-trade and other reforms to fight global warming are simply partisan political efforts to win elections. What's not said here is how this rhetoric is endangering getting any policy enacted to head off environmental catastrophe. Say the Republicans do win back majorities in the House, Senate, and the White House. They'll be handcuffed by the very rhetoric they sowed to win their majorities into doing...nothing. Just like the last 10 years of Republican rule.

That's not an option. Krugman:

You might think that this uncertainty [of climate prediction models] weakens the case for action, but it actually strengthens it. As Harvard's Martin Weitzman has argued in several influential papers, if there is a significant chance of utter catastrophe, that chance - rather than what is most likely to happen - should dominate cost-benefit calculations. And utter catastrophe does look like a realistic possibility, even if it is not the most likely outcome.

Weitzman argues - and I agree - that this risk of catastrophe, rather than the details of cost-benefit calculations, makes the most powerful case for strong climate policy. Current projections of global warming in the absence of action are just too close to the kinds of numbers associated with doomsday scenarios. It would be irresponsible - it's tempting to say criminally irresponsible - not to step back from what could all too easily turn out to be the edge of a cliff....

Personally, I lean toward the big-bang view. Stern's moral argument for loving unborn generations as we love ourselves may be too strong, but there's a compelling case to be made that public policy should take a much longer view than private markets. Even more important, the policy-ramp prescriptions seem far too much like conducting a very risky experiment with the whole planet. Nordhaus's preferred policy, for example, would stabilize the concentration of carbon dioxide in the atmosphere at a level about twice its preindustrial average. In his model, this would have only modest effects on global welfare; but how confident can we be of that? How sure are we that this kind of change in the environment would not lead to catastrophe? Not sure enough, I'd say, particularly because, as noted above, climate modelers have sharply raised their estimates of future warming in just the last couple of years.

So what I end up with is basically Martin Weitzman's argument: it's the nonnegligible probability of utter disaster that should dominate our policy analysis. And that argues for aggressive moves to curb emissions, soon.