Economists are out of touch with climate change

IN the debate over climate change, there is one group you don't hear much from: economists. The failure of climate economics to make a difference in the public discussion about climate policy should be a concern for the profession. Climate economists are just as worried as anyone about the prospect of global warming. A recent survey by the Institute for Policy Integrity found that most climate economists believe climate change is a grave threat. Most supported carbon taxes or cap-and-trade programs to limit emissions, even if these actions were taken unilaterally by the U.S. The consensus view was that a catastrophic loss of global gross domestic product -- a 25 percent decline or more -- is possible under a "business as usual" scenario.

But for all this concern, climate econ research has had little impact on the public debate. The problem, as far as I can tell, is that there is a disconnect between climate science and economics. This goes beyond the out-ofdate forecasting models used by policy makers. Even within academia, research often uses bad science.

The first climate econ paper I ever read provides a nice illustration of this problem. In 2007, Michael Greenstone of the University of Chicago and Olivier Deschenes of the University of California-Santa Barbara published a paper entitled "Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US." The paper tried to estimate how many people would die as a result of global warming. To do this, the authors calculated how many people now die from random temperature fluctuations, due to things like heatstroke. They then extrapolated this effect using the expected temperature increase from climate change, and found that the probable increase in mortality is small.

But there is an obvious problem with this type of analysis, which even a second-year grad student took about five seconds to figure out. Global warming will probably kill people a lot more ways than days of extreme heat do now. If the climate changes a lot, floods will become more common in low-lying areas. Hurricane Katrina provided an example of how a large flood can cause a lot of deaths. This has nothing to do with the mechanism studied by Deschenes and Greenstone -- the authors just leave it out. If they had paid more attention to science, they would have taken more sources of mortality into account.

This paper demonstrates how climate economics can go astray. But it is far from an unusual or solitary example. In 2011, the Stockholm Environment Institute published a report that chided climate economists for their failure to keep up with scientific advances. They glumly report:

Regrettably, climate economics tends to lag behind climate science, especially in the slow-paced, peer-reviewed economics literature. The analyses rarely portray the most recent advances in climate science; instead, they often incorporate simplified representations of scientific knowledge that is out of date by several years, if not decades. Moreover, climate economics has often been hampered by its uncritical adoption of a traditional cost-benefit framework, minimizing or overlooking the deep theoretical problems posed by uncertainty, intergenerational impacts, and long-term technological change.

The disconnect between economics and natural science is certainly part of the problem. Economists are notoriously unwilling to cite research in other social science fields, and this insularity -- sometimes called siloing -probably leads them to ignore the natural sciences as well. But many economic phenomena are critically dependent on natural phenomena, so neglecting science can make econ models spit out ludicrous results. Economic models, like any other, are subject to the problem of garbage in, garbage out.

This shortcoming plagued a second paper by Deschenes and Greenstone; when they tried to estimate the impact of climate change on agriculture, they were criticized by some of their colleagues for using out-of-date science.

The Stockholm Environment Institute report goes on to detail a number of ways in which econ could improve by paying more attention to the latest science.