Economists high­light­ing cli­mate change dan­gers

The Irish Times - Business - - FRONT PAGE - John FitzGer­ald

As­tudy of the eco­nom­ics pro­fes­sion in the United States, un­der­taken a num­ber of years ago, found that aca­demic pa­pers in eco­nom­ics rarely re­ferred to the work of other so­cial sci­en­tists, while other so­cial sci­en­tists quite of­ten ref­er­enced the work of economists. This sug­gested a cer­tain “in­su­lar­ity” in the pro­fes­sion.

How­ever, many of the win­ners of the No­bel Prize for eco­nom­ics in re­cent years are no­table for their mul­ti­dis­ci­plinary ap­proach to solv­ing eco­nomic prob­lems. The world of eco­nom­ics is chang­ing.

The first non-econ­o­mist to get the prize for eco­nom­ics was the 2002 win­ner, psy­chol­o­gist Daniel Kah­ne­man. Last year Richard Thaler, who had worked with Kah­ne­man, won the prize for his con­tri­bu­tions to be­havioural eco­nom­ics. Among the in­sights that this work has brought to eco­nom­ics is the im­por­tance of tak­ing ac­count of the way in­di­vid­ual de­ci­sion-mak­ing is af­fected by many dif­fer­ent fac­tors, not just rel­a­tive prices, and that pol­icy needs to take this com­plex­ity into ac­count.

This year’s No­bel Prize for eco­nom­ics has been awarded to two economists – Paul Romer for his work on the fac­tors driv­ing eco­nomic growth and Wil­liam Nord­haus for his work on the eco­nom­ics of cli­mate change. In the case of Nord­haus, much of his ca­reer has been de­voted to in­te­grat­ing the in­sights from cli­mate sci­ence with that of eco­nom­ics, help­ing us un­der­stand the dam­age done by cli­mate change and how best pol­i­cy­mak­ers should re­spond to this threat to hu­man­ity. Early in his ca­reer, he worked at the In­ter­na­tional In­sti­tute for Ap­plied Sys­tems Anal­y­sis in Vi­enna, an in­sti­tu­tion that brings to­gether sci­en­tists from var­ied back­grounds to study en­vi­ron­men­tal, eco­nomic, tech­no­log­i­cal and so­cial is­sues. It was an un­usual ca­reer move for an econ­o­mist who sought to climb the aca­demic lad­der in the US. How­ever, what he learned in Vi­enna, work­ing with cli­mate sci­en­tists, has al­lowed him to make a ma­jor con­tri­bu­tion to eco­nom­ics over his sub­se­quent ca­reer.

Nord­haus be­gan re­search­ing cli­mate change in the 1970s, long be­fore most us were aware of the is­sue. He pub­lished an im­por­tant pa­per en­ti­tled Eco­nomic Growth and Cli­mate: The Car­bon Diox­ide Prob­lem in the top eco­nom­ics jour­nal in 1977.

‘Cli­mate eco­nom­ics’

Ottmar Eden­hofer, di­rec­tor of the Pots­dam In­sti­tute for Cli­mate Im­pact Re­search in Ger­many, has said: “With­out him [Nord­haus], there wouldn’t be such a sub­ject of cli­mate eco­nom­ics.”

Where his work has been es­pe­cially valu­able is in how his mod­els ex­plain the way eco­nomic growth af­fects the cli­mate through green­house gas emis­sions and, in turn, how the re­sult­ing global warm­ing will im­pose huge costs on so­ci­ety in the fu­ture. These mod­els are used ex­ten­sively to as­sess both the dam­age done from fail­ing to curb our emis­sions of green­house gases, and also to quan­tify the cost to the world in the fu­ture of ev­ery tonne of car­bon diox­ide that we emit to­day. As a re­sult, Nord­haus was a very early ad­vo­cate of us­ing a car­bon tax as the best method of chang­ing be­hav­iour and halt­ing the progress to­wards cli­mate dis­as­ter. Con­cern about the en­vi­ron­ment runs in the Nord­haus fam­ily. His late brother Bob, an en­vi­ron­men­tal lawyer, drafted pro­vi­sions in US leg­is­la­tion of the 1970s that formed the le­gal ba­sis for the cli­mate change reg­u­la­tion in­tro­duced by the Obama ad­min­is­tra­tion. This reg­u­la­tion pushed for the clo­sure of coal-fired elec­tric­ity gen­er­a­tors in the US that has sub­se­quently pro­voked the par­tic­u­lar ire of the cur­rent US pres­i­dent.

From 1977 to 1979, he was a mem­ber of Pres­i­dent Jimmy Carter’s Coun­cil of Eco­nomic Ad­vis­ers. Writ­ing in 2016, Nord­haus said of his work: “It sug­gests that it will be ex­tremely dif­fi­cult to achieve the two de­grees Cel­sius tar­get of in­ter­na­tional agree­ments, even if am­bi­tious poli­cies are in­tro­duced in the near term. The re­quired car­bon price needed to achieve cur­rent tar­gets has risen over time as poli­cies have been de­layed.”

This work also in­di­cated that, when tak­ing un­cer­tain­ties into ac­count, the strength of pol­icy (as mea­sured by the op­ti­mal car­bon tax) should in­crease, not de­crease.

The UN In­ter­gov­ern­men­tal Panel on Cli­mate Change re­port, pub­lished ear­lier this week, showed us the very se­ri­ous con­se­quences for hu­man­ity from fail­ing to halt green­house gas emis­sions.

Nord­haus’s work in­di­cates that, hav­ing failed to raise the car­bon tax in this week’s bud­get, the in­crease in fu­ture years will need to be all the greater

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