It’s Time We Stop Listening to Economists on Climate Change

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Yves here. In addition to the important reasons given below for shutting economists out of the debate on climate change, an additional one is even Nicholas Stern fell for trying to look at climate change in net present value terms. As anyone how has built financial models will tell you, pretty much anything that happens more than 30 years out is ascribed no value because just about any positive interest rate will result in very long term impacts being discounted to zero.

The better way to think about climate change is insurance, where buyers knowingly pay a healthy amount over their expected risk because they can’t afford the downside. And here, the downsides are catastrophic.

We’ve written before about William Nordhaus. Calling him a disgrace is too kind.

By Jag Bhalla, a writer and entrepreneur. Originally published at Undark

A TRICKY TRUTH of the climate crisis is that it calls for humanity to act today on what we believe will happen in the future, which requires us to put our faith in the predictions of mathematical models. A trickier truth — one that has helped sow seemingly endless political division and inertia — is that not all of those models are created equal.

Take, for instance, the work of 2021 Nobel laureates Syukuro Manabe and Klaus Hasselmann, whose models accurately predicted the global warming and climate change we’ve experienced in recent decades. Their work inspired sophisticated ocean-atmosphere models that can take months to process on the world’s fastest supercomputers. Climate physics foresees an Earth undergoing essentially irreversible shifts, or tipping points, into a much-altered biosphere if global temperatures rise more than 2.7 degrees Fahrenheit (1.5 degrees Celsius) above preindustrial levels — a threshold we could reach within the next decade.

Contrast that grim forecast with the predictions of the Dynamic Integrated Climate-Economy model, for which Yale University’s William Nordhaus won the 2018 Nobel prize in economics. DICE is simple enough that a version of it can run in Excel, and Nordhaus has suggested society’s optimal climate trajectory — the one that best balances the economic harms of global warming with the costs of climate action — would correspond to a global temperature rise of 6.3 F (3.5 C) by 2100. (Note that DICE models can generate a range of results. One 2020 paper used the model to support the U.N.’s climate targets as the optimal trajectory. Here, let’s focus on Nordhaus’s influential prize-winning work.)

Arguably, DICE and the economic models it inspired have influenced climate policy far more than their counterparts from physics. The Nordhaus-style models undergird the ubiquitous concept of a social cost of carbon — which attempts to quantify the dollar amount of economic harm caused per ton of carbon emissions — and they have contributed to decades of policy inaction. Sure, we could act now on climate, these models suggest, but if we act too quickly or too forcefully, we’ll harm the economy.

Even key economists resist such conclusions. “It is irresponsible to act as if the economic models currently dominating policy analysis represent a sensible central case,” wrote Nicholas Stern of the London School of Economics and Political Science, in a 2013 paper arguing that economic models dangerously downplay the risks and urgency of the climate crisis.

I would take that a large step further: These economic models are so fundamentally flawed that the climate discourse would be better off without them.

That’s because, at their core, models like DICE attempt to do something that economics is simply unequipped to do: They try to quantify, with seemingly actionable precision, the impact of conditions unlike any humankind has ever witnessed on an economy that does not yet exist. They attempt to project the distant-future economic impacts of global warming from present-day correlations between temperature variations and economic activity.

This dicey approach has numerous flaws.

As economist Steve Keen has noted, the models can exclude large parts of the economy. A 1991 model by Nordhaus assumed that trade, manufacturing, finance, and other sectors — collectively responsible for 87 percent of total economic output at the time — were insulated from climate-change impacts because they occurred indoors or were otherwise “negligibly affected.” But climate change produces more than just higher temperatures, and its impacts absolutely reach indoors. Sea-level rise and flooding could disrupt every sector in coastal regions; increasingly intense storms would threaten supply chains; wildfires or cold snaps can crash power grids. That economic models ever ignored such obvious interdependences is troubling.

Another deficiency of DICE models is that they assume, based on little physical evidence, a smooth relationship between temperature rise and the economic impact of climate change. In mathematical parlance, the “damage function” that plots the presumed relationship between economic loss and temperature takes the shape of a quadratic curve. But we know from physics models that climate change won’t be gradual and continuous; it will be marked by vicious cycles and tipping points that abruptly shift our biosphere into a deeply different regime, potentially beyond what Nordhaus’s model assumes. Keen has cited this shortcoming as one among a host of flaws that “may be so great as to threaten the survival of human civilization.”

The mere idea that a model using today’s economic data can meaningfully tell us about economic output in the distant future, under climate-crashed conditions, strains credulity. A century ago, computers like the one I’m writing this on weren’t even widely imaginable. The global economy 100 years hence is similarly unimaginable. It’s unlikely that the myriad factors beyond temperature that affect today’s economy will have the same effects in a post-tipping-point world as they do now.

This general shortsightedness is one reason that economics writer Noah Smith says climate economics has “failed us” and that DICE’s recommendations are “obviously bananapants.” Many others agree. For instance, the European Climate Foundation’s Tom Brookes and New York University economist Gernot Wagner argue that “economics needs a climate revolution.”

To be fair, Nordhaus hasn’t hidden DICE’s key limitations. In the model’s 2013 user manual, he describes his optimal climate trajectory as an unrealistic scenario, but one that remains useful as “an efficiency benchmark against which other policies can be measured.” He notes that many economic models don’t include hard-to-model costs like biodiversity loss, ocean acidification, sea-level rise, and ocean circulation shifts, and so instead guesstimates them by tacking on an “adjustment,” set at 25 percent of the total damages — a figure which appears to be arbitrary.

Yet these models’ projections — particularly estimates of a social cost of carbon — are treated in media and policy circles as having an air of rigor on par with physics. A “science” this riddled with flaws and fudge factors isn’t one we should bet our kids’ life prospects on.

Our most egregious mistake may be letting economic thinking take the steering wheel. In abstractly pondering cost-benefit tradeoffs, it’s too easy to ignore our moral compass and lose track of who is harmed. Physics tells us that carbon we emit today will cause suffering for centuries — and disproportionately, the pain will be felt by poorer countries. By using cash as a universal yardstick, economists intrinsically underrepresent the needs, and even the rights, of the poor, who have contributed negligibly to the climate crisis.

As legal scholar Lisa Heinzerling writes, an “underlying premise of cost-benefit analysis is that there are no rights, only preferences.” Until the hidden preferences and biases baked into economic methods are changed to reflect more equitable and just values, they shouldn’t be our main guide on morally complex matters.

The justification for strong action on climate change should be on moral grounds, not economic ones. Should we have calculated an optimal social cost of slavery? Cheap sugar did not justify slavery, scientist and abolitionist Joseph Priestley rightfully observed in an 18th century sermon on the slave trade. Neither should cheap energy serve as an excuse for knowingly harming billions of the planet’s poorest people, generations yet unborn, and — in the nearer term — countless others we hold near and dear. As David Wallace-Wells noted in his book “The Uninhabitable Earth,” this is “an enveloping crisis sparing no place and leaving no life undeformed.”

A skilled user of any tool must know its limits. Whatever economists are up to, it isn’t like physics modeling. But policymakers and pundits seem intent on treating it as if it is. And that is a grave empirical, logical, and moral error.

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  1. PlutoniumKun

    There is almost nothing modern economics can tell us about how to address environmental issues. The core reason is even simpler that explained above – the reason is that virtually all economic models assume strong commensurability of variables – i.e that a range of different variables can all be ultimately descried using one variable – money. But this is demonstrably untrue. Even going back to the 1970’s and 80’s, well before behavioural economics tried to address this – there were many studies showing that different techniques used to ‘value’ intangibles such as time savings, noise exposure, leisure, pleasure, provided such vastly different figures as to make any attempt to value them meaningless. Various techniques were developed for cost benefit analyses – contingent value studies, travel cost assessments, hedonic valuations, etc. All proved pretty much useless.

    Just to give a simple example. Suppose you wanted to ‘value’ the use of a smart phone. You can do this in many ways. You can look at the market value. You can ask people how much they would pay for it in a theoretical world where only one was available for them to buy. You can ask them how much they would accept to live without a smart phone for a year. you can ask them these questions for each individual function a smartphone will give you.

    If you did the above, you can pretty much guarantee a vast range of figures, making any one ‘value’ for a smartphone irrelevant (or, if you are an academic economist, you simply pick the figure that backs up whatever point you are trying to prove. And if we can’t do that for a simple consumer product like a smart phone, how can we do this for the value of, say, wetlands in 20 years time? It can only work in such a simplified manner as to be essentially meaningless.

    This isn’t to say that all economics is useless – there is plenty of good work from economic historians and economic geographers and other usually ignored subsets of economics, that provide very valuable insights. But modelling using the mainstream techniques beloved of the Nobel committee…. they are literally worse than useless, because their results can be actively misleading. No wonder they are so popular with right wing think tanks and the fossil fuel industry.

      1. Susan Mercurio

        It’s time we stopped listening to mainstream economics on *anything* let alone climate change.
        Modern Monetary Theory (MMT) does a better job of explaining how our monetary system actually works.

    1. clarky90

      If we were to imagine that (1) “Nobel Prizes”, (2) being published, (3) getting tenure, (4) being asked to address “an assembly”…….. are, in fact, tasty-fish treats (herring) in the Circus RingMasters’ bucket of rewards.

      And that the economist, are the most talented of the trained seals, in the center ring.

      Guess (!) who are, the audience, under this Neo-Big Top, cheering and then, foaming at the mouth, as the performance unfolds?

      Yep, you guessed it……….

      American Circus Lingo

      “Alfalfa — Paper money.

      Cake — Money made by short-changing customers at ticket boxes.

      Caring Clown — Not a traditional circus term. Used by amateurs (and Ringling publicity) to refer to clowns who specialize in hospital visits (“Awwwwww…”).

      Carpet Clown — A clown who works either among the audience or on arena floor.

      Catcher — The member of a trapeze act who catches the flyer after he has released himself from the bar in a flying return act.

      Cats — Lions, tigers, leopards, panthers……….”

    2. skippy

      Here, I want to challenge the popular view that “natural experiments” offer a simple, robust and relatively “assumption free” way to learn interesting things about economic relationships. Indeed, I will argue that it is not possible to learn anything of interest from data without theoretical assumptions, even when one has available an “ideal instrument”. Data cannot determine interesting economic relationships without a priori identifying assumptions, regardless of what sort of idealized experiments, “natural experiments” or “quasi-experiments” are present in that data. Economic models are always needed to provide a window through which we interpret data, and our interpretation will always be subjective, in the sense that it is contingent on our model.

      Furthermore, atheoretical “experimentalist” approaches do not rely on fewer or weaker assumptions than do structural approaches. The real distinction is that, in a structural approach, one’s a priori assumptions about behavior must be laid out explicitly, while in an experimentalist approach, key assumptions are left implicit …

      If one accepts that inferences drawn from experimentalist work are just as contingent on a priori assumptions as those from structural work, the key presumed advantage of the experimentalist approach disappears. One is forced to accept that all empirical work in economics, whether “experimentalist” or “structural”, relies critically on a priori theoretical assumptions. – Michael Keane

      Ummm … the bible presented as a mathematical proof to the unwashed and still call it ***Natural***[tm] …

  2. Donald

    I believe Hermann Kahn developed models on the economic effects of global thermonuclear war. This seems similar.

    Seriously, it does. IIRC, one of Nordhaus’s models showed that a 6 degree increase in temperature would have a serious effect on GDP— something like a depression.

    Of course a six degree increase would make the earth into an apocalyptic hellscape.

    1. GM

      The purpose of modern economics isn’t to be a proper science, it is to provide a pseudoscientific justification for purely political decisions. Usually designed to benefit the few at the expense of the many.

      And that would be true even without its more foundational sins, but it has them too, the chief one being the complete fundamental rejection of the fact that the economy is a tiny subsystem of the much larger physical world and it is fully governed by the laws of physics.

      Normally we would be locking up people who do that in the asylum so that the world is safe from them.

      What we are doing instead is allowing them to ensure the irreversible destruction of advanced civilization on this planet by placing them in key positions of decision making…

      1. rob

        yes! what you said is absolutely true;, so what does that say as to whom should be in an asylum?
        Maybe this planet IS an asylum? That would “make more sense”, than other possibilities… where we are all crazy. for some reason.
        “in a mad world, only the mad ;are sane”

    2. Thomas P

      As I understand, Nordhaus model is symmetric, predicting an equal cost for warming and cooling. Six degrees colder would put us close to the temperature at the peak of the last glaciation. I think that would put quite a dent in our economy…

      These models are essential looking under the streetlight because that’s the only place where there is enough light to search. What lurks in the darkness outside is hard to quantify and is ignored.

  3. The Rev Kev

    These economic models sound like they use linear projections but perhaps ones should be used that take into account chaos theory. I mean yeah, models can be useful but whatever happened with the European economic development models from 1913? How did they work out? Are the insurance companies using the same models? I am sure that they have a vested interest on knowing what is coming down the road. Maybe the wrong question is being asked. Perhaps it is not a matter of asking how much climate change is going to cost us but asking instead what the cost will be if we do nothing about climate change – our present course.

    1. kevbot9000

      The author makes more or less the same point in the paragraph commenting on tipping points. (Which I tend to read as bifurcation points to more directly link it to nonlinear dynamics) Then again linear models give you an answer an arbitrary number of years out where if you use a nonlinear model (which is what chaos theory is about, more or less) you generally run out of computing power before you get to the time frame you want. (Weather forecasts are a good example of the limitations of nonlinear models) Then again that uncertainty would be good to acknowledge, and you can potentially identify bifurcation points which is what we would really like to know, at what point do things escalate in a seriously not good way.

      1. jsn

        Keen, to whom the authors refer, has several posts on his substack meticulously demolishing Nordhaus on this subject: linear assumptions about nonlinear phenomena.

  4. Jeff W

    “ICKY TRUTH of the climate crisis…”

    The original piece actually begins “A TRICKY TRUTH of the climate crisis…” which doesn’t strike the same puerile note and avoids the awkwardness caused by the missing indefinite article.

  5. Steve Ruis

    Ah, re “Economic models of climate change are so riddled with flaws and fudge factors that we’d be better off without them.”

    I would add that economic models of economics are so riddled with flaws and fudge factors that we’d be better off without them. Oh, and political bias, too.

    1. chuck roast

      Universities have been known to drop football. I hope to live to see the day that a uni drops Economics.

  6. KLG

    I read both Herman Kahn and Henry Kissinger on nuclear war as a college freshman almost 50 years ago (that long ago, really?). A good lesson for a naive 18-year-old that our leaders are frequently insane.

    Regarding insane contemporaries, Nordhaus with his “Nobel” in Economics comes to mind. That he could use “economics” to predict what would happen to the economy at 6 degrees, without noting that the earth would be an “apocalyptic hellscape” mentioned by Donald above? How does that joke go? First, assume a ladder…Not to make an argument from authority, but Syukuro Manabe and Klaus Hasselmann shared half of the Nobel Prize in Physics. Stealing from Mark Twain, the difference between the Nobel Prize in Physics and The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is the difference between lightning and a lightning bug. Except in the case of Elinor Ostrom, of course.

    Sending in my money today!

  7. Andrew DeWit

    On the other hand, surely we need economics to assess the least-cost (fiscal, material, skilled labour) maximization of mitigation and adaptation. That number-crunching role seems particularly crucial because of the constraints on copper, nickel, rare earths and other critical minerals needed for decarbonization, digitization, etc. Naked Capitalism periodically reminds us of the crisis in these critical minerals, and how addressing climate change is not at all simply a matter of critical mineral-intensive wind, solar, batteries, and other “green,” but also critical mineral-intensive health technology, water networks, communications, and the like (esp in the increasingly heat-stressed global south). So replacing economic analyses with moral imperatives doesn’t seem adequate in itself. Makes for nice “fight the power” soundbites at COP26, though…

  8. Questa Nota

    Economic journals and media articles should include a bullet-point TL;DR section that addresses the assumptions in plain language for all to see. That could also apply to NYT, WaPo and many others that use less gibberish or insider language, instead relying on narrative management. They could admit the following: Chance of application nearing zero bound asymptotically. /s

  9. JWP

    Currently taking a class titled “environmental economics”:

    We learn about how “market” based solutions which are described as carbon taxes and cap and trade are the best, especially cap and trade. and how “command and control” (nice framing) is inefficient and evil, yet have not talked about the Montreal Protocol. No discussion of resource and energy shortages, nothing on ecosystem services and biodiversity and what happens when they go. The class feels like it belongs in the 1960s with how outdated much of the information taught is. Economists will be given a seat at the table because their models are friendly to GDP and stock growth and companies will hire them to make climate models that benefit them. Clearly they should be ignored, and seeing how far behind the field is from an academic side is further reinforcement to how ungrounded economists are with the climate.

  10. Tom Pfotzer

    I think any effort at top- down solution-ing is not helpful. It’s not how evolution works.

    Evolution has:

    many players
    facing a common problem
    generating a lot of solutions
    and trying them out

    The ones that works best get replicated/adopted (via survival).

    What if we actually _learn from Nature_ and look at the problem from the other end of the telescope: bottom up.

    The “bottom” is the household.
    The “problem” is “I need to provide for my needs while fixing the planet”
    The “generated solutions” are a set of solutions, operable at household or village level, which provide for household needs of food, water, shelter, energy, information, healthcare…and doing each of those jobs in a manner that fixes the planet.

    Narrow scope waaay down to just household needs, and do _that_ work. Concentrate a lot of people’s attention on that narrow scope, like a magnifying glass, and evolve viable means to do that job.

    We’re trying to accomplish too much (e.g. change everyone at once), with poorly defined requirements (too abstract), with not enough people involved (just the technocrats and “elites”).

    That’s not going to work. No project manager would _ever_ set up a project this way and live to tell about it.

    1. jsn

      Yes, I agree. Unfortunately the evolution of civilization since settled agriculture took root has selected for escalating technological complexity, primarily under the auspices of developing more effective state violence.

      It began with God Kings legitimized by human sacrifice, which ended with the odd confluence of the Axial Age religions. Seems to me we are entering a new area of twits who think they’re gods and are okay with human sacrifice for profit.

      Households don’t have anything remotely like the tools to take on state violence as wielded by our governors through “markets” and propaganda. The first Reconciliation Bill showed our governors could address household concerns but the last two weeks show they won’t allow that “mistake” again.

      So, we’re back to the “collective action problem” in a world of toxic information flows, focus group tested to distract attention and keep households from recognizing common interests.

      1. Tom Pfotzer


        No, households can’t compete @ violence. Shouldn’t bother to try.

        I’m not sure how to get to “collective action”. There’s so much diffusion of interest and perspective and competency at levels above village. It seems like it’s too hard to get enough agreement and commitment to actually do anything.

        What is possible is individual action. At the household, possibly village level (the village co-op – retail, mfg’g, ag, whatever). That’s still quite possible, and some recognition of “common interests” might actually occur.

        But it’s not necessary.

        What’s necessary is that the individual understands “interests” and can marshal sufficient resources and competency to execute on those interests.

        I have seen people do this, and provide for themselves food, water, power, education, clothing, shelter…the basic stuff every household needs.

        The big question is “how much of your living standard do you have to sacrifice in order to provide for yourself?”.

        The answer is “it depends upon your competency level”.

        Naturally, the next question is “how to elevate the competency level sufficiently?”

        1. jsn

          Yes, I’ve been toying with the idea of purchasing co-ops for small businesses to both scale purchasing power and demonstrate alignments of interests also at scale.

          This would be at a business scale rather than households, but co-ops of various types already help the household scale.

          The degree to which cooperation can be scaled will determine the level of complexity a bottom up reconfiguration of society can sustain. Organized violence/prevention will be a part of this.

  11. MDA

    I’m continually depressed that we let money and markets play a role in climate discussions. I see two options, preserve wealth or save the planet. I don’t see any middle ground. Honestly I think the time is right for a third party of honest and principled people to pitch that message. People are hungry for change and, outside of the power structure, no one’s happy. It suggests a huge market opportunity when so many hate vote against the one party without being fully on board with the other. And, in point of fact, neither party has the interests of the voters at heart.

    If the climate discussion were focused exclusively on providing the essentials to all while preserving the planet’s ability to support life (and why shouldn’t it?) we would quickly implement Universal Public Healthcare and Basic Income so people would no longer need “jobs” to live. At the same time, we’d curtail fossil fuel extraction and subsidies, build out public transportation and pedestrian infrastructure, reduce support for personal vehicles and airlines, promote local and domestic production including sustainable agriculture to reduce the need for shipping and freight. We’d let gas and energy prices rise so, on top of everything else, people would have a financial incentive to change their habits and reduce consumption. We would absolutely cut Pentagon funding to the bone and demand the military set an example with alternative energy sources. All of these things would be simple if we focused exclusively on what mattered.

    Instead, our political class is laser focused on money and the climate crisis discussion is tied into knots with concerns about markets and economy. It’s almost comical how climate activists think they can influence government policy, like a long suffering spouse begging their addicted partner to stop gambling away the nest egg. They won’t stop gambling until it’s gone, period. If we want anything left for the future, we need to take away the purse and find another partner.

    1. Tom Pfotzer

      “All of these things would be simple if we focused exclusively on what mattered.”

      The “political class” isn’t going to do it for us, MDA. I hope, I hope, I hope that this realization finally seeps into peoples’ consciousness.

      It’s not happening top-down. I think we all understand this intellectually, but we’re not on-board emotionally yet.

      Please, let’s face this reality before it’s too late.

      If we’re to have a decent future, it’ll be because of what you do, for yourself, in _your_ micro-economy.

  12. Rod

    Good read, but one I don’t have to parse:
    The justification for strong action on climate change should be on moral grounds, not economic ones.
    ’nuff said for me.

    This resonated with me and, imo, resonates with this post:
    From KLG in comments a day or so ago: A citizen necessarily consumes but a consumer is not necessarily a citizen. “Green growth” is a contradiction in terms.

    I agree this needs to be internalized by all:
    A “science” this riddled with flaws and fudge factors isn’t one we should bet our kids’ life prospects on.

  13. Jackman

    I’m with Gavin when he says: you had me at ‘It’s time we stop listening to economists’.
    I recoil at the idea that there is anything of value to glean from this blood-soaked profession that sits alongside power serving up the giant story telling us why the few have everything and that’s the way it needs to be, with perhaps a tweak here or there–but careful not too much! In the case of climate change alone, it’s hard to imagine a failure larger than that which the profession of Economists has created, to imagine a ditch deeper than the one which they’ve confidently driven us–while still demanding that they drive. Economics as it’s been developed over the last century is well beyond redemption and I think we do ourselves a disservice by trying to call out how it could be better. It needs to be tossed into the sea and started anew, completely. And first, without economists. It should be refashioned by biologists, archeologists, botanists, anthropologists, oceanographers, and yes, regular people, all engaged in the question of how we best live on this planet together.

  14. ex-PFC Chuck

    The embedded link to Steve Keen’s paper at Taylor & Francis Online is a Must Read. Here’s his assessment of the impact of Nordhaus et al on the IPCC report:

    Given the impact that economists have had on public policy towards climate change, and the immediacy of the threat we now face from climate change (Amen et al., 2008; Gills, 2020; Gills & Morgan, 2019), this work could soon be exposed as the most significant and dangerous hoax in the history of science.

  15. Susan the other

    But I’d submit that even insurance can be inadequate. The idea is certainly good but it’s just a palliative. OK, I’ll buy some insurance against catastrophe and then I can relax and go about my business. That’s everybody’s (certainly mine) idea of “insurance”. And when you buy insurance you are always playing the odds. To make the idea of insurance have any real meaning in today’s context it has to be understood not in terms of money, because there will be nothing left worth buying, but in real change and improvements on a massive scale. Put it in social and ecological terms: We’ll take action to insure social equity and environmental protection for all future generations. Because, if we say we’ll insure that wetland for a billion dollars, so if it dries up and starts to stink really bad we can take the money and move away – but not change our habits, then of course we will take the money and not change our habits. etc. I’ve always thought that real change was like war. Maybe that’s why we resort to war. Maybe we should do a Nixon and declare war on climate change. But not just our usual photo-op stuff – real, honest-to-god mobilization. There’s not a reason to hesitate. Gosh, what did all the “economists” say in 1944 – did they do a cost-benefit analysis?

    1. rsm

      《we can take the money and move away – but not change our habits, then of course we will take the money and not change our habits. etc.》

      Then don’t we deserve our fate?

  16. Mikel

    This is all essentially about human health – fear about how the environment will affect human health.
    The moment economists were listened to about anything concerning healthcare was the moment this fate was sealed.

  17. BeliTsari

    Oooh, looky? It’s already too late: city-sized methane fireballs, where permafrost used to be. Millions fleeing drought and famine spreading novel plagues, and even small nuclear exchanges in central Asia not cooling stuff, enough! Better let our brilliant tech oligarchs try geoengineering, GE Monoculture/ CAFO agribusiness, carbon swap & sequestration scams, bailing-out ancient reactors and clean, green bridge fuels, fracked next door? AGW is just catastrophe capitalism’s last WILD card.

  18. Samuel Conner

    Perhaps one could argue that the ‘discount rate’ should vary depending on what one is discounting, and that ‘ecosystem services’ should actually have a negative discount rate, because future population may be higher than present, so that the value of future ecosystem services will be higher than the value of present ecosystem services.

  19. Peter Lynch

    OK – shut off the computers. I will get out my trusty yellow pad and summarize the math and the economics – The faster we address climate change the more money we save. The slower we go the more money we will spend and possibly make the planet uninhabitable for humans. The bottom line of this complex analysis – there is NO SPEED of addressing Climate Change that is fast enough we do not have to worry about going too fast – there is no way to go too fast. There it is, fresh off the yellow pad, and more useful than any of the other models because it is accurate.

  20. Roop Dogg

    Long time lurker. Finally managed to get PayPal to work and assuaged a growing sense of freeride-guilt with a modest donation. I forget which other forum I was lurking on when I discovered NC. It has slowly supplanted most other of my news sources… I only started reading as I was trying to set myself some target in understanding more of the economic terms I’d occasionally stumble across elsewhere. And perhaps win the odd argument against friends in the PMC class. Now Yves and Lambert seem like old friends, as do some members of the commentariat. Also this site introduced me to Michael Hudson. It was a weird feeling as my day job (Latin/Greek teacher) and (originally) passing interest in economic theory freakily dovetailed. But this site is where a lot of things have fallen into place. Thanks everyone for all you do and now that I have finally donated I might even comment again if I find I have something to say. Peace yo.

    1. Janie

      Welcome, Latin and Greek teacher! I’ve never regretted my 4 years of high school Latin. I remember more of it than I do of calculus and find it more useful. If anyone asks whether it should be “who” or “whom”, I can answer and explain why (but people are glad that I rarely do). Must go. Tempus fugit.

      1. Roop Dogg

        Shucks thanks guys. Indeed, carpe diem (et quam quam minime credula postero). Which kind of links back to the article…

  21. Alice X

    Two economists are considering a new economic model.

    Economist one: the model works well.

    Economist two: until you plug in the people.

  22. Adam Eran

    In addition to Keen’s debunk of Nordhaus, his Debunking Economics: The Naked Emperor Dethroned remains a difficult but necessary read. Keen simply dismantles anything that remains of this pseudoscience.

    As Jane Jacobs says: Modern [land-use] planning is positively neurotic in its willingness to embrace what doesn’t work and ignore what does….It’s a form of advanced superstition like [19th century] medicine when doctors believed bleeding patients would cure them.”

    That goes double for neoclassical/neoliberal economics.

  23. ArvidMartensen

    Norhaus is a disgrace. But to my mind the astronomically bigger disgrace is the panel that awarded him a Nobel Prize, or is it an ersatz Nobel Prize?
    By giving this unscientific, fossil fuel industry-serving, work the Prize, the judges have brought the properly earned Prizes into disrepute, and tarnished the achievements of those who actually embody the ideals of scientific research, like discovering penicillin.
    Just like those judges who gave Obama the Nobel Peace Prize.
    The systems with the worst outcomes are those where there are no consequence for bad decisions and bad behaviour.

  24. Dick Burkhart

    The basic problem with today’s economics is that few economists understand the mathematics of complexity and chaos. This is essential because real world economics is chaotic. Yet the basics of this mathematics and its computation have been known for 50 years (the famous limits-to-growth studies, falsely attacked by no less than Nordhaus himself).

    This approach is often called system dynamics, consisting of a system of partial differential equations that encodes feedback and feedforward loops and intertwines several key variables (just 5 for the limits-to-growth studies: industrial output, pollution, resources, population, food supply). These equations have parameters or coefficients that reflect past values but also may be varied to produce different scenarios for the future. There is one “business as usual scenario” in which these coefficients retain their current values.

    Other scenarios show the sensitivity to changes in these coefficients, yielding both a sense of the future risks and how they might be mitigated. Standard statistical analysis does not apply: The distribution of future risks depends on the assumed prior distributions of the coefficients, which are only guesses. But still with modern computers massive multi-variable Monte Carlo simulations are possible. The equations for climate change are far more complicated but have the same character.

    Note that Steve Keen is one of those few economists who does understand these methods. He won a prize for predicting the financial crash of 2008 using a simple 3 variable nonlinear model. He and others have now developed a more sophisticated program called Minsky for financial / economic forecasting. But he depends on patreon support since he is a heterodox economist.

  25. rsm

    《The Greenland ice sheet, the melting of which would raise sea level rises, could also be tipped into a state of irreversible decline beyond 1.5C.》

    So lots of new arable land? What if we just open borders and insure everyone with a basic income?

    1. rsm

      If economists included a safety factor of two as bridge engineers do, would the poverty level be double and thus almost livable?

  26. Jason

    I don’t see any evidence to suggest that the DICE model is actually influential. Never heard of public officials saying they use it to justify what they’re doing or not doing.

    1. BeliTsari

      Well, hardly anybody in Biden’s administration has admitted to “Let ‘er RIP!” as official US policy on COVID or, “I’m gonna tear you, limb from limb,” on their protocols on whistleblowers, journalists and strikers? Our “Fuck you, PAY me!” commodification of catastrophe Capitalism’s feeding frenzy is only apparent to those of us, insufficiently indoctrinated.

  27. Quill

    We’re also not good at forecasting technological progress. When the DICE model or even the Stern Review were developed or written, the cost of ending GHG emissions was catastrophic. Since then, the cost and efficiency of solar and wind power and the technological developments in batteries have changed the game, so much that cutting emissions by 1/3 to 1/2 is likely profitable in the short term.

    Developments in this area are likely to continue, with similar further effects. Because of this, I’d be pretty skeptical of any model that suggests a target for global warming much over 2 C.

  28. MarqueJaune

    Apart from Keen there’s another guy (I wouldn’t dare to call him an economist… I guess he’s much more than that…) that should be noted, Charles Hall.
    Apart from his very relevant concept of Energy Return on Investment, EROI, he, like Keen, has been banging neo-classical economics with a big hammer for ages.
    Fwiw, I find his ideas easier to apreend than some of Keen’s ones. And it’s not the whole complexity/dynamical systems approach.
    It looks to me that Keen, for instance, gets to put the laws of thermodynamics within his own framework with a bit of duct tape… It might be my own knowledge deficit of the whole edifice of economics…

    Two of the books by Charles Hall:
    Energy Return on Investment
    Energy and the Wealth of Nations

    Come to think of it there’s a couple more guys that fall within the camp of complexity economics (a different, but somewhat complementary framework of Charles Hall’s ideas/framework which are usually referred as biophysical economics) that might be worth to mention; Doyne Farmer and Brian Arthur

    Needless to say, but these guys are very far from the tired bs of neo-classical economics…

  29. David Lawunmi

    There are lots of problems with economic models of the economy and finance, e.g.

    The IMF was using a faulty Excel random number generator for its ‘stress tests’

    There is also a long and dodgy history of dubious calculations with flaky software

    Microsoft’s “dark secret” – B. D. McCullough

    “In the small world where computer science overlaps with statistics, it was well known that Microsoft Excel was riddled with statistical errors. It was so well
    known that no one bothered to write about it. In the larger world, however, it remained Microsoft’s dark secret.”

    Why would anybody take a dodgy model that doesn’t cover the basics properly seriously?

    However, if we don some Panglossian glasses we can find some utility in these models.
    They have some redeeming features.
    They tell us a great deal about the mysterious and secretive political and economic elites!

    They also tell us that we cannot rely on clowns if we want meaningful constructive options for ameliorating the current unsustainable and dangerous economic and environmental trajectory.

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