MZ asked in the Chat during class:
... I would be interested to see what data you have disconfirming climate change as an existential threat!
It's off topic for lecture, so I didn't answer it there. But I will here. There's a lot to unpack in that one sentence.
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First, no one has data from the future. So there can be no data that might disconfirm an existential threat.
Instead, most of the discussion about climate change is about the implications of models.
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Second, in the methodology of science, a position that can't be disconfirmed isn't a theory at all.
This is clearly very problematic since the only way we can then test some theories of climate change is to live through the periods they are forecasting. Potentially ... not fun.
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Third, many views that something is an existential threat rely on a supposed change in the world that is at variance with our past experience with the data.
For example, you may be afraid of dogs, and your friend may tell you their dog has never bitten anyone. Your fears can be valid, but the consequence you fear still requires a change in the world that is at variance with your friend's past experience with their dog.
With climate change, it's not easy to forecast catastrophic outcomes when the data we have doesn't show any in the past. One can always build a model in which there is catastrophic outcome, but that isn't the same thing is it?
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Fourth, as an economist, existential is a word you should be very careful with.
Lots of people outside of economics use words like "priceless" and "existential".
This is often a shortcut for either 1) not measuring the price at all, or 2) covering up the fact that the price isn't what you think it is or ought to be.
If you're going to be an economist, avoid thinking about prices as being infinite, and start thinking about putting numbers on them.
I like the punch line of this video:
In economics, pay attention to what people do, not what they say.
Oh and ... above I remarked that I like data better than a model. I also prefer a model to no-model-at-all. A lot of people who use words like existential ... don't have a model.
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Fifth, "existential" is also something that ought to have a probability attached to it. Is it a low probability of certain death? Or a higher probability but of only a possible death? Or something else? It matter. A lot.
What I say to many people when they say this sort of thing (and no insult intended MZ) is that if you don't know you should stop talking, and ideally come back when you know more.
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MZ wanted a source. I could overload you with stuff, but let's start with one. This is the (free) link to an article that just came out in the most recent issue of American Economic Journal: Macroeconomics entitled "Evaluating the Economic Cost of Coastal Flooding". That's a very good journal, and the authorship team includes economists, geoscientists, and climatologists. It's not the whole spectrum of climate change, but it's one issue that people worry about a lot. Here's the first part of the abstract:
Sea level rise will cause spatial shifts in economic activity over the next 200 years. Using a spatially disaggregated, dynamic model of the world economy, this paper estimates the consequences of probabilistic projections of local sea level changes. Under an intermediate scenario of greenhouse gas emissions, permanent flooding is projected to reduce global real GDP by 0.19 percent in present value terms. [emphasis is mine]
First off, that's in present value terms. So that's all costs of coastal flooding from the future, brought back to today's terms.
Second, is 0.2% large? Most people don't think so. Plausibly, the U.S. would be hit by roughly that percentage. Just to ballpark it, typically GDP grows 3.0%/year, and is in the range of -2% to +7% routinely. Would anyone even notice 0.2% if it was spread over many years?
And ... I'm not being dismissive. A "quick fact" I often give my principles students is that the limit of what you can feel in real GDP is a change of plus or minus 0.5%. So by a rule I've used on and off for 20 years ... this particular threat that some might call existential is not something we would even notice.
Do note that this does not mean that no one would notice it, or no one would be hurt by it. But it is saying that the collective pain would be minute.
It's also worth learning what an economist with expertise writes about existential events and climate change. Here's Robert Pindyck from MIT (I don't know Pindyck's politics, but MIT is not a place known for, really, and conservatives at all).
Pindyck is one of the foremost experts on investment under uncertainty ... like, say, averting climate change (he's so big that he wrote the math econ book I used in my first year of graduate school in 1985, and it wasn't even in the first edition then).
Six years ago he has a very tough AER article entitled "Averting Catastrophes: The Strange Economic of Scylla and Charybdis" with you can get for free here. In it he does talk about climate change, and other possibilities (including pandemics!!!) from the point of view of you can't insure against everything, so how should you ensure against a variety of existential threats that have low probabilities? And he has a model, and numbers, and simulations. Interestingly, while in some climate is a problem to be ensured against, and in others it is not ... a pandemic is always something you should ensure against.
He also wrote a JEL paper entitled "Climate Change Policy: What Do the Models Tell Us?" about the usefulness of the climate change models. It isn't pretty.
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I do think it's worthwhile asking why others are not talking about results like this.
And perhaps you are not reading between the lines ... but this is similar to the Biden administration that doesn't really seem to want to have economists involved in their economic decisions?
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I'll close with a simple suggestion that a budding economist can actually figure out. If you're concerned about climate change, what is the elasticity of your chosen temperature measure with respect to atmospheric carbon dioxide concentrations? But, of course, that comes from industrialization, so what is the elasticity of atmospheric carbon dioxide concentrations with respect to something like global GDP? And what do you make of those numbers?
Those are questions I first looked at in 1990, after becoming concerned about global warming in 1988. In 30+ years I have been unable tot reconcile them with my lived experience of climate change politics.
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