Sunday, 21 May 2017

Book Review: The Climate Casino

My last book review (Merchants of Doubt) noted my surprise at those authors' comments about William Nordhaus. As I said then, I've gone on to now read Nordhaus's book "The Climate Casino", and as I suspected, Nordhaus is far from one of the 'bad guys' when it comes to evaluating the impacts of climate change, and what should be done to reduce the impacts.

Nordhaus explicitly notes that his work has been misinterpreted by some of the critics of climate change policy (notably this 2012 piece by "sixteen scientists" in the Wall Street Journal - ungated version here). That article says:
A recent study of a wide variety of policy options by Yale economist William Nordhaus showed that nearly the highest benefit-to-cost ratio is achieved for a policy that allows 50 more years of economic growth unimpeded by green house gas controls... And it is likely that more CO2 and the modest warming that may come with it will be an overall benefit to the planet.
In response, Nordhaus notes in his book:
The major point, however, is that the sixteen scientists' summary of the economic analysis is incorrect. My research, along with that of virtually all other economic modelers, shows that acting now rather than waiting 50 years has substantial net benefits... Waiting is not only economically costly but will also make the transition much more costly when it eventually takes place.
Interestingly, other than that point Nordhaus ignores the misinterpretation of his work by Oreskes and Conway in Merchants of Doubt, although he does cite their book. Where does Nordhaus stand overall on climate change? In the concluding chapter he notes:
A fair verdict would find that there is clear and convincing evidence that the planet is warming; that unless strong steps are taken, the earth will experience a warming greater than it has seen for more than a half million years; that the consequences of the changes will be costly for human societies and grave for many unmanaged earth systems; and that the balance of risks indicates that immediate action should be taken to slow and eventually halt emissions of CO2 and other greenhouse gases...
There are no grounds for objective parties simply to ignore the basic results, to call them a hoax, or to argue that we need another half century before we act. 
The book is divided into five main sections, essentially covering: (1) climate data and the evidence for climate change; (2) the impacts of climate change on human and other living systems; (3) strategies for slowing climate change; (4) climate policy; and (5) the politics of climate change. The book is well-written, but I found that some parts might be a little too technical for the general reader. However, Nordhaus does an excellent job of citing the important literature, presenting the data, and developing a robust and believable argument, so the general reader will be able to get through it.

Nordhaus's favoured policy is clearly a carbon tax, although I get the feeling that he would be happy with any policy that results in pricing carbon and thereby leading to incentives to reduce carbon emissions. In ECON110, we look at both carbon taxes and emissions trading as potential solutions to the climate change externality, and the book gives some good discussion of those options, as well as command-and-control-type regulations.

Finally, having worked for a number of years with physical scientists on climate change projects (see this recent post on one climate change project), I think this book should be required reading for climate scientists. In particular, this bit:
Climate-change policy is a tale of two sciences. The natural sciences have done an admirable job of describing the geophysical aspects of climate change. The science behind global warming is well established...
But understanding the natural science of climate change is only the first step. Designing an effective strategy to control climate change will require the social sciences - the disciplines that study how nations can harness their economic and political systems to achieve their climate goals effectively. These questions are distinct from those addressed by the natural sciences.
To be fair though, the physical scientists that I have been working with are well aware of this point (which is why economists and other social scientists have been part of the research teams!). Climate change is a global problem, and is going to require global solutions. And those solutions involve people and politics, which is why the social sciences (not just economics, but political science, psychology, and other disciplines) need to be part of the conversation.

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