Sunday, March 18, 2012

Nordhaus on Global Warming

A correspondent points me at the work of Nordhaus and Boyer, attempting to estimate the externality from CO2 production and the appropriate response. I have not read the printed version, but there is a webbed version available. A number of things strike me:

1. Their conclusion is that 
"current approaches, such as the Kyoto Protocol, are highly inefficient, with abatement costs approximately ten times their benefits in reduced damages."
2. In order to get even that result, they depend on including costs from a very uncertain estimate of the risk that global warming will result in low probability catastrophes of one sort or another: 
"this approach is taken because of the finding of the first-generation studies that the impacts on market sectors are likely to be relatively limited."
Or in other words, without including the costs from such catastrophic risks, global warming doesn't seem to be a serious problem.

3. They estimated the cost from low probability catastrophes by asking a lot of experts how likely they thought it was that there would be a catastrophe, assuming a given rise in global temperature, that would reduce world GNP by at least 25%.

Even if one takes seriously the output of that sort of procedure, there is a striking asymmetry in their approach. They do not appear to have asked any experts what the chance is that preventing global warming would cause a catastrophe—or, to put it differently, that global warming will prevent one. Yet, as I keep pointing out, earth's climate was not designed for us, hence there is no a priori reason to assume that large negative results due to a few degrees of warming are more likely than large positive ones.

This is a striking illustration of my general critique of the "add up the externalities" approach to policy issues. Possible changes can have both positive and negative effects. If you want to conclude that something should be prevented, you focus on the negative effects, ignore or minimize the positive ones, and claim to have an objective argument to support your conclusion. That is precisely what Nordhaus and Boyer have done. The only surprising part is that, even after doing that, they still got only a weak version of the (presumably) desired conclusion.

This leaves me wondering what the pro-global warming view of Nordhaus and Boyer is. Their conclusion  weakens the case for something like the Kyoto protocol--and that conclusion hinges on a procedure that cannot, I think, be defended. Correct that error and their work appears to provide no support for any substantial effort to prevent global warming.

P.S. After writing this, it occurred to me that there is one respect in which I am being too hard on Nordhaus and Boyer. Suppose we limit "catastrophes" to changes that are not only unlikely and very large, but also very fast. Then there really is some asymmetry to the situation. Humans are currently optimized against the current environment, making any change presumptively negative. I have argued in the past that that is not a strong argument with regard to changes that occur slowly—for example three degrees of warming in a century—since humans will in any case be changing what they do in many ways over so long a period. But that argument would not apply to a change that occurred over only a few years.

If, for instance, climate change makes Europe unbearably cold but adds an equal amount of acceptable land elsewhere, say in northern Canada, and does it in only a couple of years, there will be a very large net cost.

So they would have a legitimate case if they limited their category of catastrophes to rapid ones—but, so far as I can tell from what they wrote, they did not.


Miko said...

Yet, as I keep pointing out, earth's climate was not designed for us

Quite the opposite, in fact: through the process of evolution, human beings were "designed" for the Earth's climate. But in the end this still means that your conclusion that a change in climate is as likely to be beneficial as harmful is wrong.

David Friedman said...

For Miko:

Humans were "designed" for earth's climate over a period for most of which its climate was quite different from the present—we are currently in an interglacial, a relatively short period of warmth in the current long ice age. Hence the evolutionary argument provides no support for your claim.

Anonymous said...

Yet, as I keep pointing out, earth's climate was not designed for us

We have lots of fixed capital allocated on the assumption that climate is relatively stable. Nepal for instance.

Anonymous said...

A lot of the debate on climate change is exactly about how we go about pricing low probability but catastrophic outcomes. In addition to considering the expected utility over all outcomes we need to account for risk aversion.

David MacRae said...

Mr Friedman,

I have a quibble. This is the second time you have posted about usable land in northern Canada. There is no usable land in northern Canada. There is a million square miles of rock around Hudson Bay and most of the rest of the north is a vast swampy wasteland. Farmland stops two hours north of Montreal and starts again four hours further. That's an area where an ancient sea dropped fertile soil over the rocks. In the west, farming already goes up to the border of the Northwest Territories (BC's Peace River District). Maybe the Mackenzie River Valley might be usuable but that's about it.

This being said, why all the doom and gloom about warming? Common sense says that it is a benefit. Among other things, a warmer world is a wetter world because warm air can hold more water. This might have a benefit in places like the Sahel. In fact, during the Holocene, when temperatures were higher than they are today, there were lakes in the Sahara. The CO2, whatever the cause of the rising levels, is a pure benefit. Its plant food, after all. Experiments in greenhouses indicate that the optimal level of CO2 for plant growth is about three times what we have today.

On the evolutionary question, human evolution has nothing to do with glacials. We evolved in Africa where there weren't any. The climate changed by getting drier during cold periods, not by actually getting colder. So, to the extent that evolution has anything to do with it, warmth is to be preferred. However, we are quite an adaptable series so I don't think this is really relevant.

David Friedman said...

Anonymous offers the fixed capital argument. The response, as I mentioned in the P.S. to this post, is that fixed capital is only an important issue for rapid change. Over a century, farmers will have changed crops multiple times, most buildings will have been torn down and replaced. If climate is slowly changing, the new crops or buildings will be a little different in kind or location from the old.

hudebnik said...

that is not a strong argument with regard to changes that occur slowly—for example three degrees of warming in a century—since humans will in any case be changing what they do in many ways over so long a period. But that argument would not apply to a change that occurred over only a few years.

Two objections. First, it's a lot easier for a few humans than for a hundred million to adapt to a hundred-year three-degree shift -- the first few to move might get good deals on swapping French land for Yukon land, but the rest would have a hard time. Second, it would be much more difficult for the rest of the ecosystem to adapt. I don't know how to estimate the economic cost of mass extinctions.

jimbino said...

I can see that cataclysmic change might be beneficial. It might interrupt our "focus on the family," the severe intrusion of gummint into all facets of our lives, and our prolonged waging of foreign wars. That I would welcome.

I imagine that, if I had been a Jew in 1938 to 1945 Germany, I would have welcomed earthquakes, tornadoes, floods, tsunamis, volcanoes, hurricanes or any other catastrophe that opened the prison doors and threatened to bring down the gummint.

In fact, if someone has a cloud-seeding or similar project to accomplish that, sign me up!

Xerographica said...

Speaking of partial knowledge. My guess is that none of you know the significance of my username. It refers to an epiphytic species of plant in the bromeliad family (ie pineapples)...Tillandsia xerographica.

For as long as I can remember I've been fascinated with epiphytes. Epiphytes, unlike parasites (ie mistletoe) do not derive any nutrients from their hosts, which is why they can grow on rocks as well as on trees and in quite a few instances...on cacti even!!! How cool is that? Talk about a marvelous adaptation in the ever constant conquest of space.  (Nerd alert - read the short Environmentalism and Ecology section for the Wikipedia article on Frank Herbert's classic sci-fi novel Dune) comment was getting a bit lengthy. When somebody posts a lengthy comment on my blog I tell them that they are welcome to turn any future lengthy comments into blog entries and then just link me to their blog entry. Not sure what your preference is but here's the rest of my comment...

Priorities in Peril.

markbahner said...

"There is a million square miles of rock around Hudson Bay..."

Hey! The good people of Connecticut have been living for centuries on rock. It's great for building...rock walls.

TGGP said...

If we evolved in a colder climate, that would make even warmer temperatures all the more aberrant. However, we have done a lot of evolving since the last ice age (see "The 10,000 Year Explosion") and I expect we would be maladapted if it returned.

Robbo said...

"Humans are currently optimized against the current environment"

Not really. Humans are biologically tuned towards the environments they evolved in, in Africa, which seem to have been substantially warmer than present-day Europe and US.

Our infrastructure is optimised to todays climate, and a major change over a period less than c 100 years would have an economic impact, but a small change towards warm even in a short time would increase the acreage available for food crops at the expense of the forests and tundra in the north.

David Friedman said...

Re farming on rock:

A plow, they say, to plow the snow,
They cannot mean to plant it though,
Unless in bitterness to mock
At having cultivated rock.

(Robert Frost)

Andy Z said...

I always like when someone says something like "CO2 is plant food" because then I know that everything related they say can be easily ignored.

Milhouse said...

And what is wrong with "CO2 is plant food"?

Anonymous said...

The sun is a plant's food, that's where it gets the calories, the C02 just supports them consumption of sunlight. Sunlight is like the fat and sugar, C02 is like the multivitamin. If you want fat plants, give 'em sunlight. That's where calories come from.

Milhouse said...

And what is "plant food"? I mean the stuff that is sold under that name, for you to add to the water with which you water the plants. It's not sunlight. It promotes plant growth, and it is called plant food. QED.

Tel said...

Here's a quick cut-n-paste from Yahoo Answers:

A general equation for photosynthesis is:

6 CO2(gas) + 12 H2O(liquid) + photons → C6H12O6(aqueous) + 6 O2(gas) + 6 H2O(liquid)

carbon dioxide + water + light energy → glucose + oxygen + water

OK, so who wants to explain to me which one of the items on the left-hand-side of that equation is the most important item? And why?

What were you saying about "plant food" again? You believe in science, am I right?

David Friedman said...

On the "plant food" issue ... .

Food provides us with energy, but it also provides us with other inputs, the materials used to build and repair our bodies. So I don't think it's legitimate to claim that sunlight is the only thing that can be legitimately described as plant food.