Saturday, January 13, 2007

Stern replies....

Sir Nicholas Stern has placed a short reply to the comments on his review on the Treasury Independent Reviews page. He describes the criticisms of the Review as coming from three directions:

1) Some still deny the science of climate change
There are legitimate debates over many particular details of the climate system, but it is no longer credible to doubt the underlying physical mechanisms associated with increases in greenhouse gases in the atmosphere, nor to doubt the importance of the natural carbon cycle and the potential for amplifying feedbacks that would be outside our control.
Hmm..... Eli knows a bunch of them.....
2) Some people accept the basic science, but still believe it is preferable to wait and see before taking significant action on mitigation. Some suggest a new technology will come along that will greatly reduce the costs of action, or that the changes will be such that future generations, with a higher capital stock available to them, will be able to adapt.

It is certainly true that for most countries, major transformational damages affecting the whole economy are not likely to be seen for several decades, or even a century or more - but if we wait until they appear and they are as difficult as we have reason to expect then we cannot go into reverse. Stocks of greenhouse gases are extremely difficult to reduce.....

Adaptation is necessary, but it is not the whole answer. The longer stocks of greenhouse gases are allowed to accumulate in the atmosphere, the greater the impacts to which we are committing the world. There are limits to adaptation at higher temperatures. Many of the effects could involve major dislocation, to whole nations and regions, with consequences that would be felt around the world. The only way to prevent very high future damages is to reduce greenhouse gas emissions today.
and Ethon knows those guys REAL well.
3) Some people prefer to place very low value on the future, or to put it another way, to place a very high value on near-term opportunities for consumption. It is a key feature of the challenge of climate change that we must think long-term to understand the issues and to respond to them. It will always be possible to choose a pure time discount rate that makes the benefit of reducing future damages appear trivial.

Choosing a high rate of pure time preference to analyse a long-term issue that affects the global environment is to make a profound ethical choice with, in this case, irreversible effects on future generations. It is as though a grandparent is saying to their grandchild, because you will live your life 50 years after mine, I place far less value on your well-being than I do on myself and my current neighbours, and therefore I am ready to take decisions with severe and irreversible implications for you.
Eli, was perhaps jumped on for saying the same thing in one line in a Quiggin discussion of this issue. Sir N is perhaps less pithy and more polite, but it comes to the same thing.
Nevertheless ethical choices appear different to different people
but he continues to rip Bjorn and the Danes new ones...
An alternative view, associated with Bjorn Lomborg, that it is agreed, places dealing with climate change low on the agenda, arises from comparing it with “other ways” of spending public money and suggests that they have higher social rates of return. There are important deficiencies in this approach. First, correcting an externality is a different policy question from spending public money. Second, the argument as conveniently put takes little account of the severe risks of very high temperature increases from climate change which we now know are possible, or indeed likely, under business as usual, and which cannot be reversed if they start to appear. Third, the costs of action for any given stabilisation level rise rapidly if action is delayed. Thus, this type of argument for low priority or for delay is completely unconvincing.
There is much more, including a discussion of criticisms and suggestions related to mitigation and adaptations.
Finally, some people have asked if it is really possible to create structures that will sustain co-operation and overcome the incentives for free-riding. Here, it is important to understand that public pressure for an effective response is growing in many countries, as people begin to realise the scale of the risks they and their successors face if no action is taken and as they see the wide range of initiatives by local governments, businesses and community groups that demonstrate that it is possible to do something about the problem. It is now more important than ever to build trust, through transparency and mutual understanding about the actions that different countries are taking, and to look for international mechanisms that build on and support national objectives, including by reducing costs and increasing the prospects for success.
As always, RTFR, this is but a summary through the eyes of a poor, but noble bunny.

UPDATE: A page with links to the Stern Review, reviews of the Review and comments thereupon


Anonymous said...

"Some people prefer to place very low value on the future,"

Mainstream economists, for example.

Similarly, they place essentially no expected cost on low probability futures that may have exceedingly high potential cost.

When it comes to adressing global warming, the actuarials (and gamblers!) are the people we should really be talking to rather than the economists.

Most economists seem to have a difficult time understanding the concept of "expectation". Indeed, to some, it seems completely foreign.

If one future has very high potential cost , it MUST be figured into the overall expected cost, even though it may have a very low porbablity of occurrence.

In fact, a low-probablity/high-cost potential future could contribute more to the overall "expected cost" than a high-probability/low-cost potential future.

This stuff is the bread and butter of actuarials and Stern's effort represented one of just a few attempts by economists to consider such expectation.

I don't think it is any accident that his effort has been received so negatively among his own kind (economists).

So the upshot is that if we want to know how to deal with global warming in the way that will minimize the overall expected cost, we should ask the actuarials -- or Las Vegas casinos (I'm being dead serious with the last comment).

Anonymous said...

"Some people prefer to place very low value on the future,"

Do economists hate their children? Their grandchildren? ;-)

Anonymous said...

It's simply a fact that mainstream economics and its practitioners undervalue clean air, clean water and other things that ecosystems provide.

In fact, up until failry recently, these and other natural resources were assigned no value whatsoever. They were considered mere commodities to be consumed and then thrown out.

Nearly everything in our current economic system (at least here in the US) is geared toward consumption today and in the very near future.

Mainstream economics is certainly not accustomed to considering potentialities that are 100 or even 50 years into the future. I'm not even convinced that it is capable of doing so.

Anonymous said...

Let's take the winter excess daeath rate in the UK. If global warming reduces this, is this a cost or a benefit? And to an economist?

Do economists hate their parents? Their grandparents? ;-)

Anonymous said...

ITs a benefit to the people who dont die sooner, but a cost to the rest of us paying for their retirement.
But it is likely that many of them will die of heat exhaustion in the summer instead, or else purchase air conditioning, which will be a cost.

Anonymous said...

"Let's take the winter excess "daeath rate in the UK. If global warming reduces this, is this a cost or a benefit?'

Both costs and benefits get figured into an "expected cost" analysis.

If the result is negative, it means that the expectation is that global warming will save money.

Expectation is really the only legitimate way to make rational choices regarding what (if anything) to do today about something like global warming, that may induce costly outcomes in the distant future.

Anonymous said...

"Do economists hate their children? Their grandchildren? Do economists hate their parents? Their grandparents? "

Economists hate their parents' children and their grandparents' granchildren. (-:

EliRabett said...

Not really, they have a hammer, so everything looks like a nail.

Seriously the first thing one needs to do is to examine whether the tools at hand can do the job. Any fool can make a competent argument based on a set of assumptions so it is pretty much hopeless to start with the conclusion, but the assumptions, ah, the assumptions. (OK we have a lot of incompetent fools, granted)