John Cassidy on the Economics of Climate Change

I'm very interested in the economics of climate change, and it's great that John Cassidy has an article on the subject in the May issue of Portfolio.

But I have to admit that I'm very disappointed in the tone that Cassidy decided to take.

First, the headline – "Learning to Love Global Warming" – is just dreadful. Global warming is not something that we should learn to love, it's something we should learn to fear and try to avoid.

Cassidy then leads off with a story about an unseasonably warm day in New York this past winter:

With the temperature in the low 70s, the garden was thronged with people in T-shirts and shorts. -After looking in astonishment at the pink blossoms that had come out at least two months early, I did a quick cost-benefit analysis of this presumed product of climate change.

I'm not sure who's doing the presuming here: Cassidy knows full well that you can't draw a direct causal relationship between climate change in general and a single warm winter's day in particular. But if you're going to take extreme weather events and calculate their costs and benefits, it's positively dishonest to use a nice day in Brooklyn rather than, say, Hurricane Katrina.

Cassidy then launches into a list of the winners and losers from global climate change. Here's a list of the places he mentions: California's Central Valley, Florida, the Northeast [of the USA, which goes without saying], the Mediterranean, Saint-Tropez, northwestern Europe, Scarborough. Here's some of the places he doesn't mention: Africa. India. Bangladesh.

Any honest accounting of the effects of global climate change has to be, well, global. And there's simply no way that the benefits to Scarborough can offset the costs to the 900 million people living in the Indo-Gangetic Plain, to take just one example of an area which will be devastated by global warming.

Cassidy then quotes Yale's Robert Mendelsohn talking about the effects of mild global warming on countries in the polar region and in mid-latitudes, and concluding that "warming benefits and damages will likely offset each other until warming passes [4.5°F], and even then [the cost] will be far smaller on net than originally thought."

I haven't seen Mendelsohn's sums. But it does seem that he's taking a lot of advantage from the fact that the world's poor, who will bear most of the brunt of global climate change, will also be the hardest hit. If Canada benefits and India is severely damaged, the net effects in terms of GDP might "offset each other", although I doubt it. But that doesn't mean that the outcomes are economically equivalent. After all, India has a lot more potential for future growth than Canada does. And if you take into account the opportunity cost of curtailing India's future growth, I don't think you can be quite as sanguine as Mendelsohn appears to be.

Cassidy does dip his toe into the contentious question of discount rates, setting up Sir Nicholas Stern on the one side and William Nordhaus on the other. That's fair enough, but I don't think it's fair to put John Quiggin in the middle. Quiggin, as any reader of his will know, is very much on Stern's side of the debate.

And although Cassidy does talk about preventing global warming as a useful insurance policy, he does so thusly:

Statistically speaking, it is unlikely that a 40-year-old man will get run over by a bus in a year’s time, but he takes out a policy just in case. Similarly, there may be only a small probability that unchecked growth in emissions would exacerbate global warming, but why take the risk?

No, John, there may not be "only a small probability that unchecked growth in emissions would exacerbate global warming". In fact, there's is a pretty much a 100% probability that unchecked growth in emissions will exacerbate global warming.

Cassidy tells us that he isn't "secretly working for a corporate-funded think tank that churns out skeptical studies on global warming". Maybe he should be, if he keeps on writing stuff like this.