More thoughts from the Weitzman event
Posted by Daniel Hall on April 4, 2008
That Marty Weitzman talk I attended last month not only featured Weitzman but also had some pretty amazing discussants including Richard Posner and Tom Schelling. There were plenty of juicy tidbits (besides the one I’ve already mentioned) and so I’ve gone through my notes and have tried to pull out a few of the highlights. There’s enough here that I’m putting it all below the fold…
1. On the implications of his central point about uncertainty (described in my previous post): It should shift the focus of climate economics analyses from the mean outcomes (e.g., the central estimates of benefit-cost analysis) to the importance of the assumptions that go into any analysis. It should also shift the conversation towards what risks we are willing to run for certain kinds of catastrophe.
2. On geoengineering: We should develop it. Any solution that would cap our downside exposure would at least give us an upper bound for the cost of catastrophe. He also noted that our aversion to geoengineering is odd, basically saying, “Shooting particles into the upper atmosphere is not OK, but pumping a bunch of carbon dioxide underground is?”
3. On the difference between reducing emissions and geoengineering: Mitigation is expensive, works over long times scale, and suffers from the free rider problem. Ensuring collective action is hard. Geoengineering is cheap, works over short time scales, and the private benefits could exceed the costs for an individual nation. This implies we may need international agreement to limit who could deploy geoengineering and when.
4. On discount rates: It is unclear what discount rate to use if there are big uncertainties about economic growth, i.e., future (dis)utility is unknown. [DH: If the economy is going to shrink should we use negative discount rates?]
5. On other catastrophes: Could bioengineering create an irreversible Frankenfood disaster? Agreed it is unlikely but is generally disappointed that we know so little about catastrophic risk, and isn’t sure that anthropogenic global warming is the biggest risk we face.
6. On fat tails and the threshold for taking action: We may not need to quantify the risk of truly enormous catastrophe in order to take action, e.g., a 1% chance of 10 degrees Celsius of warming may be enough to act very strongly even ignoring other scarier outcomes.
7. On low-probability events: People are terrible at estimating the odds, e.g., historical “near certainties” including thermonuclear war in the 1950s, smallpox bioterror attack the 1990s, etc. At the same time he dislikes Weitzman’s characterization of catastrophe as a low-probability event, because, for example…
8. On the West Antarctic Ice Sheet (WAIS): The disutility of the breakdown of the WAIS would be quite large and this event could be much more likely than 5%.
9. On projecting the future cost of climate change: Remember that climate change is not imposed on today’s world. Probably the best quote of the whole event then came when Schelling said (approximately), “Think of the difference between 1935 and today. If we haven’t eliminated vector-borne diseases by the time global warming gets bad the human race hardly deserves to be saved.”
10. On discount rates: Economists such as Bill Nordhaus like to use the market rate. This would be applicable if we could invest in a mutual fund for the future. The constructed rate comes from time preference and the declining marginal utility of income. [DH: See the Stern Review for an in-depth discussion.] But… it is unclear that time preference applies to others. [DH: I would rather have my cake now than later, but there is some tradeoff, whereas I would always rather have your cake, now and later.] Given this and the declining marginal utility of income, if climate change mitigation involves the current rich paying to improve the lives of the future poor then the appropriate discount rate may be negative in real terms.
11. On R&D: We should study three things. First, what will happen with methane (permafrosts in Canada, methane clathrates in the ocean, etc.)? Second, will carbon capture and storage work? This is particularly important for China. Third, can we develop geoengineering? We only have to screen out 1-2% of sunlight to offset a doubling of CO2. [DH: Of course, ocean acidification would remain a problem.] And the amount of stuff — sulfur particulates perhaps — that you have to put in the stratosphere is small because it stays up there for a year (rather than 1-2 weeks in the lower atmosphere).
There you have it. I was particularly impressed by Schelling. I hope to be half that sharp ever and a quarter that sharp when I am his age. The only thing I really have to add is that the World Bank InfoShop has the most amazingly comfortable chairs of any event center I’ve ever been in.