People often wonder what use are economists. In terms of climate change this is particularly appropriate. Most economists are not very absorbent, and cannot be used very effectively as flood defences. Nor can they be effectively deployed to scrub carbon from the atmosphere, and as a profession have a general tendency to produce hotter rather than cooler air thus rendering them particularly useless at cooling. However, all is not lost, perhaps.
The annual jamboree for economists and allied professions is the Allied Social Sciences Association meeting. This takes place ridiculously early in January every year, and is a combination of a showcase for research and a mass hiring fair for Ph.D. students wishing to enter into economics posts. From a climate perspective this year was quite interesting, with a significant number of papers beginning to focus in on the costs of not doing anything to avert ongoing anthropogenic global warming.
One of the highlights of this is always the presidential address by the incoming president of the American economic Association. In 2015 the president produced a proposal, in his presidential address, for what he termed the “climate club”. This was a grouping of Nations, similar perhaps to trade or financial groupings like the original European economic community. The crucial aspect is that in within the club members will undertake coordinated, but quite costly, actions to reduce the impact of global warming. Those outside the club would be subject to very significant tariffs and other penalties when wishing to trade or otherwise do business with members of the club. Simulation and other evidence suggested that this could produce quite significant, and quite rapid, reductions in global carbon footprints. What was missing from this was perhaps an analysis of how this club could be superimposed on the existing geopolitical and geo-economic infrastructure. It was a brave attempt to show how the design of economic institutions and economic incentives can be used to help avert catastrophe.
This year there were a number of papers presented, frightening and fascinating, which looked at global climate catastrophe. In assessing the impact of climate change economists are at a significant disadvantage. Their tools and models are generally not very good at very long horizons. Even so, some ideas can be gleaned.
One major catastrophe would be the collapse of the West Antarctic ice sheet. A full collapse of this would result in ocean rise of 4 m. There are indications that this collapse has begun. One analysis suggested that the economic costs of preventing this collapse were relatively modest, but rapidly became extremely high, due to the fact that there is a threshold after which the collapse becomes inevitable. It may be too late, given locked in carbon, so why bother runs an argument?
A further paper looked at the potential economic impact of mass acidification of the Seas. This happens when the oceans absorb more and more carbon dioxide, contracting the seawater into diluted acid. This would wipe out current reefs, including the Great Barrier Reef, and result in major changes in commercial fisheries. Despite this the estimates of damage are globaly small, because of the potential for aquaculture to adapt. Much less cod, lots more shrimp.
A third paper suggests that the shutting down of what is called thethermohaline, the Atlantic conveyor that circulates cool and warm water around the oceans, that this would not necessarily be bad (for Europe). If the Gulfstream were to shut down, this will of course result in much cooler temperatures in Europe. But, the analysis goes, the world is warming anyway. Maybe the two will offset each other? There would of course be significant effects, greatly increased warming, in Africa and South America. Put in simple terms this would result in the desertification of the Amazon and perhaps the spread of the Sahara further south. But as these areas are relatively poorer and economic analysis suggests, based on present-day and likely future paths that the impact would be limited.
All three of these are “correct”analyses in so far as they go, but they seem to me to have one fatal philosophical flaw. They are linear, first order linear. We simply have no idea, economically, what the effect would be of mass oceanic acidification. There is a small but extant possibility that it would result in the collapse of the base of the marine ecosystem, not just recreational and commercial fishery but the whole shebang. This would end up with a world sea composed mostly of jellyfish… We have no economic metrics for the global migration effects that would emerge from a catastrophic warming of Africa and south America.
Economics is a great tool for evaluating economic issues. It is about costs and benefits. When it strays into the area of long-term climate, it is at sea. We barely understand the costs of action, and have no real clue, even to orders of magnitude, of the costs of inaction. A prudent approach is to let climate scientists spell out the effects and for policy makers to work to avert the worst possible scenarios. In doing so they will avert the lesser ones. When economists make sweeping statements on the likely costs of geological, climatological or metrological catastrophes these will be used, shorn of caveats, by shortsighted politicians.