Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Freaking Out over Global Warming

Economics / Climate Change Nov 06, 2009 - 10:51 AM GMT

By: Robert_Murphy

Economics

Best Financial Markets Analysis ArticleOne of the ugliest battles in the blogosphere climate wars has involved the newly released Superfreakonomics, sequel to the best-selling Freakonomics. In their new book's final chapter, economist Steven Levitt and journalist Stephen Dubner set out to challenge the view that massively restricting carbon emissions is the only hope for averting planetwide catastrophe. Some of the most outspoken advocates for immediate "carbon legislation," such as Joe Romm and Paul Krugman, were appalled by the chapter.


In this article I will link to some of the major commentary on the book so far, and try to explain to Austrian readers why the interventionists were understandably upset. In particular, I want to caution libertarians not to reflexively side with Levitt and Dubner because "they're on our side." I will remind readers of the admitted errors Levitt made in his battles (stemming from the Freakonomics era) with anti-gun-controller John Lott.

Having done all this, at the end of the article my merciful nature will compel me to defend Levitt and Dubner from UC Berkeley economist Brad DeLong's specific claim that their support of geoengineering is somehow "bad economics."

As we'll see, Levitt and Dubner might be wrong in their views on global warming, but if so they are wrong because of the numbers. Regardless of their other possible sins, Levitt and Dubner should be acquitted of DeLong's accusation that they aren't thinking like economists.

A Summary of the Blog Wars

I can't do Levitt and Dubner's presentation justice here; I encourage the interested reader to read the chapter. To summarize very briefly, they argue that if global warming really is a threat, then it does not follow that governments need to enforce draconian cuts in carbon dioxide emissions, which would cost many trillions of dollars over the next few decades.

Instead, a "geoengineering" solution could be adopted to keep the earth cool despite increasing concentrations of greenhouse gases in the atmosphere. Perhaps the most fanciful idea is to suspend a hose using helium balloons, in order to pump sulfur dioxide into the stratosphere. This would reflect some of the incoming sunlight and arrest (or even reverse) global warming, just as occurred after the eruption of Mount Pinatubo in 1991. Best of all, this particular approach would only cost about $250 million total — less than what Al Gore's foundation is spending just to "raise awareness" about climate change.

Naturally, the proponents of massive government interventions into the economy were furious at Levitt and Dubner's claims. Physicist and Clinton administration Department of Energy official Joe Romm got the ball rolling with this fiery post in which he accused the Superfreakonomics writers not merely of being incredibly sloppy in their summary of the climate science but also of consciously distorting the views of the scientists they quoted.

Romm's frequent ally in such matters, Paul Krugman, soon followed suit and claimed that the authors horribly mischaracterized the views of leading climate economists in the chapter. Dubner defended himself and coauthor Levitt against Romm's accusations of intentional distortion in this post, and physicist (and all-around guru) Nathan Myhrvold, one of the primary sources for the chapter, defended himself from Romm's accusations of ignorance here.

Are the Critics Justified?

Readers of these pages know that I am no fan of Paul Krugman, especially when it comes to his views on climate change. But I do want to explain that I understand why he and Romm freaked out about this chapter.

The example that most offended Krugman was Levitt and Dubner's discussion of the work of economist Martin Weitzman. In a passage discussing the thorny issues of climate change — that the risks are very uncertain and won't occur for many years, making it hard to know how much action to take in the present — Levitt and Dubner say,

The economist Martin Weitzman analyzed the best available climate models and concluded the future holds a 5 percent chance of a terrible-case scenario — a rise of more than 10 degrees Celsius.

There is of course great uncertainty even in this estimate of uncertainty. So how should we place a value on this relatively small chance of worldwide catastrophe? (Superfreakonomics, p. 169)

This is the only mention of Weitzman in the chapter, and the overall theme of course is that global warming need not alter modern civilization. In context, then, one certainly gets the impression that Martin Weitzman's work weakens the case for immediate restrictions on carbon emissions.

But this is exactly the opposite of what Weitzman has done. The issues are too technical for a full discussion here, but elsewhere I have explained that Weitzman is one of the interventionists' heroes on the issue of climate change.

"I just want to caution Austrian and libertarian readers not to assume that anyone who 'thinks global warming is a big hoax' is automatically a great scholar."

Even conceding the natural-science "consensus" on human-caused climate change, standard cost-benefit models show that the "optimal carbon tax" starts out fairly modestly, and only increases gradually over the decades. This is because the serious damages from climate change won't really kick in until the end of the century, and so the present discounted value of the "social cost" of an additional ton of carbon dioxide emissions is fairly low.

Weitzman's work upsets this standard conclusion. He has shown the mathematical conditions under which the usual cost-benefit models break down. Weitzman's approach shows that, rather than making a slight marginal adjustment in the trajectory of emissions to "internalize the externality," it can be optimal to aggressively curtail emissions right away in order to minimize the likelihood of experiencing catastrophic climate events.

So it's not so much that Levitt and Dubner lied about Weitzman's work, but their reference was very misleading. Austrians can appreciate what happened by considering this analogy: Suppose a proponent of government healthcare said, "All these critics keep warning about 'socialized medicine.' But Nobel economist Friedrich Hayek wrote in the socialist-calculation debate that there was no logical problem with central planners optimally allocating resources."

Now the above (hypothetical) quotation would be accurate, strictly speaking, but horribly misleading. If it were embedded in a book chapter pushing for a government health-insurance plan, Austrian economists would understandably freak out. Thus, we should be forgiving when Paul Krugman does the same after reading Superfreakonomics on climate change.

One final point, in case the free-market reader simply cannot bring himself to empathize with Paul Krugman — let's not forget what happened in the argument between Steve Levitt and anti-gun-control economist John Lott. Levitt ultimately had to write a letter to a colleague retracting claims he had made regarding Lott's involvement with an issue of the Journal of Law and Economics. In that letter, Levitt made the following correction:

In those emails [I had sent to you], I did not mean to suggest that Dr. John R. Lott, Jr., or anyone acting on his behalf, engaged in bribery or exercised improper influence on the editorial process with respect to the preparation and publication of the Conference Issue. I acknowledge that the articles that were published in the Conference Issue were reviewed by referees engaged by the editors of the JLE. In fact, I was one of the peer referees.

In case the reader's eyes glazed over, let me emphasize the astounding admission in the above sentences by quoting one cynical blogger: "Look at the size of the lies Levitt was throwing around. 'It wasn't a refereed journal,' Levitt says. Not only was it a refereed journal, Levitt was a referee!"

Of course, just because Levitt may have been sloppy and very unfair in his treatment of the work of John Lott, doesn't prove that Romm and Krugman are right when it comes to Levitt's (and coauthor Dubner's) handling of climate change. I just want to caution Austrian and libertarian readers not to assume that anyone who "thinks global warming is a big hoax" is automatically a great scholar.

Now that I've spent so much time criticizing Levitt, let me end this article by defending him from economist Brad DeLong.

DeLong Forgets that Time Is Money

In a series of posts (one, two, and three), DeLong heaps extreme criticism on our authors. Under normal circumstances, DeLong's criticisms would be described as "scathing," yet compared to Romm's treatment, it's kid-glove stuff. For our purposes here, I want to focus on just two of DeLong's (many) complaints. First, DeLong quotes Levitt who said (during an NPR interview),

[I]f you look at the history of modern mankind, I think you will be hard pressed to find any particular problem that was serious that was solved by a behavioral change, as opposed to by a technological solution….

DeLong is astounded by this claim, and responds, "That's just not economics: economics is that incentives change, and as incentives change people's behavior changes."

DeLong is right: what Levitt said is "not economics." Rather, it's a historical claim. Maybe it's right and maybe it's wrong, but DeLong can't trump it by citing a tautology from microeconomics. I am sure that Levitt would concede the narrow point that if governments around the world instituted a massive carbon tax, and enforced it with draconian penalties for evasion, then global emissions would indeed fall quickly.

"I am sure that Levitt would concede the narrow point that if governments around the world instituted a massive carbon tax, and enforced it with draconian penalties for evasion, then global emissions would indeed fall quickly."

But one of Levitt's main points is that governments around the world are not going to do this — that it is naive to expect them to sacrifice their own economies when (in Levitt's opinion) the climate science is not nearly certain enough to justify this painful step.

Levitt is making a prediction — based on his interpretation of history — that if manmade global warming really does require drastic measures in the next few decades, the response will involve various forms of geoengineering, which (Levitt predicts) will cost a tiny fraction of what the carbon mitigation proposals would require. To repeat, I'm not saying I necessarily endorse Levitt's glib proclamations on these points, but DeLong is wrong to dismiss them as somehow "not economics."

Finally let's deal with another point on which DeLong completely misses Levitt's valid argument. He first quotes Levitt:

Now, in the long run, perhaps you'll want to deal with the [high] carbon [dioxide] issue [even with geoengineering] because we're going to have acidification of the oceans and the coral reefs will die if we don't do something about the carbon. But if you just buy the time to keep the Earth cool for a while longer, I am certain that if we invest we will come up with technology that will allow us much more effectively in the future to pull carbon out of the air than we currently have….

DeLong points out that whatever mechanism our descendants use to suck CO2 out of the atmosphere, it will require power generation. He then argues,

So now we have (a) our normal power plants to power our civilization, plus (b) our atmosphere carbon-scrubbing industry, which is (c) powered by even more carbon power plants to generate the power to break the carbon-oxygen bonds that our first set of power plants made. But plants (c) put more carbon into the atmosphere than plants (a) did.

I know, says Steve Levitt, we can power our carbon-scrubbing industry (b) by power plants (c) that use nuclear or solar or… But then why not power our original civilization-sustaining power plants (a) by nuclear or solar or whatever?

Now this is frankly silly. Let's be clear, I think Levitt and Dubner made some major goofs in their chapter, and DeLong (as well as Romm and Krugman) nailed them. But here DeLong is making an obvious mistake. He is neglecting the fact that it will be much, much cheaper to engage in carbon-free energy production the longer we wait. Does DeLong really not see this elementary point and how it makes Levitt's argument perfectly sensible?

For an analogy, consider people who contract a terminal illness and then elect to have their bodies cryonically frozen so that they can be resuscitated and cured in the future. Now maybe that's a good idea or maybe it's not, but it wouldn't really make sense for someone to say, "That's just bad economics! Why go to the trouble of having your cancer cured in the future? Just do it now." Yet that is exactly the argument DeLong has deployed against Levitt.

"There is a reason that the energy infrastructure in today's market economies is so heavily based upon fossil fuels…"

Conclusion

There is a reason that the energy infrastructure in today's market economies is so heavily based upon fossil fuels: they are by far the cheapest, most reliable forms of energy, given the needs of modern society. Regardless of their (alleged) sloppy scholarship, Levitt and Dubner raise an interesting possibility that deserves careful scrutiny, not ridicule: even if it turns out that unfettered use of fossil fuels will spell unacceptable climate damages to future generations, it does not follow that the only solution is immediate and drastic reductions in carbon emissions.

Another possibility is to buy a few decades' worth of "breathing room" (Myhrvold's phrase in the book) through pumping SO2 into the stratosphere, for example, and then make the transition to carbon-free energy production when it will not be so terribly costly.

It's surprising that some of the people who warn that the fate of the planet itself is it stake are so dismissive of what could be a crucial component of humanity's response to the very dangers of which they're warning.

Robert Murphy, an adjunct scholar of the Mises Institute and a faculty member of the Mises University, runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to Man, Economy, and State with Power and Market, the Human Action Study Guide, and The Politically Incorrect Guide to the Great Depression and the New Deal. Send him mail. See Robert P. Murphy's article archives. Comment on the blog.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

G.R.L. Cowan
06 Nov 09, 14:57
Honorable conservatives must call for fossil fuel tax reductions

... because a major reason the energy infrastructure in today's market economies is so heavily based upon fossil fuels is that they bring in so much special tax revenue. We would more quickly switch to uranium, a much cheaper and more reliable fuel, if this revenue did not motivate persons employed by government, and not domiciled near large fossil fuel installations, to put stumbling blocks in that transition's way.

(It's notable that nuclear power stations have government inspectors permanently stationed on-site, and these posts are easy to fill. If similar resident inspectorships existed every ten miles along major gas pipelines, and gas could not flow without those people be there, the switch to nuclear would take place quickly.)

The Freakonomists' geoengineering prescriptions are indeed sloppy, like recommending an employee who gets drunk at lunch and sleeps at his desk in the afternoon should take caffeine pills. Or like the old lady who swallowed a cat to catch a rat. There are solutions that address the CO2 problem directly rather than trying to compensate for one of its effects; these can be considered barf-the-rat-out solutions, while junking up the atmosphere with sun-blocking stuff is a SACTCAR one.

--- G.R.L. Cowan ('How fire can be domesticated')

http://www.eagle.ca/~gcowan/


Christian
06 Nov 09, 22:56
Freak out

Delong is a CFR member.....the CFR has a pro "freak out" over GW agenda.....apparently this agenda is useful in sustaining their power/influence as the western economies phase out the middle class.

Carroll Quigley wrote "The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole"

Quigley wrote this back in the 60's and i believe the same "club of influential and intelligent finance minded elite" PLAN AHEAD and are DETERMINED to sustain their power and influence WHEN capitalism eventually collapses from the overhang of debt. It's not that this group wanted a collapse it just socio-economic systems are not historically sustainable for more than a couple century's and debt fueled capitalism was risky enough so that elite's made plans utilizing what works (propoganda i.e Global warming) utilizing media and $...to create political movements that push people's emotional buttons and thus are useful to get people to rationalize (during economically tuff times) that hey ......we are helping the enviornment ....and see their suffering as a sacrifice....hopeless people try to hang on to believing and finding a 'positive in things'....especially when they are docile and pretty helpless to effect positive change in the political system. They choose GW because this would allow them the best manipulation over the transition to sustain their power and influence/wealth without revolt docile...having the media under your thumb is a major help..YOU see how this game is being played yet? H1N1 may also be INVALUABLE to this "club" as a cover for the failed economic policy's and conflicts of intrest... the public servants have with big industry lobbyists/lawyers who helped hollow out the economy and write laws to grow the "clubs" influence and power. "oh the economy was recovering until the H1N1 epidemic hit" divert the public's anger from failed policy's toward a freakn FLU....then get them to feel SOME good that this lower standard of living can be seen as a sacrifice that also helps Heal the earth's awful global warming and the "club" laughs all the way to the bank...GENIUS


Post Comment

Only logged in users are allowed to post comments. Register/ Log in