Monday, May 27, 2013

The Odds of Disaster: An Economist's Warning on Global Warming

One premise of modern economics is that we humans discount the future. This simply means that we value something that happens in the here-and-now -- the present -- more than we value it, right now, if we will only get it in the future. A dollar today is worth more than a dollar a year from now, for example. And that means that a dollar a year from now is worth less, in today's money, than the dollar today.

[ PBS Newsdesk]
Paul Solman: Are headlines trumpeting the fact that carbon dioxide levels in the earth's atmosphere have now passed 400 parts per million for the first time in something like three million years unduly alarmist? Or are they a timely warning?
I asked noted environmental economist Martin Weitzman to address the question.
An expert on the Soviet economy in the '70s and '80s, Weitzman first made news in 1984 with the publication of a book called The Share Economy, an argument for profit sharing instead of fixed wages. Fourteen years later came his paper Recombinant Growth, which revolutionized how some of us understood the enormous potential of technology.
But for many years, Weitzman has also been working on environmental economics and most recently, in a series of widely cited academic papers, on the economics of global warming; the most famous, on the "Economics of Catastrophic Climate Change."
Weitzman's central idea is not unlike the legendary bet proposed by the 16th century Catholic French philosopher Blaise Pascal. One way to interpret Pascal's argument: even if you think the likelihood of God's existence is vanishingly small, the cost if you're wrong -- eternal damnation -- is infinitely high. An infinite cost times even a tiny probability is still ... an infinite cost.
So you make a finite investment by believing in God and acting accordingly in order to avoid an infinite cost. To put it another way, you're obliged, mathematically, to make the investment in belief.
You might keep Pascal's argument in mind while reading Weitzman. Or think of the "Black Swan" argument of Nassim Taleb: certain events, however unlikely you think they may be, could have such enormous consequences, you just can't take the chance of letting them happen.
Martin Weitzman: Recently the concentration of atmospheric carbon dioxide (CO2) reached an unprecedented level of 400 parts per million. What is the significance of this "milestone"? Does it portend catastrophic climate change? The short answer is no. The long answer is a more complicated and more nuanced maybe.
The modern era of carefully measuring and recording atmospheric CO2 began with the work of famed scientist Charles Keeling. In 1958, Keeling began to accurately monitor daily CO2 levels atop Mauna Loa, the highest mountain in Hawaii. Keeling chose this location because it was so remote from manmade sources that it would accurately track average "well mixed" CO2 levels throughout the world. Thanks to Keeling's pioneering work we now have a continuous ongoing record of CO2 levels since 1958.
In 1958, Keeling recorded an atmospheric CO2 level of 315 ppm. Every year since then the Mauna Loa station has recorded ever-higher levels of CO2 than the year before. Atmospheric CO2 concentrations have grown relentlessly over the years until they just recently blew past the well-publicized milestone of 400 ppm.
The 400 ppm milestone is basically just a round number. To see why it might (or might not) be viewed as something unusual, or even threatening, we need to examine a longer record of CO2 levels over time. Read More