JLVernonPhD presents "American SciCo"

For my last post (Part 1 of 2), I surprisingly received very little feedback.  I’m not sure if people thought I was crazy for saying that the climate debate is over or if the post was just too technical, but I’d love to know.  Either way, this is part 2 of that post.  This post expands upon my reasons for thinking that the public debate about the science of climate change is over.  I believe the debate now and into the future surrounds how we are going to pay for the mitigation costs of climate change.  I also believe you’ll find that even the Teabaggers would agree that if the costs were fairly distributed, we should act soon.  However, until we can identify a funding mechanism for dealing with climate change that meets the Republican and Libertarian philosophies, we will struggle to write viable climate legislation.  This means we must identify ways to address climate change that allows for industry to continue to grow and remain profitable and for individuals to continue to build wealth.  Unfortunately, the economic models used by economists to maximize these two goals are based on philosophies that minimize the monetary value of life and inappropriately undervalue our concern for the quality of life for our children. The battles will be ugly as long as Republicans are on the side of profits and wealth, but those of us who value the lives of our children over profit margins must push for changes in the economic models that are currently shaping our climate policies.  So, our mission is to create economic models that properly account for the value of life in the future and also ensures the industries remain economically sustainable. 

Of course, some industries, without significant changes, are unsustainable when logically talking about climate change mitigation.  This includes the oil and coal industries and even our current agricultural and food industries.  The economic models should reflect this and should account for this by predicting alternative energy sources and the impacts of other green industries.  The new economic models should also take into account the likelihood of social change which may value saving the environment over the profit margins of unsustainable industries.  I will discuss these issues here…

Picking up where I left off…a recent article gives insight into how the economic models used by economists to make policy recommendations calculate the costs and benefits of acting on climate change.

The authors identify three principal areas in which the current economic models are deficient for dealing with climate change.  I will simplify these arguments below:

1) The discounted utility framework

Human satisfaction is a major component of economic theory.  The concept of utility is one way of measuring human satisfaction.  Economists estimate the value of factors that allow for quantification of one’s personal satisfaction.  They use the term utility when referring to satisfaction and the models used to inform policy decisions are designed to maximize utility.  “Discounted utility” addresses the effects of time on utility and is used to measure decisions that involve future generations.  Current economic models assume that immediate gratification is more valuable than the benefits of preservation efforts.  This assumes that existing human generations would prefer economic prosperity today despite potential hardships for future generations.  This is the principal that informs many of today’s economic models.

In the context of climate change, this means that choosing climate policies that incur economic hardships today in order to avoid climate-based hardships in the future would not optimize current utility.  For this reason, economists recommend minimizing the economic investment in climate remedies today.  This will ensure that personal satisfaction, or utility, remains high despite the potential effects on future generations.  One of the problems with this system is that the policy makers are not informed of the social implications on future generations when they receive economic recommendations.  If policy makers do not inquire about these potential effects, they may choose options that are optimal for today’s economy, but will have grave implications for pending generations.

This may not sound satisfying to those of us who actually have children.  Fortunately, the authors agree.  In fact, the authors argue that evidence from social sciences does not support the premise that current generations would prefer to create hardship for future generations in order to preserve their own satisfaction today.  This is promising, but until the current models used to inform climate policy are corrected, the previous assumptions still apply and policy recommendations built on these models will ignore current generations’ desire to protect future generations from decreased personal satisfaction and quality of life.

2) The characterization and monetization of the benefits of mitigation

In order for economists to make recommendations on the benefits of mitigation, they must quantify several factors: the cost of environmental protection now and in the future and the benefits of environmental protection.  While calculating costs is difficult, predicting and pricing the benefits of environmental preservation is practically impossible.  The uncertainty of outcomes associated with climate science creates an opportunity for economists to minimize the value of protecting the environment.  Some models are better than others at taking into account the worst case scenarios and balancing that with appropriate recommendations.  However, determining the costs of catastrophic climate changes still enters into the realm of philosophy.

Here’s how.  Essentially we are forced to ask the question, “What is the [monetary] value of human life, health and the natural ecosystem?”  Answering this question is a daunting challenge, one that few are equipped to address.  It is a question that must be answered, though, in order to carry out cost/benefit analysis.  I find that the methods used to determine the monetary value of human life are both intriguing and perplexing.  The Clinton administration used small wage differentials between more and less dangerous jobs to estimate this value.  The Bush administration used questionnaires to gauge people’s opinions of how much they would pay to avoid small risks of death under abstract hypothetical circumstances.  Many people are unaware that economic decisions are made based on the monetary value of their lives.  Further, the economic decisions that guide climate policy are based on the calculated acceptable loss of life that will occur given certain climate mitigation decisions.  How do you feel about this? How would the public respond if this concept were better communicated to the public?

Additional questions posed by the authors include, “Should the value of a human life depend on individual or national income levels?  Should nature located in a rich country be worth more than if it is located in a poor country?”  I’m sure many environmental ethicists would have plenty to say in response to these questions.  Just consider that our climate policy is based on the ECONOMISTS’ philosophical perspective when it comes to evaluating each of these priceless commodities!  I say this because it is the economist who must choose which model he wishes to apply to these questions.  Each model has a different way of addressing these questions.  We can only hope that those who truly value life are making these decisions.  For the record, the 1996 IPCC report determined the value of human life differentiated by national income.  This was excluded from the 2001 report, but national income is still used by many economic models to determine the value of human life.  If an economist chooses to use these models, he is assuming that the lives of citizens of rich countries are worth more than those of their poorer brethren. 

In regards to climate policy, an economic model that values the life of a citizen of a rich nation over that of a poor nation will identify greater benefits from mitigation if the impact of climate change is likely to claim more lives in a rich nation.  Just think about that for a minute.  If climate change is predicted to kill more people in rich nations, then the economic model will more likely recommend greater efforts to prevent it from happening. However, current climate change models predict, just the opposite; that the most catastrophic changes will actually occur in the developing world.  Therefore, if we rely on these economic models to inform our climate policies, then we are admittedly writing off the lives of many of our fellow global citizens who happen to be born in poor countries.  Can you believe that economists are essentially weighing the monetary value of our lives when making recommendations on climate change and in many cases they are choosing to allow for thousands of people to die in order to protect profits for American industries?

What is even scarier is that the economic models also take into account the “so-called” BENEFITS of global warming on natural habitats, agriculture and temperature regulation.  As if intolerable temperatures in certain regions of the world are acceptable, these models rely on how much a person is willing to pay for the consequences associated with climate change.  For example, one economist has concluded that Americans enjoy outdoor recreation more during the summer than in winter.  Thus, if evaluation of climate change is based on a person’s willingness to pay for warmer weather, surely Americans would respond that they would pay a fair amount for warmer temperatures.  Factoring this into an economic model designed to deal with global climate change is dangerous, because those who live in warmer countries are often less wealthy.  Therefore, the value of an American’s desires might greatly outweigh those of his less prosperous counterparts, thereby skewing the economic model.  Similarly, the so-called “BENEFITS” of warming have been calculated for agriculture.  These benefits tend to be purely subjective or scientifically outdated.  For instance, they might imply that warmer temps would lead to higher crop productivity, but they ignore increases in pests.  If they are not properly calibrated, the policy recommendations will favor highly damaging responses to climate change.  Unfortunately, scientists are unable to certify how the climate impacts will develop, so economists are left to make judgment calls without sufficient information.  Obviously, this creates a conflict of interest that will lead to questionable policy recommendations.

3) The projection of mitigation costs

The projection of mitigation costs is complicated by uncertainty, as well.  In addition to costs of damages due to climate change, forecasting these costs requires consideration of potential technologies which may improve the efficiencies of energy usage.  For example, technologies could improve the annual rate of productivity in energy use and decrease the emissions per unit of output.  Therefore, the economic models can assume that technology will make it easier and cheaper to reduce emissions in the future.  If this is true, the economists might argue that since climate change is a long term problem, action on climate change could be postponed to a time when technology reduces the costs of action.  Of course, this may be true, but we are already starting at a negative position.  I would argue that we cannot wait and gamble on potential technologies to rescue us from disaster.  We must act now.  And, perhaps, acting vigorously now could prove to be more economically beneficial.  Unfortunately, in many cases, the economic models disagree with me.  Fortunately, some models make the opposite recommendations.  These models recommend aggressive carbon abatement policies, despite the promise of new technologies.  Here again, we see that it is the economists’ judgment of which model to use that ultimately determines the recommended approach. 

Unfortunately, the policy makers have to choose a side, scientists or economists? I would argue that we are at the mercy of the economists because policy is ultimately decided in the Appropriations Committees where economists reign supreme, which is why I say the science debate within the public domain is inconsequential to the actual policy debate and scientists must focus their resources not on the public, who supports them, but on the right targets: economic models!!! 

The key to improving the existing economic models is to integrate the “depth and strength of the inter-generational ties.”  If we are able to influence the economists’ discount rates of utility (personal satisfaction) to reflect our actual consideration for our children and grandchildren, it will be a theoretical economic game changer and could lead to policies that prevent unnecessary climate-based hardships in the future.  If not, who knows?  But, we do know that if we are unable to change these assumptions within the economic models, economists will continue to assume that we hold little value for the lives of our children, and policy makers will continue to base their decisions on these faulty assumptions.  To me, this is unacceptable.

Question:  What will you sacrifice today to secure a better life for your children?

My response: Prove it.