You Can’t Trust ‘Climate Economics’

Governments, banks and other institutions have based policies on models unconnected to reality

By Roger Pielke Jr. Excerpts:

"Nature in December retracted one of the most influential climate economics papers of the past decade. The paper, by Maximilian Kotz, Anders Levermann and Leonie Wenz, claimed that unmitigated climate change would cost the global economy $38 trillion a year (in 2005 international dollars) by midcentury." 

"The authors acknowledged that its errors were “too substantial” for a correction."

"The retraction, however, isn’t a one-off. It revealed a crack that runs much deeper into the foundation of climate research."

"Can researchers actually measure how climate affects the economy from the historical record?"

"no"

"Federal agencies . . . estimate the “social cost of carbon” when assessing the costs and benefits of proposed environmental policies. This framework has shaped regulations governing appliance standards, pipeline permitting and vehicle emissions."

"the method underlying this subfield of economics can’t do what researchers claim it can. The problem . . . is that the statistical procedure strips out nearly everything that would allow researchers to identify a climate signal, then mistakes the residual noise for that signal. Lumping together countries with similar average temperatures but entirely different institutions, histories and natural resources and then calculating a single damage relationship for all of them doesn’t work; it describes the average but fails to describe a single real place on earth accurately."

"there’s no way out of this methodological predicament; the future effects of climate change are irreducibly uncertain"

"researchers built many of their climate projections on the back of a hypothetical standardized scenario called Representative Concentration Pathway 8.5—a vision of the future which required coal consumption to quintuple by 2100 based on assumptions about future energy use. Those assumptions have already diverged sharply from actual energy trends, and we know today that the scenario is implausibly extreme."

"many scientists continue to emphasize RCP8.5 in climate research"

"Projections of flood damage, heat mortality, agricultural disruption and wildfire risk have rested on an implausible baseline that describes an imaginary, modeled future."

"An insurance company modified a hurricane loss data set by starting from my team’s carefully collected data. Many of those modifications have no documentation and no basis in research."

"papers that have used the corrupted data set remain in the literature today." 

What Happens When Europeans Find Out How Poor They Are?

The Continent trails far behind U.S. economic output. Politics is bound to catch up sooner or later

By Joseph C. Sternberg. Excerpts:

"per capita gross domestic product: $94,400 in the U.S., according to the International Monetary Fund, compared with $65,300 in Germany, $61,000 in the U.K. and $52,000 in France."

"From a fairly narrow edge throughout the 1980s, the gap widened a bit in the 1990s. Since 2007, however, European per capita incomes have more or less stagnated while the U.S. has enjoyed another growth spurt."

"Switzerland amps up its per-capita GDP to $126,000 by attracting finance and pharma."

"The wealth skewing American per capita economic data is a result of innovation and entrepreneurship. Europe lacks America’s per capita output not because it lacks American tech companies and billionaires but because it lacks American-style productivity growth capable of creating tech companies and billionaires in Europe."

"On average, [British] respondents thought that if the U.K. were a state, it would be the seventh-richest in terms of per-capita GDP, behind the likes of New York and California. The reality is that Britain is toward the bottom of the table, roughly on the level of Mississippi." 

"Using the PPP metric, U.S. GDP per capita is $94,400, Germany’s is $76,800, Britain’s is $67,600, and France’s is $68,600."

"That means, broadly, that a nominal per capita income of $61,000 in the U.K. allows a Briton to consume the same amount of goods and services that would cost $67,600 in America. But that’s merely a different way of stating Europe’s problem. Europe’s economies look healthier in PPP terms to the extent a lower price level allows households to stretch their euros and pounds further. Those lower prices reflect Europe’s lower productivity. Meanwhile nominal GDP expresses Europe’s ability to consume global resources, which is lagging." 

Taxes make gas more expensive in other countries

See Why Gasoline Is So Much Cheaper in the U.S. Than Overseas by Chao Deng and Alana Pipe of The WSJ. Excerpts:

"American consumers paid an average $3.64 a gallon in March, with only about 60 cents of that made up of federal and state taxes. The average hit $4 a gallon at the end of that month."

"In most places in Europe, tax composes 50%-60% of the retail price of fuel"

"Germans paid an average of $8.75 a gallon in March, more than half of which stemmed from value-added taxes and fuel excise duties."

"In Mexico, gas averaged $5.07 a gallon in March, of which nearly $2 was tax." 

Glyphosate isn’t likely to be carcinogenic

See Supreme Court Grills Bayer Over Failure to Warn Consumers About Roundup Risks by Patrick Thomas and Lydia Wheeler of The WSJ. Excerpts:

"Bayer has maintained that Roundup is safe to use. Governments globally and the Environmental Protection Agency in the U.S. have repeatedly determined that glyphosate isn’t likely to be carcinogenic in humans and approved Roundup labels that didn’t include cancer warnings."

"plaintiffs argue the company should go further in how it warns farmers and landscapers of the risks the herbicide may pose. But Bayer argues that those claims supersede the EPA’s authority and would cause a patchwork of rules imposed by individual states.

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) prohibits states from imposing different or additional warnings from those required under the federal law."

Also see MAHA Moms Are Protesting Against Pesticides by Sabrina Siddiqui and Sara Ashley O’Brien of The WSJ. Excerpts:

"“The fact is that no health regulator anywhere in the world has ever found glyphosate to pose a threat to human health,” the company said in a statement. Bayer said that the Environmental Protection Agency and the European Union have repeatedly found that glyphosate products can be used safely according to the product label directions."

"Pressure around the issue has mounted for months. When a review paper that concluded glyphosate wasn’t a risk to people’s health was retracted last year by the scientific journal that published it 25 years ago over concerns about Monsanto’s involvement, a firestorm went off among those concerned with the chemical’s safety. The Environmental Protection Agency has said the government did not rely solely on the paper when evaluating glyphosate.

“Monsanto’s involvement with the Williams et al paper did not rise to the level of authorship and was appropriately disclosed in the acknowledgments,” Bayer said in a statement."

The Warmth of Cooperation

By Chris Freiman.

"New York City Mayor Zohran Mamdani recently caused something of an uproar when he contrasted the “the frigidity of rugged individualism” with the “warmth of collectivism.” This framing echoes the familiar criticism that capitalism forces people to go it alone as “atomistic individuals.” The thought goes like this: markets do real damage to the social fabric and our relationships because they organize our economic lives around competition and self-interest. Organizing our lives around competition encourages people to see each other as rivals rather than partners. In brief, capitalism pits us against each other, while socialism brings us together. Setting aside the fact that collectivist regimes haven’t exactly been warm to those living under them, this view gets capitalism backward.

Start with a simple observation about your own economic life under capitalism. Think about this week: how many cooperative interactions have you had, and how many competitive ones?

You probably didn’t compete with anyone when you bought coffee at Starbucks this morning. You didn’t enter a zero-sum struggle when you paid your phone bill, purchased groceries and gas, or caught a movie. Instead, you took part in a series of mutually beneficial, voluntary transactions. You gave someone money and they gave you something you wanted more than the money. Everyone walked away better off. In the words of Adam Smith, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

Competition, by contrast, rarely pops up in your day-to-day economic life. A business competes with other businesses for customers and you’ve probably competed with others for a job at some point. But you cooperate far more often than you compete. And notice what market competitions really are—they’re competitions to see who’s best at serving others. You might say that they’re competitions to discover the best ways to cooperate and who the best cooperators are (more on this below).

Unsurprisingly, Smith understood the cooperative nature of markets well. He writes that a wool coat

is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world!

Smith goes on, but I’ve got a word limit here—the point is that markets don’t atomize us. On the contrary, they lead strangers all over the world to cooperate.

Think back to the last time you bought a coffee. Starbucks has to coordinate with bean farmers, shipping companies, truck drivers, warehouse workers, roasters, equipment manufacturers, electricians, plumbers, accountants, and baristas. None of these people know you, and yet they manage, every day, to cooperate in ways that reliably get caffeine in your hand at 7:43 a.m. And this isn’t accidental—the prices provided by markets give people the information they need to figure out what others want, and they provide the incentive to give it to them.

There’s no denying that markets involve competition. You can go to the business section of a bookstore and find titles like Business Warfare and The Warfare of Business. But businesses are competing with each other to see who can best serve consumers. Netflix beat Blockbuster by figuring out a better way to give viewers what they wanted: convenience, selection, no late fees, and eventually streaming. In brief, Netflix won because consumers preferred cooperating with Netflix over Blockbuster.

A similar point applies to competition in the job market. Maybe you don’t merely want to buy coffee from Starbucks, you want to work there, too. But this means you’ll have to compete with other applicants who also want the job. Here again, let’s look at what it takes for an applicant to win this competition. They need to demonstrate that they’ll do the best job of making customers better off—say, by being more punctual, more efficient at making mochas, or more likely to serve drinks with a smile. Market competition is competition to see who can cooperate most effectively with others.

In any case, democratic socialists can’t be opposed to all competition. After all, democracy requires competition, and democratic socialists want democracy in the workplace as well as in politics. If competing for dollars is frigid, it’s hard to see why competing for votes would be any warmer. Market competition enables millions of people with different values, plans, and priorities to work together without agreeing on much of anything by helping them to coordinate many different choices. You and your barista don’t need to agree on the principles of justice to cooperate and make each other better off. Far from being atomizing or frigid, the free market is a system of interdependence that brings strangers together to cooperate for their mutual benefit."

Youth unemployment in Canada near record highs since 2022; unprecedented levels outside of a recession

By Philip Cross of The Fraser Institute. 

The Extraordinary Increase of Youth Unemployment in Canada

• The surge in unemployment for Canada’s young people (ages 15–24) since 2022 has been extraordinary. The upturn reverses a decades-long gradual downward trend.
• Both the speed of the increase and the level of youth unemployment reached are unprecedented for an economy not in recession.
• Youths who were unemployed remained jobless for the longest period ever on record (data starts in 1976).
• The gap between the unemployment rates for youths (13.8 percent) and adults (5.7 percent) in 2025 reached a near all-time high (8.1 percentage points).
• The spread (3.8 percentage points) between the Canadian youth unemployment rate (13.8 percent) and the US rate (10.0 percent) in 2025 approached its all-time high.
• Canada’s youth unemployment rate has been higher than the US rate since 2015, indicating a sustained period of higher unemployment for Canada’s youth compared to our southern neighbour.
• Finally, the unemployment rate for 15–19-year-olds (19.5 percent) was at a near-record high, outside of the COVID-19 pandemic (2020), and the gap (8.6 percentage points) with 20–24-year-olds (10.9 percent) was also at a near all-time high.
• Several government policies contributed to the historic increase in Canada’s youth unemployment.
• Specifically, the increase in immigrant labour (increased supply) and simultaneous increases in minimum wages in most provinces (decreasing demand) are key explanations for the marked rise in youth unemployment.
• It is noteworthy that the weakness in youth employment has been concentrated in the retail trade and accommodation and food services sectors, where 70 percent of youth jobs are situated.

 

Chicago’s “Disappearing Middle Class” Can Be Found in Its Proliferating Upper Middle-Class Neighborhoods

By Scott Winship of AEI. Excerpts:

"In a recent  with Stephen Rose, I argued that the narrative of a “shrinking middle class” was based on a kernel of truth, but one that undermines economic pessimism. We showed that while 36 percent of families were part of what we called the “core middle class” in 1979, the share had fallen to 31 percent by 2024. However, the share of families who fell short of the middle class shrank even more. The middle class has not been hollowed out; rather, the overall decline stems from the net movement of families upward into the upper-middle class. That group, with incomes between 5 and 15 times the 2024 federal poverty guidelines, rose from 10 percent of families in 1979 to 31 percent in 2024.  

Analyses that find a hollowed-out middle invariably rely on definitions of the middle class that peg thresholds to how the typical family is doing. In that case, even if everyone is better off over time in inflation-adjusted terms, if the middle’s gains are stronger than those of families lower down, more people can fall short of “the middle.” The Pew Research Center, for example,  that the share of families that were “lower-income” rose between 1971 and 2023, even though the purchasing power of those lower-income families rose by 55 percent. The explanation for this seeming paradox is that “middle-income” families saw a 60 percent gain, making it harder to reach the middle-income threshold if income rose more slowly than that.  

The point of my paper with Rose was that claims of a “hollowing out” of the middle class wrongly reinterpret widespread gains across the income distribution as rising insecurity and declining living standards. Unbeknownst to us, a perfect example of this misinterpretation appeared a week before we published our report in Chicago magazine. The offending article title  that “Chicago’s Middle Class Is Disappearing.” My reanalysis of the data behind the piece indicates it would be difficult to articulate a more misleading conclusion. Fewer Chicagoans live in middle-class neighborhoods than in 1970—but only because more live in richer neighborhoods."

"the Voorhees Center methodology has the same shortcoming as Pew’s analyses of the shrinking middle class. Both define middle-class status relative to a benchmark that changes over time and is tied to typical contemporary income. If everyone’s income doubles, the middle class is no larger, yet everyone’s income has doubled."

"instead of “middle income” requiring 80 to 120 percent of the 2017 metro average income, it requires 80 to 120 percent of the 1970 metro average income (adjusted for inflation to keep income in terms of constant purchasing power). Using this approach, the share of people living in middle income tracts fell in half from 1970 to 2017—from 51 percent to 25 percent. The share living in tracts below the middle income was roughly constant—42 percent in 1970 and 43 percent in 2017. In contrast, the share living in tracts above middle income more than quadrupled, rising from 7 percent to 31 percent."   

"If we instead use 2015-2019 as the end point (average national unemployment rate of 4.4 percent), the middle income share falls from 51 percent to 26 percent, the lower-income share falls from 42 percent to 36 percent, and the higher income share jumps from 7 percent to 38 percent."

"From 1970 to 2024, the share of Chicagoans who lived in middle income tracts fell from 51 percent to 25 percent. The share living in tracts falling short of middle income dropped from 42 percent to 28 percent. Meanwhile, the share living in upper income tracts rose sevenfold—from 7 percent to a whopping 48 percent. Looking at the top group, very high income tracts were home to just 4 percent of Chicagoans in 1970 but 38 percent in 2024."

"In reality, per capita income in the median Chicagoan’s census tract rose from $29,600 in 1970 to $39,300 in 2024 (both in 2025 dollars)—an increase of one-third. Using relative thresholds and letting class thresholds increase over time, the average Chicagoan in a lower income census tract lived in a tract with a per capita income of $22,300 in 1970 but $27,800 in 2024 (25 percent higher). For Chicagoans in middle income tracts, the increase was from $32,400 to $49,900 (54 percent)."