Climate Economists Base Their Alarm on Their Own Ethical Judgments

From David Henderson of EconLog.

"The title above doesn't quite tell the story. It's hard to tell in just a title. That's why you need to read this post. 

Unless you've been living in a cave, you probably know that when economists say that there is not much urgency to acting against global warming, we are accused of being "deniers."

So it comes as somewhat of a surprise that a recent survey of 365 economists who publish in the field of climate change shows that a majority of them, 59%, think climate change will have a negative impact by 2025 and that 37% of them think it will have a negative impact by 2050. These dates, especially 2025, aren't way far off, but still, I found that surprising.

By the way, Robert Murphy, whose post I will quote from liberally, doesn't quite get it right. He writes:

As the numbers indicate, 59 percent--a solid majority--thought that climate change would be beneficial for the global economy at least through the year 2025. Moreover, 37 percent of the experts thought that climate change would be beneficial to the global economy until at least the year 2050.

But one could think that it will have a negative impact by 2025 and that the impact starts, say, in 2017. If so, one would be in the 2025 category. 

 But wait. There's more. Murphy quotes David Roberts, who's touting this survey as a case for immediate action, as follows:

The median answer here is 2025, which is considerably earlier than many prominent economic models estimate. For instance, Tol's FUND model -- one of the three big models used in the field -- estimates that impacts will not be net negative until 2080.

So why do many of these economists go beyond some "prominent economic models?" 

It's because of the weight they think should be given to benefits to future generations versus costs to current generations. A standard way to do that is to use a market interest rate. But 44% of them want to substitute their own ethical judgments about interest rates for judgments that are revealed in market interest rates. Specifically, 16% of them would use a constant interest rate "calibrated using ethical parameters." And 28% would use a declining interest rate "calibrated using ethical parameters." Both methods would weight benefits to future generations--who, by the way, are likely to be way wealthier than we are--more heavily than market interest rates would do.

Murphy comments:

Although they may have expertise on certain matters of analysis, professional economists have no claim to superior ethical standards than the community at large. Economists understand the impact of discount rates on climate policy more than the average person, but economists don't have any superior standing in the debate over how we should weigh future welfare against present outcomes. Market discount rates take into account how the community at large balances the present versus the future. To throw out this "consensus" in favor of an arbitrary number picked by a group of experts is a very dubious move, which should at least be explicitly debated. The choice of the appropriate discount rate involves considerations that extend far beyond a mere technical detail, and as such a few hundred economists shouldn't dictate policy on this criterion. (italics in original)"