Monday, February 26, 2007

More about Morality and Global Warming

In response to my previous post it has been suggested, as I expected it would be, that global warming is a moral issue because it concerns our moral obligation to future generations. I disagree, because I don’t think that those who oppose action on global warming are any less concerned about future generations. They just disagree about the best way to serve those generations. The disagreement is an economic/scientific/technological one and not a moral one. As usual, each side has tried to make the issue into a moral one by claiming that the other side has ulterior motives. For some interested parties, no doubt, there are ulterior motives, but the same is true of almost any political disagreement.

There is almost certainly a tradeoff between economic growth and action to reduce global warming. There is room for considerable disagreement about the terms of that tradeoff, but it would be foolish to deny that a tradeoff exists. Future generations are the ones who will benefit most from economic growth. People who oppose action on global warming argue that the negative impact of such action on future generations by reducing economic growth will exceed the positive impact by reducing global warming.*

On the margin, of course, they are clearly wrong, provided that all the relevant functions are continuously differentiable. If there is some positive chance of harm from global warming, then there is some cost that is worth paying in order to reduce global warming. The optimal Pigovian tax is nonzero. It is, however, reasonably argued that some of the relevant functions are not well-behaved. If there is a “critical mass” involved in reducing global warming, the cost of attaining that critical mass may not be worth paying. Or if there is a cost to the precedent of, for example, instituting a Pigovian tax, then even a small tax may be detrimental. I don’t find these arguments convincing, mostly because I think that the expected benefits of effective action against global warming (averaging over the entire range of possibilities) are extremely high, but it is a reasonable matter for dispute (at least theoretically).

The big problem with viewing any issue as a moral one is that it more or less ends the discussion. Those who disagree with you will never be convinced, because their morality is different from yours.

*Another way to put this discussion is that economic growth, properly measured, is by definition the only thing that benefits future generations. Proper measurement would require subtracting the harmful impact of global warming. The question, then, is whether action on global warming would ultimately increase or reduce properly measured economic growth.

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Blogger Gabriel Mihalache said...

On the margin you don't know, because taxes are not, and have never been, zero. Take, for example, The North Sea Fiscal Regime

On the margin, we could equally argue for a tax cut, at a theoretical level. :-)

We should also bring the NPV vs. "real options" debate into this. Given the pace of technical progress, keeping our options open is smart.

Mon Feb 26, 03:07:00 PM EST  
Anonymous Bruce Wilder said...

"There is almost certainly a tradeoff between economic growth and action to reduce global warming."

Is there? Even theoretically? The normal framework for a "tradeoff" is the production possibilities frontier, where technology is fixed and opportunity cost well-defined. I don't think I even know what a "tradeoff" is, in the context of a dynamic vector passing thru the very long run, where even technology is not fixed.

I suppose that the alarm over global warming is connected to anticipation that global warming, unchecked, will reduce future economic growth well into the negative numbers. (General species collapse will tend to do that.)

If there is an optimal path, I would suppose that it might involve maximizing sustainable economic growth -- that is, economic growth over a very long period of time. I don't know; I'm open to argument.

An alternative economic path is available, that involves externalizing costs. When I hear Gore say that it is a moral issue, I interpret him to mean that we have a moral obligation to refrain from, or to mitigate, the externalization of costs, once we recognize how we are externalizing costs.

So, it is not "morally" OK to drown Bangladesh in order to enjoy driving an SUV in the suburban paradise of Utah. It is not morally OK to condemn future generations to a planet denuded of life by a general species collapse induced by a radically warming climate.

I do not think it particularly clever to give cover to a strategy of externalizing costs -- whether geographically or across generations -- by claiming that there is some rational sense to saying there's a "tradeoff" between meliorating global warming and economic growth, which somehow justifies a strategy of externalizing costs.

As I understand the warnings of climate scientists, there is indeed nasty lumpiness out there. If we don't find ways to limit the effect on global temperatures of the rise in greenhouse gases, then a threshold may be crossed beyond which positive feedback takes over, carrying the climate beyond our control to a radically different equilibrium. (For example, warming more than 2 degrees may trigger massive releases of greenhouse gasses from melting Siberian permafrost or dry and dying Amazon forest, resulting in a many degree spike in global temperatures, which will have truly catastrophic consequences for species diversity, sea levels and the rest.

I suppose it is true, that if we are truly unable to restrain climate change within that threshold -- to, in effect, avoid going off that cliff, then we might as well adopt the fatalism of Isaiah 22:13: "eat, drink and be merry, for tomorrow we die". But, let's not obfuscate with b.s. about "tradeoffs" with economic growth.

Mon Feb 26, 05:08:00 PM EST  
Blogger knzn said...

Gabriel, if the revenues from carbon taxes are used, for example, to reduce other taxes, I realize it’s still a theoretical possibility that the carbon taxes were too high in the first place relative to whatever taxes they replaced, but that possibility seems too remote to be worth considering. So I stand by my statement that “they are clearly wrong” on the margin.

Bruce, there will be a cost to whatever shifts are needed to reduce global warming, and that cost will come, at least in part, out of investment, so there is a tradeoff with economic growth, at least in the short run. In the very long run maybe not, but that just amounts to saying (see my footnote) that the harmful effects of global warming may show up in the measured, rather than the unmeasured, part of economic growth. Overall, is it unambiguously obvious that action to reduce global warming will increase total (properly measured) expected economic growth? Aside from the marginalist argument I made in the text, I think there’s still some room for disagreement (though I guess I’d have to say, not much; however, I would classify those who oppose action as rather deluded than immoral).

I have more general objections to moralism. I’m increasingly skeptical as to whether the existence of a moral sense as such actually makes people behave better. The guys who hit the WTC thought they were doing something moral.

Mon Feb 26, 06:00:00 PM EST  
Anonymous Anonymous said...

“There is room for considerable disagreement about the terms of that tradeoff, but it would be foolish to deny that a tradeoff exists.”

Well, I deny it…at least in part.

“The part played by orthodox economists, whose common sense has been insufficient to check their faulty logic, has been disastrous to the latest act.” -- J. M. Keynes (1936)

Add to this that society at large can be equally orthodox; it is not always the economist’s/policy-maker’s resistance to internalize externalities that keeps society from being green, yet they are scapegoats.

Like it or not, the attitudes of society at large and economists often converge. Here’s but one example (although several come to mind): Society was not ready for nuclear power years ago, and who cared – the monetary costs were high anyway. Now, even members of Green Peace are ready to ditch the status quo and celebrate nuclear power as a safe energy alternative; meanwhile, the costs of producing nuclear power have concomitantly fallen. Voila – markets and societal attitudes converge. I have faith that this will happen again and again (but those damn moralists do speed things up, surely). This was neither a hippy nor a moralist phenomenon, and neither are all efforts to improve the environment (not all the time).

There are not always trade-offs, as long as such convergences exist (well, no more than there is a trade-off to invest in anything, really).

Mon Feb 26, 07:39:00 PM EST  
Anonymous Alex said...

There is a trade off among almost everything in this world and you are right in pointing out that a balance needs to be kept.

And about a moral issue, again, it depends on the perception of the individual.

Moreover, 'earth' is not something which can be reconstructed. It has to be sustained and for economic growth to achieve high levels, environmentally friendly policies need to be implemented.

This is not only a moral issue, but also a very political, scientific and economic one.

Classifying an issue under one of these labels doesn't serve the purpose.

Mon Feb 26, 09:56:00 PM EST  
Anonymous Anonymous said...

"The question, then, is whether action on global warming would ultimately increase or reduce properly measured economic growth."

Morality may end a discussion, but your question on the effects of global warming on economic growth is an endless discussion.

Unfortunately, we do not have data from previous civilizations like our own to understand the ultimate effects of our actions on this earth.

Paying for insurance is not always the best economic decision. However, if the benefits of risk aversion are perceived as greater than the possible risk, then insurance is the chosen route we take.*

Not only should we discount for future generations, but also incorporate the economic risk of being held accountable for contributing to climate change.

* Perception of risk is subjective and I would suggest that we trust climatologists with regards to the risk of changing climates.

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