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10 Apr 2010Paul Krugman’s New York Times magazine article on Building a green economy is a lucid primer on the conventional view of the economics of climate change. At same point I would like to do a proper critique of the field but in the meantime here are some rough notes on the weaknesses of Krugman’s article:
1)The fact that environmental economists agree that climate change should be tackled by putting a price on carbon does not mean the assumption is right. It merely reflects the consensus that there is no alternative to the market as well as scepticism about state action.
2)I do not accept that the idea of “negative externalities” provides the best framework to use to understand the economics of climate change.
3)Krugman does not make clear what he means when he says we are facing “drastic” changes to the climate. Is he talking about a gradual change over time which will eventually have a damaging effect? Or a sudden catastrophe? Or perhaps something else? It is an important question if you are discussing tackling climate change.
4)I am pretty certain that Krugman is severely underestimating the costs of action against climate change. It would certainly be worth looking more closely at the models he upholds to argue the impact of action on economic growth would be minimal. It is particularly strange that he argues that the costs of tackling climate change would be so small while the effects could be so catastrophic.
5)Of course it also depends on what he sees as constituting “action” against climate change. The economic costs of, in effect, imposing rationing on people may not be that high. But they would be undesirable socially and also unlikely to have much impact on the climate.
6)Krugman says little about the developing countries. These nations are much less able to afford to switch to less carbon-intensive forms of energy. Development is likely to and should remain their top priority.
7)Krugman seems to assume that it is only conservatives who oppose economic programmes which prioritise climate change. But there are many reasons for anyone concerned about humanity to be wary to anything that could damage economic growth.
8)As it happens the mainstream arguments on climate change are more accurately described as conservative. Their goal is to restrain economic growth to preserve the planet. This is in contrast to a radical view which would want to focus on remoulding the planet for the benefit of humanity.
9)Krugman repeats the increasingly common point that uncertainty is the most important argument for action. That is if there is a chance of destroying the planet we have to do something about it. This is a dangerous argument as it can be used to justify virtually anything. If there is a chance the survival of the planet and humanity is at stake then surely all sorts of extreme measures can be taken? But this leaves many questions unanswered. How high is the risk of destruction? What is the timescale? What kinds of measures are likely to work?
10)Finally, all this discussion of climate change can easily mean that the importance of economic growth to human welfare is forgotten. Growth remains hugely important to the future of humanity.
Any big discussions of how humanity should go forward should start from the basis of satisfying human needs. Abolishing scarcity is a central part of achieving this goal. Mastering nature – rather than bowing down to it – is one of the means to the end.
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