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I think the vibes have fully shifted on climate change damage estimates. Tyler Cowen posted this morning with a terse:
He's referring to this paper and this thread about it. They perform an empirical review of previous major estimates, focusing on replicating them and analyzing the methodology. One thing I found interesting is that they distinguished between damage estimates, themselves, and applications of damage estimates, like SCC. They say that the latter have already been show to be irreducibly uncertain, though even if the damage->SCC pathway was not irreducibly uncertain, they are arguing that since the damage estimates, themselves, are irreducibly uncertain, so too would be things like SCC.
They spell out multiple factors that create identification challenges and show how small changes to the inputs of prior models can result in huge changes in the outputs, in strange and unstable ways. They don't necessarily think prior authors did anything actively bad or malicious in their approach, just that the entire endeavor is probably doomed from the start:
Their tweet thread has the typical disclaimer needed to get out in front of the typical objections one would immediately hear upon taking such a position:
I feel a bit vindicated by the vibe change, because I had been arguing something similar a full decade ago at the old old old place, pretty much on my lonesome. Obviously, I didn't have the exact set of empirical critiques that these authors present today, but I feel like it's a good example of where you can have very strong theoretical knowledge in a related/relevant area (timescale-separated dynamical systems) that leads to a correct intuition along the lines of, "I don't actually have to know the details of the methods they're using (though I did look at several back in the day); I can't imagine they could possibly accomplish what they're setting out to accomplish, just because of the nature of the type of system they're working with."
In a classic move, I'm going to side step the point and rant about Economists and their obsession with observational statistics.
Economists have an annoying tendency of making selective use of math. I empathize. Hard Sciences have the luxury of operating in closed systems. Economics relies on a representative model of the real world, and LLMs are proof that such a model takes a minimum of trillions of data points. Economists get 1 data-point every quarter, at best.
This claim can be extended to most economic studies, many of which parroted as fact.
It is annoying on 2 levels. First, the same lack of data points doesn't deter Economists from making wide claims about all sorts of other topics. If you fashion yourself a statistician, then be consistent in the weakness of your posteriors. Second, if they fashion themselves as mathematicians, then they should consider studying a sub-field outside of Bayesian statistics for once.
I get what the authors are saying, but there are other methods for causally linking the economic impacts of climate change. Climate change when defined as 'increase in average worldwide temperatures, and increase in local temperature swings', is real. There is statistical consensus on that claim.
Higher temperatures increase world wide energy demand. For the first time, northern temperate areas need to purchase air-conditioners, ie. increased spending without productivity gains. The increased heat in tropics makes afternoon work nigh-impossible reducing productive labor hours. These increases are causally linked to economic harms. The magnitude & scaling characteristics of said harm need to be computed, but the direction of harm is obvious.
Increasing climate uncertainty affects farm yields. It increases insurance costs for everyone in the food supply-chain, with zero productivity gains. Increasing flood likelihood in places like Miami is making them impossible to insure. That's causal. Bleaching of corals is causally linked to rising ocean temperatures which is causally linked to diving related tourism in South East Asia. I could keep going.
There are causal economic opportunities too. The opening of year round Arctic trade-routes and the availability of somewhat fertile southern-Siberian lands should help increase GDP in Russia and Kazakhastan.
The authors correctly point out that nations are often going through events that are more disruptive than climate change (economic liberalization in India, Genocides in Africa). These events overwhelm the measurable impact on economics due to climate change. But of course. That's trivially correct. Trying to use observational studies on chaotic systems was always a fools errand. Like trying to tighten a bolt with a screwdriver.
There are direct and causal economic impacts of climate change. We can disagree on the extent and what regions would be worst affected. We can disagree on whether disproportionate impact on the tropics due to disproportionate consumption from temperate zones warrants a disproportionate burden towards energy transition. We can disagree on whether these impacts will bear out over the new few years, decades, or generations. But there will be an impact, that's for sure.
Trillion dollar economic decisions are routinely made in presence of little evidence. At a national level, most economic experiments have trillion dollar implications and they have a spotty track record at best. After all, Communism was a world wide economic experiment that lasted generations.
Climate change driven economic policies are comparatively conservative. The transition to renewable energy & full-electrification in appliances was inevitable. Funding the infrastructure build-out for renewables & large-scale electrification made sense even if climate change wasn't real. Energy independence & decreasing reliance on exhaustible resources were worthwhile goals in-and-of-themselves.
Personally, as much as left-elite institutions have hand wrung (virtue signaled?) about climate change for decades, their actions haven't matched the urgency of their speech. Even at the peak of their powers, there was limited action towards combating climate change. If a vibe change leads to a further reduced action on that front, then we may undershoot the infrastructure build out needed to combat even the conservative estimates of climate change related economic impact.
I am not ranting at the authors specifically. The paper is solid and the conclusions are correct. I just wish economists didn't treat observational statistics and RCTs as the only means for establishing truth.
I'm partly responding to the self-congratulatory tone of climate-change-"skeptics" in the linked MR thread's comment sections. They will read 'no evidence = not happening'. I should know better than engage with this real but distant straw-man. But, alas.
How do you have any idea what order of magnitude the impact will be? How do you have any idea what the sign of the impact will be?
Sign - yes. It will be a net negative.
Magnitude and scaling characteristics - no.
All the promising positive effects are associated with warming in the north. Based on my previous research, Canada's North is a rocky shelf with a thin soil layer and Siberia's newly defrosted regions will be acidic marshes. There may be agricultural gains in the southern reaches of the Lena/Ob/Yenisei, but those will be limited. The Northern trade routes will reduce dependency on the Panama and Suez, but won't create any novel ground breaking trade routes per-se. Unless birth rates see radical change, the north simply isn't a place with enough people to require the sort of shipping activity that would benefit from Northern trade routes.
If I had to guess, the impact equation would be super-linear with a near impossible to compute constant term.
Economic loss = Humanly_computable_linear_term * temperature_rise^(1<super_linear_exponent_a<2) + Expected_penalty_from_catastrophic_outcomeTo me, catastrophic outcomes = simultaneous famine in multiple bread baskets, AMOC weakens, irreversible drop in marine life.
The discussion devolves into a philosophical shouting match because the
Expected_penalty_from_catastrophic_outcomeinvolves multiplying infinitesimally small probabilities with negative infinities. The combination leads to a sensitive tail that can collapse to zero or balloon to negative infinity depending on which set of plausible assumptions you start with. Objectivity goes out the door at that point.How do you know this? From what I see, you just sort of guesstimated some things on different sides and don't take the timescales of the coupled systems into account. For example, you say:
Isn't this one of those things that could plausibly change? There have been entire reports on possible migrations of people, and people can move, populations can grow/dwindle on much faster timescales than climate changes. How do you account for the timescale effects?
This is likewise concerning. Reddit search is hopelessly broken, but a while back, I remember one of these "estimates of climate change economic effects" papers coming out, and while I've already said that I think the task is actually impossible, I took the claim at face value and compared it to a contemporary Krugman NYT column that talked about tariffs. His approximate estimate of the reduction in GDP due to tariffs was ~3%, and I don't recall exactly what the particular climate paper gave, but the number that sticks in my mind was like 0.7%; I'm pretty sure it was something less than 1%. If we have no clue whether it's more like 1% or 10%, why should one think that it's more like 1% than 0%... or -1%? Like, how do we actually estimate this with anything other than vibes?
That paper -- one of the IPCC reports -- is something David Friedman (the anarchist, not the ambassador) bangs on a lot. He mentions it here
I think the one I'm remembering might have been a different one that came out later, but yeah, probably similar. There is, of course, a wide range of estimates, depending on model details.
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Yeah it’s literally impossible. First, climate science itself is based on thousands of different interactions that are hard to model out with degree of accuracy.
Then teasing out that highly uncertain future impact on the economy is nigh impossible.
A limited precaution principle is reasonable but a destroy the economy one isn’t
I actually kind of go the other way on this, depending on how strict one is about the "degree of accuracy". There's an at least plausible way that you can approximate the high-dimensional system with a low-dimensional representation with one primary input (carbon-equivalents). Of course, one needs to consider a range of possible time series inputs and acknowledge that it's a pretty noisy model, but you can do okay-ish, about as okay-ish as you can do with other noisy models. And of course, you have to acknowledge that your estimates are genuinely dependent on the chosen time series inputs (e.g., it took a long time and a lot of people saying, "RCP 8.5 probably isn't very likely," for folks to sort of grudgingly accept that it wasn't the most useful time series input; but maybe things could change and it becomes more likely! There's a genuine dependence on the time series input). But you can do alright.
It's when we glom on a coupled system, that operates in a vastly different timescale regime, that we run into serious theoretical problems.
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And this is why I am extremely skeptical of "Pigouvian" taxes. If you don't know the sign and magnitude of the externality, you can't tax (or subsidize) it to compensate.
Pigouvian taxes are just a more granular way of discouraging something instead of outright banning it. Sure, you do need to know the sign, but even if you're wrong on the magnitude, a wrong Pigouvian tax is usually going to be better than doing nothing. There's a wide range of estimates? Pick something in the middle and be done with it.
As for the sign of the impact of climate change, arguing that it might be beneficial at this point, given the evidence we're seeing, seems a bit like arguing "maybe smoking is good for you, actually".
But I think one of the strongest arguments is that, if you don't know what's going to happen when you fuck irreversibly with the earth's atmospheric composition, then be conservative and don't fuck irreversibly with the earth's atmospheric composition. We know what the climate is like now -- it's not perfect but it's alright. So it makes sense to take some effort to NOT fuck with it, even if there's some economic cost.
Being unnecessarily cautious and certainly weakening our economies to perhaps protect some aspects of the climate or the environment is a recipe for making irrelevant those who choose that path, and giving power to those who do not. We irreversably fuck with everything. It's a given. You can't stop it. Nothing will remain untouched. If altering the atmospheric composition is actually as bad an idea as some claim, then we will just have to find out about it the hard way, because reducing human economic activity will not happen.
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That's how they're used, but that means they're not Pigouvian.
No, if you know the sign but don't know the magnitude, you can overshoot and end up with much worse.
That's just the Precautionary Principle, and it's a recipe for nothing but death.
Yes, you're correct, I mean in the sense that we should try to match them to the cost of the externality - which a ban doesn't do. I was just trying to draw a contrast with banning things, which involves far more deadweight loss, in the case where the thing being banned is useful. In the case of extremely addictive drugs, they're almost never good even for the person using them, so a ban makes sense, while for fossil fuels, they have a big benefit but also this externality, so a Pigouvian tax is a good fit. I just worded it clumsily and confusingly and didn't make the point I was trying to.
My point is that even if we think that the damage caused by carbon emissions is somewhere between $5/ton and $2000/ton, a $50/ton carbon tax is much more likely to be beneficial than no tax.
Isn't the Precautionary Principle more about only allowing things once we're sure they're safe? That would have been like not allowing fossil fuels to be burned at all back when they were discovered. We have piles of evidence that what we're doing to our atmosphere is already fucking us over.
I'm not some sort of neo-luddite or de-growth advocate. Yeah, there are some things we could have avoided like leaded gas and CFCs (even for CFCs I don't think we probably should have prevented their use until we had a non-ozone-destroying alternative, given the benefits of refrigeration), but we've really screwed up by not allowing nuclear power to flourish, and on the whole, technology and building new things is good. I just think that for carbon taxes, at this point the debate should be at what level they should be, not whether we need them at all.
Yes.
If you want to end fossil fuel burning, you most certainly are.
Yes, and a car salesman thinks the debate should be about how much profit you'll give him on the car sale and not whether you are going to buy the car at all. This is just a tactic.
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Smoking might actually be good on the margins. Sure, the more you smoke the more likely you’ll die sooner. But smoking also comes with good effects (eg social). There is a case where it is okay used marginally.
What signs are there that climate change is negative? The greening of the planet?
I agree re precaution principle but you can take that too far. For example, we could get rid of all oil uses tomorrow. Society would collapse but perhaps that would be better for maintaining the environment (or perhaps not — people might burn wood).
I don't disagree, though maybe once most people don't smoke, being a smoker is actually negative socially. So nobody smoking is better than everyone smoking a little bit, probably. If you're in a society where everyone already smokes, smoking socially might be the right thing for you though, assuming you don't hate the experience.
The greening of the planet isn't actually good for agriculture. Most plants are what we consider weeds, so faster growing weeds means more pesticide use. And the big issue is really instability more than heat, as you get crazy weather, where the growing season starts early but then there's a frost, or severe droughts and heat waves, or floods, all sorts of stuff like that. Predictability is really good when in comes to farming, and the weather unpredictability caused by a warmer planet more than makes up for any benefit you might get from a longer growing season and more CO2 for plants to consume, in most places.
No disagreement on that point. I think a carbon tax of somewhere between $30 and $100 / ton CO2 is anything but taking things too far, though. A $100/ton tax would add about $1/gallon on the price of gas.
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