For an economics that takes the climate science seriously

By Chris Lang

In 2018, the economist William Nordhaus won the Nobel Prize in Economics. The prize was awarded to Nordhaus for “for integrating climate change into long-run macroeconomic analysis.”

“I think of climate change as a menace to our planet, to our future,” Nordhaus says in his prize lecture.

“It’s particularly pernicious because it involves so many activities of daily life. It affects the entire planet. It does so for decades and even centuries. And it’s challenging most of all because of none of us acting alone, as ethical individuals, can do anything about it to slow the change.”

Nordhaus tells us that there’s nothing we can do as individuals to address the climate crisis, thus brushing his high carbon academic lifestyle under the carpet. Nordhaus says that he is “very frightened by the prospect” of climate change.

Later on in his lecture, Nordhaus looks at several policy options and concludes that with a 4°C increase in temperature, the costs of abating climate change, plus the costs of the damages caused by climate change are lowest.

Nordhaus shows this slide, describing a 4°C global increase in temperature by 2140 as “optimal”:

And Nordhaus shows this slide to illustrate the results of his cost-benefit analysis:

This wasn’t a hastily prepared presentation that Nordhaus knocked out on the flight to Sweden to pick up his award. In June 2019, he published a paper based on his lecture in the American Economic Review.

Professor Steve Keen demolishes Nordhaus’s absurd assumptions in a November 2019 piece for The Conversation, and a longer article in Mint Magazine.

Nordhaus completely ignores tipping points in his economic analysis of climate change. He appears to believe that if the world warms by 4°C by about 2040, the temperature will just level off. That is extremely unlikely to happen, not least because of the impact of 4°C warming on the Amazon rainforest – to mention just one climate tipping point.

A June 2018 paper in PNAS argues that the temperature increase should be kept below 2°C,

“because of the risk that a 2°C warming could activate important tipping elements, raising the temperature further to activate other tipping elements in a domino-like cascade that could take the Earth System to even higher temperatures.”

Nordhaus has spent much of his career arguing against meaningful action to address the climate crisis.

For example, in a 1991 paper, Nordhaus argued that we shouldn’t try too hard to slow down global warming, because doing so would slow down economic growth.

Steve Keen concludes that,

Nordhaus’s interventions on climate change have trivialised the dangers, and thereby helped delay critical action to prevent climate change. He and his fellow economists should be thrown out of the IPCC, and replaced by scientists who have a far better understanding of the dangers of unleashing that much more energy on our sensitive biosphere.

Rather than “integrating climate change into long-run macroeconomic analysis”, as his Nobel citation puts it, Nordhaus has led humanity up the garden path towards a possible slaughterhouse. He will take his Nobel Prize to the grave, but we should leave his death march, now. Hopefully, before it’s too late. Climate scientists themselves are calling for the approach economists take to the mitigation of climate change to be abandoned. It is time their call was heeded.

Nordhaus makes no mention of the 100 companies that are responsible for 71% of global emissions. Neither does he talk about the fact that world’s richest 10% produce half of all carbon emissions. Obviously, he makes no mention of climate justice.

#Economists4Future

In reaction to this type of neoclassical economics nonsense, a group of economics students has put out a statement under the headline, “For an economics that takes the climate science seriously”. The statement is supported by Plurale Ökonomik and Rethinking Economics.

More than 2,500 individuals and organisations have signed on to the statement so far. The statement is posted in full below. You can sign on here.

While the criticism of neoclassical economics is certainly to be welcomed, Patrick Bond, at the University of the Western Cape School of Government, strikes a warning note:

“The question is whether any effort to reform this discipline from within, is doomed to failure – as were so many prior efforts along these lines. Even the existential climate crisis threat may not be enough, given the profound ideological role that economists play in promoting deregulated capitalism.“

Nevertheless, Bond notes that the authors of the letter have included some excellent points, that amount to “professional poison pills”, such as this one:

“Despite some exceptions, the overall contribution from economists has been nowhere near commensurate with the magnitude of the problem.

“Where we have contributed, we have been largely unsuccessful: the market-based solutions have yet to deliver the emission cuts at the required speed. . . .

“Emergencies do not call for incrementalism, they call for an intervention.”

For an economics that takes the climate science seriously.

Across the globe, young people are marching in the millions to demand that necessary action is taken to avoid catastrophic climate disaster. These climate strikers are calling on everyone to play their part in addressing this crisis.

Economists for Future is extending this demand to the economics community. Despite some exceptions, the overall contribution from economists has been nowhere near commensurate with the magnitude of the problem.

Where we have contributed, we have been largely unsuccessful: the market-based solutions have yet to deliver the emission cuts at the required speed.

In the context of the climate emergency, winning slowly is losing.

The task at hand

As the IPCC puts it, avoiding environmental breakdown requires “rapid, far-reaching and unprecedented changes in all aspects of society”.

We must radically change how we produce and consume to overcome the enormous challenge of decoupling economic activity from greenhouse gas emissions and unsustainable resource use.

Yet, the real task is to meet this challenge while transforming our world into a more prosperous and equitable place.

Stepping up

Emergencies do not call for incrementalism, they call for an intervention. If the discipline which dedicates itself to studying the economy cannot sufficiently engage in the economic transformation that the climate science requires, then who else can be expected to do this? The responsibility and the opportunity is ours.

Economists for Future believes fulfilling this responsibility and seizing this opportunity requires us to at least embrace the following:

A discipline-wide response

Climate change is itself not “the subject” that economists need to address: it is a symptom of the subject. Economists must get to the root of this problem. We must move beyond the cognitive bandwidth that says it is only environmental economists that should engage in this crisis.

This is not about having more environmental economists. This is about the whole discipline embedding its thinking and its methodologies within the context of a finite planet.

In the 20th century, economists tended to operate with the mindset that their task was to further human prosperity. In the 21st century, economists need to embed furthering human prosperity within the context of natural systems.

With the effects of climate change varying profoundly across space and time, prioritising distributional equity is central to that thinking. We should not outsource crucial issues, such as climate justice as being hard to quantify. 21st-century economists will need to have a stronger commitment to the rapid development of the discipline, even when that might be uncomfortable. Lastly, more leading economists need to move beyond academic silos by actively contributing to public deliberation.

Proposals

Economists must show the world that they take the climate science seriously by

1. Prioritising research and resources towards this issue

2. Teaching the next generation differently: the economists of the future must embed ecological concepts within their core thinking.

3. Making public and policy engagement on this issue a core responsibility.

We cannot afford to be cheerleaders for the status quo.

Business-as-usual is far too expensive. It is economically and morally indefensible.

Instead, we must play our part in creating and communicating an intellectual framework that accelerates action on the climate crisis.

There is simply not the time for a half-hearted response from the economics profession. We still have great unmet potential to help tackle this crisis but it is now or never. Signing this letter is a commitment to action now. A commitment to seize this opportunity to strengthen the discipline, but most importantly, the very subject it serves: the wellbeing of humanity.