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Mark Thoma Points Us to Partha Dasgupta's Critique of Bjorn Lomborg

The extremely thoughtful and smart Partha Dasgupta does not think Bjorn Lomborg is playing with a full deck. Mark Thoma:

Economist's View: "If The Uncertainties Are Not Small, Standard Cost–Benefit Analysis As Applied To The Economics Of Climate Change Becomes Incoherent": Partha Dasgupta reviews Cool It: The Skeptical Environmentalist's Guide to Global Warming, by Bjorn Lomborg (via email):

Bjorn Lomborg's _The Skeptical Environmentalist{ created a sensation six years ago. The author offered figures to dismiss claims that the ecological-resource base in many parts of the world is deteriorating, and argued that the costs of reducing ecological losses are usually higher than the benefits.... [P]rominent publications such as The Economist promoted the book vigorously... People learning of my own work in developing ecological economics would ask, "And have you read Lomborg?" — implying, "Why have you thrown away so much of your working life?"

Things have changed over the past year... many now regard global warming to be the central problem facing humanity. Lomborg's latest book, Cool It doesn't question the science... he questions whether we should do much about it....

The book is a series of exercises in cost–benefit analysis, interspersed with quotes on climate change from the writings of famous people who should know better than to speak in hyperbole.... whereas the smart strategies he outlines... would cost a mere $52 billion a year. By his reckoning, those strategies would limit the rise in concentration of carbon dioxide to 560 parts per million (p.p.m.) and the accompanying temperature rise to 4.7 °C. Smart strategies would cost far less than Kyoto, deliver higher economic growth worldwide, and markedly reduce poverty. From the vantage point of Kyoto, there is a free lunch to be had wherever you look....

Unfortunately, Lomborg's thesis is built on a deep misconception of Earth's system and of economics when applied to that system. The concentration of CO2 in the atmosphere is now 380 p.p.m., a figure... in excess of the maximum reached during the past 600,000 years. If there is one truth about Earth we all should know, it's that the system is driven by interlocking, nonlinear processes running at different speeds... an unknown number of tipping points.... We have no data on the consequences if Earth were to cross those tipping points. They could be good, or they could be disastrous. Even if we did have data, they would probably be of little value because nature's processes are irreversible. One implication of the Earth system's deep nonlinearities is that estimates of climatic parameters based on observations from the recent past are unreliable for making forecasts about the state of the world at CO2 concentrations of 560 p.p.m. or higher....

These truths seem to escape Lomborg. His cost–benefit analysis involves only point estimates of variables... implying that he believes we shouldn't buy insurance against potentially enormous losses resulting from climate change....

[E]ven a small amount of uncertainty — when allied to only a moderate aversion to uncertainty — would imply that humanity should spend substantial amounts on insurance, even more than the 1–2% of world output that has been advocated. If the uncertainties are not small, standard cost–benefit analysis as applied to the economics of climate change becomes incoherent, even if those uncertainties are judged to be thin-tailed (gaussian, for example); this is because the analysis would say that no matter how much humanity chooses to invest in protecting Earth from passing through those later tipping points, we should invest still more.

Economics helps us to realize what we are able to say about matters that will reveal themselves only in the distant future. Simultaneously, it helps us to realize the limits of what we are able to say. That, too, is worth knowing, for limits on what we are able to say are not a reason for inaction. Lomborg's seemingly persuasive economic calculations are a case of muddled concreteness.

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