World GDP and Global Warming
Earth got about 0.7 degrees Celsius warmer in the 20th century while it increased its GDP by 1,800 percent, by one estimate. How much of that 0.7 degrees can be laid at the feet of that 1,800 percent is unknowable, but let’s stipulate that all of the warming was the result of our prosperity…
That’s still an amazing bargain. Life expectancies in the United States increased from about 47 years to about 77 years. Literacy, medicine, leisure and even, in many respects, the environment have improved mightily over the course of the 20th century, at least in the prosperous West.
Given the option of getting another 1,800 percent richer in exchange for another 0.7 degrees warmer, I’d take the heat in a heartbeat.
In this post, I calculated the increase in world GDP as being even more–close to 50 times more GDP, although only 9 times more GDP per capita. But the point about the trade-off is still the same.
To be fair, it is not the global warming that has taken place so far that has people’s knickers in a twist. It’s the global warming that models project for the future. Some of that is projected even if our GDP grows no further, based on feedback effects from the existing level of CO2. Some of it is projected based on additional increases of GDP and more CO2 in the process.
These statistical projections are highly uncertain. In fact, I do not think that the climate modelers have anywhere near enough data to make usable predictions.
99 percent of the people who knowingly tell you that global warming is real and that the science is conclusive have no clue about statistical modeling. The statistical challenges of climate modeling that scientists understand among themselves are quite different from the popular conceptions that imagine some concrete certainty. To paraphrase Winston Churchill, never before in the field of public policy have so many had such confidence in model forecasts based on so few meaningful observations.
Feb 9 2007 at 5:46pm
When you put it in the terms that Goldberg does (1800% richer), or that you did (50x richer, life expectancy from 47 to 75), even if you factor in all the future warming (3 degrees instead of 0.7), we still come out massively ahead. Even if we have to relocate everyone from New Orleans and Bangledesh and every other low lying landmass, and pay for them to live in co-ops on the upper east side of Manhattan, we are massively ahead!
Feb 9 2007 at 9:46pm
Arnold- Do you have an intuition on how climate modeling would be fundamentally different than macroeconomic modeling?
My impression is we have something like 30-100 years of climate data and we use that data to forecast 100-150 years in the future. If you did the same thing with economic data, you’d have huge error bands in the latter years. That doesn’t appear to be the case for these climate forecasts.
Are their models more deterministic then the ones we use in economics? What driving these small error bounds?
Feb 10 2007 at 9:14am
I was not aware that degrees and GDP were comparable. When the other commenter says “even if you factor in all the future warming (3 degrees instead of 0.7), we still come out massively ahead”, I am not sure what we are ahead of. There are mainly three different objections:
1. The consequences of an earth 3 degrees hotter are many more than less place to live. We would also have less place to grow food, an increase in natural disasters such as floods and hurricanes, a marked decrease in biological diversity, less fish in the sea (leading to less food again).
2. There is no way to transfer the GDP gain of 1900-2000 into the money needed to save the populations of poor, low-lying landmasses like Bangladesh and several large regions of India and China. Moreover, there is currently no way of converting the GDP increase of 1900-2000 into replacement food for the fish and agricultural land that disappears into the ocean. Even if it was technically possible, there seems to be very little political push to do so. The effect will be a lot of dead, poor people. How much GDP is a human life worth?
3. Even if your idea of comparing GDP with degrees were meaningful, it is far from apparent that it has any power as a guide to politics. If we can avoid it, why should we let temperatures rise by 3 degrees? Just because we have earned more than we have polluted so far?
Much of the political push today is to generate growth withouth generating CO2. Would you prefer it to be otherwise? Why?
Human beings are conducting the greatest experiment ever on our own conditions of living. We are obviously unsure of the results. Yet, the many scientists of the IPCC have agreed to several estimates with large (although they are getting smaller all the time) uncertainties. These estimates point in one direction: The earth will not be an environment human beings can survive in if we continue on the path of 1900-2000.
The Stern report points to the fairly commonsensical notion that the costs of pollution are larger than the costs of avoiding them. Although we have earned shitloads on polluting so far, I thought economists (of all people) would be able to understand the principle of diminishing returns. Pollution will not be as profitable in a polluted future due to a steady decline in resources (caused by the pollution). To maintain the GDP growth, one must either pollute more (and more, and more – ultimately insustainable) or improve some other element (most likely technological progress or distribution).
Feb 10 2007 at 10:53am
Estimate a cost for the things you describe and voila! a comparison. In fact, that’s what the Stern report you cite does, so I’m not certain why you’re confused as to how a comparison is made.
Net cost-benefit comparison which should be a significant factor in all socioeconomic decisions (and as economist would assert, it should be a factor whether conscious or unconscious in every choice you make).
Specifically, if the net benefit of doing something about the temperature rise is less than the net benefit of doing nothing, then we should do nothing.
For example, an example cost for the kind of problems you describe is $50 trillion dollars a hundred years from now. The most popular (but not in economic & engineering circles) proposed remedy is to severely restrict CO2 emissions. Suppose that implementing such an approach would actually avoid the later $50 trillion dollar cost, but reduces world economic growth by 2-3% a year. With an average of 5% growth in GDP per year, the resulting growth in GDP per year would be 2-3%. Acceptable somewould say.
However, at that same 100 year projection a world economy growing at 4% annual growth would give the 50 times larger GDP than the one we have now. Assuming the US federal budget remains at ~18% of GDP, that $50 trillion dollar cost would be merely 1/2 of the US federal budget implying that it wouldn’t be too hard for the world to pay.
Now consider the lower 1-2% annual growth that would result from implementing a Kyoto like program. At 1%, the world would be just 2.7 x richer than it is today; at 2% just 7.3 x richer. That’s as compared to 50x richer if we did nothing.
So while costs would be higher, our ability to bear them would grow much faster so the pain of paying it would be much less.
To give you another feel for numbers, world GDP is about $43 trillion. Paying $50 trillion now would indeed be catastrophic. However in 50 years at 4% growth, world GDP will be $2,150 trillion and suddenly $50 trillion is not so bad. A Kyoto like approach would decrease projeted 100-year GDP to $301 trillion or $116 trillion.
Cummulatively, %2 growth costs us 41,652 trillion dollars and 1% growth costs us 47,943 trillion dollars in aggregate wealth. By comparing $50 trillion lost to 47,943 trillion lost, perhaps you can see why commentors are saying a few degrees is worth the price and why environmentalists such as Bjorn Lomborg say that one of the best things we can do about future environmental disasters is take steps to make the
economy grow even faster.
I should point out that Kyoto is projected by its proponents as having negligible effects, so the effect would be to still have the disasterous costs, but without the added wealth to pay those costs.
Feb 10 2007 at 2:02pm
Sigve Indregard writes:
This seems quite wrong. A warmer earth would have more habitable and productive land, such as Siberia and northern Canada. Food production would be higher, since growing seasons would be longer with warmer temperatures. As for natural disasters like hurricanes, they’re driven by temperature differences, so they could actually decrease. Areas that are now prone to floods might be drier. “less fish in the sea”: why? Warmth ought to increase their numbers.
Feb 10 2007 at 2:36pm
Climate modeling is based on millions of years in the geologic record. Still uncertainties exist, but it is foolish to think that they should prevent us from acting.
No doubt if we applied similar skepticism to economic theories, we would be much further ahead than where we are.
Feb 10 2007 at 2:45pm
Arnold can make the case in court when he and the libertarians finally get through their effort to sue the fossil fule industry.
The liability argument is not that some person is better off because of oil use, the argument is that an individual receives damage award if the individual can prove they use atmoshperic co2 at holocene levels (last 10,000 years).
Libertarian theory of property rights demand that these liability cases move forward and damages be assessed. Simply blogging to prove that we are fake libertarians does not stop the lawsuits.
Arnold does not need to go far to prove his libertarian credentials, he need just examine co2 levels of the last half million years and see for himself what level of co2 is supportable. From these he can easily identify the damaged parties.
Feb 10 2007 at 11:30pm
There is no proof that increasing CO2 levels have caused any damage. Even if there were proof, why would we sue the oil companies? They wouldn’t exist had there been no demand for oil. How about we sue eveyone that has ever directly or indirectly used oil? (That would be almost everyone, including you.)
Feb 11 2007 at 9:51am
Dennis Mangan: You really need to read up. You claim there will be more fish in the oceans when they get warmer. It won’t, and everyone who has ever cared to read anything about the ecosystem of the oceans know why:
Warmer water means less oxygen.
Fish can obviously adapt to warmer water (as there are fish also in warm waters), but they cannot adapt to less oxygen altogether. In addition, the difference in water temperature is a major driving factor behind in the great currents of the oceans.
In general, the odds for more food on a warmer earth are pretty slim. Animals and plants have spent hundreds of thousands of years adapting to the current climate. There is no á priori reason to assume that the climate we are making will do any better than the result natural selection has given us.
I find it amusing that you – libertarian, laissez-faire economists – are actively suggesting a strong human intervention into the climate, which is such an important production factor. Obviously the “market” of nature has created a stable climate across the years. Interfering with it can’t be good, or what?
Feb 11 2007 at 12:51pm
Absurd. You need to read up on the fact, doubted by no one, that the climate has varied considerably over periods of as little as 100 years. The “current climate” reflects recent decades only. If plants and animals couldn’t handle a few degrees temperature difference, there wouldn’t be any left.
Feb 11 2007 at 2:08pm
Dennis hits the nail on the head here. Geologically our current period is among the cooler periods. If organisms couldn’t adapt to account for a few degree shift all life on earth would have beend destroyed billions of years ago. For an interesting layman’s take on this science behind this, take a look at the following link.
Feb 11 2007 at 5:23pm
“There is no proof that increasing CO2 levels have caused any damage.”
Not for you to say, this is a matter for the liability courts, according to small government libertarians. Civil liabilities wil be easy to come by, the amount we do not know. However, Goldberg, the famous of all our big government politicos, uses his political science degree to convince us, the jury, the amount is in the trillions, according to his essay.
Jonah, who says that the trillion dollar damage award is too much for the defendant to pay, therefore, using his big government phjilosophy, he says fogive the damage award.
So, here is Arnold, defying the basic of all our libertarian rights, property rights, and agreeing with Goldberg that our government should give away trillions to because he would rather abandon his libertarian principles and get on board the socialist bandwagon for his government check?
Feb 12 2007 at 8:50pm
As a young college student and a commited republican that normally views the economy in a more important light than the enviornment, my initial views of Global Warming were that it is rubbish. 20 years ago we were being warned about “Global Cooling”,and to be honest the weather does not seem to be much different than in the past. However I now realize that I must look beyond the fact that it is 18 degrees outside my dorm room right now and understand that in the long run we will suffer the effects of this issue. As quoted in The Discovery Channel’s Global Warming: What You Need to Know “In multi-million year old air samples taken from air bubbles in glaciers in the north pole, the CO2 levels are much higher than the earth’s normal cycle of cooling and warming in the past.” This is undoubtedly from our presence on earth, due to the fact that the CO2 we emit into the atmosphere does not dissapear for many generations, resulting in a greater amount of heat trapped from the sun in the air. If you do not agree simply watch this program, it will open your eyes and allow you to realize that global warming is upon us, and although it may be tough to see now, try to look beyond the present into our near future. We must realize that global warming is a natural cycle that is now upon us, and also that it is being fueled at a greater rate by our time on earth.
Feb 12 2007 at 11:11pm
Again it bears repeating, reducing emissions is essentially free. Fully 40% of all carbon emissions are from coal power plants, and nuclear can compete with coal directly on cost especially if licensing for nuclear is streamlined.
This fear of Kyoto like approaches reducing global economic growth are only realistic if nuclear is not an option.
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