David R. Henderson  

David Friedman on Global Warming

A Lesson in Mainstream Macro... The Job-Seeker's Paradox...

After about a 3-week hiatus, David Friedman is blogging again. And the first one he did after starting is excellent. It's on global warming. Here's the opening paragraph:

The argument for large and expensive efforts to prevent or reduce global warming has three parts, in principle separable: Global temperature is trending up, the reason is human activity, and the consequences of the trend continuing are very bad. Almost all arguments, pro and con, focus on the first two. The third, although necessary to support the conclusion, is for the most part ignored by both sides.

The whole thing is worth reading.

Thomas Gale Moore, in his "Global Warming: A Balance Sheet," in The Concise Encyclopedia of Economics, makes a similar argument to David's. Moore writes:

How would climate affect economies? Climate affects principally agriculture, forestry, and fishing. For the United States, these three total less than 2 percent of the GDP. Manufacturing, most service industries, and nearly all extractive industries are immune to direct impacts from climate shifts. Factories can be built practically anywhere--in northern Sweden or in Canada, in Texas, Central America, or Mexico. Banking, insurance, medical services, retailing, education, and a wide variety of other services can prosper as well in warm climates (with air-conditioning) as in cold (with central heating). A warmer climate will lower transportation costs: less snow and ice will torment truckers and automobile drivers; fewer winter storms will disrupt air travel; bad weather in the summer has fewer disruptive effects and passes quickly; a lower incidence of storms and less fog will make shipping less risky. Higher temperatures will leave mining and the extractive industries largely unaffected; oil drilling in the northern seas and mining in the mountains might even benefit.

Moore is less agnostic about the issue than Friedman, but what they have in common is their willingness to think through the actual economic effects of global warming and the possibilities for people to adapt.

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The author at Samizdata.net in a related article titled The good aspects of global warming writes:
    David Friedman (son of Milton F.) has a good post here in which he asks the question of why we don't focus more on the possible positive impacts of man-made global warming, rather than always focus on the bads. If you live in Siberia or have endured th... [Tracked on September 14, 2011 7:13 AM]
COMMENTS (20 to date)
anon writes:

"Banking, insurance, medical services, retailing, education, and a wide variety of other services can prosper as well in warm climates (with air-conditioning) as in cold (with central heating)."

That he would think the main impact of global warming on insurance is the weather conditions near the home office suggests he hasn't really thought through the issue very much at all.

Shane writes:

I like this kind of thinking too.

However if conditions in cold climates become more temperate and pleasant, then conditions in already very hot regions may become unbearable. Perhaps I'm wrong in this, but I guess many of the world's cooler regions (North America and northern Europe come to mind) are already stable. But many of the world's hottest regions (Saharan and sub-Saharan Africa, parts of the Middle East) are already fairly unstable. Making baking hot regions hotter might create big problems for those regions - no?

mike miller writes:

Climate change becomes a moot point if you think that peak oil is a reality. I think the evidence supports this scenario, So the whole concept becomes follow the money. Oops, who benefits from
AGW ?Just asking.

Rob Bradley writes:

This discussion is pertinent to the Andy Dessler-Rick Perry debate as described at MasterResource today: http://www.masterresource.org/2011/09/dessler-perry-what-response/.

The assumption of perfect knowledge of the problem and the solution--and costless implementation of the solution plagues the debate among technical economists today.

B.B. writes:

It would be nice if we thought about the consequences for millions of other species as well.

I, too, am skeptical on anthropogenic global warming, but even so, other living things enter my utility function. Population crash or extinction will make me worse off, even if I own a factory in northern Sweden.

mtraven writes:

It takes a seriously proactive lack of imagination to ignore the effects of climate change that are happening right now, such as the the drought and fires in Texas. It doesn't matter if agriculture is only 2% of the economy and the other 98% is designing the next iPad or something, if there is widespread crop failure due to lack of water or other climate-related reason, that's a fairly serious matter. People can't eat iPads or drink financial derivatives.

mtraven writes:

And it's not like we haven't had a similar climactic/economic disruption within living memory.

kyle8 writes:

One of the arguments I do not hear often enough is the argument about opportunity costs of global warming legislation.

Any attempts to forestall this before we understand it fully, or even know if it is man caused or not will injure the global economy and extract wealth from it.

Since wealth can grow and create more wealth then what you are doing is robbing a future world of some of the wealth it might require to deal with problems (if any appear).

In other words, a wealthier future is better able to deal with the problems of the future.

kyle8 writes:

Mtraven, does that mean there was global warming way back when the Aztecs had to flee southern Texas and New Mexico due to an extended drought?

To take any isolated incident such as a drought and say that it is evidence of some global climate phenomenon is to think that history began about ten years ago.

anonymous writes:
bad weather in the summer has fewer disruptive effects and passes quickly;

Has he thought about the impact of summer storms on air travel? They are the most severe in terms of impact. A businessman who misses a meeting because he is delayed many hours doesn't consider the effect to have passed quickly. Current impact to the US flying public was estimated to be > $100 million per year. I don't know how much it cost the airlines.

PrometheeFeu writes:

My primary worry about global warming is loss of biodiversity in our food supply. There are many types of foods which I for one enjoy very much and would rather they remain available.

Jason Collins writes:

It is not as though this thinking is not being done. You might disagree with the conclusions, but the Stern Review and IPCC reports explicitly do this (there are whole chapters on it).

mtraven writes:

@kyle8 it is quite true that a single record-breaking bad year of drought is not necessarily caused by global warming. But it's a nice piece of evidence that should cause you to update your probabilities, which ought to already be close to 1 based on the scientific consensus.

@anonymous and @PrometheeFeu: apparently the worst consequences you can conceive of are some inconvenienced businessmen and the loss of some dietary enjoyment. Like I said before, such a lack of imagination has to be at some level deliberate.

frankcross writes:

This all misses the point. There is no optimal temperature. Warmer temperatures would be fine. The problem is the rate of change. The necessary adjustments may be quite costly, if they must be taken in a brief time period.

Costard writes:

The consequences of anti-carbon legislation are clear, at least. Equally clear is the impact that even the most ambitious proposals would have on projected global warming: little to none. The redirection of power and wealth, however, would be likely "unprecedented".

Fundamentally there is no difference between a theocracy and a technocracy. In either case the public is at the mercy of a group with special knowledge -- a group by definition unaccountable. Separation between church and state did not evolve out of atheism, but out of the understanding that such a union inevitably breeds corruption. God and nature are unpredictable and may spare us as well as condemn us; men, on the other hand....

kyle8 writes:

mtraven, you do your side no favors by invoking consensus. Science does not operate by consensus. And even if you put some store by that, It is false.

There is nothing like a consensus among climate scientists except that there is some climate change going on, there always has been. There is no consensus about the nature, the speed or the reasons for the change.

You are simply stating a falsehood.

Brian Clendinen writes:

David Friedman misses the fourth very important argument which there has been little debate on also.

If man is causing global warming can we actual stop it, and if we can does a given regulation actually decrease the temperature? If so, does it cost more to decrease the temperature than the harmful economic impacts of letting the temperature rise.

However, if one can’t get a sound analysis if increasing temperatures are actually harmful this fourth point can’t be properly analyzed.

Considering the science is clueless on the effect on weather if temperature increases. How can an economist make even a poor model to project economic loss from increased temperatures?

mtraven writes:

kyle8, you quite obviously have no idea what you are talking about. I will continue to pay attention to scientists who actually do know something, rather than anonymous commenters on an economics blog.

It mystifies me why some people want to be both victims and perpetrators of disinformation campaigns, given that they have to live on the same planet as the rest of us.

David C writes:

The problem with weather is there's very little data prior to the 20th century to rely upon. We know that extreme weather events have increased throughout the century. We also know that part of this is explained by more accurate reporting. Earthquakes, which are clearly not caused by global warming, have also increased; just not nearly as much. Richard Tol's work is still, I think, the go-to source for dollar estimates of the consequences of climate change.



One problem is that temperature increase estimates have risen substantially over the past decade, but the economics literature has yet to catch up. There needs to be more papers looking at the consequences of 4-8 degrees Celsius of warming.

stickman writes:


While I appreciate the direction of Friedman's thoughts, anyone with passing familiarity with climate change economics will realise that these issues have long been front and centre of field.

What are the potential benefits of climate change versus the costs? Stern, Nordhaus -- and virtually anyone else using an integrated assessment model approach -- are basically conducting an elaborate CBA study. In short, the differences in their policy prescriptions typically arise from disputes over the discount rate, not denial that warming could bring with it particular benefits.
Worried about uncertainty and our ability to accurately forecast future trends (whether that be climatic, social or technological)? Weitzman, Gollier and Nordhaus (again) are among the many economists that have produced excellent research on this topic.

I left a comment under Friedman's post with relevant links to these issues for anyone interested in some further reading. (I can't link to it directly, but my comment was towards the bottom at 3:37 PM, September 07, 2011.)

This will probably come across as more snarky than I intend, but... If you are going to comment on the AGW debate, it behoves you to understand what those working on the problem are actually saying (let alone studying).

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