My former colleague at the Naval Postgraduate School Jonathan Lipow posted something on Facebook that I think deserves wider readership. We don’t see eye to eye on everything and we don’t even see eye to eye on what’s in his Facebook post. But he says it well and makes some valid points.
Here’s his FB post, slightly edited by me with his permission. It’s about Joseph Stiglitz‘s recent article “Yellow Vests to the Green New Deal,” January 7, 2019.
While Stiglitz is truly a great economist, his forays into the public square have been consistently embarrassing, and this is no exception. Three core problems:
- The actual proposal for the green new deal is ridiculous. It is simply not possible, even if we throw an infinite amount of money at it, to reduce CO2 emissions to zero in 12 years. Or even 50, though a serious policy could probably get us to 1/3 of current emissions (my guess) in that time frame.
- The actual evidence does not support such extreme cuts making sense. I had a long talk about this with my niece – who is doing a PhD in climate science at Columbia (where Stiglitz teaches), and she confirmed something I have touched on in previous posts on recent IPCC and U.S. reports on climate change, which engendered terrifying headlines. The actual science is not nearly as dire as what the reporting suggests. The press simply chooses not to bother to actually read the reports. Instead, the press reads the summaries, which are not consistent with the reports. And then it exaggerates what is in the summaries.
- Stiglitz’s claim that the “green new deal” will generate jobs earns him an “F” in any introductory econ class, including his own. The concept of “general equilibrium” – a concept that Stiglitz uses all the time in his own research – makes it clear that you don’t increase or decrease employment by choosing to purchase any particular set of goods and services, be it Stingray torpedoes, glider surfboards, or solar panels. The real question is whether we WANT solar panels. The answer to that is yes – we do want solar panels, but it has nothing to do with jobs.
The actual consensus amongst policy people is: a modest carbon tax that will gradually be raised over time, along with investments on research into electricity storage, solar power, geothermal power, and nuclear power in order to bring the prices of these sources of power below the point that drives the “resource rent” (the value of the resource in the ground) to zero for coal and oil – something that looks increasingly possible in a 30-50 year time frame. Also, consider becoming a vegan or substituting chicken and turkey for beef and mutton. That is actually the cheapest way to reduce GHG emissions at both the national and the personal level.
Full disclosure: I had a run-in with Stiglitz a decade ago. Michael Greenstone of MIT had put out a ridiculous but very influential paper claiming that the “surge” in Iraq that was taking place back then was a failure, and I wrote a paper for “The Economist’s Voice” that tore apart his analysis. Stiglitz was editor of the “Voice” (and a vocal critic of war in Iraq) and sat on my submission for two years. Of course, in the meantime, the surge proved successful (though not for the reasons that DOD thinks, which is why the attempt to repeat the surge in Afghanistan failed). And I got a letter from Stiglitz telling me that he was rejecting my “well reasoned paper” (his words) because it was no longer relevant. I wrote back to him something not entirely complimentary about the requirements of ethical conduct in our profession.
DRH comments:
- The part I like best is Jonathan’s point #2. The press in general has done a very bad job of this.
- Re the green new deal generating jobs, I agree with Jonathan’s general equilibrium point. To that I would add, though, another point that I talk about when I teach my Ten Pillars of Economic Wisdom: Creating jobs is not the same thing as creating wealth. Indeed, when someone brags that his policy proposal creates lots of jobs, he is bragging that his proposal is really expensive.
- The solar panel point is not as clear as Jonathan suggests, but that has nothing to do with Stiglitz’s bad reasoning. The fact is that we don’t know whether solar panels are the way to go—only market prices will tell us that. (Jonathan would, I’m sure, add that the market prices have to embody the negative externality caused by carbon usage.) What we can know is that directly subsidizing solar panels or even indirectly subsidizing them by forcing utilities to pay homeowners retail prices for the electricity that solar panels generate is a bad idea.
- I was against the surge in Iraq because I was against the Iraq war. Of course, that’s different from saying that the surge didn’t work.
READER COMMENTS
Jon Murphy
Jan 15 2019 at 10:20am
Regarding #3:
Just before reading this post, I was reading (for unrelated reasons) Alchian & Allen’s discussion on “economic efficiency” in Universal Economics.
They write:
I think this is an important point that Lipow touches on when he says “The real question is whether we WANT solar panels” (I think it’s a bit misleading when he writes “we” but that’s a discussion for another time). What is considered “economically efficient” is a matter of preference; there does not exist a universal “indifference curve,” and thus “optimal” policies regarding emissions do not necessarily objectively exist.
AlexR
Jan 15 2019 at 8:43pm
At first I thought the reference to Universal Economics was a typo; surely the reference must be to University Economics, the near-mythical text from which I first learned economics many decades ago. But, following the link, I was thrilled to learn that Universal Economics is a later (!) work by Alchian and Allen, postdating both University Economics and Exchange and Production. I urge readers of this post to follow the link. A paperback edition can be had for < $15!
Jon Murphy
Jan 16 2019 at 9:12am
Glad I could help 🙂
Alan Goldhammer
Jan 15 2019 at 2:38pm
I honestly don’t understand how anyone can make point #2 stand up to reality. There is ample evidence in the scientific literature about melting of ice at both the Arctic and Antarctic areas. Most recently a Proceedings of the National Academy of Science paper showed that Antarctic melting has been accelerating. What ‘might’ be true is that ‘green’ efforts to stem global warming are way overblown particularly as India and China continue their industrialization. Whether the Paris climate treaty can do anything is certainly open to question but the facts of global warming are not (one only need look at some of the military preparedness activities in this area and particularly focus on the large Naval installation in Norfolk where flooding is becoming more regular).
Jon Murphy
Jan 15 2019 at 3:09pm
Please correct me if I misunderstand your objection, but #2 is not saying that there are not problems that need addressing. Rather, he is saying the proposed solutions are too extreme for the scope of the problem.
Here’s an example: a few years ago, a study was done that showed consuming bacon can cause cause cancer. The study also said that the amount of bacon necessary to cause this effect would need to be massive and you die of a heart attack long before the cancer can occur. However, the headlines just report that bacon causes cancer (a factually correct but informationally devoid statement). In response, someone floats a proposal to ban all bacon and cured meat production and consumption. Given the risk, is this response justified?
Alan Goldhammer
Jan 15 2019 at 4:41pm
Jon, I can only go by what David has quoted. Here is the relevant excerpt, “… she confirmed something I have touched on in previous posts on recent IPCC and U.S. reports on climate change, which engendered terrifying headlines. The actual science is not nearly as dire as what the reporting suggests. The press simply chooses not to bother to actually read the reports. Instead, the press reads the summaries, which are not consistent with the reports. And then it exaggerates what is in the summaries.”
I do not think this is correct based on the published science to date. Regarding your point on the “solutions” brought about from embracing a “green agenda,” I am also skeptical that it will provide a major solution to the problem.
MikeW
Jan 15 2019 at 6:49pm
Here is one example of the way things get exaggerated in the media:
https://www.instituteforenergyresearch.org/climate-change/popular-analysis-of-the-national-climate-assessment-misleads-the-public-on-the-economics-of-climate-change/
Mark Bahner
Jan 15 2019 at 7:09pm
Well, the problem is, you didn’t really “only go by what David has quoted.” You completely left out the first sentence in the paragraph! 🙂 Generally, the first sentence in a paragraph introduces what the paragraph is about. 🙂 For anyone who missed it, here’s the first sentence of Jonathan Lipow’s point #2:
And the “extreme cuts” he’s writing about involves getting to zero (net) emissions in 12 years. Only someone who is completely ignorant about the subject can think that could happen anywhere but on paper.
Jon Murphy
Jan 16 2019 at 9:13am
Alan-
Yeah, that quoted part, and especially the bolded sentence, is where my interpretation comes from.
Weir
Jan 15 2019 at 5:38pm
“Most of the Antarctic ice sheet is likely to thicken as a result of increased precipitation.” According to the IPCC. And it was increasing at the time of the IPCC’s last report, which is online, and really is much less dire than all the reporting about the report.
What will you read in the IPCC’s report?
“No robust trends in annual numbers of tropical storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.”
“In summary, there continues to be a lack of evidence and thus low confidence regarding the sign of trend in the magnitude and/or frequency of floods on a global scale.”
“In summary, there is low confidence in observed trends in small-scale severe weather phenomena such as hail and thunderstorms because of historical data inhomogeneities and inadequacies in monitoring systems.”
“Over periods of a century or more, evidence suggests slight decreases in the frequency of tropical cyclones making landfall in the North Atlantic and the South Pacific, once uncertainties in observing methods have been considered. Little evidence exists of any longer-term trend in other ocean basins.”
“Current data sets indicate no significant observed trends in global tropical cyclone frequency over the past century and it remains uncertain whether any reported long-term increases in tropical cyclone frequency are robust, after accounting for past changes in observing capabilities.”
“Analyses of land areas with sufficient data indicate increases in the frequency and intensity of extreme precipitation events in recent decades, but results vary strongly between regions and seasons. For instance, evidence is most compelling for increases in heavy precipitation in North America, Central America and Europe, but in some other regions—such as southern Australia and western Asia—there is evidence of decreases.”
Not terrifying. Not dire.
Mark Bahner
Jan 15 2019 at 6:59pm
With engineering–and infinite money–all things are possible. 🙂
Seriously, it’s quite possible to get down to *net* zero “emissions” in 12 years. One way to do that is to suck as much CO2 out of the atmosphere as is being emitted to the atmosphere. (So the emissions aren’t truly zero, but the amount sucked out of the atmosphere is equal to the amount emitted to the atmosphere, so effectively the “emissions” are zero.)
What would it cost for the United States to get to zero emissions? (I don’t include the world, because no other country would be stupid enough to follow our lead if we tried to get to zero emissions in 12 years.)
Well, the U.S. emits approximately 5 billion tonnes of CO2 (rounding to one digit to keep this simple). Approximately 25 percent is from coal, 30 percent from natural gas, and 45 percent is from petroleum (again, rounding a bit to keep things simple).
If we wanted to suck all 5 billion tonnes that we emitted out of the atmosphere, rather than attempting to reduce emissions, the cost would be very, very, very large. Some people have estimated $1000 a tonne (that’s a metric ton). Others, $600 per tonne. The most optimistic estimates are less than $100 per tonne. (Search for BBC article, “Key ‘step forward’ in cutting cost of removing CO2 from air”.)
So the cost for the U.S. to get to net zero emissions is probably somewhere in the range of $500 billion to $5 trillion per year. (Needless to say, it’s not something I’d recommend doing!)
Matthias Goergens
Jan 16 2019 at 10:44am
Very good point: carbon taxes or cap-and-trade are well supported by economic theory to reach the goal of lower emissions. Subsidising any particular technology that happens to seduce politicians is not.
Of course, what we see in practice is the opposite. Plenty of wannbe-green subsidies, and almost no emission-taxing. (You are more likely to see certain emission bans and regulations than emission taxes.)
Mark Bahner
Jan 16 2019 at 6:41pm
Beyond that carbon taxes find support in economic theory, is the problem that no politically viable taxes can come even close to meeting Alexandria Ocasio-Cortez’s goal of transitioning the U.S. economy to zero CO2 emissions in less than 12 years.
The problem with the “Green New Deal” is that Alexandria Ocasio-Cortez clearly knows virtually nothing about electrical power generation or transportation.
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