I’ve seen this dynamic play out so many times now, that I insist on commenting on it. It’s often argued that inflating the risks of climate change leads to despair and causes people to do nothing about it. But in my experience, the exact opposite happens: Liberals in positions of power downplay the impact of climate change, which leads to conservatives believing them at face value and concluding nothing should be done.
I’m dumb enough to visit ZeroHedge every once in a while, because I want to know what the average disillusioned American schmuck thinks about the world. And so I find this article. It is the perfect illustration of my point.
I’ll cite it here and we will look at the raw data.
Despite endless fearmongering in numerous places, a study by the White House Council of Economic Advisors shows climate change will have little impact on GDP.
Transition Risks of Climate Change on Macroeconomic Forecasting
We are told by the Biden administration, the UN, AOC, and all the Gretas of the world that a rise in global temperatures in excess of 1.5 degrees would be catastrophic.—————————————–
So the Biden administration’s council grabs a bunch of economic studies and produces an aggregate model on that basis, which shows that GDP isn’t really affected much by 4 degree Celsius of global warming.
This happens because economists like simple models. They look at how temperatures correlated to economic outcomes in a country in the past and then they look at how temperatures will change in the future and use that to conclude what’s going to happen in the future.
There are many problems with this approach. It is a bit like taking a driver who likes to drink before climbing behind the steering wheel, calculating how much damage his antics have caused him in the past and on that basis projecting how much increased alcohol consumption would cost him in the future.
When I explain it like this, you immediately understand the problem with this approach. If I’ve only ever drunk two glasses before climbing behind the wheel, you don’t know how much four glasses of alcohol would affect my driving skills. And similarly, you don’t know how Phoenix, Arizona is going to deal with temperatures it has never before experienced. Models based on data from the past can’t tell us that.
Finally, you have never experienced the small but important risk of catastrophic outcomes. You’ve never experienced the impact of the car hitting a tree and catching fire. You’ve never experienced the impact of hitting a pedestrian and going to jail. You’ve never experienced the impact of flying through your windshield.
And that’s the problem with every single one of these models. The people who make these models are not physicists and they are not climatologists. So their model can not incorporate the consequences of catastrophic scenarios.
Once I’ve illustrated the shortcomings of the economic models in this aggregate that predict the worst outcomes, you will understand why the libertarians and conservatives are being fooled by the liberals, in the opposite direction they imagine.
Let’s start with that blue line at the top of the chart. Kalkuhl and Wenz.
We have the paper here.
If you would simply read the abstract, you would find them acknowledging the shortcomings of their analysis themselves:
Abstract: We present a novel data set of subnational economic output, Gross Regional Product (GRP), for more than 1500 regions in 77 countries that allows us to empirically estimate historic climate impacts at different time scales. Employing annual panel models, long-difference regressions and cross-sectional regressions, we identify effects on productivity levels and productivity growth. We do not find evidence for permanent growth rate impacts but we find robust evidence that temperature affects productivity levels considerably. An increase in global mean surface temperature by about 3.5°C until the end of the century would reduce global output by 7–14% in 2100, with even higher damages in tropical and poor regions. Updating the DICE damage function with our estimates suggests that the social cost of carbon from temperature-induced productivity losses is on the order of 73–142$/tCO2 in 2020, rising to 92–181$/tCO2 in 2030. These numbers exclude non-market damages and damages from extreme weather events or sea-level rise.
They’re economists. They don’t know how to model the damage from extreme weather or sea-level rise. And if we open the study, we find they’re excluding what they estimate to be the main source of economic damage so far: Loss of life.
Non-market damages such as loss of life, conflicts and violence, biodiversity and ecosystem damages are not captured (confer to Howard and Sterner (2017) for a comprehensive overview of climate damage estimates based on various approaches). In particular, years of life lost are not considered in our analysis. This climate impact has been found to constitute the major share of the costs of global warming in the United States (Hsiang et al., 2017).
Do you see the insanity of this? “People die from climate change and this has the biggest cost for the economy. But we’re not going to include that cost in our analysis.” And then the White House economists take this study and include it as their worst case(!) scenario, on the basis of which they project the impact of climate change.
And then the libertarian and conservative bloggers read the White House economists conclusions, take their fancy chart, don’t bother asking themselves where the data came from and conclude that you can warm up our planet without damaging the economy and so the Biden administration shouldn’t try to stop emissions to begin with!
The other papers cited all engage in some variety of this same behavior. They look at historical data, for correlations between GDP and temperature. This can not tell you anything useful and I’ll just give you an example to illustrate this.
Imagine you live in Kentucky. Agriculture is 2% of GDP. A natural disaster strikes, a heatwave that causes all harvests to fail. The rest of the world is unaffected. Kentuckians remains calm. This reduces GDP by 2%.
Now imagine all harvests fail, the rest of the US suffers the same problem and other nations refuse to export food. The other 98% of GDP in Kentucky is entirely dependent on agriculture functioning as necessary. You can’t work if you’re hungry, or suffer severe vitamin and mineral deficiencies.
When all countries have temperatures at the high range of the historical data simultaneously, in other words, exactly what’s going to happen, the damage caused as a result is multiplied.
We’re already witnessing this outcome. Greece doesn’t have enough firefighting planes, to contain all the wildfires. As a result, the simultaneous wildfires cause more damage than they would if they occurred separately. And tourists who had to flee as their hotel was on fire aren’t going to return to islands like Rhodes, which depend on tourists for income.
For Rhodes, tourism is not just a sector of the economy. Everything else that takes place on the island is only viable due to tourism. If the tourists don’t show up, you have no income. If you have no income, you can’t spend any money. Instead of getting her hair cut and her nails done, the maid at the hotel does it herself. The government misses tax revenue. And without tax revenue, it can’t afford to maintain the roads and deliver electricity.
Which brings me to the final, most important point: GDP is an inhuman figure that doesn’t tell us what’s actually happening in our lives. Imagine my garden is flooded, so I spend 200 dollar to repair the fence. I would’ve preferred spending that 200 dollar renting an AirBnB, but because of the flood I don’t have the time and money.
For an economist, there is no difference. I spent 200 bucks. This means someone earned 200 bucks. This means GDP is up by 200 bucks. Taken to its natural conclusion, you could imagine that climate change will increase GDP, because countries like the Netherlands with a stable population will nonetheless need to spend money constructing houses far away from the coast due the rising sea level.
For the people it means they’ll live in hastily constructed ugly flats, sure. Elderly people who have lived their whole life in a town will be forced to move. But GDP is up!
Statistics allow people to believe the sort of nonsense common sense would immediately reveal to be insanity. With their petty models, these people will have you believe that 4 degree Celsius of global warming would reduce GDP by 7%, instead of resulting in the collapse of civilization.
Back to our libertarian blogger:
Assume the worst, and temperatures rise two or three degrees in an amazingly fast 20 years. The White House projects the impact on GDP would be about 1 percent, if that.
That means a GDP that would otherwise be $27.00 trillion would instead be $26.73 trillion. This we are told is catastrophic.
Here you see my point illustrated. The models err on the side of caution. The libertarians then conclude that we don’t have to do anything about the end of the Holocene. Because they think like economists, their brains are incapable of anything beyond comparing numbers.
When people are isolated from nature, they don’t understand nature. And then eventually you reach the point where the American Ron Paul acolytes conclude that number goes up, even if they transform the planet into a desert.