Thoughts on economics and liberty

Category: Economics

Although Nordhaus seemingly rejects Ehrlich’s panic, he does not realise that humans are themselves the ultimate resource

Here’s another piece by Nordhaus: Source. Once again, he comes out as a mediocre economist.


Is Growth Obsolete? – William Nordhaus and James Tobin

A long decade ago economic growth was the reigning fashion of political economy. It was simultaneously the hottest subject of economic theory and research, a slogan eagerly claimed by politicians of all stripes, and a serious objective of the policies of governments. The climate of opinion has changed dramatically. Disillusioned critics indict both economic science and economic policy for blind obeisance to aggregate material “progress,” and for neglect of its costly side effects. Growth, it is charged, distorts national priorities, worsens the distribution of income, and irreparably damages the environment. Paul Erlich speaks for a multitude when he says, “We must acquire a life style which has as its goal maximum freedom and happiness for the individual, not a maximum Gross National Product.” [Sanjeev: Does Nordhaus consider himself to be one of these multitudes?]

Growth was in an important sense a discovery of economics after the Second World War. Of course economic development has always been the grand theme of historically minded scholars of large mind and bold concept, notably Marx, Schumpeter, Kuznets. But the mainstream of economic analysis was not comfortable with phenomena of change and progress. The stationary state was the long-run equilibrium of classical and neoclassical theory, and comparison of alternative static equilibriums was the most powerful theoretical tool. Technological change and population increase were most readily accommodated as one-time exogenous shocks; comparative static analysis could be used to tell how they altered the equilibrium of the system. The obvious fact that these “shocks” were occurring continuously, never allowing the system to reach its equilibrium, was a considerable embarrassment. Keynesian theory fell in the same tradition, attempting rather awkwardly, though nonetheless fruitfully [Sanjeev: He’s a Keynesian] to apply static equilibrium theory to the essentially dynamic problem of saving and capital accumulation.

Sir Roy Harrod in 1940 began the process, brought to fruition by many theorists in the 1950s, of putting the stationary state into motion. The long-run equilibrium of the system became a path of steady growth, and the tools of comparative statics could then be applied to alternative growth paths rather than to alternative stationary states. NeoKeynesian macroeconomics began to fall into place as a description of departures from equilibrium growth, although this task of reinterpretation and integration is still far from a satisfactory completion. [Sanjeev: Nordhaus has co-authored many times with Keynesian Paul Samuelson]

By now modern neoclassical growth theory is well enough formulated to have made its way into textbooks. It is a theory of the growth of potential output, or output at a uniform standard rate of utilization of capacity. The theory relates potential output to three determinants: the labor force, the state of technology, and the stock of human and tangible capital. The first two are usually assumed to grow smoothly at rates determined exogenously by noneconomic factors. The accumulation of capital is governed by the thrift of the population, and in equilibrium the growth of the capital stock matches the growth of labor-cum-technology and the growth of output. Simple as it is, the model fits the observed trends of economic growth reasonably well.

The steady equilibrium growth of modern neoclassical theory is, it must be acknowledged, a routine process of replication. It is a dull story compared to the convulsive structural, technological, and social changes described by the historically oriented scholars of development mentioned above. The theory conceals, either in aggregation or in the abstract generality of multisector models, all the drama of the events —the rise and fall of products, technologies, and industries, and the accompanying transformations of the spatial and occupational distribution of the population. Many economists agree with the broad outlines of Schumpeter’s vision of capitalist development, which is a far cry from growth models made nowadays in either Cambridge, Massachusetts, or Cambridge, England. But visions of that kind have yet to be transformed into a theory that can be applied in everyday analytic and empirical work.

In any case, growth of some kind is now the recognized economic norm. A symptom of the change in outlook can be found in business cycle semantics. A National Bureau recession was essentially a period in which aggregate productive activity was declining. Since 1960 it has become increasingly customary to describe the state of the economy by the gap between its actual output and its growing potential. Although the word recession is still a source of confusion and controversy, almost everyone recognizes that the economy is losing ground —which will have to be recaptured eventually—whenever its actual rate of expansion is below the rate of growth of potential output.

In the early 1960s growth became a proclaimed objective of government policy, in this country as elsewhere. Who could be against it? But like most value-laden words, growth has meant different things to different people and at different times. Often growth policy was simply identified with measures to expand aggregate demand in order to bring or keep actual output in line with potential output. In this sense it is simply stabilization policy, only more gap-conscious and growth-conscious than the cycle-smoothing policies of the past.

To economists schooled in postwar neoclassical growth theory, growth policy proper meant something more than this, and more debatable. It meant deliberate effort to speed up the growth of potential output itself, specifically to accelerate the productivity of labor. Growth policy in this meaning was not widely understood or accepted. The neoclassical model outlined above suggested two kinds of policies to foster growth, possibly interrelated: measures that advanced technological knowledge and measures that increased the share of potential output devoted to accumulation of physical or human capital.’ Another implication of the standard model was that, unless someone could find a way to accelerate technological progress permanently, policy could not raise the rate of growth permanently. One-shot measures would speed up growth temporarily, for years or decades. But once the economy had absorbed these measures, its future growth rate would be limited once again by constraints of labor and technology. The level of its path, however, would be permanently higher than if the policies had not been undertaken.

Growth measures nearly always involve diversions of current resources from other uses, sacrifices of current consumption for the benefit of succeeding generations of consumers. Enthusiasts for faster

‘ The variety of possible measures, and the difficulty of raising the growth rate by more than one or two percentage points, have been explored by Edward Denison in his influential study, The Sources of Economic Growth in the United States and the Alternatives Before Us, New York, Committee for Economic Development, January 1962, Supplementary Paper No. 13.

growth are advocates of the future against the present. Their case rests on the view that in a market economy left to itself, the future would be shortchanged because too small a fraction of current output would be saved. We mention this point now because we shall return later to the ironical fact that the antigrowth men of the 1970s believe that it is they who represent the claims of a fragile future against a voracious present.

Like the enthusiasts to whom they are a reaction, current critics of growth are disenchanted with both theory and policy, with both the descriptive and the normative implications of the doctrines of the previous decade. The sources of disenchantment are worth considering today, because they indicate agenda for future theoretical and empirical research.

We have chosen to direct our attention to three important problems raised by those who question the desirability and possibility of future growth: (a) How good are measures of output currently used for evaluating the growth of economic welfare? (b) Does the growth process inevitably waste our natural resources? (c) How does the rate of population growth affect economic welfare? In particular, what would be the effect of zero population growth?


A major question raised by critics of economic growth is whether we have been growing at all in any meaningful sense. Gross national product statistics cannot give the answers, for GNP is not a measure of economic welfare. Erlich is right in claiming that maximization of GNP is not a proper objective of policy. Economists all know that, and yet their everyday use of GNP as the standard measure of economic performance apparently conveys the impression that they are evangelistic worshippers of GNP.

An obvious shortcoming of GNP is that it is an index of production, not consumption. The goal of economic activity, after all, is consumption. [Sanjeev: glad I can agree with Nordhaus on at least this thing, although without production there can be no consumption.] Although this is the central premise of economics, the profession has been slow to develop, either conceptually or statistically, a measure of economic performance oriented to consumption, broadly defined and carefully calculated. We have constructed a primitive and experimental “measure of economic welfare” (MEW), in which we attempt to allow for the more obvious discrepancies between GNP and economic welfare. A complete account is given in Appendix A. The main results will be discussed here and summarized in Tables 1 and 2.

In proposing a welfare measure, we in no way deny the importance of the conventional national income accounts or of the output measures based upon them. Our MEW is largely a rearrangement of items of the national accounts. Gross and net national product statistics are the economists’ chief tools for short-run analysis, forecasting, and policy and are also indispensable for many other purposes.

Our adjustments to GNP fall into three general categories: reclassification of GNP expenditures as consumption, investment, and intermediate; imputation for the services of consumer capital, for leisure, and for the product of household work; correction for some of the disamenities of urbanization.


On both counts, therefore, a reduction in population increase should raise sustainable consumption. [Sanjeev: Nordhaus NEVER CONSIDERED THAT POPULATION ITSELF WAS THE ULTIMATE RESOURCE] We have essayed an estimate of the magnitude of this gain. In a ZPG equilibrium sustainable consumption per capita would be 9-10 per cent higher than in a steady state of 2.1 per cent growth corresponding to 1960 fertility and mortality, and somewhat more than 3 per cent higher than in a steady state of 0.7 per cent growth corresponding to 1967 fertility and mortality.

These neoclassical calculations do not take account of the lower pressure of population growth on natural resources. As between the 1960 equilibrium and ZPG, the diminished drag of resource limitations is worth about one-tenth of 1 per cent per annum in growth of per capita consumption. Moreover, if our optimistic estimates of the ease of substitution of other factors of production for natural resources are wrong, a slowdown of population growth will have much more important effects in postponing the day of reckoning.

Is growth obsolete? We think not. Although GNP and other national income aggregates are imperfect measures of welfare, the broad picture of secular progress which they convey remains after correction of their most obvious deficiencies. At present there is no reason to arrest general economic growth to conserve natural resources, although there is good reason to provide proper economic incentives to conserve resources which currently cost their users less than true social cost. Population growth cannot continue indefinitely, and evidently it is already slowing down in the United States. This slowdown will significantly increase sustainable per capita consumption. But even with ZPG there is no reason to shut off technological progress. The classical stationary state need not become our utopian norm.

APPENDIX B: NATURAL RESOURCES B.1 The Role of Natural Resources in Economic Growth

In this appendix we consider the importance of natural resources in measured economic growth. In comparison with the usual neoclassical growth model, the laws of production are more complex. There are not simply constant returns to scale in capital and labor.

To the central question —How important are natural resources in measured growth? — we seem to get an unambiguous answer: less important than they were.

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William Nordhaus thinks population decline is a good thing and resources are constrained. That’s why he is such a mediocre pen-pusher.

William Nordhaus is a big name now in economics, with a Nobel under his belt. But I have strong differences of opinion with him. I consider him a mediocre pen-pusher. I fundamentally object to his recommendation for a carbon tax (SCC) without proof of harm.

Julian Simon considered Nordhaus’s methodological advances might have added something of value to economics, although Simon’s conclusions were transformationally different to those of Nordhaus. This extract from Ultimate Resource.

Like Oscar Wilde’s cynic, to them an economist is a person who knows the price of everything but the value of nothing. But in fact, to be a good economist one must be able to establish a sound valuation – and that means not leaving out any important elements relevant to the valuation. Of course economists often fail, but this is not a failure of the science but of its practitioners. The question really hinges on what will and will not be included in cost-benefit analyses. Economists have long taken into account goods other than those that pass through the market when doing cost-benefits analyses of such governmental activities as dam building. Included have been the value to vacationers of boating and other recreational opportunities. At the same time, economists have tried to determine the felt costs to people who would be moved from their homes by the building of a dam. I am not suggesting that these analyses have always been carried out well, but simply that economists have been cognizant of the need to include magnitudes other than those paid for in money. They have mostly proceeded by estimating how much people would pay to obtain these goods or to avoid these bads if given the opportunity to do so. In all cases, the magnitudes that have been considered have been impacts upon human beings, taking futurity into account with the discounting mechanism in standard economic fashion. On a macroeconomic level, economists – William Nordhaus and James Tobin early among them – have experimented with factoring some important non-market goods and bads into expanded estimates of national economic welfare. They have found that these expansions of the intellectual framework do not change the general impression left by GNP times series, however. But these widenings of the standard economic measurements have not satisfied many ecologists and a few economists. One major charge is that conventional economics does not take into account a depletion cost of the use of natural resources. But such an entry into the calculation often turns out to be double counting, and assumes that the value of materials extracted will be rising in the future rather than falling, as we have seen (see chapter 2 for materials and 11 for energy.)

Another assertion is that the effects of our activities other than on humans should also be included in the calculations. That is, eradication of mosquitoes and reduction of malaria might simply be recorded on the positive side of the ledger by economists. Biologists ask that the effect upon the mosquitoes, and upon species in the rest of the ecosystem such as fish that eat the mosquito larvae, also be taken into account.

I decided to investigate personally, starting with his 1974 article: Resources as a Constraint on Growth

This article is very problematic. The worst part is that while the world was exceptionally cold and scientists were screaming “Ice Age”, Nordhaus was busy thinking that CO2 is a problem –  as long ago as in 1974! He went off on a complete tangent after that, working on ways to tax the world. This type of economist brings great disrepute to the discipline.


Resources as a Constraint on Growth By WILLIAM D. NORDHAUS*

For a considerable part of its history, the American economy has functioned as a cowboy economy. It has been a cowboy economy in the sense that there have been no important resource constraints on growth. This is not to say that land, minerals, and a clean environment have been freely available. Rather, agricultural land could be obtained at roughly constant costs; most essential minerals have been present at fairly high grade in considerable abundance; and the environment could be used as a sink without becoming fouled. In the last several decades, however, cropland has stayed almost constant. Some high grade mineral deposits have been exhausted, and the carrying capacity of our environment has been strained. [Sanjeev: This is in TOTAL CONTRADICTION to what Simon has found – and that’s the kind of problem with Nordhaus: he is not a deep thinker]

The scarcity of resources has led many to argue that the operating rules of our economy must change. Whereas in the cowboy economy we could afford to use our resources profligately, the new view of economic growth is that the closing of all our frontiers means that we are now operating in a spaceship economy. In a spaceship economy, great attention must be paid to the sources of life and to the dumps where our refuse is piled. Things which have traditionally been treated as free goods—air, water, quiet, natural beauty—must now be treated with the same care as other scarce goods.

It would seem difficult to question the observation that the world economy is progressing toward a closed system. Many have carried this observation further, describing a future imperiled by famine, depleted of essential materials, running out of energy, or choking in its own exhaust fumes. Behind these pessimistic visions is a deeper skepticism about the very fruits of economic growth. [Sanjeev: I strongly differ with this absurd view]

Economists have for the most part ridiculed the new view of growth, arguing that it is merely Chicken Little Run Wild. I think that the new view of growth must be taken seriously and analyzed carefully.

What have we learned about the new view?
The first set of studies relates to theoretical investigations. (By theoretical I mean propositions based on largely untested assumptions about model structure —perhaps hypothetical would be a more accurate term.) In this category belong the celebrated writings sponsored by the Club of Rome as well as many offshoots of this work (Jay Forrester, Dennis H. Meadows et al.). These works have demonstrated that, under certain conditions involving technology, population, and resource availability, a sustained growth path for consumption is not possible.

The conclusions of these works have not generally been accepted by economists because of the dubious nature of many of their assumptions. In particular, the assumptions regarding population growth and technology are quite unsatisfactory. Several authors have shown that the conclusions of these models are not robust to minor modifications in structure. Thus R. Boyd showed that introducing a new factor called “technology” would drastically alter the model’s path. My work (1973a) showed that any of three changes in model structure—ongoing technological progress, adequate factor substitution or population decline—would lead to opposite and more optimistic results. [Sanjeev: Nordhaus thinks that POPULATION DECLINE WILL BE A GOOD THING – Simon would strongly disagree. Population is the ultimate resource.]

It should be stressed, however, that all of the debate about Club of Rome models has been theoretical. It has been demonstrated that different world models paint drastically different pictures of future economic life. It is at this moment an open question as to which is the preferred model. [Sanjeev: Why is it an open question? These are ALL ENTIRELY WRONG] Only careful empirical analysis can indicate which of the alternative models is closer to reality.

What then of empirical studies of long-run constraints on growth? Although there have been no comprehensive studies, several particular problems have been investigated. I will report on recent findings for mineral resources and energy.

For centuries there has been virtually constant concern about the availability of mineral resources. Many recent studies have kindled this anxiety by showing that the ratio of proved reserves to current consumption (R–C ratio) for most minerals is very low. Fortunately, this is unduly pessimistic because the concept of reserves is entirely different from ultimate recoverable resources. Proved reserves are akin to the working capital or inventory of known resources. At the opposite extreme it is possible to calculate the total crustal abundance (CA) of different materials; of course this is unduly optimistic because it assumes that everything can be recovered. [Sanjeev: this is ENTIRELY wrong way to look at things – the concept of resource needs to be understood first, and Nordhaus has no clue] Somewhere between the two concepts lies the economically relevant measure—ultimate recoverable resources ( URR). [Sanjeev: THIS CONCEPT IS AN ULTIMATE PIECE OF GARBAGE] Although URR is a variable which depends on technology and price, we can as a first approximation use recent estimates prepared for the U.S. Geological Survey. These assume that URR is approximately 0.01 percent of total availability to a 1-kilometer depth (Geological Survey, p. 23). It should be emphasized that these estimates do not take into account the economic feasibility of mining lower grade ores as prices rise or techniques improve. [Sanjeev: This discussion is so puerile. It doesn’t even begin to understand what is a resource, and in particular a resource is NOT what is currently considered a resource. That’s why Simon is so vastly superior to such mediocre pen-pushers]

deleted a big chunk

Under the assumptions of the model it thus appears that the long-run outlook for energy prices is favorable, although less favorable than over the last few decades. (The assumption of competitive behavior is clearly unrealistic. A cartel of oil producers would drive up the short-run price. But as Robert Solow has noted, monopolists are the conservationists’ best friends: higher prices lead to lower consumption, a stretching out of finite resources, and possibly even lower prices in the future.) [Sanjeev: This is SO VERY WRONG – the ideal is to “exploit” as much as you can immediately, grow the population, grow innovation and create new resources tomorrow]

The final and probably the most difficult question concerns the environmental effects of energy use. Up to now, there has been considerable attention given to the “local” environmental problems—especially sulphur emissions from stationary sources and the emission of oxides of nitrogen, carbon monoxide and hydrocarbons from automobiles. Adapting a technology to these new constraints has proved difficult and costly, but there seems to be wide agreement that—with sufficient time and money—emissions can be brought in conformity with any reasonable set of standards (see National Academy of Science Report).

A second set of environmental problems

The report on Man’s Impact on the Global Environment reviews very thoroughly knowledge about the possible adverse global effects of energy consumption. The most important of these for energy were a possible “greenhouse effect” stemming from a large increase in carbon dioxide (CO2) production from fossil fuels and the problem of global heat balance. Although there is great uncertainty, meteorological studies indicate that a change of two degrees Centigrade in average temperature is the order of magnitude which could trigger “albedo instabilities” leading to melting ice caps or “equator-to-pole ice cover” (Massachusetts Institute of Technology, p. 98). [Sanjeev: The man doesn’t think for himself. He has bought into some garbage study and made a career out of “analysing” its implications. That study itself is badly faulty. A very poor example of a thinking human being.] Studies report that such a temperature rise could result from a doubling of atmospheric CO2 or from net waste heat of around 3 percent of total solar radiation (MIT, p. 88). These thresholds are well beyond current levels of human activity. Moreover, our limited supply of fossil fuels limits the production of CO2 to acceptable levels.

I have performed a rough calculation of the atmospheric concentration of CO2 along the efficient path described above. Assuming that 10 percent of the atmospheric CO2 is absorbed annually (G. Skirrow), the concentration would be expected to rise from 340 ppm in 1970 to 487 ppm in 2030—a 43 percent increase. Although this is below the fateful doubling of CO2 concentration, it may well be too close for comfort. [Sanjeev: this was the start of his lifetime work on the completely wrong problem]

Waste heat could conceivably be a problem—but not for a while. Energy consumption is currently about 0.003 percent of incident solar energy—a five hundred-fold increase (160 years at a 4 percent annual growth rate) would be environmentally unacceptable.


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Even in 1996 Julian Simon’s sharp mind pierced through the “global warming” fraud – Extract from Ultimate Resource 2

Julian Simon was perhaps the most significant practical economist of the 2nd half of the 20th century. He died too early but left behind significant material that throws light on the litany of scams and hoaxes mankind has gone through.

This portion from his 1996 book, The Ultimate Resource 2 is illuminating. I’ll also scan and OCR other bits as and when I find time.

I should have re-read this portion in 2008 when I started researching “climate change”. Fortunately, the overall teaching of Simon was always in my mind so I was able to take a very critical approach to this issue and arrived at precisely his conclusion – that this whole thing needs to be taken with a huge pinch of salt.


Global Warming

Along with acid rain and the ozone hole (addressed below), the supposed greenhouse effect and global warming must be mentioned in this book because it is so salient in public thinking. I am not an atmospheric scientist, and I cannot address the technical issues. I can, however, try to put these issues in reasonable perspective.

Given the history of such environmental scares—over all of human history—my guess is that global warming is likely to be simply another transient concern, barely worthy of consideration ten years from now should I then be writing again of these issues. After all, when I first addressed environmental matters in the late 1960s and 1970s, the climatological issue of major public concern was still global cooling. These quotations collected by Anna Bray illustrate the prevailing thinking about climate in the early 1970s, only a decade before the hooha about warming began in earnest.61

[Climatologist J. Murray Mitchell, then of the National Oceanic and Atmospheric Administration, noted in 1976: “The media are having a lot of fun with this situation.
Whenever there is a cold wave, they seek out a proponent of the ice-age-is-coming school and put his theories on page one. . . . Whenever there is a heat wave . . . they turn to his opposite number, [who predicts] a kind of heat death of the earth.”

The cooling has already killed hundreds of thousands of people in poor nations. It has already made food and fuel more precious, thus increasing the price of everything we buy. If it continues, and no strong measures are taken to deal with it, the cooling will cause world famine, world chaos, and probably world war, and this could all come by the year 2000. (Lowell Ponte, The Cooling, 1976)

The facts have emerged, in recent years and months, from research into past ice ages. They imply that the threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind. (Nigel Calder, former editor of New Scientist and producer of scientific television documentaries, “In the Grip of a New Ice Age,” International Wildlife, July 1975)

At this point, the world’s climatologists are agreed. . . . Once the freeze starts, it will be too late. (Douglas Colligan, “Brace Yourself for Another Ice Age,” Science Digest, February 1973)

I believe that increasing global air pollution, through its effect on the reflectivity of the earth, is currently dominant and is responsible for the temperature decline of the past decade or two. (Reid Bryson, “Environmental Roulette,” Global Ecology: Readings Toward a Rational Strategy for Man, John P Holdren and Paul R. Ehrlich, eds., 1971)

Bryson went so far as to tell the New York Times that, compared to the then-recent “decade or two” of cooling, “there appears to be nothing like it in the past 1,000 years,” implying that cooling was inevitable.62

Indeed, many of the same persons who were then warning about global cooling are the same climatologists who are now warning of global warming—especially Stephen Schneider, one of the most prominent of the global-warming doomsters.*

It is interesting to reflect on the judgments that would be made in (say) 1996 of past decisions if the world had followed the advice of the climatologists only two decades years earlier who then urged the world to take immediate steps to head off the supposed cooling threat. Should we not be glad that

* When described as a former advocate of the cooling view by George Will (Washington Post, September 7, 1992, op-ed page) and Richard Lindzen (Regulation, vol. 15, no. 2), Schneider violently denied it. He referred to Will’s assertion as “false and possibly malicious” (Washington Post, September 26, 1991, A19) and objected to Lindzen’s statement in a strong “personal note” (Regulation, Summer 1992, p. 2), in both places asserting that his earlier book was “relatively neutral” on the subject. Therefore it behooves me to quote this summary from that earlier book in the section entitled “What Does It All Mean?” (1976, p. 90): “I have cited many examples of recent climatic variability and repeated the warnings of several well-known climatologists that a cooling trend has set in—perhaps one akin to the Little Ice Age—and that climatic variability, which is the bane of reliable food production, can be expected to increase along witht he cooling.” There is no qualification or rebuttal in the following text.

governments did not listen to the anti-cooling advice they were given in the 1970s? And therefore, is it reasonable now to trust the forecasts of those very scientists who have been systematically wrong in every doomsaying prediction that they have made—as is true of the environmental spokespersons of the past two decades, who are up in arms about global warming?

Curiously, within days after I first wrote the above paragraph, there appeared a newspaper story entitled “Volcano Reverses Global Warming: Scientists Expect Mean Temperature to Drop 1 Degree over 2-4 Years.”63 The event in question was the eruption in June 1991, of Mount Pinatubo in the Philippines. Then within a few days more there appeared a scholarly article finding that smoke particles may lead to cooling rather than warming, as had previously been assumed.’ Or do I have it backwards? No matter.

Whether the climate models will be right about Mount Pinatubo or not, and about the cooling effect of smoke particles, is in question, of course. The problem here, as with the global warming issue generally, is that our planet contains many forces about which we as yet know very little, and which we can predict little if at all—for example, volcano eruptions. It is an act of hubris and great imprudence to proceed as if we know much more than we do when a single article in a single journal can undermine our basic conclusions.

All that can be done within the scope of the available space and of my nonexpert’s knowledge is to give the following quick list of propositions about the issue.65 Before the “concerned” reader concludes that the following treatment is simply a whitewash, it would be fair to examine the state of one’s own knowledge on the subject—what you know about technical facts, and the sources of the supposed information. The basis of most people’s thoughts on the subject is simply general newspaper stories that assert that a problem exists. (In the following summary of the facts I rely heavily on Balling’s book.)

1. All climatologists agree that dire has been an increase in atmospheric carbon dioxide in recent decades. But there is great disagreement about the implications (if any) of the CO2 trend for global temperature. In the late 1980s the range of thinking ran from those who believed that there will be warming of up to 10 degrees Fahrenheit by the next mid-century to those who argued that the evidence is so mixed that one cannot predict any warming at all; by 1994, the range had come down somewhat at the top, but there is still great disagreement.

2. Even those who predict warming agree that any likely warming would not be great relative to year-to-year variability, and would be swamped by long-run natural variability over the millennia.

The high-end-estimate climatologists have also scaled back their estimates of a possible rise in sea level (due to glacial and polar ice melting) from several feet to at most a few inches.

3. Those who foresee warming rely heavily on computer simulation models. Many of those who foresee little or no warming rely on the temperature data for the
past century. And many of the skeptics of global warming believe that the simulation models lack solid theoretical basis and are built on shaky ad hoc assumptions. Skeptics also point to the absence of correlation between past carbon dioxide buildup and the temperature record.

4. Even if warming will occur, it is likely to be uneven in time and place. More of the effect would be at night than day, more in the low-sun season and less in the high-sun season, and more in the arctic regions than in the tropical parts of the world. It should be noted that these effects are less unwelcome than if the effects were in the opposite parts of the daily cycle and the planet’s geography

5. If there is warming, it will occur over many decades, during which period there will be much time for economic and technical adjustment.

6. Any necessary adjustments would be small relative to the adjustments that we make during the year to temperature differences where we reside and as we travel. A trip from New York to Philadelphia, or spring coming a day or two earlier than usual, is not very different than the temperature gradient for any likely warming within the next century

7. The necessary adjustments would be far, far smaller than the effects of the advent of air conditioning in any of the places in this world where that device commonly is found. The alterations that air conditioning—let alone central heating—make in the environment in which we spend our hours dwarf any alterations required by any conceivable global warming.

8. If there is warming, and if one is worried about it, the clear policy implication would be the substitution of nuclear fission for the burning of fossil fuels. This would have other benefits as well, of course, especially the lives saved from air pollution and coal mining. [Sanjeev: Of course, this is one thing the climate fascists don’t want]

Does this calm assessment differ from the impression you get from the news? One can gauge the effectiveness of the mass media in creating public opinion on global warming and other doomsday subjects by the increase in just a single year in the proportion of the public that were “aware of the global warming issue”—from 59 percent in 1988 to 79 percent in 1989.66 There is no way that individuals can measure for themselves the extent of global warming. Hence their thinking is labile and easily influenced by television and newspapers. Then the politicians and the environmental activists who give scare stories to the press cite public opinion as a reason to change public policy.

Assessing global warming seems more and more like assessing the likely availability of raw materials: every alarm about scarcity has been a case of speculative theory not fitted to the historical data. The alarm about greenhouse warming seems to come from those who pay attention only to various theoretical models—just as the alarm about global cooling came only from theoretical models in the 1970s (and from some of the same persons who were alarmed then)—whereas those who focus on the historical temperature record seem unconvinced that there have been unusual changes and are quite un-worried about the future. With respect to natural resources, the conclusion is inescapable that those who have believed the historical record have been correct, and those who have believed theories without checking them against the record have been in error. Is it not likely that this will be the case with global warming, too?’

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Cost-benefit analysis of CO2 and climate change

In 2011 I had asked for a cost benefit analysis of CO2. 

As far as I can gather no such official CBA has been conducted so far. I have therefore asked IPCC today for a global CO2 CBA

I’m going to write about this in more detail separately. This post compiles info that’s available so far on this topic:

Global Warming, Cost-Benefit Analysis, and The End of Doom – Bryan Caplan  – SUPERB summary

Estimating the Benefits from Carbon Dioxide Emissions Reductions

BOOK: Warming the world: economic models of global warming – William D. Nordhaus, Joseph Boyer

BOOK: A Question of Balance: Weighing the Options on Global Warming Policies – William D. Nordhaus

This is a recently released EIGHTH chapter from Heartland Institute’s book, Climate Change Reconsidered II: Fossil Fuels

There’s some work by Ross Garnaut, some by Stern.

Will keep adding to this post as I find time.

NOTES FROM  Warming the world: economic models of global warming – William D. Nordhaus

Understanding the economic impacts of climate change continues to be the thorniest issue in climate-change economics.

We reiterate that the damage function, particularly the response of developing countries and natural ecosystems to climate change, is poorly understood at
present. An important open issue is the possibility of abrupt climate change; this is a central concern because, whereas scientists have improved their understanding of many elements of climate change, the potential for abrupt or catastrophic climatic change, for which precise mechanisms and probabilities have not been determined, cannot currently be ruled out.

A related issue is that this book abstracts from issues of uncertainty, in which risk aversion and the possibility of learning may modify the stringency and timing of control strategies. Additionally, the calculations omit the interactions between climate change and other potential market failures, such as air pollution, taxes, and research and development, which might reinforce or weaken the logic behind greenhouse-gas reduction or carbon taxes. Although the model assumes substantial future technological change—both overall and carbon saving—it omits endogenous technological change.



The IPCC’s 2018 report, “Global Warming of 1.5 ºC”, does not even attempt to justify its policy goals in a cost/benefit framework. Rather, it takes the 1.5°C target as a politically “given” constraint and then discusses the pros and cons of various mechanisms to achieve it.

William Nordhaus’s economic model for the climate shows that the UN’s target would make humanity poorer than doing nothing at all about climate change. – source



one of the general findings there is that climate change is a problem and climate change would reduce human welfare but that welfare loss is actually not that great. And if you just believe the central estimates and just look at the global average then you would find that a century worth of climate change is about equal to losing a year’s worth of economic growth in terms of human welfare. It’s another very big impact and certainly does not make climate change the biggest problem of humankind as some people are trying to convince us of. [Source]

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