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Friday, November 24, 2006

Bad Economics from the Cato Institute

The recently released Stern Report from the British government recommends that the world invest in addressing global warming now to prevent significant effect on the world economy in the future.

In a report entitled, "Global Warming Insurance is a Bad Buy" by Jerry Taylor and Peter Van Doren, the Cato Institute counters the Stern Report by asking "why should the relatively poor (us) sacrifice for the relatively rich (our children and grandchildren)?" That's right. Who cares what the world looks like in 100 years, our children and grandchildren are going to be richer than we are?

This ridiculous abdication of responsibility is based on the fact that thanks to the "magic" of compounding economic growth, the Gross Domestic Product Per Capita will grow from $44,403 to $321,684 between now and 2106. "If global warming cuts GDP by 10% a year beginning about 50 years from now, then GDP per capita will be $289,515 in 2106 rather than $321,684. "
This argument is like someone in the 1970's claiming that because the population of 2006 will be richer and can better afford to clean up the environment, there was no need to pass the Clean Air Act or the Clean Water Act or any of the other laws that have cleaned the environment and forced more responsibility upon those who pollute.

Setting aside the morality of leaving our children and grandchildren to deal with the effects of our high-carbon society, the paper also forgets to mention that if you assume a 3.5% inflation rate (about the same as from 1950 to 2005), in 2106, the Per Capita GDP would need to be $1,384,992 for our great grandchildren to enjoy the same standard of living as we enjoy now. So, keeping this in mind, the argument really should be that we need to do something now because future generations will be less able to afford the solutions than we are.

The report ends with the standard stance of those against addressing the problem: "But climate predictions are not certain." Apparently, Taylor and Van Doran are willing to wait until Washington D.C. is under water to take action.

This type of report is the reason why the work of the Sustainable Energy Alliance is so important. Grass-roots groups like SEA leading the charge at the local level is the only way to counter "research" backed by Big Oil and other companies who believe the best solution is the status quo so that they can continue to make lots of money.

1 comment:

Jerry Taylor said...

"Setting aside the morality of leaving our children and grandchildren to deal with the effects of our high-carbon society ...."

Actually, the moral argument for exactly that was laid out by John Rawls (Google him is you don't know of him). In short, we should maximize the wellbeing of society's poorest members. Present generations are poorer than will be future generations. And Prof. Rawls is a hero of the anti-indivualist Left.

"... the paper also forgets to mention that if you assume a 3.5% inflation rate (about the same as from 1950 to 2005), in 2106, the Per Capita GDP would need to be $1,384,992 for our great grandchildren to enjoy the same standard of living as we enjoy now."

No it does not. The numbers are REAL GDP. Which means that they are inflation-adjusted as presented.