"Economists are part of the problem, Part 1: Robert Stavins can’t walk and chew gum at the same time"
One of my New Year’s resolutions is to blog more about the general lameness of the economics profession when it comes to energy and climate issues [Note to self: How about losing a few pounds?].
I was in the midst of putting this resolution off for a few weeks when I saw a quote by Robert Stavins that seemed to sum up the value-subtracted that economists bring to the world.
In an otherwise excellent New Yorker article on Van Jones’ efforts to push a green jobs agenda, which I will blog on separately, Elizabeth Kolbert feels compelled to “balance” Jones with some people who don’t think it’s a good idea to simultaneously address the climate problem and the poverty/jobs problem. Who else could a respectable journalist turn to than an economist, a profession that arguably has cost the country and the world more jobs than any other?
Indeed, I remember Bill Clinton opining at a Georgetown conference in 1997 on why he ignored the advice of Administration economists, like Larry Summers, who urged him not to adopt a serious greenhouse gas emissions target at Kyoto. Clinton said his economic team had assured him that his balanced budget plan would be a job killer, so he pretty much took everything they said from that point on it with a grain of salt. But I digress.
Kolbert manages to elicit this amazing response from one of our leading economists:
When I presented Jones’s arguments to Robert Stavins, a professor of business and government at Harvard who studies the economics of environmental regulation, he offered the following analogy: “Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner. And that is an illustration of the fact that it is not always best to try to address two challenges with what in the policy world we call a single-policy instrument.”
In short, whatever we do to address climate must not attempt to create jobs. And whatever we do to create jobs should make no effort whatsoever to get off our self-destructively unsustainable economic path. That would not be a Pareto optimum, I guess.
Seriously, Dr. Stavins, just because you haven’t figured out how to walk and chew gum at the same time, doesn’t mean nobody else can.
Note to Dr. Stavins: Just for the record, the efficient way to cook dinner is with Energy Star appliances (or perhaps a solar stove in some developing countries), and the efficient (and green-job-creating way) to take a shower is with a solar hot water heater (and heat exchanger connected to the shower drain to preheat the water going into the hot water heater). If you were like my old boss Amory Lovins, you could also capture the waste heat from the stove and use that, too. And while we’re at it, why don’t we make the whole damn house super-efficient (see “American Enterprise Institute (!) endorses tax credits for super-efficient, furnace-free homes“).
Note to future dinner guests of Dr. Stavins: Instead of bringing him some wine, I’m gonna suggest a nice bottle of cologne or a little deodorant. He’ll know what to do with it.
And much as I love Kolbert’s writing, especially her terrific climate book, Field Notes from a Catastrophe, the paragraph right before the Stavins quote is not one of her best gems:
Meanwhile, the basic premise of Jones’s appeal–that combatting global warming is a good way to lift people out of poverty–is very much open to debate. Economists generally agree that the key to addressing climate change is to raise the cost of burning fossil fuels, either directly, through a carbon tax, or indirectly, through a cap-and-trade program. Low-income families are the ones that would be hardest hit by such a cost increase. They could be compensated through some kind of rebate, or a cut in other taxes; it’s been proposed, for example, that revenues from a carbon tax could be used to reduce the payroll tax. But it’s not at all clear that the number of jobs created by, say, an expanding solar industry would be greater than the number lost through, say, a shrinking coal-mining industry. Nor is it clear that a green economy would be any better at providing work for the chronically unemployed than our present, “gray” economy has been.
Uhh, Elizabeth, every major climate proposal rebates money back to low-income people. And you, of all people, should understand the flawed assumptions in that paragraph. After all, the semi-famous last sentence of your book reads:
The issue is most certainly not whether “combatting global warming is a good way to lift people out of poverty.” The issue is that we have no choice as a society but to combat global warming in order to avoid destroying ourselves.
The only question is whether we are going to adopt the rigid one-thing-at-a-time single policy instruments of neoclassical economists, in which higher energy prices are the only solution and thus economic pain and hardship is inevitable — or are we going to adopt intelligent “technology-advanced” policies that simultaneously reduce emissions and create jobs?
The coal mining jobs may be unsavable — thanks to conservatives and the coal industry [see "Like Detroit, the coal industry chooses (assisted) suicide"] both of whom rely on traditional economists. But the planet must be saved, and the lost fossil fuel jobs can be replaced by green jobs — again, if we’re smart.
As an aside, our trade deficit in oil in the next decade is likely to be several trillion dollars. Somehow I think that spending that money on made-in-America efficient vehicles and alternative fuels will generate a lot more jobs than handing our money over to foreign oil tycoons, but then again I only did a concentration in economics at M.I.T., and I certainly remember arguing at DOE with administration economists who assured me that trade deficits were not at all bad things.
I know it is hopeless ask the media and policymakers to stop listening to economists, but if anyone can tell me of any intelligent thing a major economist has recently said on energy or climate other than Weitzman — (see Harvard economist disses most climate cost-benefit analyses) — or Stern (see Stern admits report “badly underestimated” climate change risks), I’ll cook them a soggy dinner.
All kidding aside, I think the economics profession’s misunderstanding of climate science and its misapplication of cost-benefit analysis are among the single biggest impediments to serious and intelligent efforts to avoid humanity’s self-destruction. I will lay that out in future posts.