Tumblr Icon RSS Icon

Is Larry Summers a voodoo economist on climate (Part 5) and does it matter?

Posted on  

"Is Larry Summers a voodoo economist on climate (Part 5) and does it matter?"

Share:

google plus icon

Yes and no.

Larry Summers is widely regarded as a very brilliant economist. I can’t dispute that. He was also the lead horse among the economists in the Clinton administration who were using every trick they knew to undermine any serious effort toward negotiating an international agreement on restricting greenhouse gases in Kyoto, Japan (see here and below).

He appears to remain firmly in the camp of most MEOWs (Mainstream Economists who Opine on Weather) in that he

  • Doesn’t understand climate science enough to realize how dire the situation is
  • Doesn’t propose remedies that would avert the irreversible catastrophe we face.

That seems clear from his two-part series on climate in the Financial Times in 2007 (Part 1 and Part 2). By his own admission, he proposes polices that are “less dramatic in their immediate claims for emissions reductions” than what the world has been considering. These include more R&D, of course, and an end to energy subsidies, plus:

The US must engage in an energy efficiency programme that takes effect without delay and has meaningful bite. As long as developing countries can point to the US as a free rider there will not be serious dialogue about what they are willing to do. I prefer carbon and/or gasoline tax measures to permit systems or heavy regulatory approaches because the latter are more likely to be economically inefficient and to be regressive

First off, the “and/or” is odd, since the “or” undermines the whole message. A gasoline tax is obviously not going to touch coal, and it is obviously not “economically efficient” if your goal is carbon reductions.

Second, it is odd economics to described an “energy efficiency” program as being driven by price, when high carbon prices primarily drive fuel switching. You would need incredibly high CO2 prices to drive efficiency in transportation (see “Why a carbon cap won’t solve our oil addiction“), something Summers has never endorsed as far as I’ve seen. Also, even his new boss knows a gas tax is a politically dubious strategy for pushing efficiency (see Obama is right: Higher gasoline taxes to boost efficiency would be “a mistake”). Fortunately, his boss also understands that smart regulations make more sense in the transportation sector (see “Obama to push for California waiver that mandates cut in auto CO2 emissions“).

In any case, if Summers won’t specify a domestic emissions target let alone a global one — and won’t specify how high a carbon or gasoline tax he has in mind, then it is impossible to view his policies as a serious addition to the debate or know if he is really serious at all. He is just another mainstream economist opining on a subject that he has not bothered to become knowledgeable enough on to make a useful contribution.

But does it matter that a MEOW, in this case a very clever kitty, is the head of the president’s powerful National Economic Council? The NYT says it does matter a lot in “In Obama’s Team, Two Camps on Climate,” which pits Summers against Carol Browner, who will oversee Obama’s energy and climate policy, and which ignores the rest of his amazing Cabinet.

I argue it does not in my latest Salon piece, “Real science comes to Washington” by way of my experience in the Clinton Administration:

[The NYT piece] attempts to recast the Obama administration as a replay of the Clinton administration.

It is true that when the Clinton administration was forming its position for the Kyoto climate treaty talks in 1997, Summers “argued that the United States would risk damaging the domestic economy if it set overly ambitious goals for reducing carbon emissions.” But the Times claims, “His view prevailed over those of officials arguing for tougher standards, among them Carol M. Browner,” then EPA administrator.

That is simply wrong. Clinton went with the toughest standard being considered by the administration. And then in Kyoto, Vice President Gore agreed to an even tougher standard than that!

I was one of the point persons for the Department of Energy in these discussions. The economists from the NEC, Council on Economic Advisers, and Treasury did everything in their power to weaken the targets. Those of us pushing for the strongest targets thought there were two camps. I figured the economists would win, since their economic models inevitably overestimate the cost of action and underestimate the cost of inaction

During 1997, I helped oversee a study by five U.S. national laboratories that examined what an aggressive technology-based strategy built around energy efficiency and renewable energy could achieve in terms of emissions reductions. That “Five Lab Study” concluded that the United States could meet the most aggressive Kyoto target being considered without raising the nation’s overall energy bill.

I remember Bill Clinton explaining at an October 1997 Georgetown conference why he ultimately ignored the advice of his economists. 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 with a grain of salt. He concluded, “I’m convinced that the people in my Energy Department labs are absolutely right.”

The story goes that Abraham Lincoln once said to his Cabinet, “Seven nays and one aye; the ayes have it.” There never were two camps. And there still aren’t.

Yes, Summers hated the Five Lab Study. He had junior economists in the Administrations trash it openly and behind the scenes. In the one principals meeting I was allowed to attend on climate in a mostly be-seen-but-not-heard mode — I was a lowly acting assistant secretary while he of course was a Deputy Secretary and never the twain shall meet — he disparaged the notion that an aggressive technology strategy was a game changer in terms of overall mitigation costs. In retrospect, this is actually kind of funny/sad since, like most MEOWs, he strongly endorses a big R&D program, but simply doesn’t believe existing or near-term technology matter. Like President Bush and indeed most conservatives, it is only nonexistent technology that MEOWs believe in, not existing technology.

[Note: I might add that it would be hard to find a non-MEOW for heading the NEC in any case, so it is probably better to have someone who knows something about climate than nothing at all. ]

Moreover, Browner is every bit the coequal of Summers in this Administration — and more than coequal on climate. She was chosen to run the energy and climate issue from the White House. Summers is just one voice among many principals, no more important than the likes of Chu, Holdren, Jackson, Biden, and Clinton. And Obama himself makes clear every passing day just how serious he is about climate (see, for instance, Must-read Obama speech warns of “irreversible catastrophe” on climate, asserts “no single issue is as fundamental to our future as energy” and “Obama to push for California waiver that mandates cut in auto CO2 emissions“).

I end the piece:

Obama’s Cabinet has been called a team of rivals, but in fact it is a team of the unrivaled — unrivaled in its knowledge of climate science, clean energy climate solutions and experience in getting things done.

I never imagined anyone would have the confidence and commitment to assemble such a group. Every one of these individuals understands that the future of the nation, the world and their place in history rests squarely on whether we prevent a climate catastrophe, whether the biggest polluting nations replace their entire energy systems in a few decades. I honestly don’t know if it is politically possible to preserve a livable climate — but if it is, these are the people to make it happen.

Related Posts:

« »

6 Responses to Is Larry Summers a voodoo economist on climate (Part 5) and does it matter?

  1. Barry says:

    Summers might be a gifted academic, this might be just another display that his expertise should be confined to macro/monetary policy area. JR is right that broad brush waffling like this shows that Summers is not to be taken seriously in climate economics. however, like any mainstream economist with an ego, sooner or later he is going to try and influence it, and his revelations of ignorance should be used to excuse his likely anti-climate change action arguments.

    Just because you are good at one branch of economics does not mean you have any authority to comment on another. Just imagine if a chemical engineer decided they should do some consulting for bridge building, because after all, it’s all engineering. Yikes!

  2. paulm says:

    And now we see the collapse and retraction of the insurance industry due to GW!

    State Farm Plans to Leave Florida Residential Market
    http://www.bloomberg.com/apps/news?pid=20601087&sid=as2i8OksHG0Q&refer=home

    “State Farm Mutual Automobile Insurance Co., the largest home insurer in the U.S., plans to drop 1.2 million customers and withdraw from Florida’s residential market after a request for a rate increase was denied by state regulators.

    The insurer cited risks from hurricanes and the rising costs of everyday claims from the state’s homeowners in an e-mailed statement today. The surplus from State Farm’s Florida unit fell by $201 million in the first three quarters of 2008, a period where no hurricanes hit the state. “

  3. Ross Hunter says:

    I agree with Barry’s point, which I extend to mean that over time the rights and wrongs of sound policy will become visible, and probably it will first take heavyweights like Summers to bet on some losing hands. But it’s good for this to happen in real policy, rather than theory.

    JR your quote of Lincoln was useful, and remember that in the Civil War he felt he had to defer to his generals for a long time, watching them fail one after another, eventually reading tactics himself, gradually sounding out his common-sense instincts against military theory, and instantly recognizing Grant as a player who could produce.

    Even in pure economics Summers may not be the right player for this meltdown. I’ve watched Pelosi explain how they canvassed all the economists, across the whole spectrum, and thus, “this stimulus will work, must work, everyone agrees.” Point is, what’s clear is that she doesn’t know Economics, and neither does Obama, and all the policymakers are forced to rely on people practicing a voodoo they can’t quite evaluate in advance. But over time, as the hands get dealt and folded, Obama will learn the theory to match his instincts, same as Lincoln with war.

    In a similar way, we’ll learn the sound policies of changing the global economy to a sustainable one. I think that climate and economics are inseparable, and the two disciplines are destined to marry in a very robust union.

    So I especially appreciate your treatments of the economics of the solutions.

  4. jorleh says:

    Economists are pseudo-scientists. Of course, however, a rather harmful lot.

  5. paulm says:

    @Richard Pauli such massive document and just one graph. Amazing!