Nobelist Krugman slams Reaganite Feldstein on global warming economics

Nobel prize-winning NYT columnist Paul Krugman has been doing some terrific writing on the economics of climate action (see Climate action “now might actually help the economy recover from its current slump” by giving “businesses a reason to invest in new equipment and facilities” and Krugman strongly endorses Waxman-Markey).

Now he has turned his attention to fellow economist Martin Feldstein, who recycled a lame WSJ piece into an uber-lame Washington Post piece.

[Note to self:  If Post editorial page editor Fred Hiatt keeps recycling garbage, you’re going to have to stop criticizing him for being anti-environmental.]

At 5:02 am (!) today, Krugman blogged:

Ugh. Martin Feldstein has been making sense on macro issues, but this is a really bad column, on multiple levels.

On the most basic level: Waxman-Markey eventually calls for a reduction of greenhouse gas emissions by more than 80 percent, so looking only at the 10-year target, for about a 15 percent reduction is deeply misleading.

Beyond that, Feldstein says this:

“Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent.”

Um, in the absence of a cap-and-trade system, emissions would grow by quite a lot. So the right comparison is not with current emissions levels but with what they would have been in the absence of the policy “” a much bigger number. That’s the sort of comparison economists always make “” it’s definitely weird for Feldstein not to see this.

Finally, and most important, anyone who has been following this issue at all knows that saying

“The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.”

is basically saying let the planet burn. The only chance we have of a global agreement is if the United States moves first; it will quickly be followed by other advanced countries, and then we sit down and use a combination of carrots and the threat of big sticks to get developing countries into the fold.


5 Responses to Nobelist Krugman slams Reaganite Feldstein on global warming economics

  1. NFJM says:

    I would add “Let’s Hurricane Katrina devastate New Orleans”. Once the extent of the damage is known, we might think of the scale required for an appropriate action. Oh and the same applies of course for all pandemics. Let’s have fun looking at the scale of measures required ex-post.

    The other point he is making is basically that you should go to negociations with empty hands and hope that everybody will throw gifts at you at the negociation tables. Feldstein must obviously have grown in a completely different world where negociations, compromise and first movers are unknown concepts.

    And can off course understand a certain level of mitigation effort required from China… But India ??? What is again the GDP ppp in India? And the emissions per capita compared to the US? Hey Mr. Feldstein, you are the economist. Ever heard of the concept of “common but differenciated” levels of responsibility?

    And off course do not miss the title of the column “cap and trade: all costs, no benefits”. Is this from the famous “fair and balanced” concept ?

  2. Mark Shapiro says:

    Looks like the good Mr. Feldstein got infected with the bad analysis that spread from ExxonMobil to Marc Morano to Chip Knappenberger to Joe Barton: “Assume the US cuts emissions severely AND the rest of the world does not cut emissions at all.”

    Joe, you blogged about this diseased analysis on 5/7/09:

    Thanks to you and Krugman for fighting this pandemic of non-analysis.

  3. dbr says:

    China makes the point that a large part of their carbon emissions are due to their manufacturing of exports to other countries. Lord Stern has proposed that consuming countries and China both share the burden of reducing these emissions. But then again, none of this will be possible unless the US acts quickly and significantly.

  4. David B. Benson says:

    Hit him harder, Paul!

  5. NFJM says:

    dbr: I do not think at this point that sharing the emissions between producing and consuming countries is feasable. This would require a very data and analysis intensive effort in life cycle analysis etc… If you are familiar with the Chinese data collection, you might know about how low the feasability of such an approach is. Only energy intensive industrial goods could apply this approach. The US imports for example 20% of its steel and is therefore missing in its GHG balance sheet one or two large primary steel mills. The same goes for cement.

    By the time you start accounting for the production of a toy in China, you might start understanding the difficulty of the exercise.

    Instead of complicating the process, it would be wiser to streamline the process (e.g. sectoral emission trading) and at the same time aim at stronger emission cuts.

    I basically agree with you but ultimately, climate goals are still political in nature and will prevail over mathematical models.