The Murky Economics Of Catastrophe

My colleague Brad Johnson talks to Lord Nicholas Stern who tells him that the relatively optimistic forecasts from the Congressional Budget Office about the economic consequences of climate change are “ludicrous”:

I try, personally, not to get too invested in this kind of controversy because I think it sort of misses the point. Expenditures on cleanup of radiation count as GDP. So by the same token, if Manhattan becomes uninhabitable and we need to build new buildings for everyone to live in, that will be GDP. The economic point would be that GDP measures flow of goods and service while ecological devastation impacts our stock of said things. And, again, grandma dying of heatstroke is not a problem for the national economy. Grandma’s retired. Grandma’s not producing goods and services. But you love her and so does your dad and your cousin.

Then the other thing that’s a little mysterious about the economisty discussion around this subject is that I see no particular reason to think that smart clean energy policies would cost anything at all. A tax on greenhouse gas emissions is a very growth-friendly source of revenue, even leaving the ecological impacts aside. There is, I suppose, some possible level of carbon tax at which this abstruse debate about the macroeconomic impact of a 6°C (11°F) warming becomes a relevant policy consideration, but you’d have to be talking about a very different political atmosphere.