Wednesday 16 December 2009

Failing the giggle test

British Prime Minister Gordon Brown says failure to reach a deal at the Copenhagen climate conference may trigger an economic disaster equivalent to the combined effects of the two world wars and the Great Depression.
Today's headline from Radio New Zealand.

Any of the folks talking about a twenty percent drop in GDP are talking about projections a century from now relative to a baseline where global warming didn't exist. They're not talking about the Great Depression tomorrow. And, you have to weigh the costs of that loss a century from now against the reduction in economic growth you'd have today if we implemented very costly measures against warming today. If you set the discount rate to zero, or if you care a lot about guarding against the lower chance of the worst outcome, then spending more now makes sense; otherwise, it doesn't.

But Brown's presenting it as though the policy alternative is costless and the costs of inaction are incurred very soon. Given that the mean expected economic costs of global warming at reasonable discount rates aren't that far from the mean expected economic costs of implementing carbon mitigation regimes, you could just as easily predict economic disaster from a carbon tax. Small reductions in economic growth rates have large cumulative effects....

2 comments:

  1. He went even further on BBC breakfast TV this morning talking about what a great job creator it will be...

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  2. If there are currently unemployed resources due to the recession that would be employed in green stuff, then it could be a job creator, but no more so than any other government spending programme during a recession. Post the recession it would have to be drawing down resources from other sectors though, and I doubt that even in the recession the kinds of folks who'd be here employed aren't the folks exhibiting the highest unemployment rates anyway.

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