"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Monday, April 28, 2008

Agreeing with WSJ Op-Ed

Today's Wall Street Journal has an opinion column entitled "The Real Cost of Tackling Climate Change" from Steven Hayward of the (often egregious) American Enterprise Institute, which I find myself surprised to be mostly in agreement with. He argues:
  • Greenhouse gas targets will be very difficult to meet
  • Renewables will probably not help as much as we'd like
  • Very large scale efforts and projects will be needed
and, especially
  • "Someone should put this question to the candidates. And not let them slide past it with glittering generalities."


anna said...

yo, Michael, it's time to turn up the sensitivity on In It's selective-truth-ometer.

What is missing from the Op-Ed? How would including the missing info change the column's take-home message? Is this important?

Michael Tobis said...

Anna, I am sure the gentleman and I would not get along, and I am sure he does not want to pay the cost, while I do, but his points are worth making and not papering over.

I know what you mean, though. We have to weigh these costs against the costs of inaction.

The pretense that any solution will be anything but riddled with painful compromises for all concerned bothers me. People are imagining a wonderful world of flowers and windmills and self-actualization without acknowledging that such a world has only a tenth as many people on it as we will soon have.

The best we can do will be ugly and industrial. CCS and nuclear are nasty heavy industries; electric rail requires new eminent domain, a whole lot of things nobody wants in their backyard will have to go in various people's back yards.

Agreeing with some points in this article is my way of saying that even the best and finest imaginable response to climate change is not actually going to be anything like a perpetual fun camping trip with kites and homemade fountains and wild berries and smoked trout.

Trust me, I have no objection to this outcome, but the world is too small. The numbers don't work. The way back to the garden is much longer and sadder than we'd like.

He implies that doing nothing is better, which is insane. He also implies doing nothing of consequence is likely, which is true.

We are in for some hard times come what may, even if we manage against all odds to get it right.

Dano said...

but the world is too small. The numbers don't work. The way back to the garden is much longer and sadder than we'd like.

Yes. I have no idea how this is going to work. Myself and the city attorney were pilloried at my last job for wondering out loud how this was going to work. People take a long time understanding that CO's Front Range is going to depopulate.



Dano said...

BTW, I'm not registered at Grist. I'd like to see your reasoning in the food article there play out before a larger audience (and in a different forum than that place).



Steve Bloom said...

Michael, I think this will be of some interest.

Michael Tobis said...

Steve, I think the idea of a reduction in emissions big enough to make a noticeable difference without regulatory action has to be some sort of a joke.

That the market is punishing companies for voluntarily taking on costs that their competitors do not is the market doing its job. That it is cheaper to emit than not to emit, on the other hand, results from the rest of society not doing our job.

Moral dilemmas don't come up when the right thing to do and the self-interested thing to do are the same. Corporations are self-interested by design, and mostly amoral. Though some have moral or immoral streaks, the market tends to eliminate those. We can't expect corporations to take major hits in the interest of any ethic other than shareholder value maximization.

That's why we need to change the laws and not so much the lightbulbs.

Dano said...

Over at MetaSD, the blogger asserts:

To achieve material reductions in emissions, “occur” must mean “be adopted” not just “be invented.” Absent market signals and institutional changes, it is unlikely that technologies like carbon sequestration will ever be adopted. Others, like vehicle and lighting efficiency, could easily see their gains eroded by increased consumption of energy services, which become cheaper as technology improves productivity.

Market signals AND institutional changes.

Both of these go hand-in-hand, just like 'adaptation and mitigation', as both informs the other.



Steven said...

BTW, Let me say up front Michael I've really enjoyed your blog, and I hope to be able to keep reading and contributing... On with the show.

One concern of mine in the "lightbulbs-laws" statement is the general implication that "People like me are smarter and have better intentions. We know the right things to do, and we need to be able to force our plans on others".

I would submit that human history shows this rarely if ever provides more benefit than a bunch of dumb hooligans doing the best they can over an iterative process and time.

It's command economy versus free market. I think we have many countries that have tried gradiations along the spectrum, although both Marxists and free-marketers will say no one has ever treid "Pure XYZ".

However- we have tried some pretty close examples. I feel confident from my survey of the world that free markets provide best for people, while command leads to abject poverty and starvation.

And I don't think wealth and luxury necessarily mean destroying the earth, while "at least the poverty is eco-friendly".

Free capitalist societies have the luxury to, and the interest in living in a cleaner environment. People in poverty don't care so much, and they have more necessity to use what may not be the cleanest methods.

I specifically take issue with your point of view that Steven Hayward wants to "do nothing". I can't speak for him, but I think it's more accurate to say he believes that there is plenty of "doing something" without legislating massive costs on production.

Hayward (and myself) look at the long trend of replacing horses with cars. It's by now a well known joke that in 1900 scientists worried, projecting from existing trends, "where will we put all the horse crap"?

There are two general theories of accumulation, wealth, and betterment. (1.) Take it from others (scarcity), and (2.) Create it (unknown boundary).

The first has existed for millenia. I think scientists tend to fall in that camp because the conservation principles are so ingrained in their minds. "You can't make new stuff!"

However, "new stuff" is simply better and more efficient uses of materials which already existed. Who could have seen plastic coming in the 1300's? But you can't say plastic is extra-natural. It is simply a more efficient use of existing materials.

It is literally true to say we can't possibly know the limits of efficiency and value that we can create. If you disagree, just think of any invention or innovation we take for granted and think back 10 years. Does it really make sense that somehow NOW is when we've run out of room for more value and more effifiency?

Who can say that the internal combustion engine can't get 500 mpg? I'm sure at every stage so far people have thought "That's all we can squeeze out of it".

Who can say that the engine won't be largely obsolete ten years from now? Manufacturers of buggy whips and harness gear would have said the same.

The idea is not "do nothing". The idea is that roughly 3 billion people are out there every day inventing, innovating, rationing, making different decisions, theorizing, researching, making millions of different decisions and looking for ways to solve, or create better ways to meet all our needs.

I think it's worked pretty damn well so far, mostly in the places where freedom is highest. Not so well where some people who deem themselves smarter and more expert have commanded from a central hierarchy what they believe to be the best plans.

Does Al Gore really think he's smarter than the combined effort of 150 million Americans who all want to better their own lives, and yes, also want a nice environment.

David B. Benson said...

Not sure where to post this, but I won't register on Gist because that site won't let me post under my name,

David B. Benson

stating that it contains 'illegal characters'.

And this site has the problem that the 'publish' button at the bottom of the preview window does not function anymore.

Dano said...

Does Al Gore really think he's smarter than the combined effort of 150 million Americans who all want to better their own lives, and yes, also want a nice environment.

I hereby call GoreWins Law, similar to Godwin's law. Any further conversation is pointless.



Dano said...

Does Al Gore really think he's smarter than the combined effort of 150 million Americans

Simonian Cornucopianism. I see that my conjecture of not having a natural science class in Uni is strengthened.

The earth is an oblate spheroid of finite dimension. Infinite substitutionism is impossible, bound by physical limits. Too bad they don't teach that in B school. It'd save a lot of bandwidth.



John Mashey said...

1) Given the history of AEI & WSJ Op-ED, it is very likely this is a "misdirection" argument, even if pieces of it are certainly true. I.e., it's like Lomborg's arguments - see my recent comments over at http://www.desmogblog.com/bjorn-lomborg-bibliography#comment-290344

2) But in any case, to be clear, most of the economic arguments I've seen seem very dubious to me, in that they:

a) Model the US economy via typical neoclassical economic assumptions

b) Which means ~3% GDP growth, more or less indefinitely

c) of which 1.5-2% come from "technological progress" or "Total Factor Productivity" or "Solow Residual" ... See for example http://en.wikipedia.org/wiki/Exogenous_growth_model

To me, this means: we' don't really understand it, but it's been that way, so it will be that way.

3) If past data more or less fits a straight line (for decades, or as in the US GDP case, for ~100 years), then the natural prediction is to predict it to continue indefinitely.

4) If it's more or less a straight line on a log scale chart, it's exponential growth with an approximately constant CAGR, and the temptation is to predict it to continue.

EX: Moore's Law for semiconductors

5) INFLECTION POINTS: if one just does mathematical predictions, without relevant physics underpinnings, one would predict Moore's Law to go on forever. It won't, but it is nontrivial to predict inflection points, and worse to analyze multiple trends and their inflections and make good bets.

6) The "biophysical economists", like Charles A. S. Hall, Robert Ayres+Benjamin Warr, Vaclav Smil, etc, think that a lot of that "Total Factor Productivity" is really:

useful work = energy * efficiency,

with perhaps a bit of a residual boost in the last few decades from computing. I think they make a very good case for it, but then I'm not an economist.

I do observe that the UK got rich in part because it was early to exploit coal heavily, and the US likewise, but for oil.

I also observe that:
- subsistence farmers with nothing but human labor, tend to be poor, but it's why they often have big families.
- farmers with draught animals usually can grow more; many poor farmers would consider the Amish lifestyle unimaginably wealthy, with say, 60 acres/family.
- farmers with electricity, diesel fuel, tractors, and combines do OK, and can (in mid-West) handle hundreds of acres of wheat or corn, and do pretty well.

7) But, if the biophysical model of the world is a better approximation than standard necoclassical, then Peak Oil+Gas is the biggest inflection point in recent history, and all these happy 3% CAGR predictions are ...useless...

8) In that case, it isn't a question of "how much will it cost", it's a question of "can we move fast enough on efficiency and renewables, and *invest* the oil+gas that's left (about 50%) so that there's an above-subsistence economy left when fossil fuels are gone?" (and not be driven by desperation into massive coal-burning). And can we avoid building infrastructure and vehicle fleets that are instant "stranded assets"?

9) Put another way: in the standard neoclassical model, an airplane can keep accelerating upward without burning fuel. Very happy.

In the biophysical model, acceleration depends in large part on increasing fuel * efficiency. In the next decade, fuel starts going down, and then accelerates downward. The plane's eventual altitude depends on the ability to increase efficiency ... and over the next century, replace the 2/3 of US energy from oil+gas. Sad, but true, if one tries to keep acceleration going as fuel diminishes, you can actually damage the engines. [If you try to extract oil too fast from a field, you can damage the oilfield and get less total oil.]

11) Assumption of ~3% growth is built into many plans. I hope it happens ... but personally, I think even folks like Stern are underestimating the problem and the urgency of moving REALLY fast.