The cost of avoiding loss


in Economics, Politics, The environment

Ken Caldiera has come up with a nice reversal of the “does it make sense to spend money fighting climate change” question:

“If we already had energy and transportation systems that met our needs without using the atmosphere as a waste dump for our carbon- dioxide pollution, and I told you that you could be 2% richer, but all you had to do was acidify the oceans and risk killing off coral reefs and other marine ecosystems, risk melting the ice caps with rapid sea-level rise, shifting weather patterns so that food-growing regions might not be able to produce adequate amounts of food, and so on, would you take all of that environmental risk, just to be 2% richer?”

You would have to be mad to say ‘yes.’

{ 3 comments… read them below or add one }

R.K. December 16, 2009 at 10:18 am

That re-phrasing takes advantage of the endowment effect.

Once we have something, we assign more value to keeping it than we would assign to acquiring it if we didn’t have it already.

. September 16, 2010 at 2:34 pm

“The first point to make is that, even if Nordhaus’ calculations [about the cost of stopping anthropogenic climate change] were reliable, the costs of climate change mitigation do not see unmanageable. As Thomas Schelling puts it:

The costs in reduced productivity are estimated at two percent of GNP forever. Two percent of GNP seems politically unmanageable in many countries. Still, if one plots the curve of US per capita GNP over the coming century with and without the two percent permanent loss, the difference is about the thickness of a line drawn with a number two pencil, and the doubled per capita income that would have been achieved by 2060 is reached in 2062. If someone could wave a wand and phase in, over a few years, a climate-mitigation program that depressed our GNP by two percent in perpetuity, no one would notice the difference. (Schelling 1997)

Even Lomborg agrees with this. He not only cites the 2 percent figure with approval but adds, “there is no way that the cost [of stabilizing abatement measures] will send us to the poorhouse” (Lomborg 2001, p.323)”

Gardiner, Stephen. “Ethics and Global Climate Change” in Gardiner, Stephen et al. Climate Ethics: Essential Readings. p.11 (paperback)

Milan September 16, 2010 at 2:41 pm

That is what we are risking the entire planet for – to avoid an economic expense that people wouldn’t even notice.

Humans are dumb.

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