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October 31, 2006
Gathering clouds
I only have a few minutes to write today, but wanted to touch on two issues.
First, I have been watching the wrangling over the hand-over of power to a pre-vote caretaker government in Bangladesh with increasing worry. The installment of President Ahmed thankfully does not appear to have exacerbated the situation as badly as some of the alternatives might have. The big test will come on November 3, the deadline for meeting the opposition Awami League's demands for reform. Some of these seem pretty hard to get done by then, though it would seem that the Ahmed has already made some gestures in their direction. What will their response be to partial fulfillment of their demands???
Second, over the past few days I received a couple of emails from web people I know asking for my thoughts on the Stern report on global warming (which suggests that the economic costs of warming could be large). Most of the attempts to predict the economic impact of global warming rely on pretty heavy guess work against spotty facts. The Stern report is no exception. The reality is that even if we fully understood the likely climactic trajectory from a scientific standpoint (which we don't, and won't in any convincing fashion for the forseeable future), predicting the economic consequences is a tricky business. There are just so many variables involved, the partial equilibriun effects (let alone general equilibrium net effects) of which remain the subject of intense research and debate.
Nonetheless, I think that the Economist more or less got the handle, when it suggested that the report is more of a political instrument than a work of serious economic analysis, the purpose of which is to get America off her ass. The desire to see America take the lead is probably driven by several considerations. First, we are the biggest producer of greenhouse gases, and no serious attempt at global stabilization of such gases could ever be made to work without doing something about our enormous and growing contribution, even if we are to be overtaken in the forseeable future by China. Second, we are the Romans, we have the imperium, they respect our authoritaaaay, l'etat c'est us, etc. etc. and as such we still set the fashion. Despite the anti-Americanism so fashionable around the world today, it never ceases to amaze me in my travels the degree to which the really cool kids around the world want to emulate us. On a political level, it is nearly impossible to think, for instance, that China will be swayed by the global crowd pushing atmospheric carbon stabilization without the weight of the US on board.
A third and important but often overlooked argument is that if America changes her ways she will suddenly create a massive market for the latest and greatest in environmentally friendly technology. Make no mistake about it: we have no intention of taking a European out whereby we lose ground for a cooler world. No, as usual, it would be the American style to insist that we have our cake and eat it too. So you have a country with massive wealth, an enormous carbon hole to dig ourselves out of, and the desire to do it with as little sweat and tears as possible. If that doesn't create an exciting new market for a certain type of emergent technology I don't know what does. If the American ship were to change course on this issue, we wouldn't even recognize the environmental technologies of twenty years from now. The promise of our demand would make financially reasonable investment in research and technology that seems irrational right now. This would be a development with extraordinary salutary global effects.
However, there is a giant cloud wrapped around this silver lining (hey, I am a dismal scientist), one that I have already explored in an earlier post: from a strictly self-interested standpoint, the US has little to gain from switching course. Nothing in the Stern report convincingly suggests otherwise. The reality is that the anticipated abatement costs (associated with, for instance, the meaningful US contribution to stabilization of global atmospheric carbon concentrations at any of the suggested thresholds) are large against the likely benefits for us (in terms of the environmental losses we avoid). This is doubly true of China.
This enormous global asymmetry of incentives between sovereign nations has been the 800lb gorilla that activists on this issue have consistently missed. Maybe it seems too dirty to them (the business of haggling over the global environment's future). I'd urge them to remember the following: China, the nation that sacrificed millions to build the Great Wall and the US, a country determined to, for instance, prosecute her Civil War or pursue reality TV programming at any cost, are unlikely simply to volunteer to do something against their interest. Moreover, we are the nation that has endured just too many decades of John Madden's Maddenisms ("they are down 31 to 18, so their strategy now should just be to score two touchdowns", "the only way the Cowboys are gonna win this one is to score more points than the Giants", etc.) to be worn down now by any kind of persistent intellectual assault. So how do you get past an 800lb gorilla? Simple: offer it some bananas.
Posted by dag at October 31, 2006 8:17 AM