CCNet
Editor: Benny Peiser Faculty
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Climate
change and the conventional wisdom
BIEE
CONFERENCE 24 SEPTEMBER 2008: AFTER DINNER SPEECH
Colin
Robinson
Earlier this year, I was composing a lecture
about climate change policy and I looked at a book which I had not read for
years (and is hardly one of my favourites). In chapter 2 of my fifty year old
copy of John Kenneth Galbraith`s `The Affluent Society’ I found his definition
of `the conventional wisdom’, a term which he coined. It reminded me what a
powerful idea it is.
The
conventional wisdom
Galbraith defined the conventional wisdom as
`the name for the ideas which are esteemed at any time for their
acceptability’. He went on to point out that since exposition of the
conventional wisdom `has the approval of those to whom it is addressed’ it is
always in great demand, and `it follows that a very large part of our social
comment –and nearly all that is well regarded – is devoted at any time to
articulating the conventional wisdom’ which, he said, is regarded as `more or less identical with sound
scholarship.’
What present day idea most closely fits
Galbraith`s notion of something that is constantly repeated, is what people
want to hear, can generally be expounded without fear of contradiction and is
regarded as `sound scholarship’? It is, of course, the damaging climate change
hypothesis by which I mean the idea that the world faces damaging changes in
climate, as a consequence of human activities, and that the only way to avoid
the dire consequences is centralised action by governments and international
institutions.
The idea has been firmly implanted and the
media constantly reinforce it. Newspapers, radio, TV and blogs (Hayek`s second
hand dealers in ideas) attribute many of the changes they see in the natural
world to `climate change’ and they urge responses which involve changes in
lifestyles, for instance away from
activities once thought liberating (such
as air and motor travel) to a `simpler’ way of life. They tend to use weather
events to spread the message about climate change, pointing out that it is
drier, wetter, warmer or colder than it was in the recent past. Since recent
weather must always fall into one of those categories (unless it stays exactly
the same), there is no weather-related event that can refute the hypothesis
that the climate is changing. The more specific hypothesis – that the climate
is warming –might seem easier to refute. But I note that even a soggy summer,
which has left my drought-resistant plants looking distinctly worse for wear, is
still being attributed in some way to global warming.
The damaging climate change hypothesis has
acquired many of the trappings of a religion. It has priests who proclaim its
main message - `the science is settled’, a dismissive phrase intended to
reinforce the position of the hypothesis as a principal element in the
conventional wisdom of the day. And august bodies, such as the Royal Society,
condemn heretics – that means anyone who raises any questions about the
validity of the hypothesis. Its constant repetition makes its status appear, in
Galbraith`s word, `virtually impregnable’.
Doubts
about the damaging climate change hypothesis
In recent times, I have tried to examine the
hypothesis and, the more I look the more doubts I feel. Let me mention just one
or two of them.
1.
Is there a
warming trend? The so-called scientific consensus that the globe
is warming is relatively recent in origin. My confidence in it is not
increased by my recollection that, only
thirty years ago, there was a consensus that the globe was cooling. As an article
in Newsweek, 28 April 1975,said
`The central fact is that after three
quarters of a century of extraordinarily mild conditions, the earth`s climate
seems to be cooling down…Climatologists are pessimistic that political leaders
will take any action to compensate for the climatic change, or even to allay
its effects. They concede that some of the more spectacular solutions proposed
such as melting the arctic ice cap by covering it with black soot…might create
problems far greater than those they solve.’
The apparent warming tendency, which has
resulted in world temperatures now apparently being slightly higher (less than
half a degree centigrade) than they were a
century ago, is a consequence of two periods (of 20-25 years each) in
the 20th century when the earth seemed to warm. Working out the
effect of GHG emissions is a difficult problem in multivariate analysis but, on
the face of it, there seems to be no close correlation with (constantly rising)
GHG emissions.
2.
The basis
of climate modelling seems to me not to have received sufficient critical
attention. Modellers in this field – such as in the Stern review – use
models of the climate, about which there is considerable ignorance, and try to
integrate them with models of economic and social linkages about which there is
at least as much ignorance. They then draw conclusions about what may happen up
to two hundred years ahead on which they base proposals for government action.
The time horizons of these models are so far ahead that I find it surprising
that anyone treats them seriously. It is indeed, to use a phrase, a prime
example of `the pretence of knowledge’.
Modelling, in its place, is an essential part of economic analysis. But
I doubt whether long term climate/economic modelling can tell us anything
useful about the future. Indeed, it may well be misleading by making the future appear more certain than it is. By
definition, adaptive mechanisms cannot be built in to these models which means there
is almost certainly a tendency for them to exaggerate problems .
3.
Given the degree of uncertainty about the extent of
climate change in future – and even the
direction of change - it seems to me far
better to rely on matters of principle rather than on these false exercises
in quantification. The main issue of principle is that the absence of property
rights in the earth`s atmosphere means that it may be used as a free factor of
production, in effect a dump for wastes, unless some restraining action is
taken.
4.
Successful
action is, however, not straightforward. The standard prescription of the
conventional neo-classical economist is to place a price on apparently harmful emissions (such as carbon) either by
taxing them or by instituting a trading scheme. Compared with the alternative
of governments `picking winners’ among technologies and sources of supply,
putting a price on carbon is in principle a better approach. But there are some
significant problems in taking it.
a)
No government, so far as I am aware, is willing to
rely on it. No government is prepared to put a price on carbon and then accept whatever
renewable and nuclear programmes emerge and the results in terms of energy
efficiency. Governments all want to pick winners as well. The effects of taxing
or trading carbon then become uncertain.
b)
Governments do not have the information that would
be required to apply the `correct’ tax or the `correct’ allowances in a trading
scheme. When there is so much uncertainty about
how much the climate might change and in which direction, governments
will act in a fog of uncertainty and risk acting in the wrong direction.
c)
Even if the direction of any climate change were
clear, governments might not be reliable instruments. If, like me, you believe
that government is mainly about appearing
to be acting, you would predict lots of ringing declarations at summits but
a marked tendency to free ride when it comes to action. That is precisely what is happening in EU climate negotiations, in
attempts to reform the awful mess that is the ETS and in negotiations about a successor
to
Action in a state of uncertainty
So we are
faced with a situation of huge uncertainty, when we are not even sure about the
future direction of change. Markets may not work well because of the absence of
the relevant property rights. Governments don`t work well either because of all
their well-known imperfections and failures (which official reports like Stern
are not allowed to mention). What can be done?
Let me here
enter a plea for voluntary action. Most mainstream economists assume that
appropriate market institutions do not exist in the climate change case because
of the property rights problem I mentioned earlier, so that coercive
centralised action is required. But is that true? The natural environment appears to be a
public good for the reasons I have mentioned, but what if there is general
concern that it is becoming over-used? It is not necessarily irrational for
people to contribute to the provision of `public goods’, even though they know
they are supporting free riders, if the provision is regarded as sufficiently
important – that is, if they think the good will otherwise not be provided at
all.
If there is sufficient concern about
over-use of the environment, the effect will be as if it were
owned. Let us assume that a large part
of the population is very concerned about the world in which their children and
grandchildren will grow up. This seems to me a reasonable assumption, though
different from what is implicitly
assumed by many people who work in the climate change field who often display a
rather elitist and patronising attitude to their fellow citizens, as though
concern for future generations were purely their own preserve and must be
forced on to others.
If there is widespread concern by
individuals for future generations, one would expect that both consumers and
producers would act in ways they perceive would protect their successors. If,
rightly or wrongly, a significant part of the population is concerned that
there will be damaging global warming in the future unless something is done,
it will demand and will be supplied goods and services that are deemed `green’
(in the sense of reducing greenhouse emissions).
Already, we can see such reactions all
around us. Much marketing now revolves around `green’ claims by suppliers of
goods and services. No doubt some claims
are false and others are exaggerated, but there is no doubt that actions to
mitigate climate change and its effects are now regarded as potentially
profitable.
Consequently, a market reaction in favour of
`green’ goods and services is under way. If you regard the pursuit of profit as
a more certain mechanism for getting things done than action through the
political process, this market reaction is to be welcomed.
The `greening’ of consumer preferences will,
so long as it is the prevailing tendency,
lead to declining greenhouse gas emissions per unit of output, switching
of fuel choices away from high carbon-emitting sources and the related
investments in buildings, plant, equipment and vehicles that will provide the
greener products and services. These effects of voluntary action are very much
the same as those sought by proponents of centralised action. But they have a
surer prospect of success since they rely on the superior information and more
clearcut incentives that markets generally provide, compared with political and
bureaucratic processes.
Of course, would-be centralisers, including
almost all those who carry out research in the climate change field, do not
like the idea that market forces might be able to cope, albeit imperfectly and
haltingly, with the climate change `problem’. They distrust their fellow
citizens and, like all pressure groups (and they are one now) would like to see
their own views implemented through the medium of government. They characterise
the market forces route as a `do-nothing’ approach. It is certainly not that. It
relies on the reactions of millions of people and it is perfectly possible that
decentralised market forces resulting from the expression of people`s
preferences, can overcome the major obstacle to adjustment away from any global
environmental issues that may be emerging -
the absence of property rights in that global environment. The absence
of an owner of the global environment will cease to be a serious problem if a
large body of people in effect become substitute owners and therefore guardians
of the natural environment.
To summarise and conclude, it seems to me
that, in practice, if damaging man-made climate change is in prospect, the only
real hope of avoiding the damage is through market responses: the chances of
effective welfare-improving action by governments and international bodies seem
to me very low. A big advantage of relying on markets is their flexibility and
adaptability. Views about global warming
will change. It may appear a more serious issue than now, in which case markets
will enhance the profitability of `greenery’, so reacting in the `right’
direction. Or it may seem less serious, so that `greenery’ starts to go out of
fashion and the market again reacts in the right direction. Can we be so
confident that the big centralised programmes now being urged by the climate
change alarmists would show a similar degree of adaptability to changing
circumstances? They are all too likely to set communities on courses which are
very difficult to change as the views of climate scientists change.
So, putting it very simply, if the world is
in danger from climate change (one way or the other), the best hope of
salvation is action by the guilt-ridden middle classes. That category probably
describes most people in this room. So make a start by getting a rickshaw to
the station tomorrow!