Wednesday, September 9, 2009
Popular Opinion and Climate Change
To answer this question, I want to look back two or three years, to the near-top of the recent bubble. There were economists - not many, mind you - but there were some who knew what was happening. Noted experimentalist Vernon Smith has a footnote in his recent work, Rationality in Economics, dated August 2005 and noting an anomaly in the P/E ratio of rental properties as compared to homes owned. Popular opinion never picked up on these themes, however, and it took a catastrophe - the bursting of the bubble - for people to recognize the facts of the situation.
Most professional economists, stockbrokers, and others in the financial industry were severely underweighting the possibility of a catastrophe. Monte Carlo simulations, the most popular tool for financial planners in the past decade, have been shown to be inadequate in predicting catastrophe, and investment professionals are now trying to rework their simulations to more adequately reflect both the odds of catastrophe and the devastation it causes.
The reality of climate change, though, is that the literature is crystal clear: the probability of a catastrophe is high and the effects will be, frankly, catastrophic. My personal opinion is that most people are risk averse; we don't run stop signs, even late at night, you can buy insurance for anything - the evidence is all around us. So why isn't the narrative ringing?
I think part of the answer is in the presentation. Climate Progress is trying to argue using the net present value of climate change, and listing the impact in hundreds of trillions of dollars. To me, this is kind of an absurd exercise. That's a number that is simply beyond the comprehension of most human beings and it frankly makes the situation seem rather hopeless.
Climate Progress has in its archives an Introduction to Climate Economics, and this exercise probably would hold a lot more weight if economists weren't so popularly vilified right now. We are probably the group you least want to identify with if you want the public to take your opinion seriously, considering our overall failure to predict the events of the last couple of years. Claims about the net cost of adaptation and failure to adapt may or may not be true, but I personally don't find them compelling, and I gather that the average American would agree with me.
I'm not sure how else to present the information or how else to argue for action, but I am sure that simply throwing around dollar figures isn't going to get the job done.
Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty