Economics isn't rational about our finite planet

Stephen Barlow today on Twitter: Leaders "have no grasp of physical and ecological reality".

(I try not to link to Twitter anymore, but here's a link to Barlow's photos on Flickr.)

Barlow says: Prof. Steve Keen has critiqued (PDF) a "massively influential" model by William Nordhaus called the DICE model. Though it tries to predict how climate will impact the economy, it's "scientifically ignorant to a ridiculous degree," Barlow sums up. Keen separately explained that, at climate tipping points that would wreck the planet, the DICE model shows rather small impacts to GDP. (No, that does not make sense. We won't have GDP if we don't have a planet.)

"Essentially, economics developed, to study a type of economy which developed during the colonial period, and especially after the industrial revolution, which had produced continuous economic and financial growth," Barlow says. However, he adds: "this economic model was based on sawing off the branch on which our civilization was perched."

Barlow explains: Scientists spot flaws in models when they know the model's suggested results just don't occur in reality. But economists don't have that reality check. Any "rational" or "responsible academic field" would examine the evidence and change based on what it learns. If you believe in "infinite growth, in a finite world," as classical economics does, you're in a "deranged cult," Barlow says.

"Robinson tells me he has been invited to meetings about the future with central bankers and defence department officials, as well as associations of hedge fund managers, although he can’t share their names. 'They don’t want to shake the confidence of the world by telling [everyone] that they’ve been consulting with a crazy science-fiction writer...They thought it might shake the stock markets.'

His key message is that 'in a practical sense...if the world fails, business fails.' Insurers, for example, could find it impossible to hike premiums enough to finance the global cost of payouts linked to natural disasters and rising temperatures. 'The backstop [provided by the insurance sector to the world] will fail,' is what Robinson told staff at Swiss Re, one of the world’s biggest providers of cover for insurance groups."

—Writer Kim Stanley Robinson: ‘If the world fails, business fails’ The cult sci-fi author on Mars, Musk — and how speculative fiction can offer real-life solutions to the climate crisis. Kenza Bryan. November 17, 2023.

On April 17, 2024, Nobel Prize-winning economist Esther Duflo proposed a climate tax at the Group of 20 summit in Washington D.C.

"This is the first time that a climate tax has been suggested on a world stage. The proposal comes amid new research that estimates that rising temperatures will cost $38 trillion per year in damages to agriculture, labor productivity, and infrastructure. The vast majority of that damage has been caused by the emissions of rich nations, including the U.S. and European countries.

Duflo estimates that the U.S. and Europe alone inflict more than $500 billion per year in climate damages on low- and middle-income countries. That number only encompasses “mortality costs,” or the estimated cost of the number of lives lost. By 2100, experts estimate that global warming will kill 6 million people per year—all in low and middle income countries.

* * *

The climate taxes would not replace the United Nations’ loss and damage fund, which will help poorer countries recover from climate disasters. But asking rich countries to voluntarily send money to poor countries has not historically worked, said Duflo. As of this year, the loss and damage fund has just over $700 million, one-thousandth of the amount needed, according to Duflo.

Instead, Duflo proposes increasing an existing international tax on multinational corporations from 15 percent to 20 percent. There would also be a 2 percent wealth tax on the world’s top 3,000 billionaires. The two climate taxes combined could raise up to $400 billion per year for a 'loss, damage, and adaptation fund.'"

— Nobel Prize-winning economist calls for climate tax on billionaires: And she called for the money to be sent directly to the world's most climate-vulnerable people. Arielle Samuelson, HEATED, April 24, 2024

Economic damage from climate change six times worse than thought – report: A 1C increase in global temperature leads to a 12% decline in world gross domestic product, researchers have found. Oliver Milman, The Guardian, 17 May 2024

My article: "Climate change is expensive, but that's not the point". It's a 10-minute read on Medium. Paid subscribers can read it.