Climate economics is a half century old. Its founder, William Nordhaus, has been recognized with the Nobel Prize in Economics. A small army of climate economists have followed in Nordhaus' footsteps in modeling climate change and how to fix it. In the process, they've inadvertently started a climate war, pitting the young against the old and climate-endangered countries against carbon-producing countries. The climate war reflects reliance on bad economics -- even worse, the subtle substitution of religion for economics.
As with all professions, one criticizes one's professional brethren at a risk. But it's a risk well worth taking. Climate change is not down the road or around the corner. It's here. The evidence, for those who respect evidence, is unmistakable. The only question is how to stop it.
What's required is a rethink of climate economics. We can't continue to invoke divine intervention as the solution. Instead, we need to model climate change for what it is -- the world's worst negative externality, which, like all negative externalities, reflects self interest.
Fortunately, economics has been known for a century how to fix externalities produced by selfish people. The answer is to use the gains from fixing the externality to bribe those creating the externality to do the right thing. This may sound immoral. But economics isn't about morality. Its prescription is clear -- share the gains from ending climate change. This will leave its victims far better off than where they are currently being dumped.
How can climate winners bribe climate losers? The answer's simple, as you'll learn. You'll also hear about the state-of-the-art climate modeling my co-authors and I are doing that produces what we need -- a carbon mitigation policy that produces a win win -- making everyone everywhere across all time better off. Coming up with this solution is a story in itself involving the consistent solution of roughly 3 million equations.
Economic Matters - The podcast is hosted by Laurence Kotlikoff and moderated by Alex Kotlikoff.
Laurence Kotlikoff is a Boston University Economist, a NY Times Best Selling Author, President of maxifi.com, and Author of Money Magic.
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Larry's Economic Commentary --- How Economists Started and Can Stop their Climate War