“What Is Endangered: Climate or Freedom?”


The internet is rife with articles about climate modeling.   Many are technical and others are based on performance.    I can be described as a person skeptical about the ability of the AGW’s  General Circulation Models to accurately predict future global climate.  Suppose that the GCMs can accurately describe what effect burning fossil fuels would have on global climate.  Would the global community even care in 2100? Is it logical that you can extrapolate current conditions to those some 100 years hence accurately?    What about the Precautionary Principle?

This conjecture prompts me to repost an entry I made July 2008 titled :

Reviewing Vaclav Klaus’ “Blue Planet in Green Shackles

Vaclav Klaus, the President of the Czech Republic, is the author of “Blue Planet in Green Shackles”.   Klaus, an economist by training and profession before entering politics,  asks “What is Endangered: Climate or Freedom?”.   He makes the case, in his book, that our freedom is endangered by the radical environmentalists.  For many of you that read this blog,  science is your background and probably your major interest.  Yet, an economist like Klaus makes a powerful economic argument against the environmentalist’s plan to have the state control fossil fuel use.

I fear I will not do justice to his arguments, so I urge you to get a copy of the book.   This entry will only cover a few of his points, which I hope you will find thought provoking.

RESOURCES:

We are warned about running out of resources.   Thus the environmentalist want regulations in place to raise the prices and reduce consumption.  In his book, Klaus says there are  “natural resources” and there are “economic resources”.  Natural resources exist in nature and are independent of humans.  Quoting from the book:

“…(natural resources) are just potential resources and have no direct connection with the existing economy (for example, to the pharaohs of Egypt, oil was not a usable resource).  Potential resources may not be used, given existing prices and technologies”.

Klaus goes on to say that

“An economic resource, in contrast, is one that is used by mankind.”

He points out that environmentalists have a static view of the concept of resources, which end logically, in their minds, as catastrophes if the government does not step in and regulate them.  Klaus says:

“Moreover, the environmentalists usually do not trust humankind its freedom(except for their own).  The basis of their illiberal, statist thinking lies in the Malthusian disbelief in humankind (and in its technological progress) and, conversely, in the belief in themselves and in their own abilities.

Klaus comments about the failure of the government attempting to set prices rather that the market setting prices as follows:

“It brings back the well-known Lange-Lerner model, used by socialists to defend the possibility of the functioning of a non-market, communist (although they would say socialist) economy in the 1930’s.  Hayek resolutely rejected the model.  The price cannot be in any way “scientifically” calculated or estimated.  That we should never forget.”

Resources are really a function of the dynamics of price and technology.  He says the exhaustion of resources does not take place as a large scale phenomenon.  He uses an Indur Goklany paraphrase that goes,

“The stone age didn’t end because we ran out of stones,  the iron age because we ran out of iron, or the bronze age because we ran out of bronze

They ended, he states, because humans came up with something new, something better.

Quoting again

“They (the environmentalist) do not know that prices reflect a real scarcity (not a fictitious one) of diverse assets (goods and resources)—of those that are genuinely scarce–better than anything else (and most important, better than the speculations of the environmentalists).  Without scarcity, there can be no price.  They are probably also not aware that as a resource becomes more and more scarce (as it becomes “exhausted”, to use their terminology), the  price increases to a point where the demand drops until it basically equals zero.  Hence the resources are—in economic terms–paradoxically inexhaustible.”

THE INTERGENERATIONAL DISCOUNT RATE AND THE PRECAUTIONARY PRINCIPLE

Most of us have done calculations of economic merit of a course of action by discounting those future dollars based on inflation and/or other criteria.  If inflation is currently running at 3%/year and you want to know the value of a dollar next year, you would calculate that as following:  $1(1-inflation rate) = $1(1-.03)=$1(.97)= $0.97, or ninety-seven cents would be its discounted value.  If inflation continued at 3% out into the future, you would continue to discount your dollar by 3% for every year you were considering.

Klaus explains that economists handle the intergenerational values (a social discount rate) in much the same way.  Recently,  Tony Blair, then Prime Minister, had the “Stern Review on the Economics of Climate Change” prepared to consider these intergenerational issues.  A characteristic of the report was the very low intergenerational discount rate.    Nicholas Stern used, 1.4% which suggested that the future would not be very different from the past.  Based on the low discount rate it was very pessimistic.

Suppose that you lived in New York City in turn of the 20th century.  You looked at the streets,  full of horse draw carriages and wondered what the streets would look like if the population doubled and the horse drawn carriages doubled too.  Maybe it would be necessary to wear hip boots to navigate those PHd (piled higher and deeper), odoriferous streets in the future. Or, being an inventive type of person, you might have thought that the city should install big ditches at the sides of the street to collect the “stuff” every night so it could be taken away and disposed of.   Would you have known that in 20 years the automobile would replace the horse?

As a measure of the way things change consider this: Michael Crichton said that Teddy Roosevelt, a major environmental figure in 1900, would not have known the meaning of the following words:    Airport, Antenna, Antibiotic, Atomic Bomb, Computer, DVD, Ecosystem, Gene, Internet, Laser, Masseur, Microwaves, Neutron, Nuclear Energy, Penicillin, Radio, Tsunami, Video, & Virus.

That tells us something about how well we can peer into the future.  And technological discovery is accelerating. Klaus says:

“In any case, in the future , society clearly will be far richer than it is today.  Moreover, many of the problems we know today will likely no longer exist.  In other words, technological progress will make a radical difference.”

So what does Klaus and what do other economists think of the Stern discount rate.

“In  the February 2007 newsletter of the Center for Economics and Politics, the Czech economist Mojmir Hampl also criticizes the low discount rate in Stern’s model.  According to Hampl, Stern wants to ‘persuade us that future generations who will live tens to hundreds of years after us will evaluate the costs of global warming and the costs of its prevention in the same way as we do today, despite the fact that they will be much richer and much more technically advanced than we are and will perhaps be dealing with completely different issues than we do.’  He adds, ‘As if we did not already have enough theoretical and empirical evidence that the measurements of tomorrow (and especially of the more distant tomorrow) through today’s eyes always leads to predictions that would make our descendants laugh’”.

“The social discount rate is thus the key parameter that compares the significance of the well-being of future generations to that of present generations.  When it equals zero, we are looking at future generations in the same way we look at present ones, which is utterly absurd.”

Surveys of the social discount rate used by economists in different countries, arrived at an average value of 4.6%.   Stern’s work would have the future  (20 years out) only modestly different from that of today—-only 23% dissimilar.  The average discount rate of 4.6% would have the dissimilarity at 60%.

This logic argues strongly against the Precautionary Principle.  The environmentalists say that even if we don’t know the science of man-made global warming exactly,  we should ration carbon just in case—-as a precaution  (The precautionary principle).  Twenty years out the picture is likely to dramatically changed and doing anything as drastic as plans to severely restrict fossil fuel use is more likely to be more disastrous than any threat from global warming.

Roy Spenser is one of the leading scientists working in the field of climatology.  He comments on the Precautionary Principle in one of his recent contributions.  The following is from his blog:

http://www.weatherquestions.com/Roy-Spencer-on-global-warming.htm

“Why Shouldn’t We Act Now?
A Critique of “Most Terrifying Video You’ll Ever See”

“Many people believe that we should act now on global warming, as a sort of “insurance policy”, just in case it ends up being a serious threat. For instance, there has been quite a bit of buzz lately about a YouTube video in which an Oregon high school teacher, Greg Craven, uses logic to convince viewers that the only responsible course of action on global warming is to act as if it is manmade and catastrophic. In other words, the potential risk of doing nothing is so high that we must act, no matter what the science says.

Unfortunately, as in all exercises of logic (as well as of scientific investigation), your conclusions are only as good as your assumptions. The bad assumptions that Mr. Craven makes that end up invalidating his conclusions are these:

1. That there are actions we can take now that will greatly alleviate the global warming problem if it is manmade, and

2. That the cost of those actions to the world will, at worst, be only economic.

Both of these assumptions are false. Humanity’s need for energy is so vast that, until a new energy technology is developed, fossil fuels will continue to dominate our energy mix. The only way to substantially reduce the risk of catastrophic manmade warming in the near-term (the next 20-30 years) would be to bring the daily activities of mankind to a virtual standstill.

Using Mr. Craven’s logic, I could argue that people should stop eating because, no matter how small the risk, people can (and do) die from choking on food. Paraphrasing Mr. Craven, not eating is the only responsible course of action to prevent choking to death. The only problem with this, of course, is that we would all die of starvation if we quit eating.

While this is admittedly an extreme example, in the case of reducing mankind’s greenhouse gas emissions it is much closer to the truth than what Mr. Craven portrays. People tend to forget that every decision we make in life, whether we know it or not, involves weighing risks against benefits. Mr. Craven incorrectly assumes that the benefits of immediate action on global warming will outweigh the risks.”

TESTIMONY BEFORE THE US HOUSE OF REPRESENTATIVES

President Klaus experienced the deceptions and the total failure of Communism and he sees that being reborn as the new environmentalism.

The following is a part of the testimony that Klaus gave to the House of Representatives’ Committee on Energy and Commerce:

As someone who lived under Communism for most of my life, I feel obliged to say that the biggest threat to freedom, democracy, the market economy, and prosperity at the beginning of the 21st century is not Communism or its various softer versions.  Communism was replaced by the threat of ambitious environmentalism.  The ideology preaches Earth and nature, and under the slogans of their protection—similarly to the old Marxists–wants to replace the free and spontaneous evolution of mankind by a sort of central (now global) planning of the whole world.”

“The environmentalists consider their ideas and arguments to be an undisputable  truth and use sophisticated methods of media manipulation and {public relations} campaigns to exert pressure on policymakers to achieve their goals.  Their argument is based on the spreading of fear and panic by declaring the future of the world to be under serious threat.  In such an atmosphere, they continue pushing policymakers to adopt illiberal measures; impose arbitrary limits, regulations, prohibitions, and restrictions on everyday human activities; and make people subject to omnipotent bureaucratic decision making. To use the words of Friedrich Hayek, they try to stop free, spontaneous human action and replace it by their own, very doubtful human design.”

“The policymakers are pushed to follow this media-driven hysteria–based on speculative and hard evidence lacking theories–and to adopt enormously costly programs, which would waste scarce resources, in order to stop the probably unstoppable climate changes, caused not by humans behavior but by various exogenous and endogenous natural processes (such as fluctuation solar activity).”

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