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55 comments on Two small bits on cars and global warming

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dinaz on April 6, 2006 - 8:11am Permalink | Subthread | Parent | Comments top
Perhaps it is better to consider that cost/benefit analysis related to climate change can occur at different scales. I think it is self evident that macro scale estimates as to the economic impacts of climate warming are impractical. Any figure cited by any group will invariably be skewed by the mandate of the group. But a choice between one technology or system and another can very easily be analysed for cost benefit, with consideration for effects externalised by classical economics. That is not to say that the valuation of the externalities will be accurate, but this does not mean that such valuation is useless. Indeed a major part of socioeconomically responding to climate change is devising new means of previously externalised costs. Measurement of economic flows is always developing and revising previous metrics. They are persistently imperfect but somehow, persistently practical. Why then should valuation of environmental and social impacts be rejected outright? IMHO it deserves a fair shot at development and integration into existing economic theory.
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Don Sailorman on April 6, 2006 - 9:41am Permalink | Subthread | Parent | Comments top
Speaking as an economist, I am a big fan of economic analysis--where it can be applied appropriately.

By its nature, economic theory is relatively well equipped to deal with incremental change, changes where parameters stay stable, functions that you can differentiate because they are continuous.

But in regard to discontinuities and parameters that suddenly become highly variable, traditional economic analysis breaks down. For example, could you do a cost-benefit analysis to decide whether or not it was of economic benefit for the U.S. to fight in World War II? I don't think so.

Similarly, when dealing with "lumpy" problems, you are forced to discard the sophisticated arsenal of economic "weapons of mass optimization" and fly by the seat of your pants.

Having said all that, I do believe in the effectiveness of market prices to help us find good responses to problems of increasingly costly oil and also effective approaches to various envirnomental problems. No, the market will not "save" us, but intelligent laws that use market forces as an alternative to government command/bureaucracies can make a huge difference to deal with what is one of the biggest challenges humans have faced since the onset of the last ice age.

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55 comments on Two small bits on cars and global warming

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