Economists are on the frontline to help the world fight climate change

Omar Al-Ubaydli
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Winning the fight against climate change will require a lot of technical ingenuity, but it will also need humans to change their behavior. The expertise that economists’ have developed in analyzing human decision-making can play an important role in formulating the right policies. What doesn’t help is demagogues falsely laying the blame for climate change at economists’ feet.

When there is a big problem – and let’s face it, climate change is a big one – everyone loves a good witch hunt. Few actions are as cathartic as singling out a group that looks or thinks differently to you as being responsible, especially because that helps you perpetuate the self-lie that you are a good person who did everything in their power, and who was merely thwarted by the witch’s evil.

A leading western newspaper played this game last week in its coverage of a talk by Professor Nicholas Stern marking the 15th anniversary of the 2006 publication of the Stern review, which was a synthesis of the climate crisis. Stern’s talk reflected a paper that he was publishing in the leading economics periodical, The Economic Journal, reflecting on what had happened since 2006, and on what to do going forward. The newspaper chose the headline: “Climate crisis: economists ‘grossly undervalue young lives’, warns Stern” and followed it with a subtitle that intimated that we are in this mess due to the failures of economists.

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As it happens, Stern’s paper is – as one would expect from such an accomplished economist – a very balanced and informative analysis of where we stand. It contains plenty of constructive criticisms for economists, but the tone is very much about how economists can better contribute to finding a solution.

Climate change is fueling heat waves, flooding, drought and nastier tropical cyclones. (File photo: AP)
Climate change is fueling heat waves, flooding, drought and nastier tropical cyclones. (File photo: AP)

The fundamental reason for human-induced climate change is that we all like to consume things that hurt the environment, whether its gourmet burgers or transatlantic flights. Capitalism and the economists extolling it didn’t turn people into monsters – history clearly shows that humans were more than capable of behaving immorally prior to the industrial revolution. Capitalism allowed people to raise their living standards to unprecedented levels, while maintaining the same indifference to the environment they had when they were poorer.

Economists are very good at analyzing human behavior, which represents a critical step in devising effective solutions. For example, a paper authored by Dr. Greer Gosnell (Payne Institute, USA) and her colleagues demonstrated how simple and cost-free adjustments to the way in which airline captains are monitored could generate considerable reductions in CO2 emissions, while also saving the airline money, meaning simultaneously higher profits and greener outcomes. The methods used in the study were unique to modern economics, and they build on over a century of contributions by the profession to addressing environmental problems.

Professor Stern knows this, hence his article’s measured tone, but since economics is a science, there is always room for improvement, and Professor Stern seized the opportunity to point out some persistent errors made by the profession that could be easily addressed.

Economists do not in fact wield as much influence on public policy as people imagine. Some of the policies that almost all economists agree on, such as the lunacy of rent controls, the counterproductive nature of tariffs, and the need to responsibly manage public debts, are totally ignored by policymakers seeking quick wins from an economically illiterate electorate.

In contrast, malevolent politicians often cherry pick self-serving economic policies, resulting in economists being painted with the same broad brush.

The biggest barrier to defeating climate change continues to be the fact that people don’t want to change their own behavior – but they are very keen on other people changing theirs. Intelligently designed policies can address this problem, and economists are specially trained to develop these interventions and to demonstrate their effectiveness rigorously.

However, their jobs will be considerably harder if people are fixated on blaming a bogeyman – economists or otherwise – and continue to dodge responsibility for their own actions. But then economists have an entire theory for that, too.

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