GUEST ESSAY
A price, but at what cost? by Spencer Glendon
When I was in graduate school, John Kenneth Galbraith gave a talk. Galbraith was a Professor Emeritus in the Economics Department, but in the crowded audience of curious people, I was the only person from the Economics Department. By this time Galbraith was considered both a has-been and “not really an economist” by mainstream economists. It was the mid-1990s and empiricism and mathematics were essential. Galbraith’s work hadn’t been mathematically complex or rigorous; he had sometimes advocated unorthodox policies including price controls; and he had worked in government during both the Depression and WWII and later was Ambassador to India. He had written mostly for the public and had undoubtedly been wrong about some things along the way. I didn’t know what I would learn at the talk, but I did know that he had always been kind to students and had a long life’s worth of experience. Plus it was free. His first five minutes were as vivid and astute an observation as I have ever heard, and they perfectly explained the state of economic conversations about climate change.
Galbraith moved to the podium and asked the audience to imagine a history book. He held up his long-fingered right hand as if holding a thick volume by its spine. “Think about the sections of a history book,” he said, running his left hand across the pages of the closed, imagined book. “Note that there are long, uneventful stretches of time that take up very few pages, while thick sections focus on very brief periods of time.” It was the long, uneventful stretches, he went on to argue, that
modern economics sought to explain. This advanced discipline was an exercise in explaining the smooth years and offered no advance warning or guidance for the times when the really important stuff happened.
Unknown to me at the time, 133 miles to the southwest of that room in Harvard Yard, an economist named William Nordhaus was in his office at Yale, working on models of how the economy would react to climate change. These models used rigorous data and modeling. They produced precise estimates. They were not written for the public but for academics and government. Nordhaus produced clear, smooth charts of the future as his models took all of the messiness out of this important topic. His papers clarified what Nordhaus described as the crucial choice of climate change: how much to pay for it. Over and over again, his answer was essentially, “not much because climate change isn’t really a big deal.” Here is the final paragraph his 1992 paper “Rolling the ‘Dice’: An Optimal Transition Path for Controlling Greenhouse Gases”: Even though there are differences among the cases studied here, the overall economic growth projected over the coming years swamps the projected impacts of climate change or of the policies to offset climate change. In these scenarios, future generations are likely to be worse off as a result of climate change, but they are still likely to be much better off than current generations. In looking at this graph, I was reminded of Tom Schelling’s remark a few years ago that the difference between a climate change and no-climate-change scenario
Spencer Glendon addresses a group of WHRC guests in Boston’s financial district in November 2018. would be thinner than the line drawn by a number 2 pencil to draw the curves. Thanks to the improved resolution of computer graphics, we can barely spot the difference! This fall William Nordhaus was awarded the Nobel Prize in Economics for his work. I don’t know if or how Galbraith will be remembered by posterity, but I have little doubt that Nordhaus will be studied for a long time to come, and that such study will find his work—and that of his climate economics collaborator, Thomas Schelling—to have been a leading cause of the dramatic, painful time that is approaching as our long, boring, not-much-happening-here period of economics comes to an end at the hands of climate change. The difference between the climate change scenario and the no-climate-change scenario will be much wider than a line drawn by a number 2 pencil. Woods Hole Research Center and the Nordhaus family have an oddly bookended relationship. In his 1975 paper, “Can We Control Carbon Winter 2019
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