A Harvard Economist Calculates the Odds of Climate Catastrophe

Dr. Martin Weitzman is considered one of the world's top economists. He has degrees in Math, Physics, Statistics and Economics from Stanford and MIT, among others places, and is a Professor of Economics at Harvard. His area of expertise is Environmental Economics, and he says there’s a chance, roughly around 1%, that the temperature of the Earth will rise by 36 degrees fahrenheit in around 200 years.

In other words, there’s a small chance that global warming will lead to a mass extinction comparable to others that have happened before on Earth. For context, the "small chance" is 10,000 times more likely than the asteroid strike which wiped out the dinosaurs, a once in a hundred million year occurrence.

Dr. Weitzman is not an alarmist by any stretch of the imagination. Look at his paper -- On Modeling and Interpreting the Economics of Catastrophic Climate Change -- and you'll see for yourself. It's light reading only if you have an advanced degree in Economics or Statistics. He talks a lot about "fat-tailed probability distributions" and calculus. He also spells out the worst case in plainer English:

Because these hypothetical temperature changes would be geologically instantaneous, they would effectively destroy planet Earth as we know it.

The point of the paper is to explore an important question: given that the probability of catastrophic climate change might be about 1% in 200 years, what's the most rational way to place our bets?

To answer the question, he considers the economics of catastrophes and shows that cost-benefit analysis (CBA), a standard tool of analysis, doesn’t work well on the big picture of climate change.

CBA is used to help make complex decisions. It calculates total costs and benefits, and also applies appropriate discounts to account for the value of money invested over time.

Critics of action on global warming frequently say that proposals to reduce emissions are economically illiterate and that CBA should be used to make more informed decisions. In contrast, Weitzman says CBA analysis of climate action so far has made an important error of omission: it has simply ignored the possibility of catastrophic outcomes.

The reason? The climate science behind those scenarios is too uncertain. Everyone accepts the idea that once temperatures rise beyond a certain point, they can spiral out of control due to multiplier effects. But no one can model with any precision just when that would happen, and how quickly.

The tiny probabilities of nightmare impacts of climate change are all such crude ballpark estimates (and they would occur so far in the future) that there is a tendency in the literature to dismiss altogether these highly uncertain forecasts on the scientific grounds that they are much too speculative to be taken seriously.

Yet the inability to precisely quantify "feedback multipliers" means our estimate of climate impacts have a high risk of being far too low. We should not simply ignore the possibility of catastrophe. In contrast to those who fear that taking action might slow economic growth by 1 or 2 per cent, Weitzman says,

Spending money now to slow global warming should not be conceptualized primarily as being about optimal "consumption smoothing" so much as an issue about how much insurance to buy to offset the small chance of a ruinous catastrophe that is difficult to compensate by ordinary savings.

How much insurance to buy. It's a question every homeowner answers. In this case, the home in question is the planet.

Weitzman's thinking is similar to Pascal’s Wager, which others have used to frame the climate action debate. French mathematician Blaise Pascal concluded that even though God’s existence can’t be proven through reason, you should live as if He does because of the size of the risks and rewards involved. Eternity is a long time to spend in hell.
Likewise, if you bet that global warming is nothing to be worried about, and you're wrong, most of the species on Earth become extinct.

Part of what Professor Weitzman does in his paper is attempt to determine what the odds are on that bet. He starts with the temperatures increases projected in 22 peer-reviewed climate studies assessed by the Intergovernmental Panel on Climate Change (IPCC), and analyzes them statistically to arrive at a worst case scenario. He determines that there is a 1% chance of mean global temperature rising 18 degrees F. But that is not the end of the story. He then adds in the effect of "feedback multipliers."

The exact size and timing of these effects is the large uncertainty that other cost-benefit analyses have ignored. Weitzman gets a handle on the worst case: sometime in the medium future, say 200 years for the sake of argument, there is a 5% chance of an 18 degree F rise in temperature, and a 1% chance that it will be 36 degrees F. This is not a possibility that we can afford to entirely ignore.

Here’s another way to think of the risk: imagine astronomers have spotted a rock the size of Oregon way off in space and it’s headed our way. If it lands a direct hit on Earth, it will be one of those dinosaur-extinction-scale impacts but the chances are only 1% that it will. It will probably at least score a glancing blow and nick us up pretty badly, but then there are a few astronomers who think it will miss completely.

Should we start a worldwide effort to deflect it? Remember, there’s only a 1% chance that most life will be wiped out. We could wait a while and see it it turns aside, but the nature of the problem is that if we wait to be 100% sure, it will be too late. There’s also some debate about just how late is too late, but the earliest estimate is that we have about 7 years from now before something needs to designed, built and ready to launch.

What do you think, is it time to start working on this problem?

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