Lomberg and a disagreement about uncertainty

There’s a persuasive follow-on to the recent conference on uncertainty, modelling and decision-making in today’s Nature, in the form of a sympathetic review of Bjorn Lomberg’s latest book by Martin Weitzman.

Sympathetic because Lomborg now agrees that climate change is an important problem. As his title – Smart Solutions to Climate Change: Comparing Costs and Benefits – indicates, he thinks we can decide what to do by economic analysis. There Weitzman parts company with him. The review is behind a paywall, but the basic problem, according to Weitzman is that the approach taken ignores a whole range of uncertainties, and assumes that both costs and benefits of various schemes, and of clinate change itself, can be reckoned fairly accurately.

On the contrary, he suggests, the ranges are broad in all cases. As he says:

in reality, there is no such thing as hitting a target of 2 °C, 4 °C or any other temperature change. Everything is probabilistic.

The economics of climate change is mainly about decision-making under extreme uncertainty. Climate-change analysis is hampered by many unknowns in the science combined with an inability to evaluate meaningfully the welfare losses from increased global temperatures. The values of key future parameters — global and regional average temperatures, damages to the world’s economy and ecology, welfare, costs of unproven technologies and so forth — cannot be known now. Instead, they must be treated as random variables, yet to be drawn from some probability distribution that itself is uncertain.

And at one end of the range tend toward what we used to call (maybe still do) zero-infinity risks – changes with a small, but not vanishingly small, chance of being realised but which would be catastrophic. The right way to deal with these, Weitzman says is an insurance-based approach to risk. The right question is then how much we are prepared to spend as a premium. As he puts it:

Climate policy is better viewed as buying insurance for the planet against extreme outcomes than as the solution to a multivariate problem over which we have control.

This of course assumes we are actually having a discussion about real risks, stemming from our scientific understanding of the problem, which is not easy to sustain, especially in the USA at the moment. But as well as offering points contra Lomborg it also helps keep in perspective the need for better, clearer climate projections, produced by faster computers. It is great that the US National Oceanic and Atmospheric Administration is going to get its Cray upgraded soon to petaflop levels, for example, but it won’t change the essential risk-based decision problem.

 

 

 

 

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