ECON 102

Climate change and the economy.

 

https://www.washingtonpost.com/opinions/robert-rubin-how-ignoring-climate-change-could-sink-the-us-economy/2014/07/24/b7b4c00c-0df6-11e4-8341-b8072b1e7348_story.html

 

 

Comments

[Yo Han(John) Ahn]

Robert E. Rubin, co-chairman of the Council on Foreign Relations, argues for the importance of considering future climate-change risks when discussing economic policy, fiscal and business decisions. Although there are disparities in beliefs among the science community, there is a consensus that climate change is a serious threat. Yet, Rubin acknowledges the potential repercussions of a future threat into a present one, identifying climate change as a danger today. He then discusses the debate about climate change in the economy – a trade-off between environmental protection and economic prosperity. In microeconomics we learned how governments often implement incentives to behave in a certain way. Considering that U.S. economy faces enormous risks from unmitigated climate change, I'm curious as to what incentives the government has placed to motivate the private sector to prevent emission of greenhouse gases and pollutants? And in what ways have these incentives affected business/economic growth? Is caring for our environment truly a trade-off from economic prosperity? Or are there ways to protect both our environment and our economy?

[plus.google.com/112908212571325157694]

In this article, Robert E. Rubin touches on exactly what we finished talking about in class. Negative externalities like pollution, global warming, etc... are part of a function of income. If negative externalities continue to grow, then the growth of the economy and the production of an economy will actually decrease. In the model of the aggregate production function, global warming would actually cause a downward shift in the function, lowering income. It's interesting that Rubin also relates negative externalities to man capital as well. In class we saw how human capital, negative externalities, natural resources, and technology were all a function of income, but according to the article, it seems that human capital is also a function of negative externalities. This being because as temperatures rise, some people will not be able to work at certain times of the day, which will further lower productivity. I also found it interesting that Rubin proposed that investors should be able to see how companies are affected by negative externalities. This information would most likely be bad and deter investors from investing, which would mean that money would either be spent on goods or saved in banks, not invested in firms. –Jack Miller

[Abigail Summerville]

"When it comes to the economy, much of the debate about climate change...is framed as a trade-off between environmental protection and economic prosperity." Instead, Robert Rubin says that people should be asking "what is the cost of inaction?" in response to climate change, which yields a greater cost than action. He lists three ways to "take action": the government should create policies protecting the environment, companies should disclose the affect climate change would have on their business in terms of assets and costs, and GDP should include externalities of the final goods and services produced, such as greenhouse gas emissions. I thought the third point was especially interesting and I'm curious to see if this new GDP idea will be adopted on a large scale. I think a fourth point should be to encourage individual investors to invest their money into R&D for environmentally-friendly technology and inventions, such as solar power, wind power, electrical cars, etc. Currently, most of the people who are being negatively affected by climate change are poor people who live on islands that are affected by rising sea levels, rural people who see changes in the ecosystem of the forest around them, and many more. The investors with all the money who live in New York City and other major cities around the world are not currently being affected by climate change, and thus see no need to start investing all their money into stopping it. However, their attitudes need to change because, as Rubin points out, climate change will have major economic costs in the future.

[Caroline Birdrow]

As a Poverty and Human Capability Studies minor, I found this article to be particularly relevant to some of the issues that I have been studying. In my poverty research seminar (capstone) course, we recently read “Environmental Justice” by Mohai, Pellow and Roberts. The authors review the history and debates of the topic of environment justice, which points to the idea that those who are racial minorities and those in poverty often experience more of the negative externalities of pollution, industrial activity, etc.. In class, we discussed the location of industrial facilities in low-income or traditionally black neighborhoods and whether or not the authors successfully address one possible counterargument. The counterargument would be that the location of these facilities spurs economic growth in those neighborhoods by employing the community members and, in general, increasing productivity. The authors did not respond to that claim in the paper, but my classmates and I shared ideas about the flaws in that manner of thinking. While the industrial facilities may increase short-term economic growth, in the long run they will be having extremely negative impacts on real people’s lives, impacts that will cost money to reverse, if at all possible (as Rubin’s article indicated). We also discussed the idea of allowing small, emerging economies to follow more lax environmental regulations, with the goal of growing the economy and only doing a small amount of harm in the meantime. Our conclusion, as Rubin appears to conclude as well, is that the costs of this eventually will outweigh the benefits and that the environment is very relevant in economic policy decisions of today and of the future. Now the question needs to be about how we can lift individuals out of poverty, preserve the dignity of racial and economic minorities, increase economic growth, and protect the environment.

[Julia Wilson]

I was surprised to learn in Robert Rubin’s article that climate change has previously and is still not completely considered a relevant variable when it comes to economic analysis. As Rubin says, the effort to reducing gas emissions and protecting the environment “is framed as a trade-off between environmental protection and economic prosperity…. [It] will impede economic growth, hurt business and hamper job creation.” However, perhaps rather than thinking of protecting the environment should be considered an investment for companies, rather than a trade-off or cost. Rubin makes a great point that our mentality is wrong. The choice we think we are making is inaccurate: “We do not face a choice between protecting our environment or protecting our economy. We face a choice between protecting our economy by protecting our environment.”

Additionally, I thought Rubin’s explanation of the negative feedback loop was really interesting. There isn’t a linear correlation between economic production and environment damage, but a positive exponential correlation: “[A]s climate change continues, the damage…. will increase on an upward-sloping curve, that could become catastrophically steep, because of negative feedback loops and other factors.” This is really alarming because this suggests a snowball effect that could greatly hurt economic health.

Finally, I think Rubin makes a great point when he says that “bad data leads to bad policy.” When it comes to statistics, it is so important to look for any lurking variable in the data. This is why I think Robert Rubin makes a great argument that climate change needs to be incorporated into our economic models.

[Davis Alliger]

The analysis done by Robert Rubin is extremely interesting, but also one sided. It is fair to assume that climate change is occurring, and although many will argue it isn't by human causes science shows that humans are responsible for most, if not all of the effects. Although Rubin does an excellent job of pointing out the many costs and negative effects of global warming he also ignores several positive ones. The first of which is the growth in jobs created as private property is threatened by rising water levels. Private and public property owners will naturally create many cost efficient ways to combat the rising water levels such as man made walls and ditches. Although these methods are costly for land owners it creates more jobs for many low skilled workers (who tend to have lowest employment levels) and in turn stimulate the economy. In addition as temperatures rise much of the areas closer to the poles become much more livable and growing seasons get longer. This makes crop production more efficient, and cheaper for consumers. Rubin ignores these and several other effects in his economic analysis of global warming. In my opinion the argument should not be whether global warming exists/ are humans causing it. The question is whether global warming has more positive or negative economic costs. In my opinion it has more negative economic costs and should be regulated and controlled, but I feel that many people ignore several important aspects of global warming.

[Jane Chiavelli]

This Washington Post article discusses how global warming, a negative externality, is a problem about which the U.S. economy should be more concerned. Rubin argues that climate change will have a negative impact on aspects of the economy such as damage from natural disasters and increasing temperatures, creating additional costs, forcing unemployment and causing a reduction of economic output.

Rubin states that a larger portion of government spending should be spent on limiting the effects of climate change. He goes further to say that in order to cover these costs, the government should cut spending on current aspects such as public investment in education. Based on our discussion in class, human capital is a critical component of long-run economic growth, and more specifically, production. If the government cuts investment in public education, the economy will suffer in the long-run as human capital decreases. On the other hand, if the government ignores climate change, it runs the risk of irreversible changes in the environment that could affect the lifestyles of individuals. Rubin is right that the U.S. needs to address the issue of climate change, but cutting spending to education will have an even greater negative effect on the economy as human capital, which has a positive relationship with education, increases production.

[Jack Boyce]

In Robert Rubin’s article “How ignoring climate change could sink the U.S. economy”, Rubin discusses the effects of the climate change and its causes are detrimental to the economy. Rubin writes about the public opinion of climate change, how 60% of people feel it is caused by human action, the effects of greenhouse gases on the environment and how that relates back to the economy. According to Rubin, there is a trade-off between the environment and its protection and business capabilities, as he states that reducing the use of fossil fuels would “impede” on production and hurt the U.S. economy. In my opinion, the climate change the world is going through is a part of the Earth’s natural cycle, but it is being sped up by the pollution people emit during their daily lives. The change to cleaner technology and reusable resources and energy source would be a benefit for society, but with the amount of pollution across the world, especially in China and India, the world may still be in trouble. Rubin has many valid points regarding the ramifications if this issue is left for a later time. The change in climate is going to affect the U.S. economy and people, especially producers and factory owners need to understand this and change their methods before it is too late.

[Caleigh Wells]

Robert Rubin’s article about climate change accurately addresses the problems associated with global warming and includes a spin regarding the lasting effects it would have on the economy. He states that nearly all scientists and about 60% of the population believe it is a problem, and today, eighteen months later, that number has probably only grown. His article is one of many that call on policy makers and American citizens to change the status quo in an attempt to save us from a greater problem in the future. However, there are a few missing pieces he did not include that pose a bigger threat than United States policy.

Rubin did not mention any country other than the United States, and did not consider climate change in terms of global policy. While the United States continues to make changes in policy and efforts to be more “green,” other countries value greater their ability to produce goods and services at a more economically efficient rate today. Climate change is a global issue, and reaching agreement on its importance is vital. However, considering how difficult it is to achieve proper bipartisanship in agreeing on policy in the United States, global plans are significantly more fragile. Rubin’s article, along with many others, is effective in inciting action among Americans, but now the energy would best be focused in inspiring other countries to the same level, so that the changes the United States is making can be made by others, and the effects it has on the planet can be more visible.

[Mary Hampton McNeal]

I read, “How Ignoring Climate Change Could Sink the U.S. Economy” earlier this week, and after rereading it today I appreciate Rubin’s proposal to require companies to include the externality of climate change in their financial reports even more. One of Rubin’s points that stuck out to me most in light of our recent conversations is his description of GDP as an inadequate measure of productivity. In class, we talked about how GDP only tells us the total goods and services produced domestically in an economy. Rubin says this is not a sufficient measure of output because it does not adjust for the externality of the pollution created while manufacturing those goods.

Although it would be extremely difficult to accurately project the future ramifications of current pollution, I agree with Rubin that companies should be required to attempt to factor in this negative externality. For investors to make informed decisions, they need to know how a given company’s assets are going to be affected by impending climate change. Even though it will be difficult to estimate, I think that a conversation should begin about adjusting our current financial reporting to reflect future environmental ramifications. As Rubin pointed out, insufficient data leads to insufficient macroeconomic policy.

[Jim Grant]

Robert E Rubin’s article on How ignoring climate change could sink the US economy offers a very interesting perspective on the repercussions of climate change. Often times when considering the impacts of global warming people focus on the environmental impacts and seek to prove the possibility and existence of negative feedback loops that could devastate an ecosystem. This article talks about the next step further that normally gets overlooked. It puts a quantifiable value on the losses for example the article states that, “between $48 billion and $68 billion worth of property in Louisiana and Florida is likely to be a risk of flooding because it will be below sea level.” And how Katrina and Sandy that were very possibly made worse by global warming have caused almost $200 billion in economic losses. It also mentions unexpected statistics about how increases in temperatures will make it impossible to work for extended periods of the year and could cause up to 65,000 heat related deaths a year. This statistics and observations tie into the idea that we talked about in class how economists look at situations in a different way than most people. An economist will look at these circumstances and analyze the extraneous conditions that occur as a result. The article was interesting and was thought provoking, it begs the question: How will politicians and other people change their decisions based off this knowledge if any change where to occur? Will there be radical changes or will things continue more or less the same like they have been?