Seminar Features Author of Book on Climate Economics

Economist Frank Ackerman of Tufts University discussed his recent book Can We Afford the Future? The Economics of a Warming World at a lunch seminar at the Frederick S. Pardee Center for the Study of the Longer-Range Future on April 28.

Approximately 35 people attended the talk, which was moderated by Prof. Kevin Gallagher, an economist in Boston University’s Department of International Relations and Pardee Center Research Fellow.

Ackerman said that the work of the Intergovernmental Planel on Climate Change (IPCC) has effectively ended the scientific debate about climate change, and he sought to explore the reasons why, having clear scientific evidience, policy makers and societies have failed to take action. He said conventional economic models that focus on cost-benefit analyses and that greatly discount present-day values of the future are one major reason for inactivity.

In his book, he tried to boil down complicated economic theory to four basic ideas and assumptions about why governments and societies should implement policies to address the issue of climate change. The four assumption are:

First, “your grandchildren’s lives are important.” He said the high discount rates that traditional economic models commonly apply to the future make it difficult to understand the true costs that the impacts of climate change — such as more extreme weather events, prolonged droughts, water shortages, etc. –  will impose on future generations.

Second, “We need to buy insurance for the planet.”  He discussed how insurance policies against house fires and premature death are targeted at extreme events that have less than one-half of one percent chance of occurring, yet most people have such insurance. The risks of the possible scenarios in the global climate change models occurring in many cases have much higher probability and so insurance —  or action to prevent those scenarios from happening — seems to be an appropriate response.

Third, “Climate damages are too valuable to have prices.” Conventional cost-benefit analyses require monetary values for comparing the costs and benefits. While the costs of the potential damage posed by climate change are relatively easy to determine, the benefits of taking action against climate change primarily involve saving human lives and nature’s ecosystems. It is impossible to  assign an economic values to human lives and nature, Ackerman said, adding “It is not good public policy to try” to value human life.  He  said that in the case of climate change, traditional cost-benefit analysis methods can’t be applied.

Fourth, “Some costs are better than others.” He said there is a trade-off between costs in terms of what you spend today versus the costs in terms of what other investments could be made with the money.  For example, prevention measures to avoid a future disaster — such as seawalls built in the Netherlands that are twice as high as the levees in New Orleans — cost more at the time of construction, which left less money available for other things.  But over time, those higher expenditures have prevented costly disasters by holding back floods in the Netherlands.  “Some costs are well worth paying,” Ackerman said.

Dr. Ackerman’s book is part of a series called “The New Economics” published by Zed Books and co-edited by Prof. Gallagher.