William Nordhaus has been awarded the Nobel Prize for economics for his work on climate change and growth (which he shares with Paul Romer). In many quarters, this is being hailed as good news, because it recognizes the reality of climate change and integrates climate change into economics. In reality, this prize rewards exactly the kind of economic thinking that created climate change in the first place — namely, the emphasis on economic growth.
Nordhaus is an unrepentant advocate of economic growth. He doesn’t believe there are limits to economic growth and believes that incredible, fantastic economic growth will occur in the near future. This incredible growth will help us pay for measures to deal with climate change.
This is much worse than “too little, too late.” It is fundamentally in the wrong direction. Nordhaus has only the virtue of being not quite as wrong as, say, Donald Trump — who, like Nordhaus, believes that we will see fantastic economic growth in the near future.
In realistic terms, there is no way that we can deal with climate change by encouraging economic growth, not even the “right kind” of economic growth. Any meaningful climate change action will limit economic growth for decades. Liberals (or for that matter, conservatives, socialists, and anyone else) need to recognize this reality. Our wealth in agriculture and industry is overwhelmingly based on fossil fuels. We cannot “flip a switch” and make the economy renewable and sustainable overnight. The transition to a non-fossil economy, which we urgently need to make, will be difficult, expensive, and painful. And this does not even mention all the other converging ecological disasters of the 21st century: mass extinctions, groundwater depletion, soil erosion, peak oil, and all the rest.
If there was ever a chance for mainstream economics to address the problem of limits, it was after The Limits to Growth was published in 1972. A number of people made attempts to “debunk” the book or the “world modeling” ideas (based on Jay Forrester’s writings) on which The Limits to Growth was based. William Nordhaus led the charge. To be fair, there were some legitimate criticisms that could be made of world modeling, most notably that technology could counterbalance the decline in resources. But because of his reputation, Nordhaus set the tone for the subsequent “debate” — such as it was — with attacks against Forrester personally as well as unsubstantiated statements of disbelief. (See Ugo Bardi’s very useful book The Limits To Growth Revisited (Springer, 2011)). Forrester and The Limits to Growth authors were not invited to reply to criticisms of their ideas and both they and their theories were ostracized from discussion.
Nordhaus is a smart guy. He wrote a book on climate change, The Climate Casino (2013), which has some genuine insights. He discusses the dramatically escalating costs of delay, as well as the problems of international cooperation. But he also predicts fantastic growth in the economy for at least another century or two. According to Nordhaus, the average world per capita income (in inflation-adjusted dollars!) will be $55,000 in 2100, and $130,000 in 2200! By contrast, today it is less than $10,000 (chart on p. 80). Nordhaus then plans a climate strategy whereby this fabulous future economic growth will help pay for measures to address climate change.
To anyone who thinks that by the end of the century the average citizen of the world (or perhaps even of Chad or Somalia) will be better off in 2100 than the average American is today due to economic growth, there is an obvious response: this isn’t going to happen. Even with mountains of debt, widespread utilization of cheap labor, worsening climate, and ramped-up attacks on the environment, average Americans are no better off today than they were in 1980, as Daly and Farley’s discussion of “genuine progress indicators” shows (Ecological Economics, p. 233–234).
How does Nordhaus think that this ten-fold expansion of the economy is going to happen? On the face of it, if the economy increases by a factor of 10, resources and energy use will need to increase by a factor of 10, or perhaps (with hugely increased efficiency) an increase of a mere 3, 5, or 8 times over what we now use. Are we going to be burning 3, 5, 8, or 10 times the coal and oil that we now use? Or throw up huge quantities of solar panels and wind turbines?
Fortunately, economic assumptions are now being challenged not just by ecological economists, but by economics students themselves (Kate Raworth, Doughnut Economics, p. 3). The Nobel Prize committee should be looking in the direction of economists such as Herman Daly or Kate Raworth. We need to be precipitating a scientific revolution in economics and related disciplines, not entrenching the failed economics of the increasingly distant past.