David Friedman on Global Warming and Externalities

The renowned economist David Friedman, author of Machinery Of Freedom, is currently on a European speaking tour. He is presenting three talks for three hosts on successive nights; I plan to attend all three (he’s been a hero of mine since I read the above book at University in the mid-1980s). The first talk was on ‘Global Warming’ and externalities.

David first talked about population growth and externalities associated with it, outlining the premise that although it has typically been thought to be a bad thing, due to the negative impacts brought by it, it also has positive impacts. As these positive impacts don’t often fit our mental model and preconceptions (prejudices) about population growth, we usual ignore them. His early economic work 40 years ago looked in detail at this issue and attempted to quantify the net positive and negative impacts. What he found was that most factors were impossible to quantify, or even sign (decide if they were positive or negative). This is hardly surprising given the complexity of the system and its variables; like forecasting weather and climate there are too many interacting variables that are themselves often unquantifiable (it’s worth reading James Gleick’s Chaos for more understanding on this).

So having established his premise that it is impossible to quantify the impacts involved in population growth, and therefore conclude whether it’s ‘good’ or ‘bad’, Friedman moved on to the main topic: global warming.

I am pleased to say that as someone with a science-based background (physics), David was more positive about the climate science research that many libertarians I know dispute. While he recognises that climate science does have a vested self-interest in provoking governments to spend more on research, he doesn’t seem to be in the Delingpolean camp that believes all climate scientists are Eco-socialists that want to resort to an imaginary idyllic agrarian economy of the Middle Ages. I disagree strongly with these tin-foil-hat-wearing conspiracy-theorists; maybe that’s because I come from a science-based background and am therefore more rational about this topic. Amusingly a couple of the said conspiracy-theorists were there and asked questions that indicated their prejudices; Friedman disappointed them by mostly not agreeing on their points.

David’s main points on global warming were:

  • Yes, the climate is warming, as climate scientists mainly agree;
  • Yes, one cause of this is carbon dioxide, though there are many causes (e.g. Water vapour) and not all are quantifiable in their impact;
  • Yes, many of these changes probably have anthropogenic causes;
  • Yes, there are many negative impacts of climate change, but there are many positive impacts which are often ignored in the calculations;
  • Yes, carbon taxes and carbon trading schemes can control some of the increase in carbon output, though there are many economic faults with these schemes that prevent them from working as planned.

One of the points David made will almost certainly have the Eco-warriors up in arms: that there are probably more positive impacts than negative impacts to a small increase (e.g. 3°C as IPCC suggests) in temperature over the next century. As he suggested the increase in habitable and productive arable land will almost certainly outweigh the land that becomes marginally less habitable or less productive for farming due to the distribution of land in the world. While this is obviously true I have a reservation about this. Due to chaotic fluctuations this transition may not be smooth: there could be catastrophic impacts to some areas, such as Bangladesh as he highlighted. His solution was to build dykes as successfully used in Holland starting over 2000 years ago (approximately 27% of the Netherlands is below sea level).

Whilst this may be difficult for poorer Bangladesh they do have a significant labour force so this isn’t insurmountable; also richer countries nearby may want to help fund this to prevent a considerable refugee problem. Another larger chaos-driven change that could occur due to a relatively minor rise in global temperatures is the movement of the Atlantic jet stream, which warms Western Europe.

There is a theory, yet unproven, that the ice melt from Greenland could alter the salinity of the North Atlantic sufficiently to move the jet stream south, thereby dramatically dropping the temperature in Europe and making much of the northern latitudes uninhabitable for all but the most hardy. The thought of hundreds of millions of relatively-wealthy Europeans becoming homeless in a short period would be catastrophic. Interestingly this scenario was proposed by influential science fiction author Stanley G. Weinbaum in his short story ‘Shifting Seas’ published in 1937; he rightly suggested it could provoke mass migrations and subsequent wars.

These issues were not answered during the session but do need to be included under the ‘low-risk/high-impact’ category that David referred to.

Sadly David did not have any magic solution to propose that would provide more effective controls over output pollutants, recognising that even in an anarcho-capitalist society that these externalities associated with public goods will always be problematic (e.g. due to free riders).

The session was video-recorded via the hosts, the Libertarian Alliance, and available to view here. Many of David’s works can be found on his website, including a downloadable copy of Machinery of Freedom.