The appallingly bad neoclassical economics of climate change

Steve Keen

The following is the abstract of a paper by Prof Steve Keen [1] published online on 1st Sept 2020, which criticises the work of economist William Nordhaus:

“ Forecasts by economists of the economic damage from climate change have been notably sanguine, compared to warnings by scientists about damage to the biosphere.

“ This is because economists made their own predictions of damages, using three spurious methods: assuming that about 90% of GDP will be unaffected by climate change, because it happens indoors; using the relationship between temperature and GDP today as a proxy for the impact of global warming over time; and using surveys that diluted extreme warnings from scientists with optimistic expectations from economists.

“ Nordhaus has misrepresented the scientific literature to justify his using a smooth function for describing the damage to GDP from climate change. Correcting for these errors makes it feasible that the economic damages

from climate change may be at least an order of magnitude worse than forecast by economists, and may be so great as to threaten the survival of human civilization. “

1. https://www.tandfonline.com/doi/full/10.1080/14747731.2020.1807856

Further comments from Dr Geoff Davies (ANU) on ERA’s Facebook Discussion page (Sept 5, 2020):

Economist Steve Keen has just challenged the utter nonsense that passes for assessing the economic effects of global warming.

Neoclassical economics (the globally dominant form) is already appallingly bad, so this is doubly appalling, about as low as you can go, in terms of intellectual credibility and integrity. And of course, a principal author of the non- sense is the faux-Nobel prize winner, William Nordhaus. They give each other prizes for this garbage.

It is the sort of nonsense governments and big corporations want to hear. It would be some of the most destructive intellectual rubbish in history.

To give you the flavour, these very clever, very ignorant people conclude that a four-degree global temperature rise would reduce the global GDP by between 4% and 7%.

But people who actually know what they are talking about now think that perhaps global industrial civilisation would have thoroughly collapsed by then, and also that the human population might be dropping rapidly.

Prof Steve Keen is an ERA patron.