The late Martin Weitzman had his doubts about Lord Stern's famous model of the cost of climate change, because it relied on :
a formal aggregative model that relies for its conclusions primarily upon imposing a very low discount rate. Concerning this discount-rate aspect, I am skeptical of the Review’s formal analysis, but this essay points out that we are actually a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged. So, fair enough: low, but there is indeed doubt about what should be used. Later on, after some analysis, there's I ultimately find such an extreme stance on the primacy of δ ≈ 0, η ≈ 1 unconvincing when super-strong policy advice is so dependent upon nonconventional assumptions that go so strongly against mainstream economics.A complaint reinforced by the failure of Naomi Oreskes and Lord Stern's latest polemic in the NYTimes to adress Wietzman's conclusion :
An IAM is essentially a model of economic growth with a controllable externality of endogenous greenhouse warming.
The Review uses an IAM called PAGE, on which some numbers have been crunched and some conclusions have been based, but the exact connection between PAGE and Stern’s conclusions is elusive, frustrating, and ultimately unsatisfactory for a professional economist who honestly wants to understand where the strong policy recommendations are coming from.
The analytical core of the Review is chapter 6 (“Economic Modelling of Climate-Change Impacts”), which is loosely tied to PAGE. However, the rest of the book contains lots of stories and examples suggesting that difficult-to-quantify uncertainty about really bad climate extremes may actually be an important informal part of Stern’s overall case. Economists are justifiably suspicious when someone refuses to aggregate various probability-weighted scenarios into an overall cost–benefit assessment, which at least can serve as a conversation starter. (How else are we to evaluate overall policy advice, such as what Stern recommends to us, except in the context of some overall model where assumptions and specifications are spelled out clearly?)
As economic analysis, the Stern Review dwells in a nonscientific state of limbo where it uses an IAM but simultaneously refuses to commit to it or to any other consistent overarching framework within which its radical recommendations might be deconstructed and judged by others.So, as faithful spear carriers in the grand old Sixth Extinction Opry, Gore telethon producer Oreskes, and the Greatest living Vegan Economist continue to compond worst case econometric assumptions with worst case sociology.
