Via Prometheus, I find a review of Stern by Nordhaus. First an aside: N is the first mainstream commentator I’ve seen to point out that the Great War on Terror was undertaken “with no discernible economic analysis”… as I’ve pointed out, both Lomborgs “Consensus” and Pielkes recent re-run have shied away from considering the economics of said War.
N points out what others have: that Sterns results are dramatically different from earlier economic models that use the same basic data and analytical structure. N does what S should have done: point out why this difference exists.
N appears to take the science in Stern at face value: There is little new science or economics here, but it provides many new syntheses of the extensive and rapidly growing literature. While not as balanced and ponderously reviewed as the reports of the Intergovernmental Panel on Climate Change (IPCC), it is much more current than the latest IPCC report, published in 2001.9 For those seriously interested in global warming, it is worth a few days’ study. I would take exception to this: the science appears somewhat questionable (Stoat and JEB passim) and is not obviously an improvement on the TAR. In fact N notices this later: “If we look inside the impact boxes, we find some strange things. The damage estimates are much higher than the standard estimates in the impact literature. This probably occurs because of assumptions that tilt up the damage curve: rapid economic growth forever, high economic damage estimates, high climatic impacts of GHG accumulation, catastrophic risks, adverse health impacts, yet higher sensitivity of the climate system, and an adjustment for inequality across countries.”
But N’s conclusion is that S using a social discount rate that is essentially zero (as Tim Worstall pointed out). And that The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today’s market place.
Which I think brings me back to my conclusion: that Stern won’t survive as a weapon to beat “skeptics” with. Or indeed anyone prepared to analyse it properly. So… what was the point? Just Politics? Perhaps.
[Update: from the comments, it looks like the issue of the discount rate is the one people want to talk about.
Eli R has something to say and points out that Stern “did not hide” his use of a low discount rate. I’m not saying he did. But what he doesn’t do is what N has done: point out what a huge difference this makes, and that it explains why he gets such a different answer. At the moment, without haveing gone through the details, I’m on Nordhaus’s side.
But perhaps rather more is: if Stern is going to do anyone any good, its going to have to convince the US and China and… so on. In which case a vigorous discussion of why GW should have very low discount rates is going to be needed. I don’t see that in the public sphere – W]
* A very clever way of proving Lord Stern wrong – Timmy at the ASI; using very-long-lease terms to try to measure the true discount rate people apply.