Thursday, December 02, 2010

Economics and Climate Change

Greg Mankiw, whose textbook I adopted for Micro this semester, posted a link to a review by Yoram Bauman giving each major textbook a grade for how it deals with climate change. Mankiw aced it, while the previous textbook we used received the lowest score ("F").

I like that the Mankiw text clearly discusses Pigovian taxes. If there is an activity that causes a negative externality (like pollution) you can either tax it directly or use a permit (cap-and-trade) system that has the same effect--raising the price and reducing the quantity of the activity and its externality. Both are market-based approaches and are more palatable than government decree. Mankiw's book illustrates how both work very simply and clearly.

In discussing a tax on gasoline, which is a Mankiw staple, Mankiw writes:
"the burning of fossil fuels such as gasoline is widely believed to be the cause of global
warming. Experts disagree about how dangerous this threat is, but there is no doubt that the gas tax reduces the threat by reducing the use of gasoline."

It's a factual statement and pretty even-handed. You don't need to believe climate change is real or that pollution is a problem to study how the government can best correct negative externalities.
The text we formerly used (Gwartney) includes a special topics chapter on environmental issues and the role of government. It states:
“[T]he earth has experienced both warming and cooling trends in the past,
and the current warming trend may well be unrelated to the emissions of carbon dioxide and other greenhouse gases into the atmosphere.”

Note the difference between that and the "widely believed" phrase from Mankiw. Bauman points out that:

This statement is not only out of line with the 2007 IPCC report, it’s even out of step with the conservative Cato Institute, which says in its 2009 policymakers handbook that “[g]lobal warming is indeed real, and human activity has been a contributor since 1975.”

Which is why Bauman gives the Gwartney text an F. This is a pretty clear example of a very subtle political slant. The Gwartney text is clearly more conservative, but I think the Mankiw text is far more useful for students to understand real life. If they graduate from a Principles class and don't understand the logic/method behind a major (but very straightforward) piece of economic legislation being debated by Congress, then that's problematic to me.

In the supplemental text I have adopted, North & Smietana's Good Intentions (my review), there is a chapter dealing with the environment and climate change. I utilize a message board for students to discuss issues related to the book. I asked the following discussion question related to that chapter (copied from a study guide accompanying the book):
What do you think keeps many Christians from being involved in the issue of global climate change?

One student wrote the following answer. It's anecdotal at best, but there were enough answers similar enough to it that I wonder if it's not a common thought for sophomore-level students here:
"I'm wondering if this climate change thing is talking about 'global warming' because it was already proven that that doesn't really exist & it was just a political scam. It seems like it is kind of just something people laugh at now."

I think this example also illustrates the stark difference between living in a"red" state (or "red" part of a "purple" state) and living in a blue state or more urban setting. Over 95% of our students are from MO, AR, OK, and KS. Conservatives like Ross Douthat writing for the NY Times and the Cato Institute in D.C. assume climate change to be real and man-made. They can't comprehend that a part of the educated populace doesn't assume that. Neither can Yoram Bauman, apparently. In any case, I'm pleased with my choice of textbooks.


Yoram Bauman said...

I like what you wrote, but believe me when I say that I encounter plenty of people (even in liberal Seattle) who are skeptics about climate change. Trying to get them to have an open mind is one of my jobs... and I also try to keep my own mind open too! (Most notably, climate scientists have predicted that global temperatures will continue to increase by about 0.2 C per decade, so if that doesn't happen then I'll have to re-evaluate. But so far they're right on target.)


JDTapp said...

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