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The Economic Case For Greta Thunberg

A young “Climate Warrior” sails into New York with a powerful message.

Christopher Columbus in 1492 found some evidence supporting the theory that the Earth is actually round. (Pythagoras “a few years prior” delivered the theory and the testable hypothesis.)

This week another European is crossing the Atlantic by sailboat in order to draw attention to the fact (it’s no longer a theory) that humans are changing the climate. She will sail into New York tomorrow. Her name is Greta Thunberg. She is a 16 year old Swedish woman, who will likely speak at the UN climate summit in early September.

The reporting on her efforts in the US press have been scant, so here is roughly what she has done so far. She started a movement called “school strike for climate”, where she skipped school on Fridays to protest outside the Swedish parliament in favor of action on climate change. This has led to a widespread movement called “Climate Fridays”. On May 24th of this year 1.4 million students in 125 countries followed her example. This drew a lot of attention and she has given a TEDx talk, spoken at the 24th UN Climate Summit in Poland, The World Economic Forum in Davos, etc.

Her speeches are calls to action. One of her most widely cited quotes is that, “I don’t want you to be hopeful. I want you to panic. I want you to feel the fear I feel every day. And then I want you to act. I want you to act as you would in a crisis. I want you to act as if the house was on fire—because it is.” She has also cited a number of the recent findings by the Intergovernmental Panel on Climate Change (IPCC), backing up her call for urgent action.

Looking at my Twitter feed, there are many snarky reactions by reporters, a bunch of snarkier economists and other social scientists belittling her efforts. The arguments usually go something like this:

Kids should stay in school and learn and then when they are well educated effect change. Awesome. We and the generations prior to us did that and have you looked at the state of the world around us?

She is creating an unjustified degree of panic. The house is not on fire. We have plenty of time to fix the climate change problem. Read an IPCC report or two. If you don’t like reading on a screen, I’ll send you a signed paper copy. We do not have much time left to act.

She claims that we know what it takes to fix the problem. Well, we sort of do. Some mix of carbon pricing and (deep breath in) technological and possibly input standards will do the trick, or at least get us well on our way.

Her sailboat trip is a media gimmick that is actually more carbon intensive than if she had flown in. That is not the point. She is not arguing that everyone should switch to sailing across the Atlantic, but rather make us think about whether trips are necessary and, if they are, to take the least carbon intensive mode.

Finally, there may be a media firm or a green technology firm behind her campaign. Well, that is just outrageous! Fossil fuel companies don’t do that at all, right? They do not hire lobbyists, advertising firms and plain old bribes to get their way! Come on. Let’s not be ridiculous. Should we require that all kid activists fund their campaigns from money they earn from their lemonade stands, while fossil fuel companies get to employ their generous government sponsored subsidies and tax break money?

Ok. Stop ranting Max. What about the economic case for Ms. Thunberg’s campaign that the title of this blog post promised. I think there are three straightforward arguments that are pretty much in any decent economics textbook.

  • In order to fix market failures from negative externalities, one can employ our favorite pricing strategies (like a tax or cap and trade), and emissions standards (which limits the amount of pollution) and/or use something called moral suasion. Moral suasion is essentially what your grandparents have taught you and is often called “doing the right thing”. Ms. Thunberg is making a strong case in support of the point that we are failing her and future generations and that this is not consistent with the values we, supposedly, have regardless of faith. She reminds us of this very effectively and politicians across the world have taken notice.
  • In economics the welfare of future generations is usually captured by a single number – the discount rate. In our super nerdy models, we assume that society exists into infinity and that individuals in each year get welfare from being alive and consuming goods and services. We discount (that is, put less weight on) the well-being of future consumption – and hence generations – by choosing that discount rate. The higher the rate, the less weight is placed on your great grandchildren. There is a battle raging with the econ equivalent of a folding chair match between “The Rock” and “Hulk Hogan” about how to do this right. Greta Thunberg does not have a favorite discount rate or method, but lends a face to this parameter. The future is a lot less personable when it is expressed in a Greek letter, compared to the face representing future generations. How much weight we place on the future in practice may depend greatly on how important politicians feel the future is.
  • Greta Thunberg may well be an important focal point in the problem of solving the climate dilemma. When people are asked about the issues that concern them, the environment often comes out at the very end of a top ten list. Her visibility achieves two things in my view. First, it draws attention to the climate problem, as the media campaign she has started is first rate. Second, solving the climate problem has suffered historically from a lack of coordination as countries have had a really hard time agreeing on what we will really do to address this challenge. Rallying behind Ms. Thunberg’s call for action at the UN in a few weeks may just do the trick – especially if the youth of the world are behind her.

It is easy to belittle others. It is easy to raise your nose and argue that Ms. Thunberg does not understand the subtleties of carbon pricing (neither do most economists, I would argue). But she has never claimed to be a climate scientist or economist. She is standing on top of a very large mountain of science and telling us to pay attention to this issue. The house is on fire. If you don’t believe me, I leave you with the picture below.

 

 

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Auffhammer, Maximilian. “The Economic Case For Greta Thunberg”, Energy Institute Blog, UC Berkeley, August 26, 2019, https://energyathaas.wordpress.com/2019/08/26/the-economic-case-for-greta-thunberg/

 

 

Maximilian Auffhammer View All

Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.

27 thoughts on “The Economic Case For Greta Thunberg Leave a comment

  1. Great to hear some support for Greta Thunberg, thanks. The greatest ‘capital’ we have is the Earth. Risk is always part of any financial instrument. It needs to get realistic, as noted by others above. Central banks have a big role to play.

  2. It’s not going to change.

    No major government will take the drastic actions necessary.

    In the US, Republicans will consistently block any efforts. The moneyed interests that make up half the party are only concerned with short term profits. And the religious half of their base that keeps them in power only cares about abortion. The end of the world doesn’t concern them, that’s just biblical prophecy. They welcome it.

    In other countries, it’s other groups keeping things from happening.

    It’ll happen after our lifetimes, but humanity will die out. The end.

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