A new crowdfunding campaign the Open Letter is under way to write a letter to the powers that be in the world as a full page ad in in the Wall Street Journal, demanding that they address climate change as a top priority. I spoke with one of the campaign’s founders, Mike Gintz, who said that economic arguments are integral to their message. Their demands for these powerful groups of people – world political leaders, news media and the wealthy – suggest ways that economic policy and the power of money can be used to curb the imminent effects of climate change. These include implementing a carbon tax and thinking more wisely about investment decisions.
But there is another more basic argument to be made; one that calls into question some basic assumptions about mainstream economic theory and the applicability of it to understanding our current crisis. As the authors point out, not addressing climate change is a choice between current profits and the well-being of future generations. In the dream world of mainstream economic theory, people take it into consideration future outcomes resulting from making economic decisions now, including the impact on future generations. This clearly isn’t happening when Florida has one of the highest levels of migration from other states while it is en route to entirely disappearing from our map if the polar ice caps keep melting. There is a cognitive dissonance between our decisions now and what the future holds for our children. Surely the people of the Florida don’t want their grandchildren to drown. (And this is to say nothing of the more severe hurricanes that are already happening now!) What is needed is an economic theory that acknowledges our inability to understand future costs, especially when they seem distant, even if they aren’t as distant as we think.
There is also some exciting economic research on climate change being done at the New School for Social Research and the Schwartz Center for Economic Policy Analysis (where Lady Economist headquarters is located) that does a better job of incorporating current costs and benefits to addressing climate change. What these brilliant colleagues of ours are discovering is that both current and future profits could be higher in a sustainable economy. So the pleas for immediate efforts to curb climate change from the Open Letter isn’t only moral, it is economic as well.