Disagreement among social scientists means that many policy initiatives to tackle climate change threats remain economically contentious despite the consensus highlighted by President Obama when he tweeted ''Ninety-seven percent of scientists agree: ##climate change is real, man-made and dangerous''.
Research by Professor Mark Freeman and Dr Ben Groom, published in the June 2015 issue of the Economic Journal, reveals why it is so difficult for governments to combine conflicting views in a way that will allow for effective decision-making. They show that there are at least two possible methods of aggregating expert opinions – and these lead to very different policy conclusions. One places much higher weight on benefits that arise in the distant future than the other, depending on the motivation behind the responses.
Governments must decide how much to invest in a wide range of very long-term projects. These include schemes for reducing greenhouse gas emissions, enhancing energy security and infrastructure, and preserving biodiversity. When making these choices, policy-makers are effectively deciding how much we should sacrifice for the benefit of future generations. This is a highly complex issue and, perhaps unsurprisingly, there is strong disagreement between those who have thought deeply about it.
In 2001, Harvard professor Martin Weitzman published the results of a seminal survey that asked over 2,000 economists for their views on how society should value future climate change damage. The variety of responses was extraordinary, ranging from one individual who felt that for every year we wait, damages should be discounted by 27%, to others who replied that future costs and benefits should be given more weight than those occurring today.
The question then arises as to how to combine these different expert opinions in a way that allows for effective advice to government. That is the central issue addressed in the new study. The authors show that there are at least two valid methods of resolving this aggregation problem.
The first may be used when responses reflect each individual''s ethical position on intergenerational justice. The second should be applied when experts use forecasts of financial market interest rates, believing that these should influence governments'' investment decision-making. These conflicting approaches to social cost-benefit analysis effectively divide economists on this question, particularly in the heated aftermath of the publication of the ''Stern Review on the Economics of Climate Change''.
The central finding of the new study is that even when analysing the same underlying survey data, the two methods of aggregation justify very different policy responses. The first places high weight on the expected benefits to future generations. The estimated social cost of carbon that results from this framework is high – $22 per ton of carbon – thus providing a robust justification for following resource-intensive international agreements on climate change, such as the Copenhagen Accord and Kyoto Protocol.
The second would make governments place more weight on dealing with today''s social problems, with a low estimated social cost of carbon of under $8/ton. Determining the optimal level of investment to prevent climate change damage will therefore remain contentious until we have a clearer understanding of the weights that experts place on ''values'' and ''facts'' when responding to such surveys.
''Positively Gamma Discounting: Combining the Opinions of Experts on the Social Discount Rate'' by Mark Freeman and Ben Groom is published in the June 2015 issue of the Economic Journal. Mark Freeman is at Loughborough University. Ben Groom is at the London School of Economics.
