"Jerry Kraus" <jkraus_1...@yahoo.com> wrote in message

news:1179850442.040023.82990@h2g2000hsg.googlegroups.com...

On May 22, 6:40 am, "Roger" <roge...@hotmail.com> wrote:

"Captain Compassion" <dar...@NOSPAMcharter.net> wrote in message

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DISCOUNTING LOGIC
National Post, 18 May 2007
http://www.canada.com/nationalpost/financialpost/comment/story.html?i...
Lawrence Solomon
Financial Post

If you're the type of person who sets aside money today for the
university education of your great-great-great grandchildren, even if
it means that you may not be able to afford university tuition for
your own children, you may think it sensible for society to invest now
in major measures to stop global warming.

If you're not this type -- and who in his right mind is -- you should
forget about Kyoto-like greenhouse-gas reduction targets and the crash
programs that would be required to meet them. Doing so would not only
be economically prudent, it would be -- by almost any measure -- the
ethical thing to do.

So argues celebrated economist William Nordhaus, author of
pathbreaking books and studies on global warming, and generally
considered the most authoritative economist in the climate change
field. His verdict on global warming alarmism, as exemplified by the
UK's Stern review, which demanded drastic measures now to avert
climate change calamity later: "Completely absurd."

As we all know, economists are the real experts on climate.

The Stern review, released last year to banner headlines, argues that
the cost of inaction greatly exceeds the cost of action. It has been
much criticized for its selective use of data -- Sir Nicholas Stern
piles one worst-case scenario upon another to arrive at his
fantastical costs, and Dr. Nordhaus is among those who note this
failing. In fact, Sir Nicholas uses Nordhaus as a source for
global-warming costs that could present themselves well after the year
2100, although Nordhaus characterized that data as particularly
unreliable.

But a series of unreliable, worst-case scenarios centuries off, by
themselves, still would not warrant the extreme greenhouse gas
prevention investments that the Stern review recommends. To make an
economic case for immediate action, Sir Nicholas adjusted his model to
have us paying now for potential damage that could be happening
hundreds of years from now.

Sir Nicholas estimates the potential costs of climate change to be so
great as to force on us a "20% cut in per-capita consumption, now and
forever."

Yet his data showed low damages from climate change in the next two
centuries. To overcome his data, he applied to his model what
economists call a "near-zero social discount rate." Doing so brings
forward future expenses -- in the Stern review's case, expenses that
might occur in the 23rd and 24th centuries. The Stern review then
presents us with a tab that includes these far-out costs, and the
invoice is eye-popping indeed.

But the Stern review approach defies logic, as Dr. Nordhaus
illustrates by demonstrating just where zero social-discount-rate
thinking leads. "Suppose that scientists discover that a wrinkle in
the climatic system will cause damages equal to 0.01% of output
starting in 2200 and continuing at that rate thereafter," he explains.
"How large a onetime investment would be justified today to remove the
wrinkle starting after two centuries? The answer is that a payment of
15% of world consumption today (approximately US$7-trillion) would
pass the review's costbenefit test. This seems completely absurd. The
bizarre result arises because the value of the future consumption
stream is so high with near-zero discounting that we would trade off a
large fraction of today's income to increase a far-future income
stream by a very tiny fraction."

Moreover, who should be asked to forgo that consumption? It hardly
seems fair to keep back poor countries, yet, if paid by the rich
countries alone, the decline would far exceed that of the Great
Depression.

Some climate-change alarmists argue that we should invest in combating
climate change now as an insurance policy against the risk of future
damage. Sounds prudent, until you consider the premium to be paid.

"Suppose that we suddenly learn that there is a 10% probability of the
wrinkle in the climatic system that reduces the post- 2200 income
stream by 0.01%," Dr. Nordhaus explains, again to illustrate the Stern
review's logic.

"What insurance premium would be justified today to reduce that
probability to zero? With conventional discount rates, we would
probably ignore any tiny wrinkle two or three centuries ahead. If we
did a careful calculation using conventional discount rates, we would
calculate a break-even 0.0002% insurance premium to remove the year
2200 contingency, and a 0.0000003% premium for the year-2400
contingency. Moreover, these dollar premiums are small whether the
probability is large or small.

"With the review's near-zero discount rate, offsetting the
low-probability wrinkle would be worth an insurance premium today of
almost 2% of current income, or $1-trillion. We would pay almost the
same amount if that threshold were to be crossed in 2400 rather than
in 2200."

Dr. Nordhaus's conclusion about such scares: "We are in effect forced
to make current decisions about highly uncertain events in the distant
future, even though these estimates are highly speculative and are
almost sure to be refined over the coming decades."

Dr. Nordhaus discounts climate-change alarmism, but not climate change
itself. He advocates research to better understand its consequences
and to develop more efficient technologies. He advocates the
elimination of subsidies that artificially increase greenhouse- gas
emissions, and other "no-regrets" measures that would benefit the
environment without harming the economy. The costs of climate change
are real, he believes, and society should act. But not overreact.

--
There may come a time when the CO2 police will wander the earth telling
the poor and the dispossed how many dung chips they can put on their
cook fires. -- Captain Compassion.

Wherever I go it will be well with me, for it was well with me here,
not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they
alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS

Celibacy in healthy human beings is a form of
insanity. -- Captain Compassion

"Civilization is the interval between Ice Ages." -- Will Durant.

Joseph R. Darancette
dar...@NOSPAMcharter.net- Hide quoted text -

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You don't have to be a climate expert to do simple arithmetic and do
basic statistics. There is no evidence for global warming. None.
Just "experts" creating models to generate research funding for their
laboratories. As "experts" always do. In any field.

Ok, so write a critical paper and submit it to any good biological
publication. It will first go to a jury who will laugh and laugh at it
because its funny. If you think you get money by running other people down
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