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December 02, 2006
Social Decay

Last month in Stern Critique, which considered Bjorn Lomborg's critique of the Stern Review, the observation of Mike Hulme, director of the Tyndall Centre for Climate Change Research, U.K. that "activists and the media have pushed climate alarmism so over the top that climate scientists have become the new climate sceptics" prompted this remark:

Now it's time for economists to step up and join climate scientists in the effort to control this blaze which threatens far worse harm to the world than climate change.
That has been happening. A major focus of the debate among economists has been the discount rate Stern used to determine the cost of global warming. This may seem to be arcane neeping but Arnold Kling translates.
Let me see if I can explain the economics to people who find Greek letters intimidating. . .
He follows that with a story line in which Robyn Crusoe on her island debates the merits of eating all her fruit or planting some for the future. The interesting bit is the implications of such decisions.
My concern is with Stern, Dasgupta, or DeLong playing social engineer and picking a social discount rate that deviates from market interest rates. I think you get unreliable conclusions any time you do that.

If as a social engineer you think that real interest rates of 2 to 4 percent are too high, then this is a huge issue, with or without global warming. You are saying that we need to lean toward a total-fruit strategy regardless, and save a lot more for the future. The form of that saving does not matter--it could consist of reduced carbon emissions (as an investment in the environment), but it equally well could consist of investments in human and physical capital.

Even if the Stern report had nothing to do with global warming, its assumption for the social discount rate has radical policy implications. Implicitly, it argues for an all-out effort to reduce private-sector and public-sector consumption and to increase investment instead.

It seems to me that the idea of engaging in social engineering to address global warming is plenty ambitious. To add to it an even more significant effort of social engineering in order to get people to defer a much larger share of consumption than they would otherwise is very brave.

Brave? Hardly. This is standard ideological boiler plate, the sort that has been tried and failed in Europe. There is still denial of that failure, and it is worth considering the bits that are denied. Consider this Johan Norberg article that picks apart the idea that Nordic, especially Swedish, policies should be emulated. They don't even work for Sweden.
But things in Sweden are not as good as the advocates would like to believe. Long the paragon of social democracy, the Swedish model is rotting from within. Ironically, the unique social and economic foundation that first allowed Sweden to construct its political edifice--and which makes it such a difficult model for other countries to emulate--has been critically weakened by the system it helped create. Far from a being a solution for the new sick men of Europe, Sweden must face serious and fundamental challenges at the heart of its social model.
The social and institutional capital that Sweden built up before the social engineers had a go have been consumed. The small and homogeneous population with high levels of trust in one another and the government, the efficient civil service free from corruption, and the Protestant work-ethic - and strong social pressures from family, friends and neighbors to conform to that ethic - have all been squandered.

All would-be social engineers need to ponder this dynamic. If your cherished schemes will undermine the foundations of society then you really can't predict what the consequences of the changes you advocate will be. The examples we have indicate that the consequences will be bad, but the badness varies depending on initial conditions. Each society is broken in unique ways by social engineering.

That's the key issue with all of the radical policy proposals regarding climate change. They are the same tired old proposals we have seen for over a century, and which have degraded societies where implemented, tarted up with new-speak as remedies for climate change. It's the same snake oil that has been prescribed for other ills in the past, to no good effect.

So why is Kling so gentle, calling such advocacy bravery? Perhaps it is tongue-in-cheek, putting a false positive spin on short sighted foolishness, and so keeping his place at the table. We need more real bravery, the kind that Lomborg has shown, the kind that dares to shrug off the blanket of liberal orthodoxy, masquerading as academic manners, that has all but smothered intellectual achievement.

If climate change is as immanent and dire a threat as many claim then we can't afford the idle tinkering of thoughtless social engineers who have no grasp of social dynamics or the foundations of social stability and resilience. The more you believe that the threats are real the more you should oppose such social sabotage. We would be wounded, unable to respond with vigor to external threats. But even if you are sceptical, judging that the threat is distant and/or minor, you should oppose social engineering since it has such a dismal record. It is ignorant and arrogant experimentation that is as dire a threat as climate change might be. It's a social insult, and perhaps compounds an injury from climate change. Double trouble.

Perhaps a clearer way to look at this issue is to frame it in terms of consumption. The paleo-engineers have long advocated reducing material consumption, as well as redistributing material wealth. But in the process they increase consumption of social and institutional capital. They don't actually reduce consumption, they shift it around, substituting one sort of capital for another. In the examples we have where this has been tried total consumption has risen markedly, and over time degrades society monotonically, sometimes ending in collapse. If they are truly concerned with investing for the future, for either pragmatic material reasons or loftier moral concerns, then they need to consider the social and insitutional repercussions of their advocacy. They need to make an intellectually honest appraisal rather than the magical thinking we have seen in the past.

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