How We’re Making Climate Change Even More Expensive

(Bloomberg Opinion) -- The potential costs of climate change, already the subject of heated debate, may actually be understated. It’s not just the potential disruptions to weather systems, agriculture and coastal cities; it’s that we may respond to those problems in stupid and destructive ways. As the philosopher and cartoon character Pogo said: “We have met the enemy and he is us.”

Consider how poorly we have responded to many non-climate-related problems. In the case of Brexit, for example, the Leave movement was arguably responding to some real problems. The European Union bureaucracy is too stringent, and perhaps the U.K. did not have an ideal arrangement with immigration. But Brexit is careening toward disaster, with no good plan on tap, the two major parties in splinters, the British pound declining, the Irish “Good Friday” agreement at risk, and the U.K. seriously talking about food stockpiles and other emergency measures.

It would have been better if the British had responded to their country’s problems in a less extreme way, or simply learned to live with the problems they had. Instead, they voted for a rash and poorly thought-out remedy.

Similarly, you might think that supporters of President Donald Trump have legitimate concerns about illegal immigration and U.S. unwillingness to stand up to China. Still, that did not require a presidential “remedy” that has brought chaos and corruption to the White House and U.S. foreign policy alike.

In short, the world increasingly appears to be reaching for extreme and imprudent remedies to admittedly complex problems. These overreactions do not seem to be mere accidents, but arise from some pretty fundamental features of polarized politics  namely, that discourse has become less rational and technocratic.

When it comes to climate change, all this plays out in interesting ways. In the U.S., imagine that many Florida residents have to leave their residences permanently, due to fiercer storms or rising sea level. The rational approach might involve well-functioning insurance markets, some public-sector transfers and compensation, and better infrastructure planning. The idea would be to limit the number of such moves or at least to lower their cost. That could prove very costly but essentially manageable.

But that is probably not what we will get. Instead, the debate may well radicalize Florida politics, which has consequences for national politics as Florida is a swing state. On the federal level, an infrastructure bill would invariably direct too much money to wasteful new projects in less populated states. Everywhere, the harsh, non-sympathetic tone of the debate will further corrode American politics.

Looking outside of the U.S.: Imagine that climate change forced or induced the migration of many people from Bangladesh. An ideal international reaction would involve foreign aid plus the cooperative parceling out of refugees to different countries. Circa 2018, following the crises in Syria and Libya, does anyone really expect such a rational outcome? A more likely, though admittedly speculative scenario, is clashes on the border with India, the further radicalization of Indian politics (“build a wall”), refugee camps full of hundreds of thousands of people, and more extremist terrorism in Bangladesh.

I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate “1 to 5% of GDP for 4°C of warming” is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost “only” 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.

Unfortunately, that is not the right way to conceptualize the problem. Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our highly imperfect and sometimes corrupt political institutions. (Libertarians, who are typically most skeptical of political solutions, should be the most worried.)

Considering how the Syrian crisis has fragmented the EU as well as internal German politics, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”

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