Global Warming and the Pitfalls of Welfare Economics

Let me begin by thanking some people who have contributed greatly to my understanding of and work on climate change economics. My first serious discussions of these problems was with Graciela Chichilnisky and Geoff Heale at Columbia University in the 1990s, which led to my participation in several workshops and conferences they organized. In November, 2006, Neva Goodwin and Jonathan Harris invited Lance Taylor and me to participate in a workshop on environmental economic problems, including climate change, which gave me an opportunity to summarize the conclusion I had reached that if “business-asusual” paths are inefficient there are no opportunity costs to correcting global warming and, in fact, that correcting global warming represents a net gain in welfare to the global economy. Armon Rezai, then a graduate student at the New School for Social Research, collaborated with Lance and myself in elaborating this point of view through the development of a growth model with climate damage which exhibits and roughly estimates the net gains to the correction of global warming. This work was published in Economic Theory in 2010. Armon and Lance are wonderful people to work with. Armon saw implications of the welfare economics point of view that greatly expanded the significance of the initial insights. Lance is an acute and astute critic, and has the uncanny ability to know the answers to quantitative questions before they have even been posed. I am delighted to be sharing this prize with Lance.