The trouble is that these models embody wildly unrealistic assumptions: there are no business cycles; the economy is always at "full employment"; strong growth is assumed, based on past growth rates; the economy automatically accommodates major changes -- if fossil fuel prices rise (as they would under anti-global warming laws), consumers quickly use less and new supplies of "clean energy" magically materialize.Before we hurdle down this road, perhaps they should look at what more pessimistic models forecast as the costs and benefits of the green economy.
There's no problem and costs are low, because the models say so. But the real world, of course, is different. Half the nation's electricity comes from coal. The costs of "carbon capture and sequestration" -- storing CO2 underground -- are uncertain, and if the technology can't be commercialized, coal plants will continue to emit or might need to be replaced by nuclear plants. Will Americans support a doubling or tripling of nuclear power? Could technical and construction obstacles be overcome in a timely way? Paralysis might lead to power brownouts or blackouts, which would penalize economic growth.
Countless practical difficulties would arise in trying to wean the U.S. economy from today's fossil fuels. One estimate done by economists at the Massachusetts Institute of Technology found that meeting most transportation needs in 2050 with locally produced biofuels would require "500 million acres of U.S. land, ... more than the total of current U.S. cropland." America would have to become a net food importer.
In truth, models have a dismal record of predicting major economic upheavals or their consequences. They didn't anticipate the present economic crisis. Earlier, they didn't predict the run-up in oil prices to almost $150 a barrel last year. In the 1970s, they didn't foresee runaway inflation. "General equilibrium" models can help evaluate different policy proposals by comparing them against a common baseline. But these models can't tell us how the economy will look in 10 or 20 years, because so much is assumed or ignored -- growth rates; financial and geopolitical crises; major bottlenecks; crippling inflation or unemployment.
The selling of the green economy involves much economic make-believe. Environmentalists not only maximize the dangers of global warming -- from rising sea levels to advancing tropical diseases. They also minimize the costs of dealing with it. Actually, no one involved in this debate really knows what the consequences or costs might be. All are inferred from models of uncertain reliability. Great schemes of economic and social engineering are proposed on shaky foundations of knowledge. Candor and common sense are in scarce supply.
Monday, April 27, 2009
Before the Congress and Obama administration launch our economy on the track of their desired anti-global warming program, let's take a second look at the models that they're using to project the costs and outcomes of the program. Robert Samuelson casts a skeptical eye on their projections.