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Quiz Question

Let’s imagine a truly horrific scenario for what a warming planet might do to the United States (these are unrealistic). Imagine that a rapidly warming planet so destroys our natural industries that they lose 50% of their value. In other words, let’s imagine that agriculture, forestry, farming, fishing, hunting, wood-product and paper-product manufacturing, and all oil and gas extraction and related activities lose 50% of their value. By how much would this hurt the US economy? Would it send us into the next Depression?

Well, not exactly. Under a 50% loss scenario we’d lose 1.6% of GDP per year, every year. Would a warming world make it harder to mine for oil and gas? I don’t imagine so. So what happens to these calculations if we assume that mining industries for oil and gas are neither hurt nor benefit from warming? How about 0.74% of GDP every year or just north of $100 billion per year. And this still assumes that warming will destroy half of these natural resource industries. Sure, warming will hit other ones, but it clearly will benefit some others too — so these stats are not likely to be very far off.

Now ponder for a moment that the deadweight loss of taxation (not the cost of collecting it, but the distortions and loss in GDP because of the inefficient way we collect them) is easily ten times this amount. Or consider that these losses, if they occur, are not likely to happen suddenly. You can pick your own favorite data to compare this to. I’ll say it again, one need not be a skeptic of global warming science at all in order to be not completely alarmed by what may come for the US. Now, what may come for other places may indeed be worse, but so too is the possibility that none of us have any clue what we are talking about. I admit that on my end.

4 Responses to “Quiz Question”

  1. Harry says:

    I am not sure I understand what “losing 50% of their value” means, WC. I am not trying to be flippant. If fifty percent of all trees disappeared, then the remaining tree owners would be in fat city, as would existing owners of houses, furniture, and paper.

    Or do you mean a fifty percent reduction in earning power, and is that net of taxes? Or is it the market price of that enterprise (bid)?

  2. Harry says:

    Suppose the Earth’s average temperature rose two degrees. (Let’s assume that that is a meaningful measure. Wintercow often concedes such assumptions to engage antagonists, as did Socrates.)

    Faced with that prospect, what do we do? Do we hand the world over to wise lawyers at the Sierra Club, the National Resounces Defense Council, and others who wish for a pre-industrial world, where we used horses for horsepower.

    My question is what happens when we reduce the returns on investment by ten or twenty percent, versus ten or twenty percent in the other direction.

    GDP does not measure all of this, which is one reason I never paid much credence in that number. The macro guys, if they are smart, do not invest their own money on aggregate numbers.

  3. Harry says:

    What sent us into the Great Depression? Many would argue that the Smoot-Hawley tariff was a trigger, only foreign trade was a small fraction of the economy. Fortunately Chuck Schumer does not run Congress, threatening to kill all sorts of major companies with disgorgement rhetoric, but he and others had better watch it.

    On the other hand, our government is overdoing the deflation problem. We could have Depressoinflation, which is not the same as decaf espresso.

  4. Rod says:

    Wintercow may be on to something here (he’s usually onto something, but this post of his offers a new perspective).

    Whatever devastation might occur as a result of climate change — x degrees greater or less than now, causing a 50 percent reduction in output in our economy and in the combined economies of all other countries — it could be small relative to the wanton destruction caused by collectivism and totalitarianism.

    A case in point is North Korea, the world’s most perfect application of communism and authoritarian government. What little output the economy of North Korea has goes into the manufacturing and production of weapons and into the feeding of an army that enlists because it’s the only alternative to starvation. The land is barren and unfertile, just as if (according to the global warmers) the Earth had warmed two degrees. The North Korean people are slaves, and only a few get to pursue happiness: the immediate family of the recently departed Kim Mentally Ill. Dissenters and other enemies of the state are exiled to starvation camps that work along the same lines as the Nazi death camps.

    So here’s what we teach our children in the United States: that our carbon footprint is too large, and that the only problem with communism is it hasn’t been tried in its purest form.

    The truth is that socialism and other variations on the collectivist theme will destroy more wealth than all the forces of nature.

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