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Keys to Economics of Global Warming: A Critique of the Dismal Theorem

Author

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  • S. Niggol Seo

    () (CEEPA (Center for Environmental Economics and Policy in Africa), University of Sydney, World Bank)

Abstract

In a recent paper on climate change, M. Weitzman argues that the traditional cost-benefit analysis cannot be used as a reference tool for designing a climate change policy due to a large uncertainty that cannot be reduced by further analyses. The findings of the ‘Dismal Theorem' are, however, based on two critical assumptions: a single geographical unit and two distinct points in time. It assumes a single geographical unit, disallowing the possibility of reallocating resources across different geographical regions under climate change. It also assumes only two time periods, the present and the year 2100, which rules out a dynamic dimension of climate policy such as burden sharing across generations and learning over time. On the empirical side, the author's apprehension of catastrophe is blown out of context since he assumes that all climate scenarios are equally likely to occur and that there would be no policy intervention to control greenhouse gases over time. Finally, impact studies do not support catastrophic results from climate change within this century.

Suggested Citation

  • S. Niggol Seo, 2010. "Keys to Economics of Global Warming: A Critique of the Dismal Theorem," Economics Bulletin, AccessEcon, vol. 30(1), pages 130-138.
  • Handle: RePEc:ebl:ecbull:eb-09-00645
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I1-P12.pdf
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    References listed on IDEAS

    as
    1. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-771, September.
    2. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
    3. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
    4. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    5. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Climate Catastrophe; Dismal Theorem; Global Public Goods; Cost-Benefit Analysis.;

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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