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A Nobel Prize Winner In Economics Views On Climate Change


April 29, 2021

Mister Nordhaus won the 2018 Nobel Prize in Economics for his work on the economics of climate change. This video is his "prize lecture" and one I think we can all benefit from watching.

As I read about Mister Nordhaus and his conclusions about the cost-benefit of the timing of abatement steps we should take, I came across an old friend of mine -- the discount rate -- how much is a dollar in the future worth today. Critics of Mister Nordhaus argue he uses too high a discount rate -- meaning that a future dollar is worth less today than it would be if he used a lower discount rate. That is an important variable in analyzing the cost-benefit of future actions and one I had not thought about regarding climate change.

Note that Mister Nordaus argues than the energy markets have failed, in that most of them have not placed a price on carbon. This leads to misallocation of resources and inefficient market signals.

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