Home > Bob Murphy, carbon pricing, Nordhaus, Weizman > Bob Murphy – fan of cost-benefit analysis (in the face of climate risks)!

Bob Murphy – fan of cost-benefit analysis (in the face of climate risks)!

Austrian-leaning economist Bob Murphy, whose efforts last year to discount the work of Yale’s William Nordhaus on how cost-benefit analysis merits current action on climate change I previously examined, is back with more, this time defending Nordhaus’ work from the criticism that I alerted him to by Martin Weitzman with respect to limits on the usefulness of CBA in the event of uncertainty (‘fat tails”). 

Bob, in a post on MasterResource, explains that Nordhaus has reviewed Weitzman’s work and found limits to it.  But he fails both to address most of the points I raised previously, including whether CBA is consistent with Austrian perspectives, and to note that Nordhaus still supports action now to price carbon.

I left the following comment with Bob at the MasterResource thread:

Bob, while you’re shoring up “cost-benefit analysis” – the tool of states and bureaucrats everywhere – perhaps you may care to address the point that, under traditional libertarian analysis, if anyone can demonstrate that others’ GHG emissions negatively affect his property (by altering temperatures, rainfall or causing flooding), he has the right to enjoin ALL such activities (and is not compelled to suffer them, subject to whatever compensation he can collect)?

Perhaps the “excitableness” of the “alarmists” may have something to do with the problems of collective action and public choice – viz., in circumstances where pollution laws and regulations provide effective “rights to pollute”, and where emissions are worldwide, how does one deal with existing rent-seekers and move the state, and do it in a meaningful way? There are plenty of private initiatives underway, and even though Austrians dissaprove of efforts to use the state, surely they can understand calls to group action, and that many of the “alarmists” sincerely believe that a fight over the wheel of government is inescapable.

Fundamental Austrian analysis straigthforwardly discussed the problems of conflicting preferences in the absence of property rights and where states are involved, but your lack of understanding or sympathy is rather striking. Why you think it helpful to label one side – a huge swath of people and organizations including Exxon and the Catholic Church – as “alarmists” while ignoring not only the institutional problem but those who profit from the status quo is rather beyond me.

Also, why so little interest in exploring policy options that you would support, like allowing immediate depreciation of capital investment and further public utility deregulation?

 Roger Koppl, another commenter, raised similar questions:

How do you square Nordhaus’s CBA with “Austrian” (or computable economics) arguments about complexity and the difficulty of prediction? Why shouldn’t we chastise Nordhaus for hubris? The pretense of knowledge and all that.

More later.

Categories: Bob Murphy, carbon pricing, Nordhaus, Weizman Tags:
  1. Donny with an A
    February 5th, 2009 at 22:37 | #1

    Well there’s also the question of what policy-making paradigm would justify the use of cost-benefit analysis in this way…I mean, is Murphy really the kind of guy who’s going to say that the role of policy is to allocate resources and coordinate behavior in order to maximize the net present value of overall social outcomes?

  2. TokyoTom
    February 5th, 2009 at 02:02 | #2

    Silas, can you stick a link or two into your comments? There may be an inquiring mind or two out there.

  3. February 4th, 2009 at 18:32 | #3

    I have repeatedly made roughly the same criticism since last June, and sadly, Bob_Murphy will respond to anything but that point. The way I’ve put it is, would you justify this kind of harm, in any other context, with a CBA? Is it somehow okay to give someone’s kids asthma (or flood their land, etc.) as long as, hey, don’t worry, this’ll help the economy!

    The silence is deafening.

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