A few years ago, while I was speaking on a panel at the Museum of Natural History in New York about the impacts of climate change, a young woman in the first row who appeared to be an earnest, diligent student raised her hand and addressed me: “I have read that world GDP will be 10% lower in 2100 because of climate change. Why aren’t business leaders taking this seriously?”
Having spent several decades in banking, economics, and investing, I am frequently asked some version of this question. Each time I hear it, I am reminded of Carl Sagan’s observation in his 1995 book The Demon Haunted World: Science as a Candle in the Dark: “There are naive questions, tedious questions, ill-phrased questions, questions put after inadequate self-criticism. But every question is a cry to understand the world. There is no such thing as a dumb question.” I saw this young woman crying out to understand, using language that she had undoubtedly been taught was the way important decisions were made. I responded to her—as I do to everyone who asks me to value future climate damages in dollar or GDP terms—that, tragically, the existing estimates of “how much climate change will cost” are dumb.
I would have been a dismal panelist if I had left the young woman and the rest of the audience with “don’t trust those numbers, they are junk.” Instead, I said, as I have now said to thousands of people, the real problem is that so much climate activism and storytelling deals in hazy abstractions like estimates of future GDP or generic references to some future apocalypse. This is a tragedy. People don’t need a spreadsheet or a metaphor. They need to understand the natural and social worlds they are choosing between in vivid, resonant, useful ways.
We need to see ourselves, our children, other people, and all of nature in something like the believable dioramas found in natural history museums that allow us to imagine living in a realistically changed world. Right now, few people can do that, including climate activists and philanthropists who deal in abstractions, and who had, implicitly, encouraged this young woman to ask her question. I was happy to tell her that when people—including business leaders—learn about climate change not in GDP terms but in practical, natural terms, they tend to take it seriously. And that, if we actually know the consequences of our choices and have thought about the natural and social worlds we prefer, economics can again be very helpful.
Trying to change people’s behavior by telling them they will lose money because of it is often equivalent to telling them they’re stupid. It’s rarely an effective way to get them to be curious. It’s usually an even worse way to get them to change their behavior. Indeed, the most profound thing you can do to influence people is to change the thing that economic models assume are fixed: what people value.
When I say this, people often push back, saying it’s impossible to change people’s minds. I like to point out to them that the six most valuable corporations in the world are in the persuasion business.
At least one quarter of GDP is persuasion
In 2015, I visited the headquarters of LinkedIn with colleagues from the investment firm where I worked. One of the people in our group was openly frustrated with LinkedIn because it wasn’t monetizing its massive troves of data as well as he believed it could. The LinkedIn execs couldn’t have agreed more: “You’re right. We know so much about our users. We know when people don’t like their jobs, when they are thinking of moving to another city, when they are pregnant… We could sell so much advertising to them. But we sell HR services to companies, not advertising. Our users wouldn’t trust us if LinkedIn were full of ads.”
Later in the same trip, Microsoft executives told us that the switch from selling discs with software to new online versions of Outlook, Excel, Word, and PowerPoint (called Office 365) would allow the company to “see not only every meeting but every email from everyone who is attending the meeting and the materials for the meeting.” Amazed at the potential to put so much data to work, they speculated about helping people prepare for meetings or manage their inboxes better. Maybe they did those things. I don’t know how great the omniscient, every day of the year, Office 365 is (my experience with Teams has been bad), but I do know that a few months later, Microsoft bought LinkedIn. And LinkedIn is now full of advertising.
Microsoft, Apple, Google, Amazon, and Meta are the most aggressive, profitable persuaders in the history of the world. As of September 2025, they occupy slots two through six on the rankings of the world’s most valuable companies. The top company, NVIDIA, manufactures the chips that fuel AI, which is quickly becoming an even more powerful persuasion technology. The fact that the best businesses in the world are in the persuasion business should make economists uneasy, because in order for any economic model to work, what people prefer must be fixed. The core idea of economics as a social science is that people know what they want and rationally choose it when given that choice.
Two economists noted the flimsiness of this assumption 30 years ago with wit and foresight. In February of 1995, Donald McCloskey (who now goes by Deirdre) and Arjo Klamer published a short, sly article in the Papers and Proceedings of the American Economic Review entitled “One Quarter of GDP Is Persuasion.” The opening line is:
Economists view talk as cheap and culture as insignificant. Yet humans are talking animals, talking in their markets. The talk probably matters: Why else would the human animals bother doing it?
McCloskey and Klamer acknowledge that some amount of talk is simply sharing information and giving orders, which some branches of economics more or less address. But they are interested in persuasive and judgmental talk, what they call sweet talk. They go on to calculate that in the 1990s, at least one quarter of GDP was paid to salespeople, marketers, teachers, lawyers, judges, actors, directors, editors, authors, social scientists, and managers of all kinds—none of whom make any sense in an economy of rational agents who know what they want.
In that article, which is only five pages long and was written 30 years ago, they quote Adam Smith: “Everyone is practicing oratory on others [through] the whole of his life.” And, presciently, they quote a character who wasn’t interested in economic theory, Donald Trump.
Trump had the power of persuasion to close deals, the art of felicitous speech acts. As he puts it, “You have to convince the other guy it’s in his interest to make the deal.” Persuasion was the main way he transformed the Commodore Hotel into the Grand Hotel: “First, I had to keep [the owners of the hotel] believing [such and such].... At the same time, I had to convince an experienced hotel operator to [do so and so].... I also had to persuade city officials [thus and such]....”
The authors use economic logic to explain that the role of persuasion in the economy and in life was likely to increase in the future because markets make competitive things cheap:
[The influence of sweet talk] will be larger in the future. The silent labor required to make a radio, a windowpane, or an automobile is disappearing. The technology associated with persuasion has improved since classical Greece, as in printing, telegraphs, railway signals, telephones, color advertising, xerox, email, and cheap transport of persuaders… Improvements in the technology of persuasion merely arm both sides better.
Unpersuasive
The climate movement has been ineffective as a persuader. Despite the evidence that the climate is changing for the worse, it is still not a popular topic of conversation or a popular issue in elections; carbon emissions are not on a meaningfully different trajectory than they were before the Kyoto Protocol; and shockingly few communities are preparing or adapting. Yes, people say they worry about it, but when asked what they are willing to do about it or what they will pay to address it, they offer very little. This shouldn’t be a surprise, because the conventional wisdom among climate activists was to avoid speaking about actual climate and instead present the problem as a choice between optimistic solutions (never speak of the doom and gloom) and an abstract, shameful apocalypse (speak only of “the end”).
When Alison Smart and I started Probable Futures, we searched for supporting evidence for this conventional wisdom. We couldn’t find any. I spent a lot of time talking with a psychologist I know about this strategy, and she explained that fears are powerful motivators to action, but they need to be specific fears. If you know what you fear, you are willing to do something about it. What’s demotivating is anxiety: a vague sense that the future is bad, that no one will really talk about it, but that it is a terrible, unspoken life of suffering we are walking toward.
The clearest illustration of this is that most climate entrepreneurs and climate investors ignore actual climate change in their work. For example, few solar developers ask if their installations are going to be at risk of damage from hail, heat pump installers use backward-looking data to estimate future heating and cooling needs, and as a founder of one of the biggest climate venture capital firms said to me, “Once we decided to solve climate change, we stopped reading climate science. We figured it would just depress us.”
The one big exception to the “no bad news” strategy was telling companies and investors outside “the climate space” that they were going to suffer financial losses in the future. Even in these cases, what constituted “climate risk” was a risk that there would be a tax or cost imposed on carbon emitters in the future. In this story, the actual cost to companies wasn’t going to come from changing weather or even the indirect consequences of changing weather (like a shrinking insurance market, disrupted supply chains, or higher local taxes to repair infrastructure). Instead it would come from regulators who were going to be driven by public concern for climate change to impose fines and taxes on carbon. This was known as “transition risk” because people of the world would demand a transition from fossil fuels to clean energy and would punish those who didn’t follow.
Some of this talk was indeed sweet enough to convince companies and investors to act, but, in 2025, the prospect of carbon taxes is as far off as it ever was in most of the world. Unfortunately, the field of economics helped lead society into this financial trap by clutching to math and dollars as proxies for well-being. It wasn’t always that way.
Wisdom and conventional wisdom
In February of 1994, I was 24 years old, living in Nizhny Novgorod, Russia. After another day working with people who were trying to create small businesses out of the wreckage of communism, I went back to my apartment, my head swimming with naive, ill-phrased questions about how to avoid bad economic outcomes. I looked at the small collection of used books I had bought for a few bucks a couple of months earlier as I had hastily packed for my move to Russia. One of them was called The New Industrial State, written in 1967 by an economist named John Kenneth Galbraith. I opened it and realized that he was worried about the future and was trying to offer guidance. He was someone who might be able to offer me guidance.
According to the book, he was a professor at Harvard in 1967. I didn’t know if he was still alive. But he was the only economist I knew of, and he seemed like he was trying to be helpful with his book, so—without reading more than a chapter of the book—I wrote him a letter asking if indeed economics was the field I was looking for, addressed it to Harvard University Department of Economics, Cambridge, MA, and put it in the mail.
Two weeks later, I received a short handwritten reply, with an invitation. Professor Galbraith encouraged me to pursue economics and offered to welcome me into his home for a conversation and tea if I were to come to Cambridge. So I used my vacation time to do just that.
Professor Galbraith opened the door of his lovely home and led me into the book-lined study. His wife, Catherine, brought us tea. I remember the feeling of welcome, hospitality, and erudition in the house but can recall only one snippet of the conversation. That snippet, however, was wise and helpful, even if I only really appreciated it years later. He explained that economics had great potential to help make the world a better place and recommended that I apply for PhD programs. But he warned that “economics now fetishizes math. You must get good enough at the math for them to respect you and for you to understand them. Otherwise, they will simply dismiss you.”
I flew back to Moscow, took the train back to Nizhny Novgorod, and sent another letter to Harvard University’s Department of Economics asking to be admitted to the PhD program. Despite having (still) never read an economics book, I was admitted. In the fall of that year, I began learning the math that makes economic models work.
In my first days at Harvard, I learned that Galbraith’s warning had been accurate and that the economists I was around dismissed him. His frameworks for thinking about the world lacked mathematical rigor, and he often wrote about the future, which academic economists tend to avoid. I was the sole economics student to attend a lecture he gave the following year, at which he offered an assessment of economics that grows more astute as time passes.
He held up his left hand, with his long fingers and thumb making a C. He then asked the audience to imagine that he was holding a history book by its spine. With the index finger of his right hand, he scanned the edge of the imaginary book. “As you know, time doesn’t move smoothly across the pages of a history book. There are short, intense spans of time when big things change the world. Those take up many pages. And then there are long stretches when things go smoothly and not much happens. Modern economics ignores the former and focuses on the latter.” He didn’t denigrate the study of smooth progress but warned that modern economics didn’t have much to say about big, bad problems.
Years later, I went back and read a number of Galbraith's books and found them splendidly insightful. His book The Great Crash, 1929, about the details of how things went so wrong at the outset of the Great Depression remains vital reading for people in finance. And in his 1958 book The Affluent Society, he invented the term “conventional wisdom” to describe the kind of thinking that is uncritically accepted as being smart.
In particular, he warned that it had become conventional wisdom to use GDP—a measure of how much is produced and consumed each year—to assess well-being. He agreed with his fellow economists that output and consumption are good proxies in poor countries where basic needs were still unmet, but he worried that in an affluent society, using GDP as a goal was likely to lead to strange outcomes. In particular, he warned that advertising and its creation of “wants” was leading us to value ephemeral consumption and chase the insecurities that corporations created in us instead of investing in and protecting things of deeper value, especially education, public infrastructure, and nature.
The economics community dismissed John Kenneth Galbraith because his ways of seeing the world lacked mathematical rigor. As a result, his warnings about the power of large corporations and the influence of advertising have been essentially absent from economic research and professional literature. I understand why his work was pushed out of the rigorous ivory tower, and his projections were imperfect, but I do not understand why the discipline was not at least as rigorous with the work of William Nordhaus.
Is it a big deal?
William Nordhaus has been a professor of economics at Yale for more than 50 years, and his research is the most tragic sweet talk I have ever encountered. A few years ago, I told a now-famous economist with whom I went to grad school that I was working on climate change. He was puzzled. “Why would you work on that? Nordhaus did the calculations, and it’s just a few percent of GDP out in the future. Why would we focus on that?” I’m confident that Professor Nordhaus would be upset to hear that assessment. Reading his work from the 1970s to today, it’s obvious that he cared deeply about the well-being of people and believed that his work would help bring attention to climate change, but his faith in the math of economics caused his work to do the opposite.
Nordhaus insisted that if we knew how much climate change would cost, we would be compelled to make good choices. However, his precise mathematical modeling of the cost of climate change is precisely what caused the economics profession to lose interest in climate change as a topic.
In the early 1980s, a time when risk of nuclear war, civil unrest, and communism were prominent, scientists began warning about climate change. So the US government commissioned a study and asked the Harvard economist Thomas Schelling to oversee it.
To get a feeling for what a different time the 1960s and 1970s were in terms of risk thinking, consider that an economist who specialized in game theory was pretty famous. Schelling had expanded the scope of economics, often referred to as the dismal science, by using models of competitive games to explore how to deal with conflict. His insights about the value of cooperation even between enemies proved extremely insightful for dealing with the threat of nuclear apocalypse, earning him the Nobel Prize and helping to inform what eventually came to be known as the theory of mutually assured destruction (or MAD). By the early 1980s, there hadn’t been a nuclear war, and Schelling was something of a hero. So when the prospect of fossil fuel use leading to apocalypse was raised by scientists, the government turned to Schelling. And Schelling turned to Nordhaus. The two of them wound up producing all of the sweet talk in one of the more important documents in the history of civilization: Changing Climate: Report of the Carbon Dioxide Assessment Committee (1983).
Schelling assembled a committee of natural scientists and economists. The natural scientists’ portion of the resulting report explained why increasing CO2 in the atmosphere would change life on earth quite substantially. They shared insight about agriculture, oceans, forests, soil, glaciers, and weather. The world they sketched out was frighteningly different from the stable climate of civilization. The pace of change if emissions kept rising was likely faster than any time in the past several hundred million years (including the period 250 million years ago that is now known as “The Great Dying”), and at some level of warming, the climate system risked becoming uncontrollably hot. Their language was dry and measured.
And then Nordhaus and Schelling wrote the introduction and conclusion to the report, and their sweet talk reframed the dangerous-sounding reports from scientists into an excuse to look away. Their narrative contributions may be among the most influential paragraphs in human history.
Here are Nordhaus and Schelling’s main conclusions from the executive summary, with my comments in between:
The social and economic implications of even the most carefully constructed and detailed scenarios of CO2 increase and climatic consequences are largely unpredictable. However, a number of inferences seem clear:
(a) Rapid climate change will take its place among the numerous other changes that will influence the course of society, and these other changes may largely determine whether the climatic impacts of greenhouse gases are a serious problem.
This seems to mean, “We’re going to have a lot of climate change, and it will be rapid, but lots of things change society. Who knows how this one will compare?” Fair enough.
(b) As a human experience, climate change is far from novel. Large numbers of people now live in almost all climatic zones and move easily between them.
Now this is interesting. True, people lived in almost every climatic zone at this time (1983), but that is not the entire set of possible climates. What about the age of dinosaurs when the planet was dominated by tropical plants and cold-blooded creatures? That would have been too hot for humans. What about new climatic zones that will be created as a result of warming? Will people live in large numbers in all of those new climatic zones? There is no mention here of the fact that human animals have limits that are likely to be passed in much of the world. And do people really move easily between every climate? Maybe a few professors from famous universities do, but are they implying that huge populations could move easily? I’m not sure about their definition of “easily” here.
(c) Nevertheless we are deeply concerned about environmental changes of this magnitude. Man-made emissions of greenhouse gases promise to impose a warming of unusual dimensions on a global climate that is already unusually warm. We may get into trouble in ways that we have barely imagined, like release of methane from marine sediments, or not yet discovered.
Oh dear. There are bigger potential risks that we are going to encounter by warming the atmosphere? That sounds like something we should try hard to avoid. They seem to be leading up to a dramatic recommendation.
(d) Climate changes, their benefits and damages, and the benefits and damages of the actions that bring them about will fall unequally on the world’s people and nations. Because of real or perceived inequities, climate change could well be a divisive rather than a unifying factor in world affairs.
The framing of benefits and damages is interesting. This framing suggests that climate change will be good for some people and places. But is that true? And even if it is, it seems like we should prepare for a lot of international strife because some countries will be seriously damaged by climate change.
Viewed in terms of energy, global pollution and worldwide environmental damage, the problem appears intractable. Viewed as a problem of changes in local environmental factors—rainfall, river flow, sea level—the myriad of individual incremental problems take their place among the other stresses to which nations and individuals adapt. It is important to be flexible both in definition of the issue… and in maintaining a variety of alternative options for response.
I have trouble not using shrugging, laugh-cry, and head exploding emojis here. “The problem appears intractable” is amazing sweet talk. Just changing “intractable” to “difficult” would make this a problem for people to work on, not a problem to give up on.
So at this point we have been told that:
- Environmental factors like rainfall, river flow, sea level, and the “myriad” of other problems will simply “take their place” among things people deal with.
- A lot of people are going to move.
- There’s likely to be a lot more international strife.
- It also could be a lot worse than we now think because we could wind up with methane emissions from the land and seas, which we know is a risk but shouldn’t really worry about now.
- It’s intractable.
- We should stay flexible.
OK, professors. What do you recommend we do?
To the extent that [this research] can offer guidance… it suggests that there are unlikely to be easy ways to prevent the buildup of atmospheric CO2. Climate modification or simply adaptation to a high CO2 and high-temperature world are likely to be more economical ways of adjusting to the potential for a large buildup of CO2 and other greenhouse gases. Whether the imponderable side effects on society—on coastlines and agriculture, on life in high latitudes, on human health, and simply the unforeseen—will in the end prove more costly than a stringent abatement of greenhouse gases, we do not now know .
This is quite a paragraph for an executive summary. The word “easy” is doing a lot of work.
Nordhaus and Schelling’s conclusion is that modifying the climate with as-yet-unkown technologies that we hope will be benign and simply adapting to a new “high-temperature world” will be cheaper (and therefore a better approach) than attempting to prevent CO2 buildup. Abating greenhouse gases would not be easy (and it would be expensive), but technology might make it easy to remove those gases in the future? Or, more inconceivably: “Simply” adapting to a radically different world will probably be easier? In the meantime, keep an eye out for “imponderable side effects” which, despite being “imponderable” include at least higher seas and damage to coastlines, agriculture, life, human health, and “the simply unforeseen.” What about the strife between nations? Should we use game theory for that? What if the countries who suffer have nukes or other weapons that will get cheaper over time?
One detail of the report sticks in my mind like a sharp splinter. In Chapter 9, “Climate Change: Implications for Welfare and Policy,” Schelling rambles about how we can’t possibly know what’s coming and that we might find we prefer hotter climates. Here he inserts a remarkable footnote with an asterisk:
*A personal observation: Every expression of concern that I have read or heard about the effect of rising temperatures on human health and comfort has been about summer heat. I conjecture that in 1900 the comments would have been about winter cold, autumn frost, and spring thaw, and the tone would have been positive.
The US government asked Schelling to assess this newly identified, potentially devastating risk. And in the end, they offer personal conjecture and the verbal equivalent of the shrug emoji. Maybe you think that reacting to alarming evidence with a blah conclusion is bizarre. But you know who didn’t? Pretty much everybody, including the US government and the economics profession. Nordhaus and Schelling continued to say for decades that terrible stuff was coming, but through the lens of economics it wasn’t that big of a deal.
Small numbers
A decade later, Nordhaus published “An Optimal Transition Path for Controlling Greenhouse Gases,” in which he turns the economics of climate change into a precise GDP estimate and an “optimal” recommendation. Nordhaus introduces a tool called the Dynamic Integrated Climate and Economy (DICE) model. The model takes the industrial mix and productivity trends of the past and confidently forecasts them out to the year 2200. He also applies a “damage function,” which is more or less an ad hoc guess at the cost of climate change. In economic terms, Nordhaus’s model treats climate change as simply an “exogenous cost,” which is a euphemism for an unexplained bummer. DICE allows you to put in possible taxes on carbon or emissions limits and then mechanically produces precise dollar estimates of five different approaches to greenhouse gas control:
- No control (i.e., don’t do anything, just let the market work)
- Economic optimization (i.e., only control emissions enough to offset the small, far-off losses from climate change that Nordhaus assumes)
- Geoengineering (i.e., let the market work and use technology to alter the atmosphere to control temperature)
- Stabilization of emissions (i.e., setting a carbon price of $5/ton until late in the 21st century, when the price would rise to $20/ton, which would limit the pace of atmospheric warming and would lead to about 3.5°C of warming by 2100)
- Stabilization of climate (i.e., working to get down to zero carbon emissions to stabilize the atmospheric temperature by putting a price on carbon)
Here are the conclusions from the paper:
Among these five, the rank order (from a purely economic point of view) at the present time is geoengineering, economic optimum, no control, emissions stabilization, and climate stabilization. The advantage of geoengineering over other policies is enormous, although this result assumes the existence of an environmentally benign geoengineering option. The policies of no controls, the economic optimum, and emissions stabilization have impacts that are less than 1% of discounted consumption. Climate stabilization would appear enormously expensive.
So the proposed best strategy from a purely economic point of view is to use an unknown form of geoengineering to alter the atmosphere in a way that is both extremely cheap and has no side effects. In other words, “from a purely economic point of view,” the best strategy is magic.
The next three strategies, all of which lead to at least 3.0°C of warming, produce outcomes that differ by less than 1% of GDP. Doing something and doing nothing are within 1% of each other. That’s precise!
And the strategy of stabilizing the climate (which is possible with a higher tax on carbon)? “Enormously expensive.” This is not precise, analytical language; it’s persuasive language. It’s strange. How about letting the readers assign the adjectives to the numbers instead of giving adjectives without numbers? “Enormously” is joining “easy” in the Nordhaus lexicon as words he uses to describe climate action. If you root around in the details, you find a range of possible costs of stabilizing the climate with an average of about 2% of GDP for a few decades. Apparently 2% of GDP is an enormous cost to stabilize the atmosphere that has been perfect for human flourishing.
At the end of the paper, just like at the end of a TV pharmaceutical ad, Nordhaus jams in a few warnings.
Finally, it should be emphasized that this analysis has a number of important qualifications. The most important shortcoming is that the economic impact of climate change, especially on developing countries and natural systems, is poorly understood at present… And finally, this study abstracts from issues of uncertainty…
So, despite not having any idea what climate change will mean for most people on earth and for natural systems, and assuming that the numbers I put into the spreadsheet are precisely right, this is a good estimate of future costs—and it is not worth 2% of GDP.
A tragic prize
Reading Nordhaus’ work is emotionally complicated because it’s clear that, like a diligent pupil, he wants to help, and he is working hard. But he can’t see that his math is obscuring even the insights of economics.
Learning about climate change and trying to help people understand it has made me appreciate tragedy. In a tragic play, a noble character is driven to catastrophe not by the forces of evil but by a flaw or weakness that anyone could have and that, until the fall, had previously been benign or even positive. I understand the impulse among many activists to bring attention to the institutions and individuals who have worked to undermine climate action, and I share their anger at those who knowingly deceive the public for short-term financial gains. But I am quite sure that when people of the future look back at the period from the 1990s through the 2020s, they will be struck not by the evil of people but by the tragedy of our approaches to the problem. Instead of looking at the problem directly, we have persuaded ourselves into perverse ways of seeing the world. William Nordhaus and his fixation on the math of economics will join a list of figures like Shakespeare’s Oedipus or Arthur Miller’s Willy Loman.
In 2018, the Nobel committee awarded Nordhaus the Nobel Prize in Economics for his work on the economics of climate change. The committee stated that his many updates and improvements of the DICE model, dozens of articles, and four books had been an important, positive contribution. Viewed from within the field of economics, giving Nordhaus this award makes sense, as even now the vast majority of assessments of the cost of climate change build on his work. For example, just recently, the largest asset manager in the world commissioned an economic research firm to estimate the impact of climate change on the US economy. The firm’s report explains: “We assume the structure of the US economy remains constant over time, to isolate the impact of changes in the climate.” Yup. To measure how climate change will affect the US economy, we just need to assume that the structure of the economy remains constant through the year 2100.
Actually, that’s not all they assume. Here are a few other things that are arbitrarily fixed so that their DICE-y model can produce a dollar estimate of the impact of climate change on GDP:
- The industry mix of every county in the US
- The population of every county
- The availability of capital in every county
- The elasticity of demand and supply to changes in temperature, drought, rainfall, and flooding. In plain language: Industrial and agricultural output and consumer demand will react to unprecedented weather perfectly proportionately to the way they reacted to less severe weather in the past.
The above is not a comprehensive list, as the economists who wrote this assume the US is unaffected by events like devastating droughts in Mexico and South America. American agriculture will suffer, but, exactly as Nordhaus stated in a 1991 paper that unironically riffed on Hamlet (“To Slow or Not to Slow: The Economics of the Greenhouse Effect”), agriculture is only 3% of GDP, and food will come from somewhere.
The people who produced this research are, like Nordhaus himself, passionate about helping people understand climate change. They really do care. It’s just that the tool they insist on using is utterly ill-suited to the task. Like the hero in a tragedy, they are doing what made them successful in a setting that will lead to a terrible end.
Each Nobel recipient gives a Nobel lecture. Nordhaus’s is a tragic monologue. He starts with his original claim that climate change is just another topic for economics, along with portfolio theory for asset allocation and growth theory. He then says this:
Technological change raised humans out of Stone Age living standards. Climate change threatens, in the most extreme scenarios, to return us economically whence we came. Humans clearly have succeeded in harnessing new technologies. But humans are clearly failing, so far, to address climate change.
I begin with the fundamental problem posed by climate change—that it is a public good or externality. Such activities are ones whose costs or benefits spill outside the market and are not captured in market prices. These include positive spillovers like new knowledge and negative spillovers like pollution.
Global warming is the most significant of all environmental externalities. It menaces our planet and looms over our future like a Colossus (see Figure 1 from Goya). It is particularly pernicious because it involves so many activities of daily life, affects the entire planet, does so for decades and even centuries, and, most of all, because none of us acting individually can do anything to slow the changes.
Here Nordhaus shows the audience Goya’s painting Colossus:
He starts this lecture with the specter of returning to the Stone Age and a terrifying giant from which animals and people are fleeing in all directions. He isn’t using numbers, but vivid imagery, like a captivating diorama. By the third page of the speech, the feeling of lament is palpable. Things are not going well. But Nordhaus is going to stick to his task and tell us why he did what he did. To do that, he needs to explain his math.
My teacher, mentor, and co-author Paul Samuelson—the first American Nobel laureate in economics—was responsible for the introduction of mathematics into economics. His view was that mathematics is necessary if we are to build coherent and consistent models of complex phenomena. That point was as much a part of my brain as the English language. Indeed, as J.W. Gibbs stated, “Mathematics is language.”
What follows is tragic. He has realized that the ideal prescription he and Schelling offer in 1983 and what he repeats in the 1990s—lowering the temperature with a magical, benign, cheap technology—is dangerous:
[G]eoengineering is dangerous. It is untested, will not offset climate change equally in all regions, will not deal with ocean carbonization, and will have major complications for international cooperation. To me, geoengineering resembles what doctors call “salvage therapy”—a potentially dangerous treatment to be used when all else fails. Doctors prescribe salvage therapy for people who are very ill and when less dangerous treatments are not available. No responsible doctor would prescribe salvage therapy for a patient who has just been diagnosed with the early stage of a treatable illness.
He has also realized the difficulty of simply taking the carbon out of the atmosphere:
Carbon removal is, in principle, a highly attractive option. It is running combustion in reverse. While it is conceptually useful, we have no technologies that can remove 200 or 400 or 1,000 billion tons of CO2 from the atmosphere at a reasonable cost. This might happen, but it has not happened yet, and it seems unwise to bank on it.
His use of “seems unwise to bank on it” would have been so much more useful and possibly led to a very different world if he had used it 40 years earlier.
Unfortunately, we thus arrive at the option he has dreaded and wrestled with for more than 30 years, reducing our carbon emissions:
So that leaves abatement as the only realistic option to deal with climate change. Unfortunately, this approach is an expensive option. Energy modelers have made mountains of estimates of costs…These estimates come from a multi-model study that examines the costs of reducing emissions for different levels of reduction. The models differ on many dimensions, such as resources, demand, growth, and the role of renewables…The average cost is slightly above 1% of output for a 50% reduction and 3.5% of output for zero emissions.
So for about 1% of GDP, we could halve carbon emissions, and for about 3% of GDP, we could stabilize the atmosphere. I think folks running from the Colossus would take that deal. I wonder if it occurred to him to consider that we spend 10 times that on persuasion.
From here, this speech is brutally sad. It’s all about how hard a problem climate change is when viewed through a purely economic lens. It’s a problem of the commons, it’s a free-rider problem, it’s got uncertain damages, numbers don’t count human suffering, on and on. And yet he keeps his insistence that this has to be a cost-benefit analysis. At one point, he says the key thing that has plagued all of his work by addressing a critique:
A deeper critique is that damage functions monetize all human and non-human activities, which is correct…The economists’ response is usually that we attempt to put all costs and benefits in a common metric so that we can balance the losses in one area with losses in others.
It’s a great Freudian/Oedipal slip: The framework is cost-benefit analysis, and in his earliest work, he used that language despite the lack of evidence of benefits. Now he says, “We can balance the losses in one area with losses in others.” It turns out that climate change isn’t good for some and bad for others. It isn’t a positive with some negatives. So why keep at it? Why use these made-up numbers? At the end of this paragraph, he defends his legacy: “As Keynes is reputed to have said, it is better to be vaguely right than precisely wrong.”
I agree. It is better to be vaguely right. But the entire “how much will climate change cost?” literature used tons of math and even more unrealistic assumptions to generate precise numbers. It’s what he won the prize for. It’s also what helped convince economists and policymakers that it just wasn’t worth the price. What’s even more maddening is that Nordhaus’s integrated models, the DICE he rolls, take models of the actual climate that have been extraordinarily right and turn them into mathematical estimates of economic costs that are precisely wrong—and whose wrongness literally appears in the small print of every single one of the papers published in this vein.
At the end of the speech, our tragic hero seems to know his models have led us into harder choices. But the audience is looking to him for direction. He is the laureate. And so he offers new guidance:
If climate change is the ultimate challenge, what steps can individuals and countries take today? There is no simple answer to this complex phenomenon, but here are four specific goals to focus on.
There are no easy strategies, no easy answers, no way of avoiding the complexity. But after decade after decade of building mathematical models, he finally gets it. The most important goal is to actually get people to learn about climate change and “to understand and accept the gravity of the impacts of global warming on the human and natural world.”
His second step is to do the expensive thing and put a price on carbon. The third is to create institutions that bind nations together to enforce that cost. And the fourth is that governments need to subsidize clean energy. After 40 years of explaining why the expensive option is unattractive, it’s the option we are left with.
The most important thing, the thing that he did the absolute worst job of, the thing that he should never have used his models to do, is the only inexpensive part of this, and it’s the only thing that has any chance of convincing people to do the other steps: persuasion. We need to understand what’s coming and, if the future looks like one we don’t want, we need to persuade ourselves and one another to act.
Unconventional wisdom
Carl Sagan worried about this very problem. He didn’t specifically know that Facebook, Instagram, Twitter, YouTube, Google, PowerPoint, Office 365, LinkedIn, TikTok, and all of Amazon’s ads would chase us around the internet, finding algorithmic ways to persuade us. But he worried that we would lose touch with physical reality. In the same book in which he says there are no dumb questions, he says this:
I have a foreboding of an America in my children’s or grandchildren’s time—when the United States is a service and information economy; when nearly all the key manufacturing industries have slipped away to other countries; when awesome technological powers are in the hands of a very few, and no one representing the public interest can even grasp the issues; when the people have lost the ability to set their own agendas or knowledgeably question those in authority; when…our critical faculties in decline, unable to distinguish between what feels good and what's true, we slide, almost without noticing, back into superstition and darkness... The dumbing down of America is most evident in the slow decay of substantive content in the enormously influential media, the 30-second sound bites (now down to 10 seconds or less), lowest common denominator programming, credulous presentations on pseudoscience and superstition, but especially a kind of celebration of ignorance.
Spooky words from 40 years ago.
I have now worked on climate change for more than a decade, and the only thing I have seen that helps people engage productively in their own professions, in their own institutions, and in their own lives and relationships is showing them how climate change will actually affect the things they care about. Not by using metaphors like asteroids or monetary terms like percentages of GDP, but in actual, physical terms. This isn’t accomplished by a 10-second video. It’s accomplished in settings where people take the time to pay attention and to do what’s sometimes called elaboration.
If I tell you that word is going around among farmers that no one in their right mind would plant a new peach, pecan, or pear tree anywhere in the world (this is indeed happening), that might spark something in you. You might think about other things that you care about that are imperiled. You might wonder how it would feel to live in a world in which you know that billions of people are suffering excruciating heat, and then you might wonder how your own children will deal with that knowledge and those feelings if they have the good fortune not to be the ones suffering the most. And then, when you’ve started to visualize and understand the world you are implicitly choosing for yourself and others, you might be willing to pay some costs.
My colleagues and I do this work because we can see that it works. It perplexes the philanthropists who want to see data that proves the cost-benefit of strategies before they fund them. It frustrates investors who simply want to know what numbers to put in their spreadsheets. And yet, it continues to illuminate important things that matter, even in the economy.
Back in 2019, I gave a speech at a hedge fund conference about why and how insurance would disappear in Florida. I knew that no economic model of the impacts of climate change includes an insurance market, a banking sector, or municipal bonds. Even today, no one knows how much this will all cost, but it’s becoming increasingly clear that there is no way to balance losses in one area with losses in another. And my colleagues at Probable Futures and I keep getting invited by banks, insurers, consulting companies, governments, and garden clubs to speak to their leaders, their boards, and their clients. Our work is a fixture in executive education at Harvard Business School. Once we help people envision the future in climate terms, they can work on translating it into their domain and can start adapting to limit the novel risks.
The economist in me also knows something that Nordhaus only implicitly acknowledges at the very end: that working to inform and persuade ourselves and one another is the most cost-effective way to address climate change. As he says in the conclusion to his speech, “Those who understand the issue must speak up.” You can do this. It doesn’t cost a thing. And we made the Probable Futures maps and explainers free so that you can educate yourself without spending a dollar. It doesn’t count in GDP, but we think it counts. If you do too, we would welcome your financial support.
Cosmic drama
Carl Sagan’s early research concluded that greenhouse gases on Venus made the planet an uninhabitable desert wasteland. This was later confirmed by probes sent to the planet’s surface. Over the course of his career, he became increasingly interested in the puzzle of why there was no evidence of intelligent life on other planets. One possibility was that intelligent, powerful species were prone to destruction or were unable to control their powers. He knew that we could wreck our planet, and he worried that we didn’t appreciate how special our world was.
But instead of simply lamenting the lack of good, entertaining, persuasive information about the cosmos, he created a public, ad-free television show about the universe called Cosmos: A Personal Voyage. The show was a 13-hour educational adventure, and not only was it seen by perhaps half of all Americans, but it was broadcasted in 60 countries, and (according to the internet) was watched by more than 500 million people. That means that more than 10% of people on Earth spent time learning about the universe and their place in it, just when economists started telling people that saving it would be a bit expensive to keep it so special. It’s hard not to wonder how different things would be today if Thomas Schelling and William Nordhaus had asked Carl Sagan for help.
Today is the equinox, so everywhere on earth, the day is split evenly between sunrise and sunset. When I started writing these essays in 2020, I chose to publish them on these days, assuming that the spinning of the planet and its rotation around the sun would remain constant as the climate changed. It turns out I was wrong. The warming atmosphere is causing glaciers to shrink, and as humans pull more and more water from aquifers, the distribution of weight around the planet is shifting. We know this because of excellent research from NASA:
In recent decades, the faster melting of ice sheets has shifted mass from the poles toward the equatorial ocean. This flattening causes Earth to decelerate and the day to lengthen, similar to when an ice skater lowers and spreads their arms to slow a spin.
The authors noticed an uptick just after 2000 in how fast the day was lengthening, a change closely correlated with independent observations of the flattening.
“In barely 100 years, human beings have altered the climate system to such a degree that we’re seeing the impact on the very way the planet spins.”
We are in a battle of persuasion. Felicitous speech acts and viral videos are making reality harder to see as the natural world shifts dangerously. We live in a world in which reading more than a few words counts as extraordinary. I know many people will react with TL;DR (for those who don’t know, that’s slang for “too long; didn’t read”), so I sincerely thank you for reading this. I hope you found it persuasive. I also know that it didn’t count toward GDP, but I hope you found some value in it. (And yes, I will be posting this on LinkedIn.)
Onward,
Spencer