Saturday, 27 June 2009

Big Issues like global warming and systemic meltdowns - no big deal! - in fact no deal

I would strongly recommend a read of this article by Mike Rorty which tackles the delusional thinking about technocratic solutions to global warming - just one of the "Big Issues" we face.

That said, the thing that worries me about the Cost-Benefit Analysis (CBA) approach to this issue is that there is always an implicit “do-over” cost in CBA. If we start a marketing campaign, hire a new team, or build a factory we do a CBA. If it turns out wrong, we simply stop the campaign, lay off the new team, or dynamite the factory. We eat our sunk costs and are back at square one. Sometimes this is costless, sometimes you have to pay for the dynamite. Indeed estimating the cost of this metaphoric dynamite should be high on the list of the CBA.

Now if 100 years from now, we want to “do-over”, how much will it cost to ‘dynamite’ the previous 100 years of warming? How much of GDP will we have to spend to get back an additional 10-20% of biodiversity?

I have also included a comment of my own on this matter (which was left at Mike Rorty's site), and it touches on a theme which is interwoven through a lot of my recent reflections on the financial crisis and the absurdly complacent manner in which the financial elite seem to believe that "normal service has been resumed."
How much would it cost to put the toothpaste back in the tube after it has been squeezed dry?
Steady loss of bio-diversity is irreversible – there is no basis for even trying to do a CBA on restoring this.
All very worrying.
Jut to show how wrong-headed many technocrats can be on related issues there was a blog article recently that suggested markets need to start “pricing in” the “cost of a systemic meltdown”. Presumably the notion that such a thing can be quantified gives some the illusion that it can then be “dealt with”.
The grand dis-illusion which is coming is that there are no deals to be done to take care of these important crises.

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