“Weitzman’s fat tail, with 10% chance of climate sensitivities out beyond 10C are circa 2007 (AR5); these extreme values have been pretty much debunked by the AR5 (not to mention Nic Lewis’ recent work…. Jerry Taylor’s argument for a carbon tax doesn’t really hold up.” (Judith Curry, below)
In her May 2015 piece, “What Would It Take to Convince You About Global Warming?,” Judith Curry tackles the “fat tails” argument for pricing carbon dioxide (CO2) emissions. She also considers Jerry Taylor’s argument for his conversion. (Taylor said: “… as each rebuttal was issued to Weitzman, they were just shredded. And then Litterman comes along and marries that analysis to the financial markets…. So my position fundamentally switched at that point.”))
Curry works from the IPCC consensus to question fat-tails as a basis for policy activism.…
Continue Reading[Editor Note: Robert Murphy’s 2009 views on the Andrew Weitzman “fat tails” argument for pricing carbon dioxide were presented yesterday. Today’s post shares Murphy’s review in 2016 of the same issue, part of his coauthored Policy Analysis (No. 801), “The Case Against a U.S. Carbon Tax,” with Patrick Michaels and Paul Knappenberger. ]
“Who would buy such an insurance policy?”
“Fat Tails” and Carbon Taxes as Insurance?
We note that the leaders in the pro-carbon tax camp are abandoning traditional cost-benefit analysis, claiming its use is inappropriate in the context of climate change. One reason given for this is concern over “fat tails”—concern that climate change could result in damages far greater than what is currently considered likely. Worries about fat tails lead some carbon tax proponents, like Harvard economist Martin Weitzman, to argue that, instead of treating a carbon tax as a policy response to a given (and known) negative externality, it should be considered a form of insurance pertaining to a catastrophe that might happen but with unknown likelihood.…
Continue Reading[Editor Note: This reprint of a February 2009 post by Robert Murphy at MasterResource is back in play regarding the self-styled conversion of Jerry Taylor from skeptic to climate alarmist. Taylor, a principal at MasterResource at the time, was well aware of the Martin Weitzman argument (below) but claims he was introduced to and converted by it years later.]
The funny thing about carbon pricing is that even if you take the latest IPCC report as gospel, and even if you assume all of the governments around the world implement a perfectly efficient carbon tax, even so the “efficient” carbon tax ends up being fairly low for a few decades, and then it ramps up as atmospheric concentrations increase. (See William Nordhaus’s new book treatment of his “DICE” model for an excellent exposition.) …
Continue Reading