People, Science and Society: the Challenge of Climate Change - The BA Presidential Address to the Festival of Science in Norwich (4 September 2006)
Addressing you tonight has a special poignancy for me, because it is 35 years almost to the day that my father, Alec Cairncross, delivered his Presidential address at the University of Wales. He began like this: “For many years it has been the practice of the British Association to call on a natural scientist to deliver this address. No professional economist has ever done so before, and no one with any claim to be regarded as a social scientist has done so since 1935, when Lord Stamp spoke on ‘The Impact of Science upon Society’.” My father’s remarks had a modest effect. I notice that, since 1971, three more social scientists have spoken here: Charles Carter, Claus Moser and Howard Newby. So the pace is picking up. But it remains the case that scientists and social scientists are not good at working together. If we are to solve the biggest problems now facing humanity, that needs to change.
I want to set much of my speech tonight in the context of climate change. This may turn out to be one of the biggest problems facing humanity. It also happens to be an area where this university has done some excellent research. And it is one that calls particularly for collaborative work between natural scientists and social scientists. But in a moment, I’ll explore the difficulty that those two groups often have in working together, the way that some areas of social science are changing, and how that may affect this uneasy relationship. In the central part of my speech, I want to talk about five special questions that make it especially hard to tackle climate change, and to look at how social scientists can help. And then I have a coda: an issue that I care passionately about, which I will share with you at the end of my speech.
Let me start with the relationship between natural and social science. It is not an easy one, for all sorts of reasons. Good interdisciplinary research is always hard to undertake. Young academics see it as a dead-end for promotion. Research Councils find it harder than they should to support. As Chair of the Economic and Social Research Council, I have seen these problems at close quarters. I have also noticed that social scientists sometimes suffer a sense of inferiority – partly because their work commands smaller budgets than that of – say – particle physicists. They also often feel excluded from discussions where they could promote effective policy interventions.
I think all this is starting to change. One of the many admirable achievements of Ian Diamond, the Chief Executive of the ESRC, has been to push interdisciplinary work further up the agenda. He has also, through Research Councils UK, the umbrella body for the research councils, ensured that scientists are more aware than ever before of the benefits of working jointly with social scientists. In the field of climate change in particular, there is now a strong commitment to fund joint research.
The BA has also encouraged collaboration. This year, we timed National Science Week, which the BA co-ordinates, to coincide with the ESRC’s Social Science Week. That allowed the two organisations to work together, notably on activities around the public understanding of climate change. There will be more opportunities for such cross-fertilisation at this Festival, including on Wednesday, when the economists devote their session to climate change.
However, one of the recurrent complaints of scientists is that social science is an altogether woollier activity than physics or chemistry or biology. Natural scientists conduct experiments and make predictions with a precision unavailable in the social sciences. It is clearly true that the very complexity of human behaviour means that it will never achieve the predictability of molecules or materials or even simple life forms. Indeed, when I was ruminating on this address, Sir Roland Jackson, chief executive of the British Association, asked me: “If social-science input is not in some sense predictive, then why is it useful in policy determination?”
Undoubtedly, social scientists have failed to predict some of the most important changes of my lifetime. Take what is probably the most astonishing social change ever to occur, and one that will reshape the coming century. The past 50 years have witnessed an astonishing and global decline in fertility. Women are having fewer children than long-term replacement of the population requires, not just in the rich world, but in most of East Asia and most of South America; in Catholic Brazil, in Sunni Muslim Turkey and probably even in Shiite Iran. Indeed, this century looks likely to be the first in modern history when the world’s population stops growing and perhaps starts to fall.
Nobody predicted that extraordinary change, as far as I know: the result of the combination of better contraception and more female employment and education. But there are other areas where social science is pretty good at prediction. Raise the cost of going to university, leaving everything else unchanged, and student applications will fall. Hold down the pay of university lecturers, relative to other professions, and fewer people will choose university teaching as a career. Reward universities for taking more students, and the intake will rise – although the average quality may decline. All this may sound like common sense – but that partly reflects the extent to which basic economic principles have become common knowledge.
Moreover, in economics, the branch of social science I know best, some recent developments are altering the scope of the discipline in novel and important ways, some of which increase the resemblance between social sciences and other sciences.
For instance, economists make increasingly inventive use of quantitative techniques. Some of these are derived from game theory, and some of them quite new. They benefit from high-performance computing and from ever more complex mathematical models, which allow a greater understanding of ways to estimate error when making predictions of human behaviour.
Economists also collaborate with a wider range of disciplines than they used to do – with psychologists, for instance, who understand better how to phrase the questions on which sample evidence may be based, or with neuroscientists, who have an ever more intimate knowledge of the workings of the mind. The result has been to allow a tremendous expansion in the territory available for exploration.
Thus, advances in the understanding of biology and of the working of the brain not only give sociologists and psychologists a new picture of how people think and feel. They also allow economists to understand more about how we take economic decisions. These experiments have already established that the prospect of risking a financial loss triggers a response in a different part of the brain from the prospect of achieving a financial gain. And decisions involving short-term rewards occur in an area associated with emotion, whereas decisions about long-term rewards happen in a part associated with reason. Such experiments seem to suggest that people are not quite the rational beings that economists still tend to assume, carefully weighing costs and benefits. Many of you may have suspected that all along!
Economists increasingly go off-piste, applying microeconomics to questions about areas of the world that would have been largely ignored by earlier generations. For one example, read Freakonomics, by Stephen Levitt and Stephen Dubner, a book that explores (among other things) the incentives to lie created by Internet dating (men generally exaggerate their incomes, women the blondness of their hair). For another example, look at Tim Harford’s new television series, which kicked off with a programme on the economics of love. Suddenly microeconomics is both hot and pop.
One reason for this is that economists are discovering new opportunities for experiments. Some of these spring from the realisation that there is lots of scope, especially in the United States, to watch what happens when a similar policy intervention is rolled out at different times and in slightly different ways in different states. Such experiments allowed Stephen Levitt and Stephen Dubner to examine links between the legalisation of abortion and the subsequent decline in rates of teenage crime. Their argument was that legalising abortion prevented the births of unwanted children to inept mothers – the sort of youngsters who, a few years later, would have gone on to commit crimes.
Other experiments observe how real people take decisions under the nearest thing available to laboratory conditions. My own disheartening favourite of this genre is the work that has been done in the United States on the reluctance of women to compete as fiercely as men in the job market or to negotiate as ferociously for higher pay. An experiment at Carnegie Mellon University set male and female students to play a game in exchange for a promised payment. At the end, actors pretending to be experimenters offered the students less than had originally been agreed. Astonishingly, the number of men who demanded the original amount was nine times higher than the number of women. Another experiment by a group at the University of Chicago’s business school got children to run timed races. Girls racing alone ran no faster than girls racing against girls – or against boys. But boys racing against other boys ran faster than they did when running alone. And you can all guess what happened when boys raced against girls….
The bottom line in all this is that social scientists are moving forward in their understanding of human behaviour and of the impact of interventions, and moving at a pace that some natural scientists may not fully appreciate. They will never be able to predict the impact of a policy change with the precision and reliability with which a physicist can foretell the behaviour of a material or a chemist the movement of a molecule. But they are dealing more effectively with the limits of rationality, the understanding of uncertainty and the huge new set of problems created by globalisation.
All these problems – plus immense scientific uncertainties – arise in the case of global warming, the issue to which I now want to turn. I confess to having been sceptical about climate change for a long period. I am old enough to recall the articles in the 1970s about the coming of a new Ice Age. It is important to realise that climate change is a probability – albeit an increasingly convincing and alarming probability – and not a demonstrable certainty. There are still scientists who are not cranks but who are sceptical of the work done by the Intergovernmental Panel on Climate Change. Such sceptics sometimes complain that research money now bets heavily on the IPCC thesis and ignores those who want to test contradictory views. Indeed, this point worried the House of Lords Select Committee on Economic Affairs, which published an excellent report on the economics of climate change a year ago.
But in this past year, I have read enough to make me think that something important and irreversible may indeed be happening. It is not just that the world’s ten warmest years since the 1870s have all occurred since 1994, with 2005 the second warmest - and July this year the warmest month ever recorded in Britain. Sea level is perceptibly rising; many glaciers are retreating (although some are advancing). Moreover, there seems strong reason to believe that human activity is the main cause, largely through burning fossil fuels, but also through changes in land-use such as deforestation and animal farming. Carbon-dioxide levels in the atmosphere are now higher than at any time in at least the past 650,000 years. And rising: although carbon-dioxide emissions per head have fallen in every decade since 1970, the world’s total output is accelerating with the rapid industrialisation of countries such as China, India and Brazil. The inexorable arithmetic of population growth will drive it further. By the middle of this century, without a sharp change in the relationship between energy use and economic growth, the upshot is likely to be a doubling of concentrations of greenhouse gases, relative to the level in 1750.
Here is a problem that tests the limits of economics. Sir Nicholas Stern, a government economist who has been conducting an important review of climate change policy, has said, “There is very little economics left out here. There is growth, development, international, institutional, there is information, there is environmental and the whole area of public economics….you have got to bring all the economic tools that are available in trying to analyse this story.”
The issues raised by climate change are intractable in at least five different ways. These are the level of uncertainty and the probability of irreversibility; the length of time scale; the central importance of energy in our lives; and finally, the international dimension. Let me say something about each in turn.
First, uncertainty. No one has categorised it better than Donald Rumsfeld in 2003:
“As we know, there are known knowns; there are the things we know we know.
We also know there are known unknowns; that is to say, we know there are some things we know we do not know. But there are also unknown unknowns - the ones we don’t know we don’t know.”
By far the most important of the known unknowns is the possibility of some extreme and profoundly destructive event. The scale of this risk is the key question we have to answer before we know what measures we should take. For, if warming occurs at a steady pace, we can adjust. It may not be easy, and it will change the nature of geography. It may obliterate a country or two. But that is a different matter from the risk that climate change may spin far beyond human control. We might face a change in the pattern of ocean currents, which would suddenly lower temperatures in Northern Europe; or a melting of permafrost that might release large quantities of global-warming methane into the atmosphere; or a shift in the pattern of India’s monsoon. Any one of these would be a catastrophe on a terrifying scale. Such frightening prospects are akin to the risk of cataclysmic war. The risks clearly rise as temperatures do. They thus place an obligation on governments to err on the side of taking strong action.
Secondly, with uncertainty comes the prospect of irreversibility. The gases given off by these human activities do not decay rapidly, but linger in the atmosphere for long periods of time. So, even if the rate of growth of emissions of carbon dioxide, the main greenhouse gas, were to flatten out tomorrow, the concentration of the gas in the atmosphere would continue to rise. To stabilise it would require an immediate and permanent fall in emissions of about 60%. That will not happen. So there is no quick fix.
A third and related point is the time scale. Climate change will affect our generation far less than our grandchildren, and their grandchildren beyond them. Groucho Marx once asked, “Why should I care about posterity? What’s posterity ever done for me?” In fact, most of us care about posterity – and parents make big sacrifices on behalf of their children. But the prospect of climate change tests to the limits the extent to which people today will give up quality of life for the benefit of future generations. It will also involve a perverse sort of redistribution. For global poverty is likely to diminish as the world economy continues to expand. So being fair to future generations is partly about whether to put the needs of today’s poor ahead of tomorrow’s less poor.
These three aspects – risk of catastrophe, irreversibility and time scale – make it difficult to talk in conventional economic terms of costs and benefits. Yet we need some sense of what we should pay to avoid the possibility of a very big catastrophe that will occur – if at all – after our children are dead and gone. For clearly, this is not a priority that should override everything else – including keeping today’s generation alive. We need to be sure – and we are not yet sure – that it is wiser to spend money on curbing emissions than on saving lives in other ways.
The importance of this decision is underlined by the fourth characteristic that makes climate change so intractable: our living standards are inextricably related to our use of energy, which has risen almost in line with economic growth. There is no way to tackle climate change without substantially reducing our demands on our main source of energy, fossil fuel. Of course, there are alternatives. We can increase energy from renewables such as wind and solar power. But these account for only about 2% of world electricity generation today – whereas coal accounts for about 40%. Another option is nuclear power. We need more of it, and not just in Britain. But it is much slower to build a nuclear plant than a coal-fired one, and the fast-growing countries of Asia can’t afford to wait. Besides, nuclear power carries risks and costs of its own.
Coal will dominate energy production, especially in China and India, for the foreseeable future. Carbon capture and storage is going to be essential here, but the technology has hardly began to be used commercially, and may always be an add-on cost, making it unattractive without government intervention of some sort.
Changing the fuels used for transport may be even harder. Removing a tonne of carbon from a stationary fuel source currently costs roughly one-tenth as much as removing it from a mobile one. What about biofuels? Fine, but growing them has other environmental consequences for land and water use. They need to be part of the solution, but not merely in order to give governments a new excuse to subsidise farmers.
Energy conservation, rigorously applied, could reduce the prospective rise in emissions more sharply than any other known technology. But the lags are long: many of the technologies we use today were invented a century ago. Decisions taken now, on buildings, town planning, transport design and power generation, will determine our ability to restrain climate change half a century hence.
The bottom line here is that, with present technologies, no combination of existing energy sources can conceivably bring about the reductions in energy use that we need – or at least, not without a disruption that is politically unimaginable. The careful analysis of the International Energy Agency concludes that, even if we applied to their utmost limits all the emission-reducing technologies we already have, emissions would still continue to rise. This is a strong argument for the sort of hefty investment in clean technologies that the United States has embarked upon and that Lord Rees of the Royal Society has suggested for Britain.
Fifth, this is an international problem – not a national one. Climate change can be tackled only through international agreement. But one of the few certainties is that it will affect different countries in different ways. That will make it particularly hard to introduce an effective international treaty to stem greenhouse-gas emissions. Agreement will be possible only if all participants perceive that the benefits exceed the costs. It’s a point that Scott Barrett will be making when he speaks here on Wednesday.
The trouble is, whereas the damage done by climate change could be huge, the costs of taking action to avoid it will definitely be enormous. Most people in most countries have not yet grasped just how expensive effective measures may be. Just pause to reflect on the fact that oil today costs more than $70 a barrel – the equivalent of a tax that no politician would have dared to suggest when Kyoto was negotiated – and yet our roads are still crammed with cars, and our skies with planes. How would voters feel about price rises large enough to provide a real incentive for behaviour to change?
Moreover, some of the places that grow warmer may be delighted. Ironically, those parts of the planet that may become uninhabitable are mostly poor; those parts that gain or suffer less are relatively rich. Climate change will be harsh for India and sub-Saharan Africa. But a sunny Siberia might delight Russia, and Canadians might also welcome a warmer winter. Both countries – a further irony - are already large producers of fossil fuels. If swathes of Arctic ice melt, it will be easier to extract the oil and gas reserves – perhaps a quarter of the world’s remaining buried stocks, much of them on Russian territory.
For other countries, a moderate rise in temperature will carry costs that seem modest compared with the costs of tackling climate change. Take the United States. It is wealthy enough to build flood defences against another Katrina and has a vast landmass, including Alaska, three times the size of France, to move people away from overheated areas. Or take China. Its densely settled land will probably be harmed by climate change. But, at least for the next half century, it has much more to gain from exploiting its huge reserves of coal to raise its output of energy. China adds the equivalent of Britain’s entire power-generating capacity in a year – and most of that addition is coal-fired. China cares about energy pollution – but about dirty air, not global warming.
So striking a global deal will be difficult. It means discouraging free riders from benefiting from the restraint of others. It also means persuading this generation to accept sacrifices on behalf of posterity; and persuading countries that will gain from climate change or lose little to take action on behalf not of their own grandchildren but of the descendants of people in other nations. It is not a question of persuading America to sign up to Kyoto – it won’t – or even of extending that largely ineffectual agreement. It will take extraordinary diplomacy and ingenious mixtures of threats and rewards to persuade the main protagonists to reach agreement.
Faced with an issue of such immensity, what can social scientists do? There are two main tasks: they need to work out, first, what actions make most sense; and secondly, how to encourage them to happen.
What actions make most sense? Well, we can adapt to climate change, or we can try to slow it. In reality, we will do both. But getting the balance needs a better understanding of the cost of slowing emissions. Here, there is still huge scope for debate. And of course, the size of the bill depends partly on the pace at which technology changes, and partly on deciding what level of emissions to aim for.
Adaptation to climate change has had relatively little discussion. It sounds brutal: and indeed meaningless, if you live in Bangladesh. But we need to think now about policies that prepare for a hotter, drier world, especially in poorer countries. That may involve, for instance, developing new crops, constructing flood defences, setting different building regulations, or banning building close to sea level.
Adaptation policies have big advantages. They can be pursued at a national – indeed, at a local level – and so will involve far less complex international negotiation. They will require good public policies, but a great deal of adaptation will happen in any case, and largely through the private sector: no government mandate boosted sales of fans and air conditioning as temperatures soared this summer. Of course, there are important areas where no adaptation is possible – we cannot relocate the Amazon or insulate coral reefs – and so we need mitigation too. But the government could and should put in place an adaptation strategy right away.
As for policies to slow climate change, some will make sense anyway. We need to remove perverse incentives – coal subsidies, badly designed farm support and poorly defined logging permits are three examples. But broadly speaking, the technologies that will reduce our output of greenhouse gases are more expensive than those that they will replace. Of course, their cost will fall as they are more widely used. But the cost of dirty technologies may well fall too.
So governments need to intervene in the market to persuade people to use climate-friendly technologies. Such intervention also needs to signal to companies and universities that there is money to be made from innovations that cut greenhouse gas output. Innovation is usually a matter of serendipity, but the market can powerfully drive the way a new technology develops.
The second task for social scientists is to devise tools for encouraging sensible change. Governments can regulate, or they can influence prices. Economists don’t much like regulations such as standard-setting, because they easily become a policy of picking winners, and may have perverse results. The explosion in demand for gas-guzzling trucks and SUVs in the United States followed tough regulations on the fuel economy of the car fleet – light trucks didn’t count as cars. If instead the government had simply raising petrol taxes to European levels, cutting other taxes to match, Americans would long ago have switched to more fuel-efficient vehicles. Driving a Prius may not be very exciting – though the new Google sports car sounds like fun – but it is better than being dependent for fuel on the Middle East. However, some standards, if they are simple, clear and enduring, may accelerate change.
Influencing prices may mean higher taxes on fossil fuels or on carbon emissions, or it may come about through setting a ceiling on overall carbon emissions and then distributing permits to emit which can be bought and sold. Economists are still arguing over which approach is better. Much of the EU now has a jumble of both approaches, neither working very well. The infant market in trading carbon-emissions permits has given traders a roller-coaster ride, but it has at least turned the attention of big banks and bright bankers on to the need to build a system that is durable, credible and efficient.
Measures like these are more likely to work if people believe they are necessary. The British accepted food rationing during the Second World War – but rationing after the War was infuriating. So it will be immensely important to find ways to influence public opinion. That is already happening, even in the United States. Arnold Schwartzenegger, a Republican, must now be the greenest politician in the world. A film made by Al Gore, who may yet be the Democratic presidential candidate in 2008, has had huge impact. Hurricane Katrina and the loss of a large and prosperous city have shown Americans that meteorology can threaten even the world’s most powerful nation.
And, in one sense, the problem is a limited one. It would be enough to win an agreement between America, India, China and two or three more nations to take action and to impose tough trade sanctions on countries that did not. The costs of taking action are large but not unmanageable. The costs of failure may be immense.
Finally, since a soapbox like this is something I rarely enjoy, let me finish with one quite different thought. Is there a policy measure that would both improve the quality of all the sciences in this country, and increase public understanding of the global-warming debate? I believed there is, and it is called education. Since I moved from journalism into the academic world, I have been scandalised to discover what has happened to the teaching of maths and sciences in Britain’s maintained schools. Did you realise that, according to figures analysed by the Independent Schools Council, roughly 45% of A grades in A-level Maths, Chemistry, Biology and Physics and 58% of A grades in Economics come from independent schools? In each case, the proportion of A grades is considerably higher than the proportion of entries – and that gap has widened. Yet independent schools educate only 7% of Britain’s school children.
It is particularly important to raise the proportion of children taking A level maths. Without it, many doors slam shut. It’s hard to study economics at university satisfactorily if you do not have A level maths, and other social sciences increasingly require quantitative skills. You cannot properly understand risk, or probability, or judge many scientific debates if your maths skills are poor. Yet the numbers doing maths A levels have fallen under this government. Even with this year’s welcome and impressive improvement, there were still more than 10,000 fewer maths entrants than in 2001.
However, at least entries are now rising. If you ask economists how to reinforce this trend, they will answer in terms of incentives. A good maths A level is a good predictor of high lifetime earnings – but how many 16-year-olds understand this? Besides, the young discount the future at a high rate. So perhaps we need to experiment with a bounty of, say, £500 for every grade A maths A level taken in a maintained school – divided equally between the student and the class teachers – or a couple of extra UCAS points for each A grade. As scientists and social scientists we should care about this issue, and not just for the future health of our disciplines. An innumerate population is less likely to devise good solutions to climate change and a host of other environmental problems than one at home with mathematical and scientific concepts. We owe it to our grandchildren to educate our children properly.
Frances Cairncross
I want to set much of my speech tonight in the context of climate change. This may turn out to be one of the biggest problems facing humanity. It also happens to be an area where this university has done some excellent research. And it is one that calls particularly for collaborative work between natural scientists and social scientists. But in a moment, I’ll explore the difficulty that those two groups often have in working together, the way that some areas of social science are changing, and how that may affect this uneasy relationship. In the central part of my speech, I want to talk about five special questions that make it especially hard to tackle climate change, and to look at how social scientists can help. And then I have a coda: an issue that I care passionately about, which I will share with you at the end of my speech.
Let me start with the relationship between natural and social science. It is not an easy one, for all sorts of reasons. Good interdisciplinary research is always hard to undertake. Young academics see it as a dead-end for promotion. Research Councils find it harder than they should to support. As Chair of the Economic and Social Research Council, I have seen these problems at close quarters. I have also noticed that social scientists sometimes suffer a sense of inferiority – partly because their work commands smaller budgets than that of – say – particle physicists. They also often feel excluded from discussions where they could promote effective policy interventions.
I think all this is starting to change. One of the many admirable achievements of Ian Diamond, the Chief Executive of the ESRC, has been to push interdisciplinary work further up the agenda. He has also, through Research Councils UK, the umbrella body for the research councils, ensured that scientists are more aware than ever before of the benefits of working jointly with social scientists. In the field of climate change in particular, there is now a strong commitment to fund joint research.
The BA has also encouraged collaboration. This year, we timed National Science Week, which the BA co-ordinates, to coincide with the ESRC’s Social Science Week. That allowed the two organisations to work together, notably on activities around the public understanding of climate change. There will be more opportunities for such cross-fertilisation at this Festival, including on Wednesday, when the economists devote their session to climate change.
However, one of the recurrent complaints of scientists is that social science is an altogether woollier activity than physics or chemistry or biology. Natural scientists conduct experiments and make predictions with a precision unavailable in the social sciences. It is clearly true that the very complexity of human behaviour means that it will never achieve the predictability of molecules or materials or even simple life forms. Indeed, when I was ruminating on this address, Sir Roland Jackson, chief executive of the British Association, asked me: “If social-science input is not in some sense predictive, then why is it useful in policy determination?”
Undoubtedly, social scientists have failed to predict some of the most important changes of my lifetime. Take what is probably the most astonishing social change ever to occur, and one that will reshape the coming century. The past 50 years have witnessed an astonishing and global decline in fertility. Women are having fewer children than long-term replacement of the population requires, not just in the rich world, but in most of East Asia and most of South America; in Catholic Brazil, in Sunni Muslim Turkey and probably even in Shiite Iran. Indeed, this century looks likely to be the first in modern history when the world’s population stops growing and perhaps starts to fall.
Nobody predicted that extraordinary change, as far as I know: the result of the combination of better contraception and more female employment and education. But there are other areas where social science is pretty good at prediction. Raise the cost of going to university, leaving everything else unchanged, and student applications will fall. Hold down the pay of university lecturers, relative to other professions, and fewer people will choose university teaching as a career. Reward universities for taking more students, and the intake will rise – although the average quality may decline. All this may sound like common sense – but that partly reflects the extent to which basic economic principles have become common knowledge.
Moreover, in economics, the branch of social science I know best, some recent developments are altering the scope of the discipline in novel and important ways, some of which increase the resemblance between social sciences and other sciences.
For instance, economists make increasingly inventive use of quantitative techniques. Some of these are derived from game theory, and some of them quite new. They benefit from high-performance computing and from ever more complex mathematical models, which allow a greater understanding of ways to estimate error when making predictions of human behaviour.
Economists also collaborate with a wider range of disciplines than they used to do – with psychologists, for instance, who understand better how to phrase the questions on which sample evidence may be based, or with neuroscientists, who have an ever more intimate knowledge of the workings of the mind. The result has been to allow a tremendous expansion in the territory available for exploration.
Thus, advances in the understanding of biology and of the working of the brain not only give sociologists and psychologists a new picture of how people think and feel. They also allow economists to understand more about how we take economic decisions. These experiments have already established that the prospect of risking a financial loss triggers a response in a different part of the brain from the prospect of achieving a financial gain. And decisions involving short-term rewards occur in an area associated with emotion, whereas decisions about long-term rewards happen in a part associated with reason. Such experiments seem to suggest that people are not quite the rational beings that economists still tend to assume, carefully weighing costs and benefits. Many of you may have suspected that all along!
Economists increasingly go off-piste, applying microeconomics to questions about areas of the world that would have been largely ignored by earlier generations. For one example, read Freakonomics, by Stephen Levitt and Stephen Dubner, a book that explores (among other things) the incentives to lie created by Internet dating (men generally exaggerate their incomes, women the blondness of their hair). For another example, look at Tim Harford’s new television series, which kicked off with a programme on the economics of love. Suddenly microeconomics is both hot and pop.
One reason for this is that economists are discovering new opportunities for experiments. Some of these spring from the realisation that there is lots of scope, especially in the United States, to watch what happens when a similar policy intervention is rolled out at different times and in slightly different ways in different states. Such experiments allowed Stephen Levitt and Stephen Dubner to examine links between the legalisation of abortion and the subsequent decline in rates of teenage crime. Their argument was that legalising abortion prevented the births of unwanted children to inept mothers – the sort of youngsters who, a few years later, would have gone on to commit crimes.
Other experiments observe how real people take decisions under the nearest thing available to laboratory conditions. My own disheartening favourite of this genre is the work that has been done in the United States on the reluctance of women to compete as fiercely as men in the job market or to negotiate as ferociously for higher pay. An experiment at Carnegie Mellon University set male and female students to play a game in exchange for a promised payment. At the end, actors pretending to be experimenters offered the students less than had originally been agreed. Astonishingly, the number of men who demanded the original amount was nine times higher than the number of women. Another experiment by a group at the University of Chicago’s business school got children to run timed races. Girls racing alone ran no faster than girls racing against girls – or against boys. But boys racing against other boys ran faster than they did when running alone. And you can all guess what happened when boys raced against girls….
The bottom line in all this is that social scientists are moving forward in their understanding of human behaviour and of the impact of interventions, and moving at a pace that some natural scientists may not fully appreciate. They will never be able to predict the impact of a policy change with the precision and reliability with which a physicist can foretell the behaviour of a material or a chemist the movement of a molecule. But they are dealing more effectively with the limits of rationality, the understanding of uncertainty and the huge new set of problems created by globalisation.
All these problems – plus immense scientific uncertainties – arise in the case of global warming, the issue to which I now want to turn. I confess to having been sceptical about climate change for a long period. I am old enough to recall the articles in the 1970s about the coming of a new Ice Age. It is important to realise that climate change is a probability – albeit an increasingly convincing and alarming probability – and not a demonstrable certainty. There are still scientists who are not cranks but who are sceptical of the work done by the Intergovernmental Panel on Climate Change. Such sceptics sometimes complain that research money now bets heavily on the IPCC thesis and ignores those who want to test contradictory views. Indeed, this point worried the House of Lords Select Committee on Economic Affairs, which published an excellent report on the economics of climate change a year ago.
But in this past year, I have read enough to make me think that something important and irreversible may indeed be happening. It is not just that the world’s ten warmest years since the 1870s have all occurred since 1994, with 2005 the second warmest - and July this year the warmest month ever recorded in Britain. Sea level is perceptibly rising; many glaciers are retreating (although some are advancing). Moreover, there seems strong reason to believe that human activity is the main cause, largely through burning fossil fuels, but also through changes in land-use such as deforestation and animal farming. Carbon-dioxide levels in the atmosphere are now higher than at any time in at least the past 650,000 years. And rising: although carbon-dioxide emissions per head have fallen in every decade since 1970, the world’s total output is accelerating with the rapid industrialisation of countries such as China, India and Brazil. The inexorable arithmetic of population growth will drive it further. By the middle of this century, without a sharp change in the relationship between energy use and economic growth, the upshot is likely to be a doubling of concentrations of greenhouse gases, relative to the level in 1750.
Here is a problem that tests the limits of economics. Sir Nicholas Stern, a government economist who has been conducting an important review of climate change policy, has said, “There is very little economics left out here. There is growth, development, international, institutional, there is information, there is environmental and the whole area of public economics….you have got to bring all the economic tools that are available in trying to analyse this story.”
The issues raised by climate change are intractable in at least five different ways. These are the level of uncertainty and the probability of irreversibility; the length of time scale; the central importance of energy in our lives; and finally, the international dimension. Let me say something about each in turn.
First, uncertainty. No one has categorised it better than Donald Rumsfeld in 2003:
“As we know, there are known knowns; there are the things we know we know.
We also know there are known unknowns; that is to say, we know there are some things we know we do not know. But there are also unknown unknowns - the ones we don’t know we don’t know.”
By far the most important of the known unknowns is the possibility of some extreme and profoundly destructive event. The scale of this risk is the key question we have to answer before we know what measures we should take. For, if warming occurs at a steady pace, we can adjust. It may not be easy, and it will change the nature of geography. It may obliterate a country or two. But that is a different matter from the risk that climate change may spin far beyond human control. We might face a change in the pattern of ocean currents, which would suddenly lower temperatures in Northern Europe; or a melting of permafrost that might release large quantities of global-warming methane into the atmosphere; or a shift in the pattern of India’s monsoon. Any one of these would be a catastrophe on a terrifying scale. Such frightening prospects are akin to the risk of cataclysmic war. The risks clearly rise as temperatures do. They thus place an obligation on governments to err on the side of taking strong action.
Secondly, with uncertainty comes the prospect of irreversibility. The gases given off by these human activities do not decay rapidly, but linger in the atmosphere for long periods of time. So, even if the rate of growth of emissions of carbon dioxide, the main greenhouse gas, were to flatten out tomorrow, the concentration of the gas in the atmosphere would continue to rise. To stabilise it would require an immediate and permanent fall in emissions of about 60%. That will not happen. So there is no quick fix.
A third and related point is the time scale. Climate change will affect our generation far less than our grandchildren, and their grandchildren beyond them. Groucho Marx once asked, “Why should I care about posterity? What’s posterity ever done for me?” In fact, most of us care about posterity – and parents make big sacrifices on behalf of their children. But the prospect of climate change tests to the limits the extent to which people today will give up quality of life for the benefit of future generations. It will also involve a perverse sort of redistribution. For global poverty is likely to diminish as the world economy continues to expand. So being fair to future generations is partly about whether to put the needs of today’s poor ahead of tomorrow’s less poor.
These three aspects – risk of catastrophe, irreversibility and time scale – make it difficult to talk in conventional economic terms of costs and benefits. Yet we need some sense of what we should pay to avoid the possibility of a very big catastrophe that will occur – if at all – after our children are dead and gone. For clearly, this is not a priority that should override everything else – including keeping today’s generation alive. We need to be sure – and we are not yet sure – that it is wiser to spend money on curbing emissions than on saving lives in other ways.
The importance of this decision is underlined by the fourth characteristic that makes climate change so intractable: our living standards are inextricably related to our use of energy, which has risen almost in line with economic growth. There is no way to tackle climate change without substantially reducing our demands on our main source of energy, fossil fuel. Of course, there are alternatives. We can increase energy from renewables such as wind and solar power. But these account for only about 2% of world electricity generation today – whereas coal accounts for about 40%. Another option is nuclear power. We need more of it, and not just in Britain. But it is much slower to build a nuclear plant than a coal-fired one, and the fast-growing countries of Asia can’t afford to wait. Besides, nuclear power carries risks and costs of its own.
Coal will dominate energy production, especially in China and India, for the foreseeable future. Carbon capture and storage is going to be essential here, but the technology has hardly began to be used commercially, and may always be an add-on cost, making it unattractive without government intervention of some sort.
Changing the fuels used for transport may be even harder. Removing a tonne of carbon from a stationary fuel source currently costs roughly one-tenth as much as removing it from a mobile one. What about biofuels? Fine, but growing them has other environmental consequences for land and water use. They need to be part of the solution, but not merely in order to give governments a new excuse to subsidise farmers.
Energy conservation, rigorously applied, could reduce the prospective rise in emissions more sharply than any other known technology. But the lags are long: many of the technologies we use today were invented a century ago. Decisions taken now, on buildings, town planning, transport design and power generation, will determine our ability to restrain climate change half a century hence.
The bottom line here is that, with present technologies, no combination of existing energy sources can conceivably bring about the reductions in energy use that we need – or at least, not without a disruption that is politically unimaginable. The careful analysis of the International Energy Agency concludes that, even if we applied to their utmost limits all the emission-reducing technologies we already have, emissions would still continue to rise. This is a strong argument for the sort of hefty investment in clean technologies that the United States has embarked upon and that Lord Rees of the Royal Society has suggested for Britain.
Fifth, this is an international problem – not a national one. Climate change can be tackled only through international agreement. But one of the few certainties is that it will affect different countries in different ways. That will make it particularly hard to introduce an effective international treaty to stem greenhouse-gas emissions. Agreement will be possible only if all participants perceive that the benefits exceed the costs. It’s a point that Scott Barrett will be making when he speaks here on Wednesday.
The trouble is, whereas the damage done by climate change could be huge, the costs of taking action to avoid it will definitely be enormous. Most people in most countries have not yet grasped just how expensive effective measures may be. Just pause to reflect on the fact that oil today costs more than $70 a barrel – the equivalent of a tax that no politician would have dared to suggest when Kyoto was negotiated – and yet our roads are still crammed with cars, and our skies with planes. How would voters feel about price rises large enough to provide a real incentive for behaviour to change?
Moreover, some of the places that grow warmer may be delighted. Ironically, those parts of the planet that may become uninhabitable are mostly poor; those parts that gain or suffer less are relatively rich. Climate change will be harsh for India and sub-Saharan Africa. But a sunny Siberia might delight Russia, and Canadians might also welcome a warmer winter. Both countries – a further irony - are already large producers of fossil fuels. If swathes of Arctic ice melt, it will be easier to extract the oil and gas reserves – perhaps a quarter of the world’s remaining buried stocks, much of them on Russian territory.
For other countries, a moderate rise in temperature will carry costs that seem modest compared with the costs of tackling climate change. Take the United States. It is wealthy enough to build flood defences against another Katrina and has a vast landmass, including Alaska, three times the size of France, to move people away from overheated areas. Or take China. Its densely settled land will probably be harmed by climate change. But, at least for the next half century, it has much more to gain from exploiting its huge reserves of coal to raise its output of energy. China adds the equivalent of Britain’s entire power-generating capacity in a year – and most of that addition is coal-fired. China cares about energy pollution – but about dirty air, not global warming.
So striking a global deal will be difficult. It means discouraging free riders from benefiting from the restraint of others. It also means persuading this generation to accept sacrifices on behalf of posterity; and persuading countries that will gain from climate change or lose little to take action on behalf not of their own grandchildren but of the descendants of people in other nations. It is not a question of persuading America to sign up to Kyoto – it won’t – or even of extending that largely ineffectual agreement. It will take extraordinary diplomacy and ingenious mixtures of threats and rewards to persuade the main protagonists to reach agreement.
Faced with an issue of such immensity, what can social scientists do? There are two main tasks: they need to work out, first, what actions make most sense; and secondly, how to encourage them to happen.
What actions make most sense? Well, we can adapt to climate change, or we can try to slow it. In reality, we will do both. But getting the balance needs a better understanding of the cost of slowing emissions. Here, there is still huge scope for debate. And of course, the size of the bill depends partly on the pace at which technology changes, and partly on deciding what level of emissions to aim for.
Adaptation to climate change has had relatively little discussion. It sounds brutal: and indeed meaningless, if you live in Bangladesh. But we need to think now about policies that prepare for a hotter, drier world, especially in poorer countries. That may involve, for instance, developing new crops, constructing flood defences, setting different building regulations, or banning building close to sea level.
Adaptation policies have big advantages. They can be pursued at a national – indeed, at a local level – and so will involve far less complex international negotiation. They will require good public policies, but a great deal of adaptation will happen in any case, and largely through the private sector: no government mandate boosted sales of fans and air conditioning as temperatures soared this summer. Of course, there are important areas where no adaptation is possible – we cannot relocate the Amazon or insulate coral reefs – and so we need mitigation too. But the government could and should put in place an adaptation strategy right away.
As for policies to slow climate change, some will make sense anyway. We need to remove perverse incentives – coal subsidies, badly designed farm support and poorly defined logging permits are three examples. But broadly speaking, the technologies that will reduce our output of greenhouse gases are more expensive than those that they will replace. Of course, their cost will fall as they are more widely used. But the cost of dirty technologies may well fall too.
So governments need to intervene in the market to persuade people to use climate-friendly technologies. Such intervention also needs to signal to companies and universities that there is money to be made from innovations that cut greenhouse gas output. Innovation is usually a matter of serendipity, but the market can powerfully drive the way a new technology develops.
The second task for social scientists is to devise tools for encouraging sensible change. Governments can regulate, or they can influence prices. Economists don’t much like regulations such as standard-setting, because they easily become a policy of picking winners, and may have perverse results. The explosion in demand for gas-guzzling trucks and SUVs in the United States followed tough regulations on the fuel economy of the car fleet – light trucks didn’t count as cars. If instead the government had simply raising petrol taxes to European levels, cutting other taxes to match, Americans would long ago have switched to more fuel-efficient vehicles. Driving a Prius may not be very exciting – though the new Google sports car sounds like fun – but it is better than being dependent for fuel on the Middle East. However, some standards, if they are simple, clear and enduring, may accelerate change.
Influencing prices may mean higher taxes on fossil fuels or on carbon emissions, or it may come about through setting a ceiling on overall carbon emissions and then distributing permits to emit which can be bought and sold. Economists are still arguing over which approach is better. Much of the EU now has a jumble of both approaches, neither working very well. The infant market in trading carbon-emissions permits has given traders a roller-coaster ride, but it has at least turned the attention of big banks and bright bankers on to the need to build a system that is durable, credible and efficient.
Measures like these are more likely to work if people believe they are necessary. The British accepted food rationing during the Second World War – but rationing after the War was infuriating. So it will be immensely important to find ways to influence public opinion. That is already happening, even in the United States. Arnold Schwartzenegger, a Republican, must now be the greenest politician in the world. A film made by Al Gore, who may yet be the Democratic presidential candidate in 2008, has had huge impact. Hurricane Katrina and the loss of a large and prosperous city have shown Americans that meteorology can threaten even the world’s most powerful nation.
And, in one sense, the problem is a limited one. It would be enough to win an agreement between America, India, China and two or three more nations to take action and to impose tough trade sanctions on countries that did not. The costs of taking action are large but not unmanageable. The costs of failure may be immense.
Finally, since a soapbox like this is something I rarely enjoy, let me finish with one quite different thought. Is there a policy measure that would both improve the quality of all the sciences in this country, and increase public understanding of the global-warming debate? I believed there is, and it is called education. Since I moved from journalism into the academic world, I have been scandalised to discover what has happened to the teaching of maths and sciences in Britain’s maintained schools. Did you realise that, according to figures analysed by the Independent Schools Council, roughly 45% of A grades in A-level Maths, Chemistry, Biology and Physics and 58% of A grades in Economics come from independent schools? In each case, the proportion of A grades is considerably higher than the proportion of entries – and that gap has widened. Yet independent schools educate only 7% of Britain’s school children.
It is particularly important to raise the proportion of children taking A level maths. Without it, many doors slam shut. It’s hard to study economics at university satisfactorily if you do not have A level maths, and other social sciences increasingly require quantitative skills. You cannot properly understand risk, or probability, or judge many scientific debates if your maths skills are poor. Yet the numbers doing maths A levels have fallen under this government. Even with this year’s welcome and impressive improvement, there were still more than 10,000 fewer maths entrants than in 2001.
However, at least entries are now rising. If you ask economists how to reinforce this trend, they will answer in terms of incentives. A good maths A level is a good predictor of high lifetime earnings – but how many 16-year-olds understand this? Besides, the young discount the future at a high rate. So perhaps we need to experiment with a bounty of, say, £500 for every grade A maths A level taken in a maintained school – divided equally between the student and the class teachers – or a couple of extra UCAS points for each A grade. As scientists and social scientists we should care about this issue, and not just for the future health of our disciplines. An innumerate population is less likely to devise good solutions to climate change and a host of other environmental problems than one at home with mathematical and scientific concepts. We owe it to our grandchildren to educate our children properly.
Frances Cairncross
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