The mythical economic data on climate change (1): Nordhaus’s 1994 survey of “experts”

As part of my critique of mainstream economics work on climate change, I'm going through each of the 14 data points that Nordhaus used to fit his damage function to "data" in the manual to his DICE program {Nordhaus, 2013 #5673}. These came from a survey paper by Tol in 2009: "The Economic Effects of Climate Change" {Tol, 2009 #5683}. Nordhaus later revised his function, given errors he belatedly spotted in Tol's table {Nordhaus, 2017 #5584}, but there were many errors he didn't see that I'll cover first before turning to his 2017 paper. The paper in question here is:

Nordhaus, W. (1994). "Expert Opinion on Climate Change." American Scientist 82(1): pp. 45–51.

For context, Figure 1 shows Tol's table, highlighting the numbers he gave for this paper (which are erroneous), while Figure 2 shows all the numbers Nordhaus used, with this pair—a 3 Kelvin (K) increase in temperature, and a 4.8% fall in GDP)—highlighted.

Figure 1: Tol's summary table of damage estimates, with Nordhaus 1994b highlighted

As it stands, this is the most extreme prediction given for the damages to GDP from climate change—though because of errors in Tol's table and the errors in Nordhaus's methodology, it is both too high, and not high enough.

Figure 2: The plot of numbers to which Nordhaus fitted his damage function, with Tol's number for this paper highlighted

This paper reported on a survey of 19 people conducted by Nordhaus. The 19 people included 3 climate/meteorology scientists, one ecologist, one engineer, 4 from other social sciences, and 10 economists—only two of whom specialised in environmental economics, including Nordhaus himself, and both of whom expect only mild economic effects from global warming. The other 8 economists were not environmental economists, and one was Larry Summers (I'd lay odds that Summers was the source of the quote on page 50 that "For my answer, the existence value [of species] is irrelevant—I don't care about ants except for drugs").

They were presented with 3 scenarios: (A) 3 degree warming by 2090, (B) 6 degree by 2175, and (C) 6 degrees by 2090. They were asked a range of questions about their expectations for GWP (Gross World Product), the likelihood of extreme events, etc.

It is therefore not a survey of experts on climate change, but a survey that mixes 3 actual experts on the climate with 16 others (Nordhaus and Pearce were not experts on climate change per se). The impact of this is obvious in the paper: the experts (and one other, presumably the ecologist) were concerned about global warming, while the other 15 non experts were not. A telling paragraph is the following:

Apocalypse or Small Potatoes?
The second impression that arises from this survey is that for most respondents the best guess of the impact of a 3-degree warming by 2090, in the words of respondent 17, would be "small potatoes". Only 3 respondents expect the impact of scenario A to be more than 3 percent of GWP. In terms of economic growth, the median estimated impact for scenario A over the next century would reduce the growth of per capita incomes from, say, 1.5 percent per year to 1.485 percent per year. One respondent summarized the relaxed view: "I am impressed with the view that it takes a very sharp pencil to see the difference between the world with and without climate change or with and without mitigation". (48. Emphasis added)

However, 2 of the 3 respondents who predicted more than a 3 percent decline in GDP from a 3 degree rise in temperature by 2090 were physical scientists specialising in climate change: it was the amateurs and climate economists who were relaxed. Figure 1 (Nordhaus's Figure 2) illustrates this, while also wrongly labelling the mean as the median and vice versa.

Figure 3: The range and wrongly labelled median and mean guesses of damages from climate change in Nordhaus 1994

Focusing on scenario A, while the mean GWP decline estimate (from the 18 respondents who answered this question) was 3.6%, the median was 1.9% and the maximum was 21%. In summary, half the respondents expected a fall of less than 2%, 15 expected a fall of under 3%, while the 3 who expected more than a 3% decline boosted the average to almost twice the median.

Nordhaus undertook this survey of 19 "experts" because of the difficulties of getting data at all. Taking this at face value, Nordhaus notes that, though the "original purpose of the survey reported here":

was to establish estimates of impacts of climatic change that could be used in quantitative modeling of global change… the survey took on a life of its own. It became a means of exploring the diversity of views held by those who have thought deeply about global warming and its impacts and about the extent of uncertainties. The survey revealed that the range of estimated impacts was indeed enormous, and the stakes in both better understanding and wise policies are clearly equally large. Aside from the not surprising finding of great dissension, the opinions of experts revealed major differences among disciplines, particularly between mainstream economists and natural scientists…" (45. Emphasis added)

This is emphasised in the descriptive text for the figure that highlights the whole paper:

Figure 1. Will greenhouse warming lead to fruitless plains or fruited paradise? Experts on global change are deeply divided on this question. At one extreme, the author's survey shows, are mainstream economists who view the prospect of greenhouse warming with little concern, confident that human societies will adapt handily to such changes. At the other extreme, natural scientists worry about major and irreversible impacts unpredictable extreme events, such as shifting ocean currents or migrating monsoons. Which picture more closely depicts the future reality cannot now be predicted. (pp. 46-47. Emphasis added)

This survey's genesis was a letter to two "experts in climatic change" and "one economist who had extensive experience in surveys" (45). The survey process therefore didn't start badly: Nordhaus wrote mainly to natural scientists, with the economist consulted primarily on the issue of how to devise surveys. But from then on, it deteriorated by selection criteria that emphasised expertise in economics over expertise in climate science. Nordhaus described his initial selection criteria as follows:

"Expertise in the area of global warming was the key criterion used for selecting people to participate in the survey. Within this broad category, those who were conversant with issues of the economic impacts of global warming and those who had working knowledge of economic statistics were preferred." (46. Emphasis added)

This is already biased towards economists, when in the introduction Nordhaus noted how different the predisposition of economists towards climate change when compared to actual scientists specialising in climate change:

the opinions of experts revealed major differences among disciplines, particularly between mainstream economists and natural scientists. One might even say that over the two centuries since Malthus, economists have cast off the mantle of the dismal science while Malthus's intellectual progeny in ecology and the evolutionary sciences have donned that cloak. (45)

An initial list was trimmed, using criteria that once again were biased towards economists:

Next, the respondents were asked to nominate for the survey persons who represented a cross section of knowledgeable expert opinion. This process tended to fission rapidly, and the growing list was trimmed by giving preference to those who were mentioned more than once and to those who had written on the issue of the economics of climatic change. In the end, 22 persons (including the author) were invited to participate, but three did not. (p. 46. Emphasis added)

The final list then consisted of "10 economists, four other social scientists and five natural scientists and engineers" (p. 46). An inquiry that began with 33% economists and 67% natural scientists (assuming that the survey designer was one of those surveyed) ended up with 53% economists and 16% scientists. On top of this disciplinary bias, of the ten economists, Nordhaus described only 2 of them as primarily environmental economists—and one of these was Nordhaus himself, whom he self-described in the paper as "one who has developed estimates of the impact of climatic change that are modest compared with some of the scientific concerns and popular rhetoric". The other was David Pearce (since deceased), who was a co-author with Tol and others on papers that are also part of Tol's data table.

Therefore, far from being a survey of expert opinion, this was a survey with 3 experts from the physical sciences (one of whom refused to participate in the survey's key question), 2 economists specialising in climate change (both with a known predilection to modest estimates of the economic impact of climate change), and 14 other non-experts—with 8 of these drawn from economics. The dominant message of the survey was the difference between the views of these non-experts on climate, and the experts:

The major impression emerges from this survey is that experts hold vastly different views about the potential economic impact of climatic change. At one extreme are the natural scientists, all three of whom have found concerns about the economic pacts of greenhouse warming. For example, the mean of these three respondents' answers has a 12-percent probability of severe economic consequences under scenario A. At the other extreme are the "other subdisciplines" of economics (those whose principal concerns lie outside environmental economics); these eight respondents see much less calamitous outcome—0.4 per cent, or about one-30th of the magnitude estimated by the natural scientists. (48. Emphasis added.)

Figure 4: Nordhaus's Figure 4. "Difference in academic discipline separated those making high estimates of the economic impacts from global warming from those who were comparatively unconcerned. Natural scientists' estimates were 20 to 30 times higher than mainstream economists"

What this shows is that mainstream economists are generally climate change trivializers—not that they know anything meaningful about the magnitude of disruption to the globe's ecological and economic systems that will result from climate change.  The 30-times difference in expectations of serious disruption from climate change between scientists and economists  should have been the takeaway from this survey, not the average of the expectations of damage.

Nordhaus at least acknowledges one important flaw in this survey: with him asking the questions, people who weren't experts in climate change—the majority, at 14 of the 19 respondents (if we count Nordhaus and Pearce as experts, at least in the sense that their own models would have given them a basis for their opinions)—could have been intimidated by Nordhaus's own well-known position, to give answers that were similar to what Nordhaus himself would give. He framed the answers in effect, by being the one asking the questions:

Two important methodological issues may contaminate the results. The first is the interviewer effect. I am known to the respondents as one who has developed estimates of the impact of climatic change that are modest compared with some of the scientific concerns and popular rhetoric, and this knowledge might have influenced the respondents (p. 46) 

Therefore, the substantive content of this "data" is not the average temperature result from the opinions of 2 climate change experts and 16 others (mainly economists), but the huge difference between the climatic expert predictions and the guesses of the other 16 (where 2 of these, Nordhaus and Pearce, would have been influenced in their answers by the results of their own models—including earlier versions of the model Nordhaus was using this data point to calibrate).

If anything, the only result that should be taken from this paper, since it purports to be a survey of experts, is the average of the 3 scientists surveyed—or rather, the 2 scientists who agreed to answer the question about the damage to GDP they expected under the three scenarios. Figure 3, which shows the range of estimates of damages by 18 of the 19 respondents, helps work out what this result should have been.

Figure 5: Nordhaus's Figure 5, showing the mean, 10th decile and 90th decile predictions of damages under scenario A for 18 of the 19 surveyed

The orange line in each bar is the middle of the damage range for each respondent—this is where the 0 to 21% of GDP range of damage estimates comes from, as well as the average estimate of 3.6% fall, and the median of 1.9% fall. The last 2 shown are 2 of the 3 the scientists surveyed, while the other 16 are the amateurs.

These two scientists gave 50th percentile estimates that exceeded the 90th percentile estimate of all other respondents: the maximum 90th percentile of the non-experts was 13% damage, versus a 50th percentile estimate of 16% for one scientist and 21% for the other. The ranges for damages they gave exceed the scale of the graph; given the skew in most answers, where the 50th percentile guess is about ¼ above the 10th percentile and ¾ below the 90th percentile, their not-shown upper estimates were probably in the range of 60-100% damage.

That then was the real news from this paper. The paper's reported results—of experts—should have been that a 3K temperature rise would lead to an 18% fall in GDP ((16+21)/2), with a range from 3% to (probably) 90% of GDP (the 10th decile estimate of the more sanguine expert to the estimated 90th decile estimate of the more pessimistic).

What about the 3rd physical scientist, who refused to answer this question? To give Nordhaus credit, he does report this holdout's reasons—and they cast a pall over the whole endeavour, not only of this survey, but the way in which the tiny cabal of mainstream economists who have specialized in climate change have gone about their chosen task:

Also, although the willingness of the respondents to hazard estimates of subjective probabilities was encouraging, it should be emphasized that most respondents proffered these estimates with reservations and a recognition of the inherent difficulty of the task. One respondent (19), however, was a holdout from such guesswork, writing:
"I must tell you that I marvel that economists are willing to make quantitative estimates of economic consequences of climate change where the only measures available are estimates of global surface average increases in temperature. As [one] who has spent his career worrying about the vagaries of the dynamics of the atmosphere, I marvel that they can translate a single global number, an extremely poor surrogate for a description of the climatic conditions, into quantitative estimates of impacts of global economic conditions." (p. 51. Emphasis added)

Finally, Tol's summary of paper is erroneous. Tol shows this survey as giving an average damage estimate of 4.8% for a 3K temperature rise. But the only occurrence of 4.8% in the text or diagrams is for the "probability of the high-consequence outcome of 4.8, 12.1 and 17.5 percent for scenarios A, B and C" {Nordhaus, 1994 #5699, p. 47}.

If he'd used the right numbers from this paper (I refuse to call them information or data!), Tol would have reported that a 3.6% fall in GDP for a 3K temperature rise, with a range from 0 to 21%—the correct numbers in terms of average estimate of GDP decline for a 3K temperature rise. Instead, what he reported were the temperature rise (3K) along with the average probability of a large event.

I'll leave the final word to Nordhaus himself here, since it emphasises that the basis of the sanguine attitude mainstream economists take to climate change is simply faith that the market economy can adapt to any challenge—including climatic conditions that will be utterly unlike anything humans have experienced during the existence of our species on this planet:

Our Ability to Adapt
There is a clear difference in outlook among the respondents, depending on their assumptions about the ability of society to adapt to climatic changes. One was concerned that society's response to the approaching millennium would be akin to that prevalent during the Dark Ages, whereas another respondent held that the degree of adaptability of human economies is so high that for most of the scenarios the impact of global warming would be "essentially zero." An economist (14) explains that in his view energy and brain power are the only limits to growth in the long run, and with sufficient quantities of these it is possible to adapt or develop new technologies so as to prevent any significant economic costs. This respondent also points out that the time frame over which the climatic changes are expected to take place is sufficient to allow developments of new technologies and other adaptations. (p. 49)

My summary of this "data" is as follows:

  • Tol data point: 3K temperature rise, 4.8% fall in GDP, range 0 to 30% of GDP.
  • Correct data point: 3K temperature rise, 3.6% fall in GDP, range from 0 to 21%
  • Justified data point: 3K temperature rise, 18% fall in GDP, range from 5 to 100%

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