Changing the Way We Value the Future in Climate Change Economics

3p is proud to partner with the Presidio Graduate School’s Macroeconomics course on a blogging series about “the economics of sustainability.” This post is part of that series. To follow along, please click here. *** By Josh Newman It has been a long time since generations have faced the possibility that the future might not be better - with some notable exceptions, standards of living have been improving globally since the Industrial Revolution and the advent of serious oil production. If you ask most people whether they value the lives of future generations, they will say “yes.”  If you ask many economists, they’ll likely say, “that depends on people’s willingness to pay.” That's economist-speak for valuing the future as long as we don’t have to spend too much now. In our profit-maximizing neo-classically-minded use of economic policy, climate change is often discounted at very high rates. In other words, problems that may occur as a result of a changing climate in the future really aren't counted for much now, because they're not definite enough. One of the reasons for this is that dollars given to you now can be invested and earn interest, whereas dollars in the future can't accrue interest until you receive them. With climate change, too, we often choose to receive economic benefits now, even though future generations face virtually unlimited liability from the consequences of our actions. This is made even more confusing and complicated because we actually do receive benefits from certain intermediate effects of climate change, such as longer growing seasons in some cooler regions. Reassessing discounting is a moral and political challenge, as well as a physical and economic necessity. To this point, many willingness-to-pay assessments and surveys that account for the effects our actions on future generations come woefully short of addressing this fundamental moral question: how do we value life? There is, potentially, an elegant solution to the problem: liberals and conservatives alike can unite around lowering climate-impact discount rates, because revaluing these rates has the potential to satisfy the ideological needs of both. Admittedly, this is a difficult issue to tackle, and any attempt to do so will no doubt be fraught with moral judgments regarding equitable distribution of wealth between generations. But on both extremes - liberal and conservative - proponents purport to value highly the fate of future generations. Many libertarian conservatives couch it in terms of fiscal burden to their progeny, while many liberals are beginning to assess it in terms of environmental burden to theirs. Of course the two are inextricably linked; there is no economic system without environmental services, and there is no society without either one. Still, you might ask, why should we mess with a system that has afforded us our many luxuries? Broadly, assumptions about our ability to innovate our way out of catastrophe without mitigating intermediary steps are presumptuous at best. At worst, they leave us open to immense risk from climate change-induced events. The Earth itself will survive, but how long we survive on it remains subject to our choices. Our current process of discounting at very high rates leaves that decision to almost entirely exogenous factors - such as the hope that technology (by way of economic growth) will save us. Never mind that the most commonly discussed renewable technologies, wind and solar, still require substantial fossil fuel inputs for construction and transportation. When we begin to think in different terms, starting with a fundamental re-envisioning of the value of future generations, then we can begin to think about sustainability on a meaningful scale. Until then, we are really just rearranging the deckchairs.   Josh Newman is an MPA candidate at Presidio Graduate School. His professional interests include climate change policies, sustainability in public administration, and land use issues. He can be reached at joshua.newman@presidioedu.org *** Want to learn more about Presidio and this project? Click here.