“The weather,” the nineteenth century New England essayist Charles Dudley Warner once observed, “is a matter about which a great deal is said and very little done.”1 Today we are doing something to the weather, however: we are destabilizing the climate by pumping greenhouse gases into the Earth’s atmosphere. And a great deal is being said about this, if not much done.
Economists are very much a part of the climate change conversation. Most joined it later than the scientists, but this has not inhibited them from offering bold prescriptions as to what ought to be done, or as the economists themselves might put it, sharing their expertise.
Today I will offer some thoughts about what economics can tell us about climate change, and about what economics cannot tell us.
I will suggest that economists can bring important insights into the choices we face in climate policy. In particular, economics can shed light on the crucial role of carbon pricing for mitigation, how it should be instituted, and its distributional impacts.
I will also maintain, however, that there are important questions that economics cannot be expected and should not try to answer. In particular, economics cannot be relied upon to tell us what limit we should put on the quantity of carbon dioxide and other greenhouse gases that we add to the atmosphere. On this question, I will argue, economists ought to show some humility.