Friday, September 25, 2015

EconTalk: Matt Ridley, Martin Weitzman, Climate Change and Fat Tails

In a recent EconTalk podcast with Russ Roberts, Matt Ridley comments on a previous discussion with Martin Weitzman regarding the tail risk associated with climate change:

"the fat tail on the distribution, the relatively significant even if small possibility of a really big warming has got a heck of a lot thinner in recent years. This is partly because there was a howling mistake in the 2007 IPCC Report, the AR4 Report (Fourth Assessment Report: Climate Change, 2007), where a graph was actually distorted. And a brilliant scientist named Nick Lewis pointed this out later. It's one of the great, shocking scandals of this, that a graph--and I'm literally talking about the shape of the tail of the graph--was distorted to make a fatter tail than is necessary. When you correct that, the number gets smaller. When you feed in all these 14 papers that I've been talking about, all the latest observational data, 42 scientists involved in publishing this stuff, most of the mainstream scientists--I'm not talking about skeptics here--when you feed all that in and you get the average probability density functions for climate sensitivity, they turn out to have much thinner tails than was portrayed in the 2007. And that Martin Weitzman is basing his argument on. So the 10% chance of 6 degrees of warming in 100 years becomes much less than 1% if you look at these charts now."

Very interesting, because I thought Weitzman's discussion of tail risk was compelling. Unlike Nassem Taleb's characterization of tail risk and GMOs. I think a key to policy analysis must  revolve around getting the distribution correct, particularly the tails of the distribution, then getting the discount rate correct as well. Will there ever truly be a consensus in relation to climate change policy?

No comments: