DICE damage functions

Once again the question of the "standard" IAM results showing let us say entirely containable GDP damage estimates for GW up to let us say 2100^{1, 4} comes up. For example,

If the economic impact of climate change (by ~2100) has a good chance of being ~10% of GDP with economic growth continuing at 2-3% per year, then why is there so much worry about climate change? Is it 1. We shouldn't be concerned, because this really does properly reflect the overall impact? 2. This properly reflects the economic impact, but misses other substantive impacts that can't be quantified. 3. Simply doesn't make sense if we're heading for > 4C. 4. Something else?

First, is the premise of the question true: does the econ impact have a "good" (whatever that means) chance of being ~10% (and note that means a 10% decrease for GW-related reasons over an otherwise large increase, by a factor of perhaps 5)? I don't know. Expressed in hand-waving terms as my personal uncertainty, which I think reflects the state of expert knowledge to some degree, then I don't think I'd be confident of excluding damage less than 10%, but I wouldn't be confident of excluding "catastrophic" damage either.

But really, I didn't want to talk about that, I wanted to talk about IAMs damage functions², in particular DICE's, since DICE is pretty well known. When faced with a damage function that doesn't predict enough damage, people tend to say things like "because it's pants-off ludicrous to estimate the economic & societal impacts of global temperature change using present-day GDP differences as a function of regional temperature"³. This is, of course, not a coherent argument. But AA interjected with Playing DICE with Life on Earth: Nordhaus’s Damage Function; by Prof Steve Keen, which is a coherent argument; whether it is right or convincing or not I shall now proceed to consider.

It doesn't start well, going on about "completely failed to anticipate the 2008 Global Financial Crisis", which makes as much sense as complaining that GCMs fail to predict individual ENSOs. But I think the author merely wants a dig against "neoclassical" economics to demonstrate his credentials. Onwards, to the damage function; he quotes Nordhaus: "Including all factors, the final estimate is that the damages are 2.1% of global income at a 3 °C warming, and 8.5% of income at a 6 °C warming" and notes - as my lead-in quote from ATTP also noted - that if that's true, then what are we worried about?

SK's first go is: Except those in New York... and numerous other coastal cities... 6 degrees is well above the threshold at which all of Greenland and the Antarctic will melt completely... That will take much more than a century of course, but a planetary temperature rise of 6 degrees will doom any city less than 70 metres above sea level. They will all have to be relocated and rebuilt. Which may well be true, but is a fail, because it goes beyond 2100. Next? a 6 degree increase in temperature will make many [near-equator cities] unliveable. The obvious suspects—the Middle East and Northern Africa—would see average summer temperatures of over 40 degrees in their major cities, and much of their countryside. Moving them, or emigrating from them, would be essential for survival. But is this true? Not obviously; you could air condition them. Using power from the giant solar arrays built in the desert. Or something. And I'm not sure that moving a whole pile of such cities would even be 10% of global GDP. SK decides on this basis that DICE-type damage numbers fail "the smell test" but a sense of smell is a very personal thing. Then we have the obligatory mention of tipping points, or tipping elements for the cognoscenti, but as so often the discussion doesn't really go anywhere, because other than "we can't rule out the existence of tipping points" there isn't very much to say.

So overall, as an attempt to dent DICE, it's not very convincing sez oi. Call for... Marty-Man!

Weitzman Sez

Another attempted answer was the sainted but dismal Weitzman. There were two offerings: ON MODELING AND INTERPRETING THE ECONOMICS OF CATASTROPHIC CLIMATE CHANGE - perhaps a bit shouty - and Reactions to the Nordhaus Critique.

In the second, W tries to make a heuristic-empirical case for there being big structural uncertainties in the economics of extreme climate change. I have no objections to that, indeed I'd be inclined to agree, but of course uncertainty isn't a definite answer. With mt and many others I would argue that uncertainty isn't your friend, but in terms of ATTP's lead-in, it also isn't a good answer in general discourse. What I'm really looking for are strong arguments that the existing damage function is wrong: not lots of examples of other functions you could fit, or reasons why the fit is uncertain. W is an economist not a climatologist, so some of his stuff around here is distinctly dodgy, including his assertion that carbon-cycle feedbacks are largely ignored in the std analysis. W's conclusion is that the economics of climate change consists of a very long chain of tenuous inferences fraught with big uncertainties in every link, which may well be true but doesn't actually offer any positive support for non-standard assumptions.

In the first (I skimmed it) it looks like he's doing "fat tails" again, which gets very much the same response. See-also God's Own view of dismality.

Is that 500 words yet? Can I stop now? It's nearly 10 pm.

Update: there's Climate Impacts on Economic Growth as Drivers of Uncertainty in the Social Cost of Carbon by Elisabeth J. Moyer et al., 2013. And there's The Economic Impacts of Climate Change by Richard Tol. Moyer wants more damage from damages affecting growth; Tol acknowledges this could be an affect but finds no evidence in favour. I do not arbitrate between them.

Notes

1. I don't think it's worth spending much time looking beyond 2100. And happily, ATTP's Twit was phrased to 2100 too.

2. And not about the other biggie, discount rates.

3. Note: Twatter's threading is utterly shite, or I'm just bad at using it, so if I've got any of these call-and-responses out of order, I blame Twatter, and anyone dumb enough to attempt to have a coherent argument there.

4. 2023/06: ATTP has Criticism of economic models which is mostly weirdly off the ball, but does ref Hansel et al., which tweaks things a bit to Re-mould it nearer to the Heart's Desire! That appears to stuff all those who say "DICE must be wrong and so must the entire methodology because it gives obviously wrong results".

Refs

* Estimates of the economic impact of climate change - ATTP
* Thompson, Erica L.; Smith, Leonard A: working paper: Escape from model-land

* [2021] Economic damages from on-going climate change imply deeper near-term emission cuts Anselm Schultes et al.

* 2022/01: Graun Climate crisis could wipe 1% a year off UK economy by 2045, say ministers. But 1% over 23 years is pretty cheap...

* Neoclassical tipping points of no return.