The New York Times today has an interesting summary of a debate between Sir Nicolas Stern and Professor William Nordhaus of Yale University on the economics of climate change. The article raises the question, for me at least, at what point do policy analyses cease to matter? In the language of my forthcoming book — The Honest Broker — has climate politics become “abortion politics”? The answer to my own question is that, yes, we may indeed be in a situation where analysis is viewed as being more useful as a tool of persuasion than clarifying the consequences of a wide range of alternative courses of action. In such a situation policy analyses will be far less important than the political dynamics.

A recent example of such a situation that will be familiar to most readers is when the Bush Administration decided to invade Iraq and then fixed the intelligence to meet the policy. Any analysis that supported invasion, regardless of its intellectual merits, then became “right” even if for the “wrong reasons.” Sure, some policy analyses were still needed after that decision, for instance, to determine whether 110,000 versus 130,000 troops would be needed. But I view this as a far different sort of analysis than focusing analytical attention on the broad question of what might have been done about Saddam Hussein. In that situation, once the politics were settled, then such wide-ranging analyses became completely irrelevant. But arguably that is exactly the sort of analysis that mattered most of all and for the lack of which were are suffering today Climate change, of course some will say, is different.

Here is an excerpt from the Times article, which describes these dynamics:

Technically, then, Sir Nicholas’s opponents win the debate. But in practical terms, their argument has a weak link. They are assuming that the economic gains from, say, education will make future generations rich enough to make up for any damage caused by climate change. Sea walls will be able to protect cities; technology can allow crops to grow in new ways; better medicines can stop the spread of disease.

No one knows whether this is true, let alone desirable, because no one knows what life will be like on a planet that is five degrees hotter. “If ever there was an example where there was uncertainty, this is it,” said Martin L. Weitzman, a Harvard economist who attended the debate.

While sitting there, I was reminded of the speeches that Alan Greenspan gave a few years ago about the risks of deflation. It wasn’t the most likely outcome, he said, but the consequences of it could be so bad that policy makers had to take steps to prevent it. Focusing attention on this point — the catastrophic risks of climate change — is Sir Nicholas’s biggest accomplishment, whatever you think of his math.

As Mr. Weitzman puts it, the Stern Review is “right for the wrong reasons.”

Even its critics seem open to this idea. When Mr. Nordhaus and Sir Nicholas were exchanging e-mail messages before the debate — to their credit, some academics keep their arguments from becoming personal — Mr. Nordhaus sent a note that summed up his view. “I think it’s a great study, but it’s 50 years ahead of its time,” he recalled writing. “Since everybody else is 50 years behind the times, if you average the two, you might come out just right.”

In other words, it’s time for a tax on carbon emissions.

Once your have the political answer in hand, analysis then ceases to be a tool that provides insight on alternatives and then becomes a tool of marketing, and sometimes a way to limit debate. Harvard’s Martin Weitzman acknowledges this explicitly in the review paper (here in PDF) on Stern cited in the Times article:

The Stern Review is a political document –in Keynes’s phrase an essay in persuasion –as much as it is an economic analysis, and in fairness it needs ultimately to be judged by both standards. To its great credit the Review supports very strongly the politically-
unpalatable idea, which no politician planning to remain in office anywhere wants to hear, that the world needs desperately to start confronting the reality that burning carbon has a significant externality cost that should be taken into account by being charged full-freight for doing it. (This should have been, but of course was not, the most central “inconvenient truth”of all in Al Gore’’s tale about inconvenient climate-change truths.) As the Review puts it, “establishing a carbon price, through tax, trading, or regulation, is an essential foundation for climate-change policy.” One can only wish that U.S. political leaders might have the wisdom to understand and the courage to act upon the breathtakingly-simple relatively-market-friendly idea that the right carbon tax could do much more to unleash the decentralized power of greedy, self seeking, capitalistic American inventive genius on the problem of developing commercially-feasible carbon-avoiding alternative technologies than
all of the command-and-control schemes and patchwork subsidies making the rounds in Washington these days. As I have made clear here, a generous interpretation might also credit the Stern Review with intuiting the greater significance of insuring against catastrophic
uncertainty than of consumption smoothing for the climate problem, even if this intuition remains subliminal and does not formally enter the analysis through the front door.

To be honest about the economic-analysis side, the Stern Review predetermines the outcome in favor of strong immediate action to curtail greenhouse gas emissions by creating a very low value of r ~1.4% via the indirect route of picking parameter values   p ~ 0 and n~ 1   1that are more like theoretically-reasoned extreme lower bounds than empirically-plausible estimates of representative tastes. In this sense, it must be said staightforwardly that the subconsiously-reverse-engineered output of PAGE and the goal-oriented formal economic analysis of the Review are not worth a great deal. But we have also seen that a fair recognition of the truth that we are genuinely uncertain about what interest rate should be used to discount costs and benefits of climate changes a century from now brings discounting rates down from conventional values r  6% to much lower values of perhaps r ~  2-3%, which would create a more intermediate sense of urgency somewhere between what the Stern
Review is advocating and the more modest measures to slow global warming advocated by its mainstream critics. The important remaining caveat is that such an intermediate position is still grounded in a conventional deterministic consumption-smoothing approach to the
economic analysis of climate change that, at least formally, ignores the issue of what to do about catastrophe insurance against the possibility of rare disasters.

On the political side of the Stern Review, my most charitable interpretation of its urgent tone is that the report is an essay in persuasion that is more about gut instincts regarding the horrors of uncertain rare disasters whose probabilities we do not know than it is about economic analysis as that term is conventionally understood. Although it is difficult enough to analyze people’s motives, much less the motives of a 600-page document, I can’’t help but think after reading it that the strong tone of morality and alarm is mostly reflecting a fear of what is potentially out there with greenhouse warming in (using ponderous terminology here to make sure the thought is exact) “the inherently-thick left tail of the reduced-form posterior-predictive probability distribution of the growth rate of a comprehensive measure of consumption that includes the natural environment.” I have argued that this inherently- thick left tail of g is an important aspect of the economics of climate change that every analyst –Stern and the critics of Stern –might do well to try to address more directly. History will judge whether the economic analysis of the Stern Review was more wrong or more right, and, if it was more right, whether as pure economic analysis it was right for the right reasons or it was right for the wrong reasons.