Michael Greenstone on environmental economics … and basketball

World-famous economist Michael Greenstone tells Mike about his main professional mission: to apply the tools of economics to reduce human suffering. But that wasn’t always the case. No indeed. For many years, including all of college, Michael’s main goal in life was to have a career in the NBA. Happily for economics, Division III basketball at Swarthmore didn’t immediately translate to the desired outcome, and Michael found his way to natural resource-energy-climate economics via a short stint in labor economics. Now he and his colleagues are pushing forward on an extremely challenging agenda designed to bring economics into the realm of rigorous nature science. To meet the goal, as Michael puts it, a study should have a global analysis, with plausibly causal mechanisms, and consideration of the true range of adaptations that society would bring to bear in the face of climate change. We’re not there yet, but the pathway is clearer than ever before.

Michael Greenstone.

Much as Michael assaulted the hoop back in his Swarthmore days, he now destroys Mike’s ideas about what economics is, and could be. Outside the field, economics has, at least in some quarters, a dodgy reputation: toy models with no practical application, ridiculous assumptions (witness the many ‘assume a can opener’ jokes, inability to predict events like the 2008 economic collapse, untestable hypotheses, to name a few. But the field is changing rapidly, due to, finally, the influx of data, controlled experiments, and computational power. Economics now has the power to identify, investigate, and solve major real-world problems. In one project, Michael co-led a team to identify the systemic conflicts of interest at work in Gujarat’s power plant inspections, and devised a novel system that led to a 30% reduction in the notorious atmospheric pollutant PM 2.5.

Yet Michael is not an environmentalist. Instead, he favors applying agnostic cost-benefit analyses to identify the most efficient ways of reducing suffering and increasing well-being. That might involve climate, but it might not. In fact, Michael favors a focus on what he calls the global energy challenge, rather than the climate problem. The two are linked, but ultimately the grand challenge is to provide inexpensive and reliable energy for everyone while minimizing negative health consequences and avoiding disruptive climate change. It’s a difficult-to-construct three-legged stool … but like all three-legged stools, once built, they don’t wobble.


Music: Balkan Quolou by Watcha Clan and Heiser Zibn by The Underscore Orkestra, both CC BY-NC-SA 3.0 US.

Climate economics with Sol Hsiang

The field of environmental economics in general — and climate economics in particular — is exploding. And my guest on episode 44 of Forecast, Solomon Hsiang from UC Berkeley, is helping to crack open some of the recalcitrant oyster shells of the field. How does climate influence conflict, migration and economic productivity? We talk through some of the big challenges in addressing these topics: the frequent impossibility of running experiments and the accompanying use of quasi-experiments; the growing use of — at last! — data; how incredibly hard it is to disentangle the influence of single factors — like climate — in a complicated human system. In many ways economics is decades behind physical sciences. As Sol explains, we’ve now for the most part forgotten about the initial debates regarding fluid dynamics, but economics is still very much at the phase of figuring out elementary processes. Sometimes this means that the major findings reside in statistical approaches, without clear mechanistic understanding. But Sol and his colleagues are working towards linking microscale human decisions to aggregate societal processes, and it is this sort of understanding that will, and indeed already is, proving important in a policy context.

Credit: Brittany Murphy

Music:  Le train pour Paspébiac, Quand la bière est tirée and Matelot by QuimorucruCC BY-NC-ND 4.0.