Abstract
There is a growing recognition that we are facing a reckoning brought on by the ecological and economic impacts of disruptive climate change. There is also the reality that the economy has been clipping along for more than a decade without recession, seemingly juiced by tax cuts and low-interest Federal Reserve money.
What happens when ecological and economic forces start to interact, when we experience both an economic downturn while simultaneously experiencing climate disruption?
Frank Ackerman faces these scenarios in Worst-Case Economics, a book that challenges the traditional predictive models and “cost–benefit analysis” orthodoxies that attempt to inform our future. Ackerman’s understated message to fellow economists and policy makers: We have not even begun to imagine and respond to the potential disruption ahead.
Take the decimating social impact of the post-2008 Great Recession. More than nine million people were thrown out of work and another nine million lost their homes. The multigenerational impact of the meltdown is still rippling through society—and its political impact around the world has given rise to right-wing populism. Our current low unemployment plateau is benefiting from artificially low-interest rates and deficit spending. But with the next economic bump in the road, there will be fewer tools in the toolbox to stabilize the economy.
Ackerman explains why past attempts to understand patterns of financial and climate risk and the tools of conventional economics are inadequate to the task. Traditional economics tends to dismiss extreme events and retain an academic disconnect with the reality of lived experience. For example, the staggering economic inequalities of our decade create new volatilities. Ackerman has a good summary of the ways that the concentration of wealth and growing inequality are distorting the economy, even before adding ecological disruption to the toxic brew.
Unlike the gyrations of financial markets, Ackerman observes, “worst-case climate risks involve unprecedented tipping points that are outside the range of historical experience” (p. 95). He notes, “Many environmental risks involve critical transitions, or one-time jumps to long-lasting different states” (p. 68). He offers a case study of the collapse of the Canadian cod fishery as an example. For this reason, “No one needs a cost-benefit calculation to confirm that we should do everything necessary to survive” (p. 153).
As Ackerman observes, economic projections on the future of climate change are overly focused on one-time disruptive weather events—not the long-term adverse impacts of changes to food systems, coastal cities, migration patterns. He writes, “there is a need for alternative pictures of probability, in which extreme events are much more common” (p. 39).
Nor do we fully understand how ecological weirding will alter our economic realities about energy, consumption, and classical notions of economic growth. 1 As anyone who has visited a major U.S. coastal city knows, trillions of dollars of speculative bets have been made on luxury commercial and residential real estate and the extract-burn-dump perpetual motion machine model of economic growth. What happens when these wagers go belly up? The tsunami caused by the growth bubble bursting will make the 2008 Great Recession look like a ripple in a bath tub.
As Richard Heinberg has observed, the fossil fuel infused fiesta of economic growth is winding down. 1 But no one has told the traditional economists and investors yet. The party is just too lucrative for the extractive energy industry and the superwealthy—so they will continue looting until the music stops (or lawmakers wake up and levy a carbon tax). Nicholas Stern has aptly noted on this score that unpriced carbon emissions are “the greatest market failure that the world has seen.” 2
While written for readers with a fair amount of economic literacy, Ackerman spices the book with discussions of contemporary culture and film and engaging narrative examples that round out his analysis. Ackerman once proposed a new climate economics model that he wanted to call “ACDC” for the band’s 1979 blockbuster album, Highway to Hell, in part to underscore the irreversibility of climate impacts. Unfortunately, he was overruled by less musically appreciative colleagues.
Worst-Case Economics was published before the recent resurgence of the Green New Deal movement, but Ackerman has put forward the economic, social and ecological preparedness case for taking just such bold action. He argues for a robustly more precautionary approach to address both financial and climate risks. “The risks of climate change call for a reinvention of energy, transportation and industry,” he writes, “undoubtedly including, but not limited to, a price on carbon” (p. 169). On the economic side, he recommends a financial transaction tax—similar to those implemented in Europe—to chill the speculative financial proclivities of concentrated wealth. He calls for incentives to shift capital from Wall Street to the new energy economy that is building a low-carbon future.
The bottom line is that we are woefully ill-prepared for the economic and ecological shocks ahead. And our economists—with the exception of unconstrained and original thinkers like Ackerman—are letting us down. Thankfully, social movements like the Extinction Rebellion and the Sunrise movement are not waiting as they take to the streets to demand a Green New Deal.