Looming Ahead

Global Warming

A Second Inconvenient Truth

George A. Akerlof

People think in terms of stories (or narratives). Tell the wrong story and you get yourself into trouble. American linguist-anthropologist-hobbyist Benjamin Lee Whorf documented this phenomenon in the 1920s. In his day job as a fire-prevention engineer he noticed a large number of fires occurred at gas stations. Putting his linguistics to work, Whorf discovered that the workers who handled the gasoline drums then used to transport gasoline chose to light up for a smoke around barrels they “knew” were “empty.”

A similar bit of linguistics is now getting the world into a great deal of trouble. Every few years the world’s leaders gather in grand conclave: Rio de Janeiro, Kyoto, Johannesburg, Copenhagen. Solemn pronouncements are made, but the can of global warming action is once again kicked down the road. The language of global warming doesn’t motivate individuals, on the one hand, and their governments, on the other, to take action today.

One simple story is both compelling and true. The Earth’s atmosphere acts like a protective blanket around us. This blanket allows the energy from the sun to penetrate, so the sun warms the Earth, and then the atmosphere benignly slows the rate at which that warmth radiates out.

Collectively we humans have a baby: the Earth. Year by year, inexorably, the atmosphere-blanket around our baby is getting heavier and heavier and heavier. Even a short road trip of 50 miles each way, using five gallons of gasoline, adds 100 pounds of carbon dioxide to the atmosphere. Through such innocent activities, the average U.S. family, for example, thus adds 1,800 pounds a week to Earth’s blanket. Add up all the families around the world, and with a dollop of science on top of our intuitive understanding about babies and blankets, and it’s easy to see that the world is, in all likelihood, getting warmer and warmer and warmer.

Any parent would rush to rescue a baby in such circumstances. But the stories we tell ourselves about global warming are too cold and too cautious. We read the proclamations of the Intergovernmental Panel on Climate Change. We defer to the conclusions of “scientists.” The scientists have spoken, with all but unanimous voice and often with great passion and force, but the professional dispassion of science muffles the message. I remember sitting next to a famous astronomer at a dinner some 20 years ago. Not knowing what to say to an astronomer, I brought up climate change. “We do not yet have confirmation that there is global warming due to anthropogenic climate change,” he told me.

That statement was correct in science-speak, appropriately wrapped as it was in his degree of doubt. But for the purposes of public policy, given the high probability of man-made global warming, such caution is foolhardy. Parents don’t take a baby’s temperature to decide whether the room is too warm; likewise, for global warming we need a story that spurs us to do what is necessary.

We need such a rhetoric not just for ourselves but so our governments will have the legitimacy and the will they need to take action. The economics of global warming is as well understood as any economic problem could be. The best way to fight it (but not without considerable expense) is to place a uniform tax on carbon emissions; that tax should escalate until emissions fall to desirable levels. Optimal policy also calls for subsidization of research and development into ways to reduce emissions.

But global warming is a global problem and emissions come from everywhere, so taxes and subsidies must be global. Each country must view it as its duty to come running. We need to enter into a global alliance in which “we” are all in this globally together. We must tell ourselves that we all need to pull together. We must pull as hard as we can, whatever the others do. Why? Because the Earth is our beautiful baby.

There are thus two inconvenient truths. The first is global warming itself. The second is that we aren’t yet telling ourselves the stories that compel us to combat it. ■

George A. Akerlof won the Nobel Prize for economics in 2001. He is Guest Scholar in the IMF’s Research Department, Professor Emeritus of Economics at the University of California, Berkeley, and author, most recently, with Rachel Kranton of Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being.

Increasing Demand

The Unresolved Crisis

Paul Krugman

Midway into the second decade of the 21st century, the biggest problem facing the world economy—or at least its relatively rich countries—is a problem many economists never thought we’d see. For the first time since the 1930s, the world appears to be suffering from a persistent lack of adequate demand; people just aren’t spending enough to make use of the productive capacity we have. This was supposed to be a solved problem, one that may have bedeviled our grandfathers but wasn’t going to come back. But it did, and answers remain elusive.

Let me offer some crude summary numbers. If we take the IMF’s “advanced economies” aggregate from its World Economic Outlook (WEO) database, we find that the combined real GDP of these economies grew 18 percent between 2000 and 2007. Projections made at the time called for a continuation of growth at similar rates over the medium term. In fact, however, it now appears that the advanced economies will have grown only about 6 percent between 2007 and 2014, implying a 10 percent shortfall relative to what we used to think was the trend.

True, it’s widely argued that the actual amount of economic slack is much less than this...