The problem with measuring climate change impact in GDP

From Matt Steinglass

June 27, 2009

Jim Manzi writes:

The expected impacts of human-induced climate change are marginal as compared either to the sloppy, sentimental and self-righteous rhetoric that surrounds this issue…

There will be no snow left on Kilimanjaro within a few years. The economic cost of that change to US GDP is zero. There will be no year-round snow left in the Himalayas in 100 years. The economic cost of that change to US GDP is tiny. There will be no Everglades in 100 years. The economic cost of that change to US GDP is marginal. There will be no Venice in 100 years. The economic cost of that change to US GDP is tiny. There will be no New Orleans in 100 years. The economic cost of that change to US GDP is extremely small.

There are two issues here. First, GDP measures income, not wealth. If your house burns down, it will most likely not change your income. Does that mean you should spend nothing to protect your house from burning down? Second, GDP only measures things that can be measured in money. But the worth of many precious things cannot be measured in money: Yellowstone National Park, the independence of one’s country from foreign rule, the existence of elephants and polar bears, clean air, the ruins of the city of Ur, the fact that humans have traveled to the moon, etc.

As far as I know, the only reasonable way to measure the worth of these things is to find out how much people are willing to pay to preserve or get them. The economic value of clean air in 1965, before the passage of the Clean Air Act, was zero. How much is the cleaner air we have today worth? You could say it’s worth nothing, since we breathe it for free; and indeed it doesn’t really show up in GDP figures. But if you’ve ever lived in a city without any pollution controls, you know that in fact its value is immense, and probably the best way to measure how much clean air is worth would be to measure how much the American people have been willing to spend over the past 40 years to get it. And the only way to find out how much it’s worth to keep snow on Mt. Everest, keep Florida above water, keep polar bears in existence, and so forth, is to find out how much Americans are willing to spend on these things. I would bet it’s actually far more than $50 a year per person for the next 100 years.