Ingmar Schumacher Podcasts

In this new episode of Dialogues for the Common Good I talk with Jakub Growiec about his new book “Accelerating Economic Growth”. Jakub Growiec is a Professor of Social Science at Warsaw School of Economics who works on economic growth, looking more specifically at production functions, determinants of growth, technological progress, productivity, R&D, but also the economics of social capital.

Jakub recently wrote a book that he, I believe rightly so, called his magnus opus. It is entitled “Accelerating Economic Growth: Lessons From 200 000 Years of Technological Progress and Human Development”. I have to say that I found this an amazing walk through our history of economic growth, with an equally in-depth and thoughtful walk through our potential future. It is a profound work that deserves wide attention and discussion. Jakub discusses issues related to the history and future of economic growth, the ultimate goal of humankind, the decomposition of development, the acceleration of growth, the need to establish data accounts in the line of national accounts, the role of Artificial Intelligence, and he redefines the production function. There is simply so much depth in this book and new ideas, I believe it should be on the reading list of all economists.

What I particularly like about this book is that it is written in a casual, interesting and even funny style yet goes into details that especially economists will appreciate. While it is written for a general audience, I believe that you should be an economist, especially a growth economist, in order to be able to fully comprehend the importance of the ideas raised. While one can see that Jakub was inspired by the likes of Yuval Noah Harari, Jakub’s contribution takes a different direction and clearly goes much deeper. Only a highly sophisticated economist, who not only knows about economic growth but economics in general, can collect and present such a wealth of novel contributions in a mere 180 pages.

Enjoy the interview.

About the book:

What made it possible for the human species to conquer the world, build a global digital economy, and still want more? What drives technological progress and economic growth in the long run and on a global scale? And how will technological progress, economic growth, and the overall prosperity of human civilization unfold in the future?

This book sheds new light on these big questions by incorporating findings from physics, anthropology, psychology, history, philosophy, and computer science in a brand-new theory of economic growth. Looking back across the millennia, it identifies five major technological revolutions which have transformed humankind’s capacity to process energy and information—the cognitive, agricultural, scientific, industrial, and digital revolutions—and characterizes the new avenues of economic development which they have opened while also exponentially accelerating growth.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

In this new episode of Dialogues for the Common Good Ed Barbier and myself talk about his new book “Economics for a fragile planet: Rethinking Markets, Institutions and Governance“. Ed Barbier is a University Distinguished Professor in the Department of Economics, Colorado State University and a Senior Scholar in the School of Global Environmental Sustainability. His main expertise is natural resource and development economics as well as the interface between economics and ecology. His new book is a fascinating discourse on the source, consequences and potential treatments of our world’s environmental problems. It builds upon his life’s work, which among many scientific articles, contains important books such as “Economics of the SDGs: Putting the Sustainable Development Goals into Practice“, co-authored with Joanne C. Burgess, or “A New Blueprint for a Green Economy“, co-authored with Anil Markandya. You find both the video and the postcast below.

If you have further questions, post them below in the comment section or write them to me personally, and Ed and/or myself will get back to you on these.

Enjoy, share and comment please.

Book summary:

In a world of growing environmental risks and ecological scarcities, ensuring a safe Anthropocene for humankind is essential. Managing an increasingly “fragile” planet requires new thinking on markets, institutions and governance built on five principles: ending the underpricing of nature, fostering collective action, accepting absolute limits, attaining sustainability, and promoting inclusivity. Rethinking economics and policies in this way can help to overcome the global challenges posed by climate change, biodiversity loss, freshwater scarcity, and deteriorating marine and coastal habitats. It requires decoupling wealth creation from environmental degradation through business, policy and financial actions aimed at better stewardship of the biosphere. In this book, renowned environmental economist Edward Barbier offers a blueprint for a greener and more inclusive economy, and outlines the steps we must take now to build a post-COVID world that limits environmental threats while sustaining per capita welfare.

‘This is the most thorough and expansive introduction to a conception that sees the human economy as embedded in Nature. Beautifully written and technically adroit, it displays the author’s wide social sympathies. University courses in environmental and resource economics can find no superior text today to include on their list.’ Professor Sir Partha Dasgupta, University of Cambridge

‘Ed Barbier was at the frontier of new economic thinking with Blueprint for a Green Economy. Here, he continues to innovate and challenge us to reinvent and realign economics for a fragile planet. And not a moment too soon.’ Steven Stone, UN Environment Programme

‘At the intersection of economics and the environment, Barbier’s timely book details in a clear and accessible way the rationale for saving our planet. For too long we have undervalued nature – at our peril. Barbier lays out the roadmap for the kind of economic thought and policymaking needed to save our ‘fragile planet’ – for us and those who will inherit this earth from us.’ Achim Steiner, United Nations Development Programme

‘This is a must-read book for anybody concerned about the future of the environment and the lives of current and future generations. It dissects the underlying causes of today’s environmental emergencies, climate change, loss of biodiversity, quantity and quality of water, and degradation of the marine environment. It assess their impacts on human well-being and identifies the changes needed in our economic and financial systems to become a more sustainable and equitable society. This book shows that business as usual is not an option, but the solutions exist – actions are needed now by governments, businesses, financial institutions and consumers.’ Professor Sir Robert Watson, CMG, FRS

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Head of the department of energy, transportation and environment at the German Institute for Economic Research in Berlin (DIW Berlin)
and
Professor of Energy Economics and Energy Policy at Leuphana University

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In this new episode of Meet Top Environmental Economists (#MeetTopEnvEcon) I am very happy to present to you Professor Dr Claudia Kemfert. Claudia Kemfert is the head of the department of energy, transportation and environment at the German Institute for Economic Research in Berlin (DIW Berlin), and she is a Professor of Energy Economics and Energy Policy at Leuphana University. In her research, Claudia focuses on climate and energy economics, with most of her research being very policy oriented. It is this policy-oriented approach that allowed her to become a member of the German Council on the Environment, a member of the scientific advisory board of the EU Commissioner for Environment where she advised, among others, EU President José Manuel Barroso, and she advises the state prime ministers of Lower Saxony and Hesse on their energy strategies. She has written over 250 scientific articles, many non-scientific ones, and several books, which are also directed towards the general public. Her most recent book is called “Mondays for Future”, where she provides answers to 120 questions related to climate issues, such as climate scepticism, eco-dictatorship, emission trading and many more. This is a really interesting book, written for everyone interested in climate issues, and well-worth reading. Claudia has already had an exceptionable career in environmental economics, both contributing widely to the academic field, while at the same also being someone who is very engaged in the policy world. For her contributions and efforts to help shape environmental policy through scientific knowledge, I am very pleased to present her here in the Meet Top Environmental Economists series.

Here is the podcast version of the Express Views interview:

And now I am very happy to present you the Meet Top Environmental Economists interview:

(Date of interview: May 2022)

Could you please be so kind and give me a brief background of yourself.

I was inspired by Reinhard Selten’s lectures on game theory at the University of Bielefeld. I always found the game-theoretical and behavioral-economic approaches exciting. In particular, energy markets fascinated me at a pretty early stage. The role of market power versus free competition in the fossil energy market were very interesting to me at the beginning of my studies. In the last years of my studies, environmental economics came in, especially climate science. The first report of the IPCC at the beginning of the 90s influenced me. Since then, I have been studying the economic impacts of energy and climate policy. In my doctoral thesis, I compared the effects of emissions trading with those of the eco-tax.  Very early in my research career, I focused on renewable energy. In fact, I was lucky enough to study at a university where, at that time, more than 25 years ago, the first program on renewable energy was offered. I was inspired by numerous works, e.g. by Nobel Prize winner Elinor Ostrom on environmental economics, but also by climate science, especially Klaus Hasselmann, with whom I had the privilege of working very early on. Klaus Hasselmann is a very bright mind, and then an incredibly fine human being. I learned a lot from him.

You have written over 250 scientific articles, many, many non-scientific ones, several books (also for the general public). You consult the industry and governments. How do you manage this incredible workload of research, consulting, and policy work?

All my life, I have been very fortunate to work on research that interests me enormously. After all, I have been working on nothing else for 25 years. Therefore, I can benefit from a very long history of experience. A lot of knowledge has been accumulated. In addition, I work with a very great and large team. And I am also involved in a very large number of research collaborations and research projects, which results in a great many joint publications. At DIW, I have a great team of researchers, and also at the university and within the framework of the German Advisory Council on the Environment. Joint reports and publications are produced there. It’s all teamwork.

Among the many publications, which of your academic (or policy) contributions are you most proud of (and why)?

One of the very early ones and one of the most recent.

I am particularly proud of one of the first publications that came out of the research network as a young scientist. Most recent Nobel price taker Klaus Hasselmann initiated a joint research network at that time, and I was incredibly happy to be part of it. I am proud of this publication not only because it is an important scientific publication, but also because it was produced in a very great research network. Many very important colleagues of many years are involved. And because as a very young researcher I got the opportunity to be part of such an important research network. This has influenced my work. But there are so many publications that I am also proud of, not only because they cover such different facets of energy markets, the impact of conservation and environmental protection, but also because they have resulted in long-standing research collaborations and friendships. I am still friends with Klaus Hasselmann today, and it makes me glad.

And in the last few years we’ve done research on evaluating a full renewable energy supply, and great collaborations with colleagues in Finland and Stanford. It’s very good that these findings have also been incorporated into the recent IPCC report.

Hasselmann, K., Kemfert, C., Latif, M., Azar, C., Berz, G., Edenhofer, O., Hare, B., Jaeger, C., Johannson, O., Singer, S., Wokaun, A. (2003): The case for long term mitigation of anthropogenic climate change. In: Science magazine 302 (2003), 5652, S. 12

Child, M., Kemfert, C., Bogdanov, D., Breyer C. (2019) Flexible Electricity Generation, Grid Exchange and Storage for the Transition to a 100% Renewable Energy System in Europe. In: Renewable Energy 139 (2019), S. 80-101

Pao-Yu Oei, Thorsten Burandt, Karlo Hainsch, Konstantin Löffler, Claudia Kemfert (2020). Lessons from Modeling 100% Renewable Scenarios Using GENeSYS-MOD. In: Economics of Energy and Environmental Policy 9 (2020), 1, S. 103-120

If you were to give a list of articles that a young researcher in your line of research should read, what would it be and why?

You should start with Dennis Meadows and the Limits to Growth from 1972. You should read it to understand how science and mathematical modeling has evolved, but also because this report was the starting point for global environmental policy to prevent environmental damage. At that time, the debates started about how much more we should pollute the planet. 

I would also recommend reading the work of Nobel Prize-winning economist William Nordhaus, especially the early work on assessing the economic costs of climate change. From this, insights can also be derived for the later works of Nicolas Stern, on the economic costs of climate change. This is particularly exciting that political conclusions were drawn from these research papers, and on research papers disappeared from publication.  It was not until Kate Raworth’s book, Doughnut economics, that public debate on this topic returned. She has a refreshingly innovative but also extraordinary look at economics, and the resulting problems on the environment and climate. Economics is the cause of the problem, but it can also be the solution. That’s why I find Mariana Mazzucato’s work very important in this context. But she also shows how economy can be rethought.

Carlos Alvarez Pereira (Eds), Ugo Bardi (2022):  Limits and Beyond: 50 years on from The Limits to Growth, what did we learn and what’s next? 

Nordhaus, W.D. (1993) Optimal Greenhouse-Gas Reductions and Tax Policy in the Dice Model. The American Economic Review, 83, 313-317.

N. Stern (2006), Stern Review: The Economics of Climate Change (Cambridge Univ. Press, 2006)

Rate Raworth (2018) Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist https://www.kateraworth.com/doughnut/#

Mariana Mazzucato (2021) Mission Economy A Moonshot Guide to Changing Capitalism

Policy makers don’t necessarily have the same technical backgrounds that researchers have. Which book or reference would you suggest a policy maker should read, if they wanted to know about research in your field?

In all my books for the general public, I summarize the latest research findings, such as the latest book “Mondays for future” from 2020.

 Since we work at the interface with policy advice in our institute, we regularly produce reports for the general public, which politicians in particular also read. I myself have been involved in science communication for decades, so the translation work is done by us.  Very few politicians have time to read scientific studies, which is why we provide this kind of “translation service”.

What advice would you give to young students who want to work in your field (energy and climate economics)? What advice would you give young students who want to take a similar path as you did (combine research with policy advice)?

My advice is always to take time to study, to read many studies from the last decades, and to go deep into the subject matter. Especially in the field of climate research and environmental economics, it is important to read interdisciplinary research, especially from the natural and social sciences. If you are interested in the interface with policy advice, it makes sense to work at a research institute similar to ours, where this interface is very close. We ourselves also train doctoral students, so that from a very early stage such a career path is very much possible.

You are working closely together with the industry and the government. In a nutshell, what are the two most important lessons that you took away from this?

We do not work with industry, nor do we have any research collaboration with industry. We work at the interface with policy consulting, and regularly produce studies for the general public.

 In direct policy advice, one can learn how the real world outside works, how real economy works, and according to which criteria politicians make decisions. These often have nothing to do with the scientific ideal model. That is why it is important to translate and to put oneself in the shoes of the decision-makers. The fact that politics often decides completely differently from what wissenschaft.de proposes is particularly striking in climate science. Whenever fundamental changes are needed and massive interventions are necessary, there is a lot of public polemical debate, which does not exactly simplify the discussion. Therefore, it is important to always make transparent how one arrives at the scientific findings, to understand and accept that politics also has other decision-making patterns, and to communicate this transparently.

You have been a strong advocate of the `energiewende’ (energy transition). Many countries pursue this energy transition in different ways, Germany and France being two stark, contrasting examples. Is there too much ideology involved in the energy transition? How have the key challenges of the energy transition changed during the past 30 years?

The progress of the energy transition depends very much on political ideologies. Germany rightly started to promote renewable energies more than 20 years ago. As a result, costs have dropped massively; they are now much cheaper than all conventional energies, especially nuclear energy. According to our studies, nuclear energy is insanely expensive, especially because the construction of the power plants consumes a lot of money, but also the storage of nuclear waste, the dismantling and the negative external effects. Only if nuclear energy is subsidized by the state, and it will be in France, can it continue to exist. The construction of new power plants requires extensive subsidies, as can be seen from the planned new construction projects in England. Purely for economic reasons, nuclear energy makes no sense at all. France has a different political system than Germany, and in our view obscures the true costs of nuclear energy. Especially in times of war, a highly risky technology like nuclear power should play a less and less significant role. But Germany has also made many mistakes, has been too slow in developing renewable energy, has not fossilized enough energy, and the share of coal-fired power plants is still far too high. It is therefore particularly important that we finally change taxes and implement the energy turnaround faster than before. Away from nuclear and coal, away from all fossil fuels to a full supply of renewable energies.

How strong is the fossil lobby (EU, USA, rest of world)? What can we do to reduce its impact upon policy?

The fossil energy lobby is enormously strong everywhere. It has prevented us from implementing sufficient environmental and climate policies over the last 40 years. The findings of climate science are overwhelming. We need to get away from fossil fuels as quickly as possible in order to reduce greenhouse gases very rapidly. We are miles away from that at the moment, partly because fossil fuel lobbyists have repeatedly cast doubt over the past decades that climate protection would be too expensive, that it supposedly wouldn’t work without fossil fuels, and doubted the scientific facts. This is where science is called upon: we need to bring our findings into the public discourse much more than we have in the past. The scientific findings on climate change need to become much better known, both among the general public and in politics. That is precisely the task of science.

Let’s go to a different topic. Do you know the concept of holidays? Or do you take your papers to the beach?

Of course I know the concept of vacation! I go on vacation regularly, and I don’t take professional articles with me there. This is quite important for me. Only in absolute exceptions emergencies would take scientific work. That is actually taboo for me. But I can also relax on the weekends, but also in the weeks where we take a vacation during the year. That’s when I recharge my batteries for the many exciting tasks in the field of science and science communication.

Please feel free to suggest someone else who you would like to see in this series of interviews, who would be the person on your list?

There are so many great environmental economists to interview, it’s hard to pick out specific ones. It would be nice if more female researchers were visible, so I recommend Esther Duflo, Veronika Grimm, or Karen Pittel.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Professor of Environmental/Resource Economics and Sustainability at the Ruhr University Bochum

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I am very happy to present to you Andreas Löschel in this Meet Top Environmental Economists interview series. Andreas holds the Chair for Environmental/Resource Economics and Sustainability at the Ruhr University Bochum. Since 2011 he chaired the Expert Commission of the German Government to monitor the energy transformation and is a Lead Author of the Intergovernmental Panel on Climate Change (IPCC) for the Fifth and Sixth Assessment Report. He is a member of the German National Academy of Science and Engineering (acatech) and several times among the 50 most influential economists in Germany in the Frankfurter Allgemeine Zeitung (F.A.Z.) economist ranking. He published around 100 scientific articles in top journals, and is one of the most policy active environmental economists.

His impact on policy making in Germany and the EU, especially in terms of energy issues, is immense. He is one of the very few environmental economists who regularly appears in national news, both the TV as well as newspapers and the radio. It is pretty amazing where he takes the time from to do all this policy work, and, despite all that, he still publishes many academic articles. There is much to learn from someone like him, and I would say a really vital lesson that any reader should take away is that it is possible for an environmental economist to bring one’s ideas and knowledge into the policy debate. The path towards this may be rough and rocky, but, as Andreas shows, it is possible, given one is willing to put in the effort.

Here is the podcast version of the Express Views interview:

And now I am very happy to present you the Meet Top Environmental Economists interview:

(Date of interview: December 2021)

Meet Top Environmental Economists – Andreas Löschel

Could you please tell me what motivated you to do research in environmental economics.

I had a very interesting encounter with Joe Stiglitz in 1997, just before I ended my diploma in Nuremberg. Joe was handed over a prize for achievement of the University of Nuremberg with a lot of money and my professor asked me to host Joe for a day and take him to Rothenburg ob der Tauber. Rothenburg is a very nice, medieval town. I had the pleasure the spend the full day alone with Joe Stiglitz and his wife. I was working as a tour guide at that time, explaining the city and making some extra money. So, I had this full day with Joe Stiglitz who was already very famous. That was all very interesting because he asked me a lot about my own opinions, what my point is on this and on that. At that time, I wrote a master thesis on old age security and pension systems, and I wanted to do something with public economics.

But Joe kept asking me about environmental issues, environmental regulation, environmental problems and the likes because he was interested already at that time working on this topic. This was for me an important occasion because it was this encounter with somebody who was a world leader in researcher, and it was very inspiring to see how was he thinking about things, what he had achieved , what was he working on.

Then. a month later, I saw an advertisement of a position, which was the first PhD position on environmental economics, a graduated program at the University of Heidelberg in Manheim.

So I was coming out of this public economics perspective and had these ideas about environmental taxation which was something, let’s say, new, and it was also the year where the Kyoto protocol was negotiated. Then I decided to apply, and I was lucky to get this position, which was basically the first graduate program of the German Science Foundation on environmental economics. My advisor, Klaus Conrad, brought me into the CGE (Computable General Equilibrium) modelling. He had just come back from a year with Dale Jorgenson in Harvard, and he was bringing back CGE models to Germany. Then I ended up getting in contact with Christoph Böhringer, who just started in Mannheim at the ZEW.

From there on we were just working on developing models for impact analysis. That was really an exciting time. Then I went to the European Commission, and afterwards got a leading position at the ZEW. This was a development without a lot of planning, in fact I never had a master plan to move into academics. The next step seemed to always have been a good decision for me, and it turned out that I ended up with this professorship first in Heidelberg and then in Münster and now in Bochum.

How very interesting. You seemed to have always met the right people at the right time.

Yes. I think everybody is probably meeting the right people at the right time, but it is probably important to take these chances as well and to develop from there.  

You moved around a lot. What is your main motivation to move to different places?

Moving to another place is an opportunity to learn new things, to take up new questions, to meet new people and to build new networks. I think it can be very important for your own development. When I was working at ZEW I was doing a lot of quantitative analysis, I did my PhD, my habilitation on simulation modelling. When I moved to Mannheim, I started doing laboratory and field experiments. In Münster, I was working more on questions about energy (while before I was more working on climate and climate policy). I was more interested in bottom-up research on energy policy analysis with a lot of focus on energy demand behavior. When I moved to Bochum I again restructured my research agenda, looking a bit more into industry and mobility issues, building infrastructures and industrial transformations, which will be the next big thing in Germany.

I can totally agree that it is much more interesting to work on a variety of topics. But if you compare this to what most researchers are doing, then they work all their life on one very specific single idea. Don’t you find it is becoming increasingly more difficult to change the topic and to work in something new?

Yes, that is the case. But, I think, in terms of what you have learned in the past, you have built up knowledge on methods, you have built up knowledge on theory, and all of these are, of course, not lost. I’ve also never been a person that was doing classical research where you work over years to get a paper done. The reason is that I am not only interested in the academic quality, which I think it is important, but I am as well interested in the impact of the research in the policy arena. I try to develop a science-based answer to pressing issues, and here the time scales are often not years but much shorter.

Nevertheless, in academics I think you need both: You need the people that stick with the problem for decades, but there is as well room for other ways to do research.

What we have just been discussing is maybe not the best advice that one would give to students in our field. If you had to give advice to students in our field, what would it be?

I think for PhD students the ideal is really to try to get to the academic edge and try to integrate as far as possible and as soon as possible in the usual academic life. To be successful it is important to be in international networks, try to get in contact with people that are on the edge in these topics, to go to conferences and talk to the people that are the leading researchers in your area, understand what they are working on, and what are the problems they are concerned with. I think it is crucial for young researchers, to really learn how academics is done in an international competitive framework.

What kind of skills should they acquire? For example, on one hand, there are very technical skills, while on the other hand there are very interdisciplinary ones.

I am very big fan of the technical side, so I think it is important that you are very good in terms of methodology. This can be theory, it can be econometrics or empirical or experimental work, but I think you must have a methodological core, and you really must have the depth to publish in economics journal. This should be the direction to go.

You are not going to be very competitive if you become too interdisciplinary early on in your career, because there are other people that are in much better position, and many of the PhDs in Economics departments do this type of work. I suggest that later you can learn a bit better how to place your research in a broader context. I would always advice to be strong disciplinary, and to publish in leading economic journals and develop it from there.

What future direction would you then envision for environmental economics and what kind of obstacles do you see there?

I have just done an overview article where we look at the development in the field using the articles in the Journal of Environmental Economics and Management and I think one of the insights you can gain from there is that you have developments that are driven by certain areas (especially climate change and the energy transformation), and nowadays a lot of articles are moving from theory to empirics as well as to experimental approaches.

In the next years I think we will see a much broader use of newly available data that you have not seen before, which will be looking deeper at the temporal or locational differences in environmental impacts.

In terms of the field as such, we see as well that there are more publications in top journals. Until a couple of years ago there had been practically no publications in the top five journals in economics from the environmental side. This is changing now as well.

There is more demand for environmental work from editors in top journal, because before they did not see the worth or the potential. There is also the supply side, with many more researchers with very good education in excellent departments that are now working on environmental issues and writing high quality articles. I think what we are going to see is that this whole field is going to become mainstream in top journals.

In terms of the obstacles, I would see that we are going to be side-lined as economists from other disciplines. Think about climate change and think about the discussion about the pace of change and the need of quick transformation.

The usual approach of economists is to study policy responses in terms of efficiency, of the right policy mix, and addressing different externalities. But there is often a need of urgency in responses, so policy makers do not care necessarily about things that we traditionally are interesting in. They want to achieve as much as possible, as quickly as possible. In this case, efficiency and trade-offs are no longer playing a big role. I think that is a real danger for the field, and this will be a big obstacle for the economists to be heard in this type of discussion in the broader public.

You are one of the few environmental economists who has substantial exposure to the policy side. From 2007 to 2014 you were the head of the research department Environmental and Resource Economics at ZEW. You were coordinating over 20 full time researchers, and in that time, you regularly travelled to Berlin, talked to Merkel and other leading politicians. What do you take away from that time, what were your key experience?

Policy advise should be grounded in research, but in the end these are two different spheres. In your research, you must come up with a rigorous analysis of problems. and in the policy arena, you must come up with a good description of possible solutions.  For policy makers you should give your assessment of pros and cons, which sometimes is based on your own research. Very often, however, the own research is going to be much more detailed while politicians are going to ask you bigger questions. Policy advice is a bit like the IPCC idea, which is synthesizing research. You are not going to sell your own research but your reading of the literature and the insights that you think now can be derived from this and can be brought into the policies spaces.  It will be, to some extent, subjective, but you try as good as you can to be objective.

My point is, it’s not that you’re doing your research and then you come with your paper and show this to a policymaker. This is not how it is working and very often you’re going to see that a lot of policy advisers are not at all familiar with the research in the field. They have basically no background in Environmental Research, and even many of the leading policy advisors have not published anything on climate policy.  Still, they are making both claims on what the government should do in terms of environmental policy, and some are using their academic credentials to do so, but very often though they are from other fields.

For this reason, I think it’s important to really understand the literature in the field that you’re talking about, being capable of synthesizing academic research in a way that it is helpful for policy makers, and it’s important to keep credibility with your fellow researchers. This should be the foundation for doing science-based policy advice.

You have to understand what the problems are that policy makers want to solve. In addition, you have to have the capability of providing a bundle of possible answers, not just one, with some qualifications on likely consequences, and then you should be able to step back and let politicians decide. In the last two decades, I have seen a lot of decisions which I thought were wrong, and I would have done differently, but this is not my role. I can try to offer my advice as a researcher who specializes in this field, but it must ultimately be the policy maker who decides.  This is a process that needs a bit of persistence and yields quite some frustration, but I still think it’s worthwhile, over the long run.

Most politicians do not have the academic background that you have just been talking of, and they already have a certain view or opinion on topics. If you come to them with some advice that somehow does not conform with their view, but that you know is sufficiently well grounded in academic research will they ignore this?

There is always a danger that policymakers are going to pick just one argument that fits their agenda. That is inherently a danger that we are facing, and I always tried to circumvent this danger of just being used by policymakers for some decision that they want to push. There are of course many people that are bringing forward their wishes and their perspectives to politicians and academics are only one of these groups.  

It depends a bit on the politician, how they are valuing these different inputs, and there are some politicians that are interested in learning about other perspectives that are not necessarily in line with their political intuitions. But this is not the rule, and I would say it’s rather the exception. I think they often like talking with academics, but they are often hesitant to really engage in this type of argumentations, which are very often more nuanced than they can sell to their constituencies.

It’s a difficult situation as well for advising policymakers as you have to take this into account, in the end you’re one voice and there are many other voices. As academics we are, however, independent, and thus we have the luxury to come up with inconvenient claims and we should use this position as well.

Since 2011 you have chaired the Expert Commission of the German government to monitor the energy transformation. You have also travelled regularly to China and worked with the Chinese government. Do you see important differences how Europe and China handle energy issues? How do they approach academics who are trying to tell them what to do or suggesting them what do? 

In Germany I’ve been doing this for 10 years now, under different governments, with different parties and politicians. In Germany we are not really embedded in the government, but we are side-lined a bit and we talk with politicians but it’s not like in the Council of Economic Advisors in the US where you are really participating in drafting laws and so forth, where you have a direct possibility as academic to influence policy. In Germany researchers are not part of government, they are advising and that means the impact is much softer than the potential impact in the US, for example, where you see academics have leading roles, for example, in the White. Researchers in Germany can give opinions or give a perspective, but they are not involved in the legal process in a concrete way.

In China I have to say that I am seeing this from the point of view of an European economist in the end. I can only observe how the Chinese colleagues are advising their government and my role is not such an important one. The Chinese are very interested in understanding the German perspective on many of these transformational issues, such as moving out of coal and nuclear, and how we are transforming our industry. That sounds for them really revolutionary, and they are really interested in trying to learn why we are doing this and how this should be managed.

I feel foreigners who are going to China are trying to show that there are good examples of environmental policies, and that we have been able to balance economic development with environmental or social issues and I think that’s an important message as well to deliver. In China, academics are again much closer to policymakers than we are here in Europe.  I think they are doing a lot of direct work for the government but in comparison to the US probably with less possibilities to influence the decisions of the government. In the US researchers have more leeway, more possibilities to bring in their economic ideas into legislations. In China, academics are heavily woven into governmental issues but with much fewer possibilities to influence policy.

What do you think is the better way, the European one, the Chinese or the American one?

I have to say I have a big sympathy for the American way of policy-science interface. Personally, I like a lot the idea that you’re a top academic and then you spend some time in the government and then you go back to university.  We don’t have this; we have these separated spheres and I see that’s not very fruitful in terms of exchanging different perspectives. So very often academics are unaware of the way policy formation is happening, and policy makers are not understanding the quality or importance of scientific work. For example, for them, everybody who has a professor title is basically delivering the same quality of advice, simply because they don’t understand the academic system. So, they cannot distinguish between a statement that they are hearing from X or Y, because they are unaware of how academics are checking quality and how quality can be distinguished.

Policymakers here in Europe don’t really appreciate academics that are moving into administration and opening a little bit of thinking. I think Americans are more open to this interaction than Germans.  However, academics in the US see it as the privilege to work in administration, while, for example, in Germany, it’s seen as a bad thing. Moving from academics into policy for some time is seen as something you should not do. In contrast, in the US, academics from the very best departments are directly involved in policymaking and it seems that this is appreciated.

You were the lead author for the 5th and 6th assessment report of the IPCC. How does someone become an author for these assessment reports?

That was a miracle.  You must apply for it and then there is a selection process, but this is behind closed doors. I think it’s probably a combination of visibility, because in the you must be appointed by the government, which is the only direct interference of policy.  In general, the authors are researchers that are visibly academically, of course, but as well visible in general policy discussions. Nobody knows why and how you are selected as lead author.  It’s a bit different for contributing lead authors, because then you have a big responsibility and people are interacting, and asking whether somebody wants to take over this role but besides you simply don’t know, I mean you’re applying and then you hear from IPCC.

What positive or negative experiences did you walk away with from this experience?

It’s a relatively intensive work over a long period of time and academically it’s not very rewarding. In terms of citations, it might be OK because these are highly cited documents, but most academics will not value a lot the 120 pages that you have written. It’s highly away from an economics point of view and a highly inefficient process because you’re writing, and re-writing and you get thousands of comments, and you rewrite and rewrite again.

Sometimes you struggle to remember what was the idea that you started off with three years ago, because this has been maneuvered and rearranged for several times. 

But I think it is an interesting experience to bring these different perspectives in one chapter. You must find a version where all authors agree, so you have to sometimes also compromise, you have to argue your own points. These things are very often discussed sentence by sentence with all the other colleagues and this is not a self-selected group of friends, but this is a group, a global group with very different perspectives.

As an example, for the chapter on energy in the IPCC report, you know that even between Germany and France there are quite some differences in how they think the energy system should look like and even more on a global scale. In the end, if we want to tackle these problems, we really must develop solutions that work for everybody or otherwise this is not going to function. Therefore, discussing with the IPCC authors from the US, from China,  from the developing countries, Africa, South America, I think this is really rewarding because otherwise you’ll stick to your own research bubble, while here you are confronted with these perspectives.

A slightly different topic. Do you know the concept of holidays, or do you take your papers to the beach?

I know the concept of holidays and from time to time you have to rest also a bit. But, if I am honest, while I’m not taking my papers to the beach I’m working on them in the evenings, for example. So it’s very difficult to really stop for a few days; I think I’ve not done that in the last two decades. There are the papers that you want to work on, as well as doing a lot with the press and then you have to follow up what’s happening in reality. I’m a big fan of relaxing and spending time on the beach, but letting go fully is difficult.

What is your favorite economic joke on anecdote from a conference?

When I started my PhD I went to my first EAERE conference. I personally have to say I always linked it up with football, because usually we have either European Championships or World Championships.  Very often I’m linking this with watching football with friends and co-authors and having nice evening somewhere where we would talk about research, but then as we would sit together and cheer for our teams. I think that the deepest sad memory is 2006, when we hosted the world championship in Germany, and there was the world conference in Kyoto, and I was watching the semi-final Germany-Italy. There were many researchers from FEEM with Valentina, Massimo and Carlo and we were in this Japanese bar watching this game and the Germans lost in their home championship, but the Italians were celebrating, so I have to say this took me some time to cope with, and I think I still must cope with this. But that actually a great experience even though the ending was bad. That’s really what I enjoy most. In these conferences, being in touch with the co-authors, with people that you’re interacting for a long time, that you know from their research, and then you find some additional personal connections, for example, via football.  

Could you suggest someone who you would like to see in this interview series?

Well, obviously there are lots of great economists that you want to talk to. When you ask me about some people I really benefited from, then the one person I would like to mention is Malte Faber.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Anastasios Xepapadeas

Professor of Economics at the Department of International and European Economic Studies of Athens University of Economics and Business and the Department of Economics of the University of Bologna

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I am very happy to present Anastasios Xepapadeas in my new episode of Meet Top Environmental Economists (#MeetTopEnvEcon). Tasos, as everyone calls him, is currently Professor of Economics at the Department of International and European Economic Studies of Athens University of Economics and Business and the Department of Economics of the University of Bologna (part time with parallel affiliation). He is an International Member of the US National Academy of Sciences and is a past president of the European Association of Environmental and Resource Economics and past Chair of the Board of Directors of the Beijer Institute of Ecological Economics of the Royal Swedish Academy of Sciences.

Tasos has published on a large variety of topics such as Spatial-temporal Analysis in Economics, Economics of Climate Change, Uncertainty, Ambiguity and Robust Control, Environment and Growth as well as Evolutionary Approaches to Policy Design and Environmental Policy. He participated as coordinator or lead researcher in more than 35 research programs funded by the EU, the Greek government, or private sources in the area of environmental and resource economics. He has published more than one hundred and fifty papers in leading journals and collective volumes, such as the American Economic Review, European Economic Review, Environmental and Resource Economics, Journal of the Association of Environmental and Resource Economists; or the Journal of Environmental Economics and Management.

It is always a great pleasure to talk to Tasos. He is open for most discussions, and really enjoys working with the younger generation of researchers. Don’t hesitate to get in touch with him if you think you have a nice idea, there is much to learn from him. I had been inspired by his work on shallow lakes, which I find gives a neat and novel way to think about irreversibilities. It’s always interesting how one simple equation can capture so many ideas.

Here is the video of the Express Views interview:

Here is the podcast version of the Express Views interview:

And now I am very happy to present you the Meet Top Environmental Economists interview:

(Date of interview: December 2021)

(download interview as pdf)

Meet Top Environmental Economists interview – Anastasios Xepapadeas

Could you please let me know what motivates you to do research in environmental economics.

My PhD at the economics Department of the University of Manchester was not in environmental economics, but on straight-forward cost-benefit analysis. After my PhD, I returned to Greece, where I spent two years in the army, which was a requirement for all Greek citizens.When I went back on the job market, I started working for the Public Power Corporation, which was a public enterprise controlled by the Ministry of Energy. My tasks were basically to help design pricing policies, although these days pricing policies were very much affected by the political aspect of the problem. So, the minister would, at the end of the day, approve the new prices and the approval would include ‘we need to subsidize that group’, ‘we need to do this, we need to do that’. My other task was to help, engineers to try and design the expansion of the energy system in an efficient way, and that was very interesting, and I enjoyed it.

It was nothing related to the core of environmental economics, but mainly to energy and the expansion of power systems. But then I decided to go into academia, because there were openings, there were new departments coming out, so I thought ‘ok’ my objective was academia. These days, we’re talking about the mid-80s now, were an interesting period of changes in Greece, because 1981 was a year of big political change in Greece. It was the year that Andreas Papandreou took over, who earlier in his career had been the head of the Department of Economics at UC Berkeley, and was a very good economist with broad ideas. The Greek university system those days followed the German system, which was a pyramid of people under the professor who held a chair. Papandreou changed the Greek university system and made departments.

This was the point where I entered the system, and I started looking for different things regarding how I would start my research again. There were water management projects discussed these days, so I started with these, using my knowledge of cost-benefit analysis applied to environmental issues, and that’s how I ended up doing research in environmental economics.

During my PhD studies I had wanted to do research in optimal control and dynamic optimizations, and thus I had followed some classes on mathematical economics. When I started doing research after my service in the army, I liked the idea of modelling, and optimal control was very useful. I believed that to understand a problem, somehow you need to take the core of the problem, model it, and then try to find out the mechanisms that drive the whole problem. And to do that, you need to model, I mean you need to take out everything that isn’t the core, so, that’s what I did, and I guess I was successful with that.

Yes, one can certainly say that. Your research is heavily mathematically based and when one looks at the evolution of research, there’s a change during the past years, with a large move from theory to much more empirical papers being published. So, as a mathematical economist, how do you feel about this?

Actually, in my PhD I did econometrics. Those days, I was trying to do both, so I did econometrics when I started research, but then I moved to theory because I liked it more. I believe that in order to have good empirical results, you need good theory. So, I think that the empirical analysis somehow should go together with the advances of theory. And the recent focus on empirical analysis, maybe somehow delays the breakthroughs in theory, because a lot of good minds, lots of young scientists, brilliant scientists, go to econometrics. This may be fine, because they might think that they will have more recognition there, but we need a balance in the development of research. I would prefer a little bit more theory in journals and research agendas.

Would this also be an advice that you would give to young students that want to work in your field or what would you suggest to them?

What I would suggest to them is to be good in basic economics, to study economics as a core and acquire the mathematical tools which you need if you want to be a good econometrician. If you get publications faster and greater visibility by doing econometrics, then people, especially younger people in academia that want to go forward, will follow you in that approach and that may create a bias. It’s hard to advise people in these kinds of things because I might tell them ‘go and study here’, but if you do theory and cannot be successful in developing theories, or as successful as you can be in econometrics, then there’s an issue there. I want more balanced approaches to these research strands. So, my advice would be, if you want to get into environmental economics, you need to be a good economist, and for that you need to know your tools.

But, of course, environmental economics is interdisciplinary, which means that it also attracts people from different disciplines. Then, I believe that researchers in environmental economics should have a good understanding of economics, have the mathematical tools to build economic-environmental models, and to understand issues related to the hard science part of environmental economics.  

And let’s say, there are some students who would like to change the world, who would like to make a big impact, how do you think would they be able to do that as a potential future professor in environmental economics. Or would you suggest them to take potentially another route?

To make a big impact, most likely you have to be a politician, because that’s how you make a big impact in the world. Now, to be a scientist and make a big impact I think that, unless you are Einstein or Turing or somebody of that level, scientists make marginal changes. For the majority of scientists, my feeling is that some of the changes and the contributions are ‘big marginal’, if I can use that term, some of them are ‘marginal-marginal’. Maybe you can have strong scientists that might develop a breakthrough, but in economics, I’m not that sure. For example, Kenneth Arrow was the greatest economist of the 20th century. He put forward a lot of ideas which have been used and built on, but I think that for most scientists or economists the changes will be marginal.  

What is your favorite article in environmental economics?

I have lots of them. It will be very hard to distinguish my favorite article. I would say, I enjoyed, but also it helped me in what I did later, the paper by Dockner and Van Long, on international pollution control in JEEM. It was as a very interesting thing, feedback equilibria, non-linearities and all that. Also, Kathy Segerson’s paper on non-point source pollution, a long time ago, it also gave me ideas and helped me understand better certain things that I then used and published – that was in JEEM.

But after I started working on these spatial-temporal dynamics, what I really enjoyed was Allan Turing’s paper on the chemical basis of morphogenesis. It’s a paper that has nothing to do with economics, and it’s written in a style that we are not used to now, I think the paper was published in the early 50s. But if somebody is interested in these kinds of analytical approaches, it’s a real beauty. He proved that if you mix two chemicals, say blue and yellow, you don’t get something in between, if you mix red and blue you get purple, but if you mix them in a specific may, you get blobs, you get patterns. So, this is how you get morphogenesis, and then biologists discovered using Turing’s mechanism, they modelled the way that leopards or animals get their spots on their skin. So, it’s a beauty, I really like it.

What book should every environmental economist have read?

I think Baumol and Oates on the Theory of Environmental Policy, and Dasgupta and Heal on Resources.

In the last 20 years, the number of researchers in our discipline has substantially increased, do you think that this is good for the profession or are there simply so many papers being written nowadays, that we just don’t have the overview anymore and that even more important papers get simply lost in the system or behind many smaller marginal contributions of so many other papers.

I think so. I see that there’s a big supply of papers coming now from countries that are developing. As an editor of different journals, I now experience a big supply of papers from countries not in Europe, the US or Canada. And then there’s also a big development of these “predatory journals”. You receive probably hundreds of invitations per month to edit special issues or to submit papers in these journals, but these journals are no good, people pay to be published in these journals. So, this oversupply of papers everywhere somehow dilutes the very good papers, so you need to concentrate on specific top journals to see good papers. In good journals, however, the editors will be conservative most of the times. In economics it takes one to two years to publish a paper in a journal with a reputation. In other disciplines, like in physics, you publish very fast, ideas get tested and rejected really fast. In economics, we are slower; sometimes a good paper might get lost.

So what future direction would you envision for your field and what do you see as the obstacles?

We need a breakthrough in environmental economics.

Why? What’s wrong with environmental economics?

There’s nothing wrong with environmental economics per se. Every field needs to go forward, you need to go forward, to have new ideas, new approaches to problems. I think we need that, and this has to do with theory, because I think that it is more likely to get a breakthrough from theory than from econometrics. We need to free ourselves from that trap of analytical solutions and move a little more towards the numerical methods. I think it’s happening little by little. There’s a group of people, especially in climate modelling, that move to numerical approaches and try to solve big numerical problems. Maybe we have to move towards this direction, but again, what might create a problem for us could be theory.  For example, you know very well, that one of the greatest issues in climate models is the lack of rigorous theory behind the damage function. That’s where I see the need for the field to expand.

And what do you see as the obstacle towards achieving these breakthroughs?

There are a lot of good universities and research institutions around, so I don’t think there’s any kind of institutional obstacle. An obstacle related to the possible breakthroughs could be the urge to build your career and you try to publish a lot, doing lots of regressions, doing lots of econometrics, in issues that might not support the breakthrough I have in mind, because you believe by doing that, your visibility might be improved. But by doing that, you lose the opportunity to bring forth a breakthrough. Don’t get me wrong: I do not underestimate at all the value of the empirical work. I just think that it may not be the vehicle for a breakthrough in environmental economics. I think a breakthrough will have to come from basic research – policy basically uses the results developed in basic research.

And do you think it should be someone with a background of really pure theory of economics or do you expect it to be a more interdisciplinary point of view?

I don’t know to be honest. Let’s say the breakthrough might come from a person with an interdisciplinary background who manages to combine certain things and see through these combinations what comes forward. But interdisciplinary work is difficult because it’s not enough to read a few things from that discipline and the other. You need to go deep, to the core. And this is a big investment, in time, in effort, and as such, not an investment that everybody is willing to undertake, because by focusing on one thing instead of spreading around, you might be more successful in your career in academia. At the end of the day, you might not manage to be really successful in an interdisciplinary context

What you just said is something that I also had on my mind. Most professors spend a lot of their life on one specific topic, but you work on shallow lakes, on extensions to dynamic games, spatial economics, uncertainty, pollution, climate change, environmental policy. How would you describe your research agenda?

As a person doing scientific research, I don’t like repetition, so I try to get involved in new things, new ideas and likely I have colleagues and friends that I discuss these ideas with at some point. And I have to thank Karl-Göran Mäler for creating these institutions that develop these ideas. The work on temporal dynamics and shallow lakes came from the Beijer Institute. There was a collaboration with the Abdus Salam International Centre for Theoretical Physics in Trieste and then we were trying to find new ideas. It was there that I started to work with Buz Brock in spatiotemporal dynamics. In Beijer there were people like Simon Levin, who is a famous mathematical biologist, and mathematical biologists are very much used to these diffusion processes and analytical mathematical work in space. This is where a learned about Turing instability. The contact I had with people from different disciplines shaped my research agenda.

Would you say you’re more interested in the mathematical challenges involved or in the topic per se?

In the topic per se. I teach my students in economics that mathematics is a tool. You need good mathematics, you need to be able to use that tool very well, because that tool sometimes, if you don’t use it very well, might create problems. But I’m interested in the outcome of mathematics, and if it makes sense. I’m not trying to find a theorem by reading mathematics that I try to fit in economics. At least my objective is to go the other way around: to have an economic problem and then try to find a theorem that might be used to solve the economic problem, or whatever problem I have in mind. So, sometimes, I see mathematics and economics as plumbers use their tools. Plumbers have these great tools that they use to fix our pipes, and that’s what I think of mathematics in our discipline: as an elegant tool, but always a tool.

Don’t you feel that rigid mathematical modelling is also holding us back sometimes? It leads us, for example in the case of dynamic games, to only consider a linear quadratic setup, which then gives very specific results that may not be generalizable.

I agree with you, but maybe we don’t need analytical solutions. In physics they don’t use analytical solutions. We specify the range of the functional forms and parameters that make sense in economics and then try to get numeric solutions in that range. If that range of parameters makes sense in economics, then the solution will make sense. That’s how I see it. In dynamic games, we had some papers, especially with feedback solutions, that could not be solved analytically, and we solved them numerically and the results made sense. I think that we don’t need that generality, we need generality that makes sense in terms of economics.

Let me give you an example: in the late 90s, Matthews, a scientist, developed the idea that instead of using a nonlinear formula for temperature forcing when trying to understand the dynamics of temperature, a simple linear relation can be used. And that simplifies things a lot. Then there were a lot of reactions, I remember having big fights with the reviewers in some papers where we used that assumption. A reviewer suggested to the journal not to publish that paper, because it would ruin the reputation of the journal among environmental economists. We managed to convince the reviewer that it was a valuable approximation, and a couple of years later, some important research results stated that this linear relationship is relevant for the practical range of global greenhouse gas emissions. So, we might think that, instead of waiting for the general formula, maybe we can get numerical solutions for problems where the parameters make sense in terms of economics.

In addition to your analytical and academic work, you work on many publicly and privately funded projects. How do you reconcile the very applied work that one needs to do for these projects with your much more heavily focused theoretical research?

I am often in charge of projects that are financed for basic research, so there is no conflict. But in other projects I worked on, the idea was to say something that makes sense in terms of policy. For example, almost 11 years ago, we started a project for the Bank of Greece to study the impact of climate change in Greece. The Bank of Greece was among probably the first central banks to start studying this problem. I don’t know if it contributed so that more central banks started trying to study this problem, but at the same time, it made the problem, or the issue, of climate change much more visible in Greece, simply because it was the Bank of Greece talking about that. And we see now that the government of Greece is very much pushing forward the process of decarbonization. A couple of days ago there was a discussion in which the prime minister of Greece, Frans Timmermans, the director of the IMF, and Jeffrey Sachs, discussed these issues. I think that some of these discussions that came out of the Bank of Greece helped shape the opinion in Greece towards this direction.

What were the main lessons that you took away from these privately or publicly funded projects?

The main lesson is that sometimes you might make decision makers aware of the problem. Sometimes you might not. I had a very small project with a gene bank in Thessaloniki that keeps seeds. It was a very small project, but then it somehow helped that gene bank to get new refrigerators, and I was very pleased with that.  

Do you nowadays get offers for research projects of this kind or do you still have to apply just like everybody else?

Sometimes I get asked, sometimes, if it is something big, I have to apply. After all these years, I don’t want to get involved in bureaucratic issues like writing proposals. So, usually I don’t apply. If there are younger people that want to undertake the effort of administrative work, I might help. But these days, I don’t take the initiative.

You still have PhD students. How do you feel about them, what is your main incentive of having PhD students?

Well, I like the topics. They come with an idea, because usually when I had PhD students or people would come to me and asked me if I would supervise, I ask them their idea; I don’t give my PhD students topics. I want them to have their own idea and if I like their idea, I go forward with that. I want to understand what they’re doing.

Let’s go to a slightly different topic. Do you know the concept of holidays or do you take your articles with you to the beach?

Well, I know the concept, it’s how to implement it that I don’t know (laughs). Yes, I go swimming, I’m a sea person, I love the sea, usually I take my snorkel with me, spend several hours snorkeling and then I go home. When I’m in areas where snorkeling isn’t so interesting, I go and use chairs on the beach, I usually take some work with me. I’ve reviewed papers, I’ve corrected papers and I’ve gone through proofs on the beach. Usually, in this profession, you can’t simply ‘turn it off’ —  or at least I cannot do that. It’s always there. So yes, I know the concept but I’m not very good at implementing the idea.

What is your favourite economics joke or anecdote from a conference?

It’s an anecdote, it’s about a mathematical economist. A mathematical economist goes on a hike and there’s a shepherd with a lot of goats and sheep. So, they start talking and the shepherd says ‘ok, I produce milk here, I produce the wool and meat I need, but what are you doing here?’ And the other guy replies ‘I’m a mathematical economist’. ‘What’s that, can you give me an idea?’ – he says ‘look, I’m using mathematics to solve problems in economics.’ The shepherd looks and says, ‘What is this?’, and he replies ‘ok I’ll give you an explanation: I can tell you exactly how many animals you have and what kind of animals you have here.’ The shepherd says: ‘ok, if you manage to give me a correct answer, I’ll give you a goat to take home’; ‘ok, fine’. The mathematical economist takes out the computer and starts doing one of these spatial-temporal models, densities etc. Finally, he says ‘you have 136 animals, you have that many goats and that many sheep.’ The shepherd says: ‘you are right, take a goat and go’. So, the mathematical economist takes a goat and starts leaving, then he hears the shepherd ‘Where are you going with my dog?’. This shows how far from reality we can sometimes be.

Can you suggest someone who you would like to see these series of interviews?

It would be interesting to talk to Simon Levin, who is a great mathematical biologist. He has been involved with lots of economists, with Kenneth Arrow, with people in Princeton, he understands economists and he understands a lot about the issues that we are dealing with. Also, David Zilberman in Berkeley, he did a lot of work in everything from agricultural economics, environmental economics, to econometrics, and of course Buz Brock, who I believe is one of the greatest mathematical economists with great understanding of environmental and ecological issues.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

University Distinguished Professor
Department of Economics
Colorado State University, United States

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I am very happy to present a new episode of Meet Top Environmental Economists (#MeetTopEnvEcon), this time with none other than Edward B. Barbier. Ed is a University Distinguished Professor in the Department of Economics, Colorado State University and a Senior Scholar in the School of Global Environmental Sustainability. His main expertise is environmental and resource economics as well as international environmental policy. He has consulted for a variety of national, international and non-governmental agencies, including many UN organizations, the World Bank and the OECD. He has authored over 300 peer-reviewed journal articles and book chapters, written or edited 25 books, and published in popular journals.

Apart from being one of the most productive environmental economists, his contributions to environmental and resource economics, with a more specific focus on biodiversity and nature conservation, are exceptional. His overview and review articles yield insights and discussions of a depth that few others do, and if you are interested in some more in-depth discussion and policy-oriented work, then take a closer look at his books. Ed has a fresh and open, kind-spirited character, is up for laughs and seems to be able to not only write about environmental and resource economics, but also has a life outside of academia. If you read on, then, among other insights, you will also find out which famous other environmental economist he is married to. Enjoy.

Here is the video of the Express Views interview:

Here is the podcast version of the Express Views interview:

And now I am very happy to present you the Meet Top Environmental Economists interview:

(Date of interview: December 2021)

(download interview as pdf)

Meet Top Environmental Economists interview – Edward Barbier

What made you become an environmental economist?

It’s interesting because I never really thought I would end up being an environmental and resource economist. In fact, it took me a long time to settle on economics, even as an area of interest. When I went to college, one of the advantage in the United States is that you don’t have to go to college for a particular subject. And that was the case in my situation, I didn’t really know what I wanted to study at college when I went and I basically thought I would be a writer. I was interested in writing and I also was interested in engineering and I was pretty good at math. I wasn’t brilliant at math, but I was good enough I thought I could be an engineer. So I was taking courses like that.

And then, because I grew up in low and middle income countries, I also had an interest in the world in general, so I took a political science course. Not only did I enjoy that course, but I also found that it was really easy. And I said, well, I’m beating my head on the wall doing physics and stuff and not really enjoying it. And I’m enjoying literature and English, but it just seems way too vague.

What interested me was the comparative politics and economic side. So I thought I’ll try out economics courses and I discovered I really liked them. Then I decided that I wanted to go on to do graduate work. So I went to do a master’s degree at the London School of Economics. There, I discovered that I was attracted to development economics given the fact I grew up in low and middle income countries, but I was a little unsatisfied because a lot of the problems I saw, both growing up and when I went back to visit for undergraduate research field work, that there was no real talk of how poor people lived and how they interacted with their environment for just basic survival.

I was then encouraged to take a course on development by Partha Dasgupta, who was a very young professor at LSE at the time. It wasn’t meant to be about resources, but he had just finished writing the book with Geoffrey Heal on the economics of exhaustible resources. So towards the end of the course, he was actually giving us the type script that he had photocopied for us to read, just to delve into some things different. And I just got fascinated with that. So, that’s what really got me into thinking about environment and resource economics, but in a development context.

And when I went on to do my PhD, I was still fascinated with problems of natural resource use in developing countries more than I was in standard problems, such as optimal resource extraction of a finite resource or fishery resources. So I started to delve into things like tropical deforestation, soil erosion and its impact on farmers and their livelihoods, ecological functions and how poor people depended on nature. And so that’s the work I started to do and think about during my PhD and afterwards, and that got me into this issue.

So I kind of constructed my own path in environment and resource economics by an interest in development and rural resource problems in developing countries and big problems. I mean, I was fascinated by things like the global public good problem with climate change that people like Bill Nordhaus were just talking about in the late seventies. And then on top of that, I was given a golden opportunity after my PhD to work as an economist at the International Institute for Environment and Development. And at the same time, just right next door to us was the Department of Economics of the University College London. And there were two economists there, David Pearce and Anil Markandya, who were working at the World Bank, OECD, every institute, basically talking about global environmental problems and economics.

So the three of us got together and formed the London Environmental Economic Centre, exploring everything from green economy issues to climate change, to poverty and natural resource use, to economics in the ivory trade. And we were writing all this stuff and I was like a kid in a candy shop and that’s where my background and my interest just took off.

You’re writing around, let’s say, 10 academic articles a year, and many of them get published in top journals. You also wrote 25 books. Some edited, okay, but some really written only by yourself. How do you find the time? How do you spend your usual day in order to bring about such a vast output?

Contrary to popular myth, I do not work all the time. People think, oh, you must work 20 hours a day and that’s not true. I actually don’t. When my eldest daughter was 15. she came to me one day and she said, “Dad, you’re an economist. You’re interested in efficiency, aren’t you?” I said, “Yeah.” She said, “Well, I just came across this great definition of efficiency.” And I’m thinking, okay, she’s going to talk about something like minimizing cost or allocation of resources. And she said, “It’s intelligent laziness.” And I thought, wow, that just captures me. I mean, I’m really efficient with my time, but because I operate under the principle of intelligent laziness, I’m inherently lazy, which means I don’t like to waste time and I enjoy my time and I enjoy my leisure time.

There’s so many things out there, particularly in our modern age that are very distracting, such as email and Twitter, Facebook, social media, and so on. When you’re a professor, of course, you’ve got students, you have responsibilities in teaching and more administrators asking for more meetings and more stuff that you have to do as an academic. So I try and keep that to a minimum. I like to carve out time for myself to do the reading, the thinking, writing, and often most of it is thinking, but just ideas and concentration. And I don’t like to waste that time.

If I commit to doing something, whether it’s a consultancy report or a book or an article with co-authors, or even for myself, I try and say, okay, this is the deadline. This is what I need to work towards. What do I need in order to get to that point? I know now from experience how I work and how I do things, I know there’s so much time I need for the various tasks you need for research, including the writing side.

If you were to give a list of articles that a young researcher in your line of research should read, what would it be (and why if you want)?

In terms of a list of articles, here are my suggestions for articles published in approximately the last 10 years or so.  I have focused on major review articles, rather than specific technical articles, as I think the former are the best way for any young economist to be introduced to a broad area of economics literature.  I would include:

Arrow,  K.J.,  P.  Dasgupta,  L.H. Goulder,  K.J.  Mumford,  and  K. Oleson. 2012.   “Sustainability   and   the   Measurement   of Wealth.” Environment and Development Economics (3): 317–53.

Barbier, E.B. 2021. “The Evolution of Economic Views on Natural Resource Scarcity.” Review of Environmental Economics and Policy 15(1):24-44. 

https://www.journals.uchicago.edu/doi/10.1086/712926

Barbier, E.B. 2019. “The concept of natural capital.” Oxford Review of Economic Policy 35(1):14-36. https://academic.oup.com/oxrep/article/35/1/14/5267896 

Damania, R. 2020. “The economics of water scarcity and variability.” Oxford Review of Economic Policy 36(1):24-44. 

Kraay, Aart. and David McKenzie. 2014. “Do poverty traps exist? Assessing the evidence.” Journal of Economic Perspectives 28:127-148.

Van der Ploeg, F., 2011. Natural resources: Curse or blessing?. Journal of Economic Literature, 49(2), pp.366-420. 

Venables, A.J. 2016. “Using Natural Resources for Development: Why Has It Proven So Difficult?” Journal of Economic Perspectives 30:161-84.

What articles or books in your topic of research would you suggest to someone who is working in policy (politician, policy advisor)?
 

I would recommend:

Dasgupta, Partha. 2021. The Economics of Biodiversity: The Dasgupta Review. HM Treasury, London. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/962785/The_Economics_of_Biodiversity_The_Dasgupta_Review_Full_Report.pdf 

Barbier, Edward B. 2022. Economics for a Fragile Planet. Rethinking Markets, Institutions and Governance. Cambridge University Press, New York and Cambridge. https://www.cambridge.org/core/books/economics-for-a-fragile-planet/E1A205824EF1BBB89B83240475915F4D#:~:text=In%20this%20book%2C%20renowned%20environmental,while%20sustaining%20per%20capita%20welfare.

What advice you would give to young students who want to work in your field or in economics in general?

First of all, one of the things I often say to undergraduate students, who are going on to graduate school is, don’t do it right away. Don’t go from being an undergrad immediately to a grad school, which is kind of hypocritical, because that’s what I did. But I actually took a break between doing a master’s and a PhD, because I needed to just kind of figure out what it is I was interested in.

It’s hard to be a graduate student in economics. It’s a real commitment. We’re one of the toughest disciplines, certainly among social sciences, because we demand so much of our students. Don’t rush into it because you don’t want to burn out in graduate school, which is what I see way too often with people.

Now, once they’re in graduate school, unlike when I was, as I described earlier, nowadays, there’s so much choice. And the great thing is there’s environmental and resource economics everywhere. My first piece of advice would be go to the best place for what you’re interested in. Who’s doing the research there that really appeals to you?

And the third piece of advice would be, be both a researcher and a teacher. So obviously you’re interested in researching, but also, make sure that you’re in a program that gets you to do a little bit of teaching as well, but maybe not too much so you can’t do your research, so that you can get a feel for what it’s like to teach from what you’re learning. I learned a lot of economics from teaching. And also, if you’re fortunate enough to get a course to teach when you’re a graduate student, that’s in your area of interest, such as environmental economics, it just really makes a huge difference to you to be able to do that, to work with people along the way.

The other thing I’ve been increasingly telling graduate students is don’t think that because you become a PhD you have to become a professor or get an academic position. It’s not easy. It takes a certain type of person. There’s so many other opportunities you can do with a PhD in economics, including environmental economics. We’re very lucky now that so many areas, like the private sector, NGOs, government agencies, academics, research institutes, all want environmental economists. Get some experience there, too.  

I also tell graduate students, think about a postdoc. There’s some very interesting postdocs being offered by some really excellent professors and researchers and some in economics and some even outside of economics, that really are great opportunities and give you a chance to find out whether this is for you or not to become a full-fledged researcher.

And the last thing I’ll say is that I basically think for young environment and resource economists, we are really, really lucky in this field. Well, there’s a good side and a bad side. The good side is we’re very lucky that we’re at this point where everyone’s trying to figure out where does economy and nature fit together. And there is a huge range of opportunities for our subfield in terms of research. That’s the good news.

The bad news is that, unfortunately, there has always been this kind of prejudice within our discipline, which is that because we study the environment, we are not top mainstream economists. We’re not the cutting-edge economists. That’s the macro economists. Those are the econometricians and financial economists. It’s changing and it’s changed an awful lot with climate change issues becoming so prominent and others, but nonetheless, that’s slightly the downside. If you can live with that and be happy that you have a huge playground of research opportunities, then environment and resource economics is really for you.

Another thing I say to young researchers is: don’t be afraid to collaborate with natural scientists and ecologists and even hydrologists and climate scientists. Write some really fascinating interdisciplinary articles. And you can get those in the top journals in the world, Science, Nature, Proceedings of the National Academy of Science, Royal Society Philosophical Transactions. These journals have citation rates 10 times higher than the top economics journal citations. Now, maybe if you’re an academic economist in certain departments those are not counted very high because economics departments often say you have to publish in economics or top field journals, but increasingly in terms of an impact on policy and moving the world’s thinking, environmental economists do that more regularly than other economists do.

When it comes to skill building, I’m old school on that. I also believe in interdisciplinary research and I believe in interdisciplinary collaboration. I like to see a combination of theory and empirical methods, and essentially I’m an applied economist.

Now, if you want to tackle a particular problem, whether it’s, let’s say, coastal habitat supporting fisheries, you can work with an ecologist to help you. You can work with a fishery biologist to help you. You can work with a mangrove expert and you can obviously use your skills as an economist. And you can put that together and you can come up with something novel there and that can help bring in new methodologies as well as some interesting, really economic and scientific and policy insights. But that doesn’t mean that you give up being an economist. You’re using your discipline’s skills to work together, to solve a complex problem. That’s how I think progress on environmental problems should be done on the whole.

What future direction would you envision for environmental economics?

I think we’re at a huge crossroads right now, both in our discipline and also in the world as well. I started off my career thinking big because nobody was doing that work at that time. It was kind of a golden age in some ways, environment and resource economics, where we suddenly realized in the early eighties and nineties, that there were so many problems out there where environmental economics had a way to think and their big problems and little problems, big global problems like climate change and biodiversity. And then also small problems like poverty and how do poor people use resources to survive. And in between we had resource extraction and pollution.

We’re at a point now that the world is facing major global environmental risks and environment resource economics is, within economics, the one field that is best capable and has been talking about many of these risks. And so we, as environmental resource economists, are now in a good position to help the world think about how do we deal with these problems?

My mother, who just celebrated her hundredth birthday, always had a few sayings for us growing up and one of them is: you can lead a horse to water, but you can’t make it drink. Environment and resource economists have been saying for decades these are serious global problems. We have ways of analyzing them that show this is what we need in terms of collective action. This is what we need individual countries to do. This is what we need to do, change markets and policies at the local and national level. And we’ve been saying that, but so little progress has been done.

So we’ve led the horse of society to the water, but they have yet to drink. And I think this is a critical 10-year period we’re in right now. We’re running out of time for many of these global problems, obviously climate change, fresh water scarcity, nature and biodiversity loss, and deterioration of coastal and marine environments.

I just finished writing a book for Cambridge University Press called Economics for a Fragile Planet. And in this book, I’m aiming it at the interested public. I’m aiming it at policy makers. I’m also aiming it at fellow economists to say, look, let’s keep going. Let’s keep our nose to the grindstone, keep pushing. And this is what we’ve learned from economics. And also, we need to go a step further and have to think more about problems, not just in terms of relative scarcity, but we have to think about constraints and how do we self-limit, how do we think about our economies within nature, embedded within nature? What does that mean for our market incentives, our policies and so forth? How do we transition to green economies? What’s the role of business and finance and how does business risk, financial risk, environmental risks fit together?

You have written on poverty and climate change, on environmental issues, nature, the interlinkages between these. Doesn’t overcoming poverty quickly imply further degradation of the biosphere and the worsening of climate change?

It does if we continue to do it the way we’ve been doing it, which is basically to say, all economies should follow the model of development that has been hereto put forward. So I’ve written about this in some of my books, and maybe one or two articles. These are big issues, but I’ve been very interested periodically about looking at different historical eras of how economies have used natural resources. In fact, I got so interested in it, I wrote a book about it called Scarcity and Frontiers: How Economies Developed Through Natural Resource Exploitation. And one of the things I got out of that exercise, besides a really nice book, is the fact that each era where we’ve had a pattern of natural resources and development, one economy or a series of economies have emerged as the model. This book goes back to the beginning of the agricultural transition of 10,000 years ago.

Fast forwarding to the modern era, essentially I see ourselves still stuck in what I call the fossil fuel age. And the fossil fuel age is, of course, connected to the industrial revolution, but the fossil fuel age was divided into two parts in my view. One part was the coal-based era led by Britain, where Britain was the model economy. How it developed and how it used its colonies from 1750 to the end of the 19th century was the model. And they were the leading economy and everybody else, all the other economies in Western Europe, United States, Japan, and all the other Neo-Europes adopted similar technologies.

But then something happened, which was towards the end of the 19th century. There was a discovery in the United States in the use of oil and natural gas. Now that didn’t change the fossil fuel age, it just put it on a different trajectory and it put the United States, with its abundant natural resources that it had within its borders, into the forefront of the model of global development. And essentially we’ve been following that model of global development since that period. It stopped being so productive around 1970, but it so happens that we still follow that model. All the economies in the world are t this model, our populations are benefiting and poverty has been reduced, but we’re following a model which is heavy on natural resource use, heavy on fossil fuel use, and heavy on destruction of nature.

And you can see trends. And I point this out in my recent book, from 1970 on, this acceleration of the destruction of nature around the world, that is the byproduct of that model. So in a sense to answer your question, we are stuck in this age where it has diminishing returns and it’s now being actually destructive and harmful to the environment, which is why we’re facing global environmental risks. And the problem is that this is the model we’re using to pull people out of poverty. And I actually think that the work I’ve been doing and others on sustainability for 35 or more years, we’ve been arguing about intergenerational equity, about the fact that we can’t go on using natural resources and environment to satisfy needs today without impacting the opportunities and welfare of future generations.

We’ve been seeing sustainability as an intergenerational equity problem. We’re now at the point where it’s also an intragenerational equity problem. Inequality’s gotten worse, wealth inequality, income inequality. And so essentially the gap between rich and poor has gotten worse. And with the recent global pandemic, the progress we’ve made in the last 10 or 15 years in reducing global poverty has been reversed, and in some cases, anywhere from up to 150 million more people may have been thrown into extreme poverty.

And so we cannot revive the old model of pulling people out of poverty without doing serious harm to the environment. And also, I don’t think it’s going to work to pull people out of poverty anymore, because there’s diminishing returns to it. And that was the focus of a book I wrote inspired by Thomas Piketty, among others, called Nature and Wealth where I tie inequality and natural resource exploitation, ecological scarcity together. And it’s something that I now believe people are starting to recognize. That’s where I see the green economy is not a luxury. It’s a necessity. The transition to a greener economy, a more sustainable economy has to be a way of also being more inclusive and certainly we need a new model.

The good news is that those economies that figure that out first, they will lead the new era. They’ll be the new model economies. I don’t know who will be, but if one or more economies in the world start to prove that a green economy transition is beneficially economically, as well as socially, then it’s going to be the new model. It’ll be after my lifetime. I’m actually quite worried that we could have a few catastrophes before we get there, but I hope not. But I think that’s the future.

So another option to reach sustainability is, of course, what has been recently advocated by the degrowth movement? What is your position on this initiative?

Well, that’s interesting as well, because I remember back in my days as a graduate student or between periods where I was a master’s and a PhD student, I used to go and listen to these debates about growth is bad for the environment. And you had to be on one side or the other. But working with David Pearce and Anil Markandya early on, all three of us agreed that it’s not about growth. It’s about development. It’s how you develop. Structural change is not growth. Structural change in the economy, whether it’s transformation of a developing country from predominantly rural to a diversified economy, where you have industries and services, that’s development.

Similarly, a transition from an economy that is fundamentally dependent on pollution, natural resources and fossil fuels, to one that’s fundamentally green, that’s more sustainable, that’s a developmental and a structural transformation. That’s what we need. It’s not about how much does the existing economy grow in the short run or even the long run. It’s how do we transform economies? How do our economies transform along a path toward sustainability?

And also, I was profoundly influenced by Schumpeter’s work over the years, not necessarily just the creative destruction side of his work, but he wrote one of the first books on development way back at the beginning of the 20th century. Schumpeter made it very clear that there is an ongoing process of change in the economy. Economies don’t stop developing just because they’re richer and others are poor. They’re constantly transforming and new sectors are coming up and others are changing.

And so we have this weird obsession in economics with the Gross Domestic Product, how much goods and services we produce and how much that production grows or increases over time. So I think these degrowth models are missing the point. You don’t want to take the existing economy and stop it from growing. You want to transform that economy into a more sustainable, greener, less fossil fuel dependent economy.

You’re saying that one of the really big problems is the intragenerational inequity, the extreme poverty. This needs to be overcome, but it needs to be overcome with a sustainable approach, which would be helping these countries to grow in a green way. At the same time, the developed countries need to transform the economies also and need to transition to a more sustainable path out of the fossil era.

Well, can I make two minor modifications to what you just said? The first one is that I don’t see intragenerational equity to be just about poverty. I also see it to be about the amassing concentration of wealth at the 0.1%, meaning we now have created this uber rich class in the world who have tremendous wealth power, and they can use that power and are influencing political processes that govern our economy. That to me is just as much a part of intragenerational inequity as is the continuing poverty problem.

The second thing I want to say is that I think all economies should become greener and more sustainable, not just the rich ones. The rich ones certainly do, but I also think that emerging market economies and even developing economies for their specific development stages that they’re at, they need also to transition to greener economies. That may be different than how more advanced economies do it, but I think this is necessary for the entire world economy, not just the rich ones.

I would presuppose that the rich countries have enough finances and means to make the transition themselves, if the political will then persists or develops, but do you believe that the poor regions, the developing ones, have also the financial means or do that? Or do they need help and how would they get that help?

I think it’s a combination of the two. It’s not that the rich countries have to provide the assistance to help developing countries, develop in a way that it’s more sustainable, nor is it just the fact that developing countries have to do it on their own. There are certain things that rich countries need to compensate poor countries for and to provide assistance for, particularly technical financial assistance for goods and services that they don’t have and technologies they don’t have, as well as assistance for global public goods, conserving nature that has global public value are things that need compensation from rich to poor.

The other thing that often is left out of that conversation is what’s the role of the private versus the public sector? Right now, almost all assistance for things connected to nature in developing countries is predominantly provided by other governments and through international public financing. But the private sector has huge supply chains. Businesses have supply chains that are based in developing countries or a part of developing countries. They have a stake in managing nature, too, and managing nature that benefits them directly. And there are more mechanisms by which the private sector can be involved in helping more capital flows, investment flows assistance to developing countries.

Another area of assistance is, of course, adaptation because there are certain developing countries that are going to bear the brunt of climate change, sea level rise and other natural disasters and calamities that are upon us now. And I do think that there needs to be a system of assistance.

But I also think there’s a lot of things that developing countries and governments and entities within those countries, which are under the control of those countries, could do that would be more beneficial. One is the issue of subsidies. To give you one example, water and sanitation subsidies around the world, they’re around $400 billion a year. This is for big supply networks, both for cities and for irrigation. Almost all those subsidies are in developing countries. That’s not a sustainable way of meeting the clean water and sanitation needs of millions of people, who currently lack it in developing countries. But there are other ways that you could reallocate those subsidies to meet some of those issues.

Equally, in developing countries, there’s a huge amount of fossil fuel subsidies, not in all of them, but in many of them. Those could be reallocated to expand better use of access to rural energy by poor households, solar safety net programs, and so forth. India and Bangladesh already have programs like that. Many developing countries depend on primary products as the majority of their exports. Those natural resources are often poorly managed and depreciation is too fast and the way in which the management takes place is harmful to long-term use and sustained use of those natural sources, which those economies need to use in a sustainable way and in an efficient way in order to make that eventual transition to diversify their economies.

And similarly, there need to be policies in place that allow the rents from natural resources to be invested back into physical and human capital within countries. And these are things that countries themselves can control and do, yet many of them do it in completely the wrong way for short-term gain profit and at the detriment to much of their populations.

In this regard, it has been quite often argued that developing countries also lack the expertise to take the right decisions. Would you agree with that? And if you agree, what can be done?

In some cases, it’s lack of expertise, certainly regarding new more advanced greener technologies. Developing countries aren’t the innovators, they’re the adapters of technologies. And you do need a certain degree of human capital skills and so forth. But we’ve been there before and the private sector is quite capable, with the right incentives, to make that transfer. However, in terms of management of natural capital, whether you’re talking about fossil fuels, timber products, land, so forth, there are mega companies and entities within developing countries that already have the expertise. It’s not a problem of expertise. It’s a problem of political will and acting in private versus social interests and understanding the critical role that natural resources play in terms of long-term development, rather than short-term profit gain and exports.

But those big companies, they don’t necessarily have the incentives to take the best policies for the country.

Sometimes they don’t. And also, often they’re in collaboration with the political leaders to focus on short-term gain, rent seeking, and so forth at the detriment of greater social welfare. But to say it’s a problem of lack of expertise, no, it’s not. It’s a problem of political economy and also poor incentives, poor institutions, governance, and so forth. And I think that, time and time again, we see that it’s how natural resources that are managed, that determine how the development takes place, rather than just simply the fact whether we have abundant natural resources or scarcity confines us to less development or more development. No, it’s how we manage natural resources that is important. And we have that expertise in place in many developing countries. It’s just poorly done.

Let’s pick up this management of natural resources. In much of your writing, you advocate for a price on nature. Yet some researchers argue that if we introduce markets for nature, then this will only worsen the extortion of nature. What would you say to these researchers?

Well, first of all, they don’t understand that nature already has a price in markets. It’s near zero, because in the commercial decisions that are made to exploit nature, essentially those commercial decisions are marketed decision. They involve conversion of forests to oil palm. They involve conversion of mangroves to agriculture. Those issues are taking place and they’re market decisions, but the externalities, the environmental impacts, the value of those natural systems that are being destroyed are not taken into account in those commercial decisions. So we’re already giving them a price. It’s zero. But it’s worse in that we often subsidize those activities, so that in effect, by subsidizing, they go out and exploit more. We’re putting a negative price on nature.

And that doesn’t reflect the real scarcity of the goods and services that are destroyed and embodied in that natural capital when it’s lost. We need to start understanding what those values are. And we have to make sure that policy and business decisions that lead to destruction of nature take into account in market-based decisions and commercial decisions that loss of scarcity value. And that’s the problem. And that’s what I call the underpricing of nature problem.

We know from the International Energy Agency that around $400 billion a year globally is spent on fossil fuel subsidies. The OECD has estimated for 50 countries that $100 billion or more of agricultural subsidies are directly environmentally harmful. I mentioned water and sanitation subsidies that lead to overuse of water. That’s around $400 billion a year. Fishing subsidies, tens of billions a year, which are destructive subsidies. So we know about a lot of subsidies that are directly environmentally harmful. Yet we perpetuate them and that causes this environmental damage.

Then on top of that, we also have to say, okay, if we’re going to look at commercial decisions and policy decisions that impact nature, what are we losing there in terms of value and capital? We have to make sure that those policy and market decisions include those lost values. That is what I mean by ending the underpricing of nature, but that’s part of the problem. That’s one part of it. And I talk about that in my latest book on Economics for a Fragile Planet, but I say there’s another problem, which is we grossly underfund nature. And it’s tied to underpricing, because if you give nature a zero or near zero value, or even a negative value, who’s going to invest in it, right? You’re going to build more factories rather than protect nature, because you’re saying that doesn’t have any value. There’s no return on my capital.

More and more businesses are finding out that the supply chain depends on nature. We’re finding that some of the services of nature are important for the poor, but they’re also important in terms of protecting downstream activities. So protection of forest and watersheds actually protects agriculture and infrastructure downstream. And so suddenly people are realizing, there is a return to nature. We need to find ways of funding it. Now here’s the problem. The problem is that most of the world’s most valuable nature and its biodiverse nature is in tropical countries, which are predominantly poor countries of the world. Low and middle income countries are predominantly the tropical countries. That’s where most of the world’s most important nature is, but the whole world benefits from it.

So we need to find ways of public funding that can assist helping developing countries, tropical countries in particular, to conserve nature. We need them to spend more and we need we need public funding to do that. We also need more and more companies and corporations to see that their supply chains are dependent on nature protection in tropical regions around the world and, to treat nature in their business decisions as being a valuable form of capital.  

You were talking about the funding. Given that we already have so many problems to get the 100 billion together for climate finance, do you see any reasonable grounds for saying that we could create a similar fund for nature?

That hundred billion is purely public funding. That’s money promised by rich governments to poor governments going back to the Paris Agreement. They promised, starting in 2020, they would provide $100 billion per year in assistance to developing countries. And I think that’s important for us to achieve, but I think that there’s more scope from the private sector than what’s there. And there are ways of raising money privately or through some sort of quasi-public way.

For example, take green bonds. Green bonds are bonds that are essentially a way of financing large-scale projects. There are green bonds being released now by multilateral banks, by rich and poor governments, and by private companies that are geared towards green projects. That bond market is growing and more and more long-term projects are involved. Right now, most of the green bonds are financing climate and energy projects, renewable energy, clean energy, and transportation projects in particular. Very little is used for land use biodiversity nature projects, because those projects are much smaller and they’re usually scattered around countries. And many of them are in developing countries rather than in rich countries, which is where we need the funding.

But one could put together a portfolio of these programs and projects and then release a green bond through multilateral banks and through the government of the developing country and get it financed that way. And then private investors could invest. You could also see a case where you have major companies that have a vested interest in a certain industry, such as the seafood industry, get together and say, we have a problem with global marine stocks of fish and those biological resources that support our commercial fish stocks, the feed stocks and the other parts of the marine food web. We have a problem here and we’re losing our capital.

And that’s essentially what’s happened: that there’s been an initiative put together by the major seafood companies to say, we have a problem with the sustainability of our stocks. We’ve got to figure out a way of working with local governments and jurisdictions and use our might as the major seafood companies to deal with it. And they’ve put together something called the SeaBOS Initiative, supported by scientists and policy thinkers to try and tackle this problem. And we need much more creative thinking than that, it’s not just about rich countries’ governments reaching into their pocket, pulling out money and doing it.

Some colleagues and I have argued, and these colleagues include two ministries of environment from developing countries and one of the vice-presidents of Conservation International. We wrote an article for nature calling for a tropical carbon tax. And this is a tax for developing countries tax their fossil fuels and put some of their proceeds towards investing in nature-based conservation restoration, land management projects. This is not just a theoretical exercise. This has actually been done since 1997 by Costa Rica and Columbia has adopted since 2016. In this nature article, which we published in 2020, we basically said, well, if 16 mega diverse tropical countries did the same thing, they would raise billions of dollars of years for this type of solution.

One last example, which is from United States, is that one of the biggest things that is of concern to environment and resource economists in the United States like myself, is the fact that we don’t have a national carbon price, whether it’s a tradeable permit market or a tax. But what we do see is more and more states and local initiatives, subnational jurisdictions adopt carbon pricing, and that’s starting to have an impact on the US meeting its 2015 Paris Agreement national contributions. And so there are different mechanisms that can happen. To think it’s all government to government and the government has to do everything and the rich countries have to just give poor countries money to solve the problem, I think we make a mistake putting it in those terms. There’s so many mechanisms, policy instruments, and so forth. What we lack is the vision to say, this is what we could use these things for, and the political will to see those go through.

Time is running out. I have a couple of quick questions. Do you know the concept of holidays or do you take your papers to the beach?

Oh, definitely, when I have a holiday, I am not taking papers to the beach. I used to do that occasionally, but no, I take proper holidays.

Your wife, Jo Burgess, is also an environmental economist. How do you spend your evenings? Do you discuss about environmental economics or do you prohibit that talk?

We used to have a rule that we would stop talking about environmental economics. So we’d go out to dinner or something, and then we’d stop. But now we just talk about environmental economics whenever we want. Our kids have gotten used to this, and sometimes they ask questions as well. None of them so far have shown an interest in economics directly in terms of studying it, although our youngest daughter is keen to learn some. But they all know enough economics from hanging around us that they are interested. So they bring up questions and we often have family discussions. My wife and I we publish a lot together. We’ve written books together, papers, and we insist on just that always from the beginning, she uses her maiden name so we don’t sound like a law firm when we write papers. 

But taking a break from economics and taking a break from global environmental problems or whatever we’re working on is really important. That’s why holidays are important. Another really important part of my life is playing music. That’s a break for me. I’ve played in different, small rock bands over the years, just for fun and playing some gigs.

What is your favorite economic joke or anecdote from a conference?

One of my favorite jokes is three economists go duck hunting, and they’re waiting and waiting and finally a duck flies by. The first one takes a shot and he misses 10 meters to the left. And then the other one takes a shot, he misses 10 meters to the right. So the third economist throws up his shotgun and he says, “Hooray, on average we hit it.”

Nice. Finally an economist who knows a joke, haha. Please feel free to suggest someone else who you would like to see in this series.

There’s so many good top environmental economists, and you have already talked to quite a few, including Partha Dasgupta and Anil Markandya I believe! You should also ask Nick Hanley from Britain. First of all, he’s I think really very interesting in what he’s done over the years. And Sjak Smulders you should have, because I think Sjak has really great insights. Frank Convery, of course. I think Frank is great because he has such a wonderful policy experience and unusual because of the combination of academics policy and insight, plus he’s so darn entertaining to listen to, and he’ll be very good for this. I’m sure there’s others and I apologize, there’s many others I could probably mention that should be also included.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Professor of Energy & Economic Development at John F. Kennedy School of Government, Harvard University, USA.

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It provides me with a great pleasure to present to you Professor Robert Stavins in the Meet Top Environmental Economists interview series. Robert is a Professor of Energy & Economic Development at John F. Kennedy School of Government, Harvard University, in the United States. He published more than 100 scientific articles in journals such as the American Economic Review, Quarterly Journal of Economics, Science, Nature, or the Journal of Environmental Economics and Management, and has edited a larger number of books on climate policy and regulation. Rob has also advised an impressive long list of international and national organizations, governments and companies. He is also the author of the blog “An Economic View of the Environment”, which I suggest everyone to take a close look at. It always contains interesting discussions and valuable insights.

As the interview shows, Rob took – for a professor in economics – a somewhat unusual career path: after studying he worked for quite some while for the US Peace Corps in rural Sierra Leone, and only upon his return he went into full-time academia. He wrote a number of seminal articles on technical change, innovation and energy efficiency that are on the reading list of every good graduate course, and was also one of the lead authors of the 2014 IPCC report. He has helped shape environmental economics during the past years like few others have, and the insights in his articles are always worthwhile to keep in mind.

Here is the video of the Express Views interview:

Here is the podcast version of the Express Views interview:

And now I am very happy to present you the Meet Top Environmental Economists interview:

(Date of interview: December 2021)

(download interview as pdf)

Could you let me know about your background and what motivated you to become an environmental economist.

I took what may be a strange route: rather than having an interest in economics and then coming to environmental economics, I had an interest in environment and then came to economics. My undergraduate work was in philosophy and in astrophysics, and when I graduated, I immediately joined the US Peace Corps. This is a government agency that sends thousands of young people a year, usually right out of college, to developing countries to work on the ground on very practical projects. I worked in Sierra Leone in West Africa on paddy rice development. Living in Sierra Leone, I witnessed for the first time, not in a formalized way, not theoretical, just with my eyes and ears, the trade-offs between economic development and environmental quality. When I left the Peace Corps, after about four and a half years, I spent a year developing irrigation in Israel.

I then came back to the United States and I decided that I wanted to work not on philosophy, but on something where I could really make a difference because I had been inspired. I wanted to work on economic development. I started out in graduate school at Cornell to work on economic development, but then something happened: there was a very prominent nuclear accident in the United States, at Three Mile Island. That got me very interested in environment, and so I decided that rather than working on economic development, I wanted to work on the economics of an environmental issue. After my master’s degree program at Cornell, I went to the University of California to work on an environmental economics research project, which was on the use of herbicides in commercial forestry.

I knew that I wanted to do something further and more activist. I eventually joined the Environmental Defense Fund, which is an advocacy organization. But while I was there, I became frustrated by the fact that, without having the certification of a PhD degree, I was limited in what I could do in terms of testifying, authoring things, et cetera. So it wasn’t that I wanted the knowledge that would come with a PhD degree, I just wanted the certification. And so I applied to programs and I decided to accept an offer of admission at Harvard University into the economics department. I came into Harvard with this strong interest in environmental economics, but at Harvard, there was really no such thing as environmental economics.

I got my PhD in economics, specializing in econometrics, and then wrote a dissertation in environmental economics. It was on the unintended consequences of particular government policies of the depletion of forested wetlands in the United States. I then had an offer to become an assistant professor at the Kennedy School of Government. And I accepted that offer.

How did you feel, was it difficult for you to do this step from philosophy to economics?

It was a gradual process, and it wasn’t difficult because something that was true about me, beside the fact that I did a bachelor’s degree in philosophy, is that I was sort of strong in math and interested in mathematical approaches to things. So after Peace Corps, when I came back and decided to enroll in the Cornell master’s degree program, it just fit me like a glove. It was very natural because suddenly I could study more mathematics and apply it to something I cared about.

After all these, let’s say, hands-on work that you did in Sierra Leone, how difficult was it for you or to get back into academia? And did you actually see any use in academia after you had all these practical experiences?

It was difficult more broadly to reintegrate into US society after living in a small, mud hut in a tiny village in West Africa, no running water, no electricity, no one speaking English or any other European language. So the readjustment to the Western world was as difficult, if not more difficult, than what my adjustment had been four and a half years earlier to living in the tribal society in Sierra Leone. But after that, what eventually became reintegrating into the academic world, it was again a gradual process because of Cornell. My master’s degree was very professional oriented, it was a terminal master’s degree. So, if it’s not an oxymoron to say this, it was a master’s degree that was not heavily academic. But then when I came to Harvard, that was a significant adjustment because that was very much a conventional PhD in economics.

I found what happened to me, for better or for worse, is that I became socialized. And so, although I came in simply wanting to get certification, to finish as quickly as possible, go back to the Environmental Defense Fund to do my advocacy work, what happened is that I became socialized into this new academic environment, and because I did well in the program, I internalized the thinking of my faculty mentors: if you can become an academic, when you finish the program, then that’s what you should do. That’s what the “cream of the crop” does. And I came to believe that, for better or for worse. And so, although in my first year it was clear that I justed wanted to get my degree and get out, by my fourth and fifth (final) year, it was clear to me that I wanted to take an academic route.

Are you happy about this or do you sometimes believe that the more hands-on version would’ve suited you as well, and allowed you to do more?

That’s a great question, but the honest truth is that I’ve never regretted it for a single moment. I also had an offer to stay as an assistant professor in the Economics Department at Harvard. That I might have regretted because I would not have been able to do, at least not successfully, the kind of work I wanted to do. But at the Kennedy School, which not only celebrated primarily my academic research (I wouldn’t have gotten tenure without it), my first Dean, Graham Allison, and subsequent deans up until the present, took very seriously what I refer to as outreach work. Working in the real world, whether it means testifying to the US Congress, working in the US administration, working in the Intergovernmental Panel on Climate Change or the United Nations, any of those, that’s taken very seriously and celebrated for faculty members at the Kennedy School.

Let’s talk a bit about what you achieved, focusing on your own personal view of which academic or policy contributions you are most proud of.

I suppose for what academic contribution I’m most as proud of, I’d probably always say my most recent one, but I actually believe this. I recently wrote an NBER working paper, different parts of it are coming out in different journals. That took a what I think is a neutral approach to assessing the two key carbon pricing instruments, carbon taxes and cap and trade. I say this because back in approximately 2007, I was asked by what’s called the Hamilton Project at the Brookings Institution: “We would like you to write a proposal for a cap and trade system.” And this wass for what would be the new incoming administration of Barack Obama, a Democratic administration, because the Hamilton project is geared toward moderate market-friendly Democrats.  And I responded, “No, I don’t want to do that. What I’d like to do is to write a paper, which is on carbon taxes and cap and trade. Both of them, the two carbon pricing instruments, and show the similarities and the differences, because that’s the way I teach it in class.”

And they said, “No, that’s not what we want. We’re going to find someone else to write the proposal for a carbon tax.” And that turned out be my friend Gilbert Metcalf of the Tufts University Economics Department. So they told me “we want you to write the strongest proposal you can for the cap trade system.” So I did that. And in the process of doing that I came to be perceived, and to some degree became, an advocate for cap and trade. Years later, namely in about 2019, when an opportunity came up from the National Bureau of Economic Research to submit a proposal for the first conference they were doing on environment and economics in Washington, I submitted a proposal for what I wanted to do in the first place. And that is to step back, take an unbiased view of these two instruments, both normatively and in terms of positive political economy, compare their merits, and compare what the outlook is for each. And so that’s what I did in the NBER working paper, which is available at my website.

One part of that paper is coming out in the Review of Environmental Economics and Policy on purely the normative aspects. And then with Jeffry Frieden in the Government Department at Harvard, which is our Political Science department, I’m co-authoring an article on the positive political economy of these two instruments.

In terms of contributions to policy it would be the same one, it would be the paper I did for the Hamilton Project in 2007. The reason is that it turned out to be the starting point during the transition for the first term of the Obama administration for its proposal for a national cap and trade system in what came to be called the Waxman-Markey Legislation, which passed the House of Representatives and then never got a vote in the Senate. But the fact that I contributed to that very important legislation to that degree, I still take great pride in.

I’m surprised that you didn’t mention one of your most cited publications, the one in QJE on innovation.

I love that paper and there are others. I mean, I could also, in terms of where they appeared naturally, I’d gravitate towards the several articles I’ve had in the American Economic Review, that one in the Quarterly Journal of Economics, the Journal of Economic Literature, the Journal of Economic Perspectives, and other journals. And I guess actually that QJE article, which is together with Adam Jaffe and Richard Newell, Richard now being president of Resources for the Future. I put in that plug because he was my first PhD student and also I’m on the Board of Directors of Resources for the Future. So that article has been highly cited, it still gets cited quite a bit whenever someone is writing about the so-called energy paradox or energy efficiency gap, and I recall that it won an award from the Association of Environmental and Resource Economists for a “publication of enduring quality” or some such thing.

Let’s go back to that later. In your line of research, what would you say should be a list of articles that young researchers should have read?

Well, if it was in environmental economics, then what I would want them to read are the latest articles that have come out, that are sort of pushing the frontiers, and this will be work by Michael Greenstone, and other lead young people in the field. I would also want them to read some of the fundamental articles of the field. And for that, I would go back to, for example, within the regulatory area and environmental policy, to Marty Weitzman’s “Prices versus Quantities,” because it’s a remarkable article that he wrote mainly having in mind the choice in centrally planned economies between controlling prices, dictating prices to the factories, or dictating quantities to the factories. And it has turned out to be incredibly important for regulatory economics.  It’s a marvelous article. I would place that very, very high on the list.

What would you say to a policymaker without their technical backgrounds? What book should they read or what journal article should they read to get the information that they need?

Well, if by policymakers, we mean staff, so not the elected officials, for example, in the US Senate or the US House of Representatives, but the staff who work for them, then, on climate change policy, I would recommend two relatively recent books that came out at the same time, and both are really excellent. One is by Lawrence Goulder from Stanford and Marc Hafstead from Resources for the Future: Confronting the Climate Challenge. It’s on carbon pricing, and utilizes their CGE model in order to analyze alternative climate change policies. The other is Gib Metcalf’s book, Paying for Pollution, which contains more advocacy and more of a strong policy perspective. He argues in favor of a carbon tax, which he sees as clearly superior to a cap and trade system. Whether or not I agree with him, doesn’t matter. It’s an excellent book, and I recommend both of these, because in both of these books, there’s virtually no math and the little math there is you can read around and still get all of the essence.

You have worked in environmental economics and in policy in regulation for a long time now. How do you perceive the field has changed and what are the most important new developments?

I got into the field in the late 1980s when I got my PhD. The field has grown immensely; for example, there was no such thing as environmental economics at Harvard. When I entered the economics department, environmental economics in the United States existed only within what are referred to usually as Departments of Agricultural and Resource Economics. Now, that’s completely changed, it was a gradual change over time. It was accelerated by interest in climate change, which brought greater interest to environmental economics. And so environmental economics has gone from being a very small, very peripheral subfield of economics, to a major area of work in economics. Likewise, at the same time, we went at the National Bureau of Economic Research from not having any kind of a program in environmental and energy economics to now having a program which I believe in the Summer Institute is the largest of all the programs.

If we went back to looking at Job Opportunities for Economists, which is published by the American Economic Association, and you look for positions in environmental economics, when I was on the job market in 1988, there were at best a handful, if that. There may have been zero listed as such, and now it’s a very substantial job market, and in fact it’s one of the best job markets. I always tell our PhD students at Harvard that you shouldn’t worry about getting a job, you’ll be able to decide among job offers and where you want to live and what kind of work you want to do. So that’s been a huge change.  It’s also gone from being theoretical in the US to much more empirical.

My casual observation is that European environmental economists tend to focus more on theory than US ones do. In the US, it’s highly empirical, so that’s brought in all sorts of pathbreaking and new methodologies. The wonderful thing about environmental economics is that it brings challenges to economics, because of the global commons nature of the problem, and because of this breathtaking, inter-temporal asymmetry of upfront costs for policy compared to delayed benefits because of the stock nature of carbon dioxide in the atmosphere. It brings challenges to benefit-cost analysis. And that means that the research has not only been good for environmental economics, but there have been positive spillovers to economics more broadly.

What I see is that a lot of empirics is being done without theory. And it seems to me that lot of these interdisciplinary programs are the cause of that.

I would distinguish between interdisciplinary programs and multidisciplinary programs. I agree with you completely, in terms of interdisciplinary programs, like the idea of a PhD in environmental studies or a PhD in climate change policy that can add up to being nothing better than three or four master’s degrees. And after one master’s degree, the marginal value of the following ones is close to zero in my view.

I want to distinguish that from a multidisciplinary PhD program, one example of which is the PhD program I chair at Harvard, which is a PhD in Public Policy in which students come into a track. One of the tracks is economics, another is essentially political science. We have two additional ones beyond that, but for purposes of our discussion, it’s those two that matter.

Students wind up studying for what you could think of as a PhD in Applied Economics. They’re required to do the first year PhD coursework in microeconomic theory, statistics and econometrics that you would do in any of those departments, and then field courses. It could be a field course in environmental economics, it could in labor economics, whatever. And then their dissertation is a three-essay dissertation. Their job market paper will be virtually indistinguishable from a job market paper that someone would write coming out of an economics department. The difference is that there are three essays we will allow – even sometimes encourage – one of those essays will take a broader political view of the problem, but two out of three would be conventional economics.

I think that’s a fantastic approach. That’s how it should be. Europe has much to learn in this regard. Let’s talk a bit more about policy. If we talk about developments in the field, a result of one of your papers, the one in the QJE that we already alluded to, was that a sizeable portion of efficiency improvements in energy technologies appears to have been autonomous. Does this mean that there is little role for policy, or that the limited finances from policy might be better used for something else?

Well, I think the first thing it indicates is just to be modest about that or any analysis, and that we were able statistically to associate only a limited share of the change to specific policies. But that said, it’s true that a substantial amount of technological change takes place separate from policies.  That doesn’t mean it’s economically exogenous, because in any economy, energy comes at a cost. We have to pay for oil or natural gas, nuclear power, or electricity. And so there already is a baked-in incentive in a market economy for technology diffusion, therefore for innovation, and even for invention of new technologies that can deliver services at a lower cost. And that inspires technological change.

If through a public policy we can increase either the explicit cost of energy, as through a carbon tax or carbon cap and trade, or the shadow price through a conventional regulatory approach, then that’s going to spur even greater technological change. 

This brings me to a related question. In one of your recent papers in Science you suggest that we should stick to the social cost of carbon. Does this mean that we should rely only on instruments such as the carbon tax, or would you also want to see other regulations put in place?

Oh, so that’s a very good question. And the answer is no, it does not mean that. What we’re arguing for in that recent article – with Joseph Aldy, Matthew Kotchen, and James Stock – is the use of the social cost of carbon –an estimate of the present discount of value of the future stream of avoided damages – as a measure of the benefits of a climate change policy. But we’re not arguing that governments should use necessarily a carbon-pricing instrument; that’s a completely separate issue.

Now having said that, I, like most economists, would label a carbon-pricing approach as the approach which is most likely to be effective and feasible in terms of affecting the millions of diverse sources in a modern economy. I can’t see us trying to hit all of those sources through conventional regulations, let alone technology standards. Those instruments also won’t be cost-effective, because the marginal cost of abatement of CO2, for example, is highly heterogeneous.

I see carbon pricing very favorably. However, in certain countries such as the United States, carbon pricing faces massive political challenges. I know it’s faced political challenges and continues to in the European Union, but not to the degree I think that we’ve experienced here. In the US, carbon taxes are completely off the table because of the word “tax,” and then cap and trade was successfully demonized back in the early Obama administration by labeling cap and trade as “cap and tax.”

So, both of those are now politically unappealing, and elected officials, at least in the US, don’t like to pass out costs, which is what a carbon pricing regime does. They like to pass out only benefits, and subsidies or regulations that hide the costs are much more attractive.

Thus, in my latest research I’m asking, how can economic thinking and incentives be used to improve command and control policies, to move them closer to being economically cost-effective and environmentally effective? Thus, overall, I am certainly not arguing that carbon pricing is the necessary and only way to go.

What would you say is the main reason for which there’s such a difference in acceptance between a carbon tax in the US and let’s say Europe?

Well, the honest answer is, I don’t know. When I look at these two parts of the world, I notice a couple of things. One is the very significant difference in forms of government.   Compared with the approach we have in the US, where it is frequently the case that the executive branch is controlled by one party and one or both of the bodies in the bicameral legislature, the upper house and the lower house, are controlled by the other party. And that means that we frequently see profound disagreements and the impossibility of going forward with any approach which is not acceptable to both parties. And carbon taxes, because of the fact that they place a very visible cost on society, tend not to be supported. And that’s happened also with cap and trade.

So that’s one reason, but there’s something that goes beyond that, and I don’t understand it, it’s been there for a long time. And that is that some European countries, particularly the Northern European countries, particularly the Scandinavian countries, but also, I’d say Belgium, France, Germany, and then less so, as we get to the Mediterranean the Southern European countries, have just been much more accepting of the notion of using taxes to achieve social purposes than is the case in the United States, where the history of this country, as you may know, going back to the revolution in the 18th century was based in large part upon opposition to taxes. And it’s still quite profound.

I agree that this kind of social inertia might be one of the major reasons. We talked a bit about what is most important in the field, we talked about how the field has changed, what future direction would you envision for the policy side of environmental economics? And what kind of obstacles would you see there?

One thing I see happening – and I hope this is not simply because that’s a direction in which I’m moving – in this recent project with Joe Aldy, but I’ve heard it in conversations regularly with other economists, particularly colleagues around Harvard: the time has passed for environmental economists to think about climate policy only in terms of carbon pricing instruments. We really need to broaden our perspective and to bring our expertise to other kinds of policy instruments. We need to make carbon pricing instruments more politically feasible, although second best in design, and make non-pricing instruments more effective and more cost-effective. I see that as the future now, but I want to recognize that it may be because of the psychological bias that I am already working on this.

In addition, I perceive that this trend towards more reliance on empirical work is going to continue. I think, fortunately, the obsession in economics with mathematics may have peaked. In saying that, I recognize that I got tenure because of the highly quantitative work that I did in the AER, QJE, and elsewhere, but I think that it peaked around that time. It peaked in the 1990s or maybe in the 2000s. And I think we’re seeing more interest in work that is driven by the policy problem, as opposed to by methodological innovation alone. Now it’s too soon to say whether this is also a blip or whether it’s actually a trend, but I think I see it as a likely trend.

I think that one of the reasons for that is just simply the availability of all these new data sets.

That’s a very good point. Yes, when I was in graduate school, if one wanted to do some work in environmental economics, one had to collect the data. For my dissertation, for example, I needed land use data in the United States. I went down to Arkansas, Louisiana, and Mississippi to the Army Corps of Engineers and got out these physical maps of the flood plains, and then I had to measure these physically and then input that into a computer.

I did the same in London where I had to go to the library to get these statistical yearbooks. And then when you go to the next year of statistical yearbook, then there would be the update for e.g. the data on GDP from the year before, which sometimes changed by 5 or 10%. It was absolutely ridiculous. You talked a bit about the students and that a lot has changed. What advice would you give if to young students who want to work in the same field?

The advice I would give to them is, for your first year, or the first two years even, try to remember why you went to graduate school, what was it that interested you in environmental economics? And in order to remember why you went to graduate school, go to a seminar every other week that’s on environment, or environmental economics to maintain your sanity. But that’s just to maintain your sanity, what you really need to do in those first two years is to build a foundation. And the foundation are the fundamental microeconomic theory courses. In some cases, the macroeconomic theory courses, and surely the basic courses in mathematical statistics and econometrics. Those are the fundamental building blocks. And if you don’t get those building blocks down firmly, then just like any foundation, when you start building the upper stories of the construction, it’s going to collapse.

So that’s my first bit of advice, maintain your sanity but give your attention to what you need to do in the first years, which is purely those required courses in the PhD programs. And in the second year, the field courses in your chosen fields. But then, my advice would be in terms of the dissertation stage, which comes next, is to start with a policy problem, not with a methodology, start with a policy problem. And then search around, what’s the refutable hypothesis you can specify? Is there a theoretical model that you can construct that then can be tested empirically with available data, rather than starting with the data and asking, “Okay, what question can I ask with these data?” Give yourself one chance to start with the policy problem. But then when you’re getting to the point, last bit of advice, of trying to decide, “Okay, I’m working on different things, which should become my job market paper, which at least in the US context is all important for getting the best possible post-doctoral fellowship or assistant professorship?”

You then have to think in terms of a very important concept that I think is valuable throughout life, which is comparative advantage. Think about where your comparative advantage lies, and if your comparative advantage is not theory, don’t go with a theoretical paper because there are other people who are going to do that, and they’re going to be able to do it better than you. If your comparative advantage is in terms of particular empirical approaches, then go with that. Or if your comparative advantage is really qualitative political economy, then go with that. It’ll mean a different path going forward in terms of decisions. But if it’s your comparative advantage, that’s what you’re going to be best off with, that’s what you’re going to be most successful with in your career.

That’s a valuable advice, especially because lots of students don’t do that. They’re just following their PhD supervisors, and they’re not stuck with something that they don’t like and something that they might not even be able to do. You have done an amazing amount of policy work. Economists in Europe tend to have the feeling that they have a very limited impact on policy. Do you think the situation is different in the US?

Yes. I think in the US, if we make a mistake, if anything it is in the opposite direction. I think environmentally economists may think they have more of an effect on policy than they really do (Joe Aldy wrote about this recently in a paper in the journal Climate Change Economics. It’s because there are lots of avenues that are open to environmental economists. So, for example, the Environmental Protection Agency, which is the agency of the executive branch which works most in this area, has a whole large office called the National Center for Environmental Economics, staffed by PhD economists. And they always want input. There are all sorts of task force and agencies that want input.

Also, we have a very important structure in the executive branch, which is the Council of Economic Advisors, which is giving advice to the president of the United States, from the economics community. And the Council of Economic Advisors, which has three members, those three members are tenured economics faculty on leave from their university.  And then one notch down are what are called senior staff economists. And those tend to be junior economists from a faculty who are getting very close to tenure. They’re also taking a leave of absence for one to two years from their university. We have this whole structure that draws academics in, and then importantly, those academics go back to their universities with a renewed sensitivity and interest in policy.

And then, of course, there’s the legislature. Regularly I’m getting phone calls from congressional committees to testify. Many of my colleagues are getting even more phone calls than I do. There are lots of avenues in which economics is being brought to bear. If I can give a promotion for one article of mine, it’s the one I just mentioned, which is together with Joseph Aldy.  We wrote an article on Nordhaus’ contributions to policy in the journal Climate Change Economics. In this we looked in more generic terms at how economists influence policy, whether it’s directly by serving in a job like those jobs I just mentioned, whether it’s because a model you developed is actually being used directly, or through more indirect means. And it turns out that our view is that the indirect means and the serving in a job, that’s the way economists in general are most effective in the environmental realm.

It is actually impressive that in the US there’s a much tighter link between policy work and researchers compared to Europe. Do you have any intuition why that is the case?

I think some of it is structural. Because of the fact that you’ve got EPA that has this Center for Environmental Economics, that you have the Council of Economic Advisors, which since it was set up in the post World War II period, has always had economists from academia go in for a short period of time and then leave. The other one, which is both a good trait and a bad trait, is that we in the US tend to think we can do anything, extremely self-confident as people, at least in the past. That may contribute to this notion that academics think they can add something of practical value to government policy. There’s a distinct lack of modesty on the part of US academics in wanting to promote their work among policy makers.

Do you know the concept of holidays, or do you take your academic articles with you to your beach?

Well, before I had tenure, to be honest, I thought I just had to work on my research constantly, as much as possible, at all times. And for that reason, because of that pressure, partly internalized from the process, I did work all the time. Post-tenure, I find that, although I usually will not work after dinner on any day of the week, I find that I still work on weekends on Saturdays and Sundays, but it’s not because of external pressure, it’s because I want to, I find it interesting and enjoyable. So when we go on vacation, to tell the truth, I always take my laptop computer.

Could you suggest someone else who you would like to see in this series of interviews?

I would think that for a very interesting discussion, my colleague, Joseph Aldy, because in addition to doing scholarly research at Resources for the Future, and more recently at Harvard, has also spent very substantial time in government. He was the Special Assistant to President Obama for energy and climate, and was really on the inside of the corridors of power in this area.  So he would be a very interesting person. Another superb candidate would be Professor Ottmar Edenhofer of the Technical University of Berlin, the Potsdam Institute, and the Mercator Research Institute.  He’s great.  And speaking of academic economists who are closely involved in real-world public policy, there’s no one in Europe who better personifies that than Professor Edenhofer.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Professor of economics at the University of Sussex

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Date of interview: December 2021

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I am very happy to present Richard Tol in the series Meet Top Enviromental Economists. Richard is a Professor at the Department of Economics, University of Sussex, the Professor of the Economics of Climate Change, Institute for Environmental Studies and Department of Spatial Economics, Vrije Universiteit, Amsterdam, the Netherlands, and a Research Fellow of the Tinbergen Institute and CESifo. He specialises in the economics of energy, environment, and climate, and is interested in integrated assessment modelling.

Richard ranks among the top 150 economists in the world and among the top 50 most-cited climate scholars. He wrote over 200 academic publications and three books. He is an editor for Energy Economics, and an associate editor of Economics the e-journal. He advises national and international policy and research and was also an author (contributing, lead, principal and convening) of Working Groups I, II and III of the Intergovernmental Panel on Climate Change.

Richard is definitely one of the more vivid figures in environmental economics, someone that should be listened to. Not everyone agrees with him, but I believe he tries to give a research-based and neutral view of problems related to climate and energy issues. He is very direct, which does not go down well with some people, and the press is terribly good at quoting him out of context, which led to some controversial claims. I hope that this interview is able to set some of those issues right, and sheds light on the man behind the myth. Enjoy the Express Views interview, the podcast, and the Meet Top Environmental Economists interview.

Here is the Express Views interview with Richard:

Here is the podcast version of the Express Views interview:

And, last but not least, here is the Meet Top Environmental Economists interview:

How did you become an environmental economist?

The answer is I don’t know, because there’s no pattern there. I started not as an Environmental Economist but I actually trained as an Econometrician. We did much more maths and computer science than we did economics. Taking time series analysis and Bayesian econometrics was my specialty. I was deeply disillusioned with economics at that stage because we had a fairly traditional education. Economics was taught through rigor over realism, with beautiful mathematical proofs, but absolutely no connection with reality. I also did a minor in Environmental Science at the time. After I graduated, I started working for the Institute for Environmental Studies, which is very policy-focused. It’s very interdisciplinary, which I enjoyed much more than pure economics. And so I stayed there and did my Ph.D. there. Then I moved first to Carnegie Mellon (University in Pittsburg), which was also a very interdisciplinary group, and later to Hamburg, where I was actually a professor of Geoscience. My work was always very much applied policy analysis. I then spent some time in Princeton, again with the environmental group, and then the Economic and Social Research Institute where I was a Policy Advisor. Ten years ago I moved to Sussex where, for the first time, I was an economist, again. I’m completely flabbergasted by how economics had changed: it had become what I had thought it should be 20 years earlier. Economics should be mainly an empirical science.

I’m driven by trying to solve and understand problems, and I don’t care if that problem crosses a disciplinary boundary.

That is really my background, and that is how I approach Environmental Economics: as mostly an empirical topic that is there to advise policy. I’m driven by trying to solve and understand problems, and I don’t care if that problem crosses a disciplinary boundary.

When I was younger, I was pretty green. I don’t think that anybody, nowadays, would mistake me for a green. Nowadays, what drives me is the next interesting problem to solve. There are two elements to that. One is I like to work with people. So if somebody comes along and says, “I need help with this particular paper”, then that is something that motivates me because I like doing that, particularly with younger people.

Other than that, sometimes, it’s a stupid paper that somebody published and I want to show them wrong. Or sometimes it’s just a problem that came up in some other context that I don’t know how to solve and that I would like to solve it.     

In the end, Kenneth Arrow was the one who convinced me not to abandon economics.

I have heard when you met Kenneth Arrow for the first time that you got into a fight with him. What was that about?

If Arrow taught me one thing, you should always know who you’re talking to. When we met for the first time then I said we could use Arrow-Debreu(-McKenzie) to interpret observed interest rates as revealed preferences. He was upset by that, and I ended up defending general equilibrium theory against Arrow.
It took me a while to understand that the Impossibility Theorem was Arrow’s answer to the social planners (then the dominant strain in economics) and that his work on dynamic general equilibrium theory is another impossibility theorem (future markets cannot be complete) aimed at the free marketeers (then the emerging strain in economics). In the end, Kenneth Arrow was the one who convinced me not to abandon economics.

If you were to give a list of articles that a young researcher in your line of research should read, what would it be and why?

Everyone in this field should read Tom Schelling’s 1992 presidential address in the AER. If you’ve read it already, you should read it again. Jean-Michel Chevet’s 2011 paper in the AER is underappreciated. Matt Kahn’s 2005 paper in REStat is often cited but rarely understood. The current frontier is defined by Meredith Fowlie’s 2018 paper in the JPE, Lint Barrage’s 2020 paper in REStud, and Eric Zou’s 2021 paper in the AER.

What advice would you give to young students who want to work in the field of energy economics or climate economics?

The most important thing is that you should find a niche for yourself. And that niche should fulfil various criteria. One, it has to be a gap in knowledge. If you work on something that other people haven’t worked on before, then that is important.

It should also be something that sufficiently motivates you, where you actually can make the effort needed to make a contribution. Sometimes I see young people who identify a research question, but then they’re going for it half-heartedly. That is a route that barely leads to success. The reason is that, if you study most people’s careers, the research that you do during your Ph.D. is what you are going do for the next 30 years. Very few people actually completely change track. So, the steps that you make early in your career are actually very important. It is, of course, true that once you know more about something, it becomes more interesting. So maybe it’s not as bad as it sounds.

But, definitely, what people should do is find a gap in knowledge that interests them, and that they also feel they can solve. They either already have or can acquire the skills to actually do something about this.

A lot of young people also come and say, “I want to be like X”. And then they typically take somebody they admire but who’s very young, which is a big mistake. Because the person is still around and you’re competing with the best in the field. You want to be like him or her. You’re never going to catch up. So they should find their own way of doing things and their own interests.

And then, of course, they should acquire as many skills as they need to solve problems. Particularly at a young age, it’s much easier to acquire skills. But, of course, you should also have domain knowledge. You should actually know what you’re talking about. That is something that you can always acquire later.

If somebody has a background in applied labor, so she knows about e.g. identification, then I would advise against going into climate or environment because there’s a whole bunch of such people around these fields already and  so it’s much harder to make a contribution. Whereas in Energy Economics many things can be done.

If it is somebody who comes with a background in industrial organization, then I would say, “Well, energy is a very rich field for industrial organization. But… it’s also a very crowded field. And there’s actually a couple of Nobel laureates who have made their mark in energy economics. So contributing as an industrial organizer to Energy Economics is actually pretty tough, whereas in environmental economics there is actually very little of this stuff going on. There’s a good bit of the second-best, and how to regulate from the second-best, but it’s still a pretty small field. And the empirical applications of industrial organization in environmental economics are far too few.

Everybody assumes, in all of the prospective models, as well as in a lot of retrospective models, that we have this perfect first-class implementation, which is complete nonsense.

What future direction would you envision for Energy Economics or Climate Economics? And also, what kind of obstacles would you see there?

I think that the biggest issue has to do with the transformation to a carbon-neutral or low carbon energy system. And everything that comes with that. And the biggest issues there concerns the distributed power generation. Consumers become producers, consumers become stores of energy. That is terribly important to understand how we actually decarbonize the energy sector.

Methodologically, the big issue in energy economics is that the credibility revolution hasn’t reached the field. We see an increase in laboratory experiments, some field experiments but not a great many. Using natural experiments is still something that is rare.

So, that is something that is going to change dramatically over the next decade. And a lot of the work that is currently being published will be seen as obsolete within 10 years.

The methodological bias is the curse of Nordhaus, in that when climate economics started, climate policy was in the future. Another part of the curse of Nordhaus is the focus on the first best. I called it the curse of Nordhaus. Nordhaus knows this, he hates this. He doesn’t want a thousand mini-Nordhauses walking around.

The other things that I hope will happen is that people are going make more use of the rapidly increasing availability of data.

In terms of obstacles, I am not convinced that there is an ideological bias or at least not one that is special to the economics of climate change. Of course, economists documented ideological biases, but I don’t think that climate economists are in any way special there.

The methodological bias is the curse of Nordhaus, in that when climate economics started, climate policy was in the future. Another part of the curse of Nordhaus is the focus on the first best. The DICE model provides the first-best solution to the climate problem, which is, of course, a very useful yardstick. But there are still large numbers of relatively young researchers who are doing what Nordhaus did. But with different parameters and different calibrations and so on and so forth.

But it’s still the first best. And we are arguing about what the discount rate should be and whether we should include an ambiguity aversion or whether we should include loss aversion and all that stuff, right? We’re not talking about how are we actually solve this kind of problem in the real world, not in the idealised world of our models. This is institutional inertia. Rather than asking, “Did Nordhaus actually ask the right question? Yes, he did in 1982. And in 1991, he still asked the right question.” But you will not ask the question that Nordhaus did in 2021.

I called it the curse of Nordhaus. Nordhaus knows this, he hates this. He doesn’t want a thousand mini-Nordhauses walking around. He likes people who challenge what he has done. Not repeat, not some variation on a theme. He doesn’t like that at all. So it’s not the old guys who are blocking this or blocking innovation. It’s the young guys who are not sufficiently imaginative or sufficiently daring to just go do something else entirely.

You have recently been involved in some controversies. Some of these come from one of your paper that you published in the Journal of Economic Perspectives. You found that for low levels of warming this may help economic growth, and higher levels of warming result in reductions to economic growth. And then it was found out that the paper has some errors, of course we all make errors. So, that’s not the issue. But the unfortunate thing is, of course, that the article had a significant impact on policy and many people now believe the first result still holds. Could let our readers know what the latest results are on that line of research?

The Journal of Economics Perspective paper indeed had a few errors. They were of two kinds. Some data was wrong in the printed table, but right in the data set. So, this did not actually affect the conclusions at all. Then there were some minor miscodings, where a number was 2.2, rather than 2.3, and stuff like that. So it did not affect the results at all in any substantive way.

Since then, two things that have happened. First, a number of new estimates of the total economic impact of climate change have been published and they should be added. I’ve added a few but not all of them. The other issue is, there’s been now seven papers or so that estimate the impact of climate change, ot on the level of economic welfare, but on the rate of economic growth. Those two sets of estimates have to be reconciled, which I hope to do over the next months. So there is no update there.

There is a website in the UK called ‘The Conversation’. It has apparently banned comments from you, because they believed you to be among a group that they called ‘climate change deniers’ or ‘climate change skeptics’, such as Bjorn Lomborg. Would you, want to set the record straight? What would you say to all those that call you a climate skeptics?

I wasn’t aware that I was banned from The Conversation. That’s news to me. It reveals just how strange the debate on climate policy has become.

From mid-1990 onwards, I have argued for climate policy. And definitely for the last 20 years or so, I’ve argued for a carbon tax. I don’t know where people get the idea that I am against carbon policy. The reason that people do this is, of course, because at the same time, I push back against the alarmism and the doomism.

My first paper was an econometric one: A time-series analysis of the relationship between temperature and carbon dioxide concentrations. It was the first, as far as I know, that shows that CO2 has a significant effect on temperature and that both are cointegrated.  So, the notion that I would deny that there is a relationship or that human activity has a significant effect on the temperature is just historically wrong. You can just go to that 1992 paper and read my words on this, which people apparently do not do. The idea that I would deny the human influence on climate, it’s just ridiculous.

From mid-1990 onwards, I have argued for climate policy. And definitely for the last 20 years or so, I’ve argued for a carbon tax. I actually used to be ambivalent about whether we wanted a carbon tax or tradable permits. It used to be more on the tradable permit side, and now I’m more on the carbon tax side.

So I don’t know where people get the idea that I am against carbon policy. The reason that people do this is, of course, because at the same time, I push back against the alarmism and the doomism. Also I push back, actually much stronger, against ill-designed climate policy. Yes, we should have climate policy, but we should have climate policy that is well designed. For example, we’ve actually seen a number of instances of climate policy that do not serve emission reduction at all, but serve completely different purposes.

I push back against that. Because I am fairly visible and fairly vocal, and sometimes assertive enough, if not aggressive in the tone that I take, people think that smearing my name would help their cause. I think it just helps polarization. And polarization is the last thing that I think we need to solve the climate problem. The other reason that they don’t like me is because I confront them with this sort of stuff.

What you also said is, or what you find, and what you definitely do advocate for is for is a rather low social cost of carbon.  

That is also not true: The social cost of carbon that comes out of our models, and that comes out of my meta-analysis, is higher than the social cost of carbon that is applied around the world. David Pearce, I think, said it best. We can argue all we want about what is the optimal environmental policy. But if actual environmental policy is below what anybody reasonably says would be the optimum, then we should not argue with the guy who argues for the lowest carbon tax. We should just argue, raise it first to that level, and then start the argument about whether we should go higher or not.

But if you, let’s say, go to market in Morocco and you start to haggle with the local trader, this guy would start at uh, €100, and you know the actual worth is 20. So maybe just because the bargaining started too high you actually end up with a higher price.

I accept that that is a good strategy if you’re on a market in Morocco. It’s not how we set the carbon tax, right?

How much warming would you expect from a $20 tax on carbon?

That’s a very difficult question and the reason that I hesitate here is because we’ve been taken by surprise just how fast the cost of wind and solar – and solar in particular, has fallen. Much faster than anybody anticipated. The older scenarios where we were looking at 5 or 6 degrees of warming seem completely implausible now – assuming that the climate sensitivity is roughly in the middle of the range cited.

The implication of this is that a fairly modest carbon tax would actually not lead to a very dramatic warming. This is provided that the carbon tax also increases and it doesn’t stay at the 20. If you were to worldwide impose a carbon tax of $20 per ton of carbon, that goes up let’s say 2% a year, then I’d be surprised if we get much above 3 and a half, 4 degrees warming.

Let’s say earth warming will be 4 degrees. On the one hand, we have the wealth of economic analysis that is then saying “a $20 carbon tax is good and the 4 degrees warming is optimal.” On the other hand, we have the results of various environmental scientists, all the results collected in the IPCC reports and that are saying, “Look, a 4 degrees warming would be horrendous. There will be ecosystem collapse, there will be problems of scales that we can hardly potentially envision.” How do these two fit together?

It’s mostly the assessment of values that is different there. In our estimates of the economic impact of climate change, we actually rely on the same information. So, we do look at ecosystem models and we do look at the impacts of sea-level rise and we do look at the economic models, and so on and so forth.

So, the information is practically the same in terms of physical impacts. The big difference is  the interpretation in terms of human welfare. I think the natural sciences are simply not qualified to do this.

There’s actually another key difference and that is the role of human agency in a human adaptation. A lot of the very dramatic impact estimates, particularly on sea level rise and agriculture, assume that there is no adaptation. Natural sciences assumes that the humans just let it happen. They assume the farmers will continue to do what they’ve always done and what their grandparents did. This is a very silly assumption, I think that’s simply wrong.

The bigger difference is in the value system that is employed. If you look at climate change from the perspective: what will this do to humans and what will this do to human welfare, the impacts are negative, but not very large. But if you look at it from the perspective: “Oh, my God, I’m going to focus on this one particular species that may go extinct.” Or, if “I’m going to focus on this one particular island that may disappear.” Or, if “I’m going look at one particular ecosystem, and it’s going to be completely different in the future.” Then that is another value-related issue.

The fact that things will be different in the future does not mean that it will be worse in the future. The fact that something disappears does not mean that this is catastrophic. Yes, it is catastrophic for the things that have disappeared, but not necessarily for humans. Or for biodiversity. For example, in the climate debate, there’s always a lot of talk about the polar bear. Actually, the biology and the ecology of polar bears is not at all understood. People who say they know what climate change is going to do to the polar bear are bluffing or lying. But even so, even if the polar bear would go extinct, what does that mean to humans? We hardly interact with the animals. If you look at the biodiversity aspect, they are just a subspecies of brown bear with a different color of fur. But it does not make them a different species.

Would you say that the economists’ estimates of the economic costs of 4 degrees warming are sufficiently good?

I would not say that they’re good, and I would not say that they’re good enough. But, it’s the only estimates that we have. I definitely think that they’re better than the alternatives, at the moment. I think we should work very hard to make them better.

One very unfortunate aspect is that, between 2000 and 2015, there was hardly any funding for this kind of research. Fortunately, over the last couple of years in the United States, unfortunately still not in Europe, there is substantial funding to look again in the economic costs from climate change.

However, most of the funding is misguided because people look at the impacts of weather rather than the impacts of climate. But people are beginning to examine what we can actually learn from the weather about climate.

One problem is that the mechanistic models of adaptation that we use are really not good enough. But because of climate change, we can see fundamental realignment in the way we do things. And the way technology develops and the way economic systems are organized. All of this works towards reducing our impact estimates, not increasing our impact estimates,

Some of the aspect that you studied, related to the social cost of carbon and to the impact of climate change on our world, were also differences between poor and rich. In 2014, you wrote in the Financial Times “Humans are tough and adaptable species. People live on the equator and in the Arctic, in the desert and the rainforest and we survived ice ages with primitive technologies. The idea that climate change poses an existential threat to humankind is laughable.” Would you want to clarify this statement a bit? And especially now with the more  recent results that you found in mind, where you actually obtain that the impact of climate change in poor regions can be substantial. We agree that some of humankind will survive 4, 5, 6 degrees, whatever it may be. But the question, obviously, is not necessarily about the existential threat, but, about leading a good life. And the other question is, how does climate change potentially impact those regions that are very poor?

Estimates show indeed, that in rich countries you’ll see small impacts or even positive impacts. In poor countries, the poorest countries, you would see for 2.5 degrees of warming that 20-25% of income would be lost. If you start including the uncertainties the loss can be a good bit larger than that, up to the point, in some local economies, where you have that the economy just collapses.

How do we get people out of this precarious situation? One way, of course, is economic development. The reason that they are so very, very vulnerable, is because they are so poor. One of the things that I used to talk about is the difference in vulnerability to sea-level rise between the Netherlands and Bangladesh. Both are low-lying very densely populated countries. You have floods from the sea or floods from the river. You have your occasional very big storm. However, everybody would think of Bangladesh as terribly vulnerable, while  the Netherlands is seen as fairly robust to sea-level rise.

So what is the difference between the two? The history of dike building in the Netherlands started around 1850. If you look at old pictures how dikes were built, then it was mostly manpower. People did not know a whole lot about morphology or sedimentology. They definitely did not have satellite imagery or model computers to calculate how far dikes should be built. And then, when you look at Bangladesh now, it has much better technologies, much better knowledge about how to do this.

Estimates show indeed, that in rich countries you’ll see small impacts or even positive impacts. In poor countries, the poorest countries, you would see for 2.5 degrees of warming that 20-25% of income would be lost. If you start including the uncertainties the loss can be a good bit larger than that, up to the point, in some local economies, where you have that the economy just collapses.

And actually, if you look at per capita income, the Netherlands wasn’t much richer than when it started building dikes than Bangladesh is now and so it’s not economics either. So what is the big difference between the Netherlands then and Bangladesh now? It’s all to do with politics. In 1850, the Netherlands transformed itself from essentially a kleptocracy into a modern democracy where the government was responsive to the people. As soon as the Netherland’s central government was formed, the dike building program started and the Netherlands became a lot safer.

There are two things that have happened in Bangladesh over the last 10 years. One is that they’ve grown economically very, very rapidly. The other is that actually politics have stabilized, not necessarily in a good way from a democratic perspective, because it’s a fairly authoritarian. But they have acquired competence because they’re no longer fighting with the opposition that much. So the priority of politicians is no longer to get rich as quickly as they can before they get out of office. They’ve been in office long enough, they are rich enough, so that they can begin to care about the country.

So this is a story of developments. In a world of 4 degrees, the Bangladesh of 10 years ago, that would be a major disaster. And a much bigger one than most people would imagine, I think. Because most people think of Bangladesh with a major sea-level rise of one and a half meter sea level rise, as you would have to evacuate 60 million people, right? Which is disastrous enough. But where would those people go? They would probably push it to India. But India doesn’t like them at all. There’s already a lot of low-level conflict between India and Bangladesh. I believe that if you have 50 million Bangladeshis pushing into India, that conflict will be worse, much worse. And Pakistan would then get involved. And then you might be talking about nuclear war.  

So we have to keep in mind that climate change will not fall on the current world, and we actually can see it coming. And we have plenty of time to do something against this. If we can’t solve poverty, then I would argue that that is still the bigger problem than climate change itself.

But it’s not 4 degrees warming in the current world. It’s 4 degrees in the future world. And that is something that we should keep in mind. Arguably, if in a 100 years time South Asia and Africa are still as poor as they are today, then climate change on top of that would be a complete and utter disaster. But you could also argue, well, if they’re still as poor then as they are now, then we’ve also completely failed in our development policies. And that probably causes more human misery, than future climate change would.

So we have to keep in mind that climate change will not fall on the current world, and we actually can see it coming. And we have plenty of time to do something against this. If we can’t solve poverty, then I would argue that that is still the bigger problem than climate change itself.

Isn’t it also, or shouldn’t it be, a problem of responsibility somehow? Let’s say poor countries have to spend a large budget on adapting to the climate change that we are making, is that how the world should look like? That’s a question of justice, too. If we hurt the developing countries, through our activities, then it’s a question of responsibility.

Of course, we do have a responsibility there, because our trade policy discriminates, and our immigration policy discriminates. It’s an interconnected world, we do have a responsibility. And of course we have a historical responsibility as well. French have a historic responsibility for the mess they created in South Asia, and we Dutch have a historic responsibility for the mess we created in Indonesia.

The question is how to best deal with this, rather than arguing over who is responsible for what. And the current preferred diplomatic solution is to create big pots of money that go through the United Nations and the World Bank, and the IMF. I’m not convinced that is the best solution. Any country has a responsibility to reduce carbon.   

I definitely also think that we have a responsibility to spend some of our wealth on charity and development aid. I think that we should also do what we can, not just through donations, but also through the initiation of policies to create room and possibilities for other people to live up economically just as we have.

Do you believe that if we increase our development aid or climate finance to developing countries, then this will go a long way towards, buying us free of our responsibility?

I’m not a fan at all of how a lot of that mitigation money is spent. A lot of adaptation money is simply misspent. It goes to investing a lot into satellites and stuff and it doesn’t help people at all. It goes to research that then tells struggling South Africa farmers that the weather is important, it’s as if they didn’t know that already.

What the World Bank and other multilateral organizations at the moment are doing is that they are withholding support for coal-fired power plants. I’m not so convinced that that is the right thing to do. Yes, that would decrease emissions, but that would also hurt economic growth. And you can’t grow your economy if you ration energy, and that is a big problem in many of the poor parts of the world. Unfortunately, wind and solar are not good enough, at the moment, so you do need to go to fossil fuels. That’s the only feasible solution for many energy systems.

It’s not just that renewables are unreliable and intermittent and all those sorts of things. But also, it is technically much more challenging to run your economy on renewables than it is on thermal power, because you just need much more expertise, much better regulations to actually make the system work. It’s difficult enough to pull this off in a sophisticated country like Germany, and we see lots of problems in the integration of renewables in Germany at the moment. Doing this in Nigeria, it’s just like, gosh, forget it. It just doesn’t work. 

I’m not a fan at all of how a lot of that mitigation money is spent. A lot of adaptation money is simply misspent. It goes to investing a lot into satellites and stuff and it doesn’t help people at all. It goes to research that then tells struggling South Africa farmers that the weather is important, it’s as if they didn’t know that already.

Doesn’t this even further suggest that the development money that we provide to the poor countries is very unlikely to substantially help them to get out of poverty? And the further damage that we are doing due to climate change is even simply worsening their problems?

I would even say it’s worse than that. I mentioned briefly Sussex being good at labor economics. We also actually have a pretty strong group in development economics. Development economics now, actually, it’s finally gotten to the stage – not that we know how to develop and how to give development aid – but we definitely know how not to do it. We have a lot of experience with that. But we have now also gotten to the stage that we actually know about small things that help, such as education of girls, build-up of civil service and those other things. And what we’ve seen over the last 10, 15 years or so, is that more and more development money, that used to go to the education of girls, is now being diverted to what is essentially our priority, climate change.

So I think it’s actually worse than you say. We’re actually, in the name of climate, actively diverting money away from we know what works. There’s been a couple of papers on the effectiveness of the early years of climate aid. And they tell two things. They don’t help, they don’t help development but also they do not reduce emissions. So a lot of the fund money is wasted, and it comes directly at the expense of the development aid that we know that works.

Let’s say, even if most developed aid was spent well and not diverted, then would all this money really help the developing countries in order to increase their growth sufficiently so that damages from climate change would be manageable?

In the end, they have to do it themselves, right? At the end of the day, growth in Africa is generated in Africa, not through external support. Some countries are doing fine, Botswana being one example. Some countries seem to do fine but in fact are going backwards, Ethiopia is an example of that. Some countries just seem to be in a hopeless mess and have been in a hopeless mess since forever. Nigeria is an example of that. Well, there are also signs of hope in Nigeria. There’s parts of Nigeria that are doing very well. But, in the end, they have to do it themselves. They have to reorganize their society and their economy so that it’s conducive to economic growth.

But that brings us then full circle back to the conundrum of responsibility.

If substantial parts of the world do not develop economically, then you could see very dramatic impacts of climate change.  If indeed it is impossible for development aid to help them grow, then it is a moral duty for us to not hurt them. And then the only way is for us to reduce emissions as fast as we can.

Developing countries will have to rely much more on non-renewables in the future due to their energy-dependent economic growth, because their energy systems will not be up to the task of wind and solar.

All that is putting much more strain on the ecosystems which are necessary, for example, for agricultural sectors in developing countries. Isn’t all of this coming back to the fact that economic growth and development is simply going in such a way that it is using up too much of our natural resources? And that our current lifestyles are simply not sustainable, even, let’s say if we solve the climate problem?

It really depends on what you’re looking at. What you’re seeing at the moment in North America and in Europe is that we have become so good at agriculture, that we need less and less area for it. If you compare acid rain over Europe now and as it was 40 years ago, things have much improved. So, some things are getting better, some things are getting worse. Of course, it is not interesting academically to talk about problems that have been solved.

And the same is true for the news. It is just not interesting if newspapers say that things are getting better. So some things are getting better, some things are getting worse. In general we tend to focus on things that are getting worse because we want to avoid it getting worse still.

What is your position on the Dasgupta Review?

I have not read it in detail, but Partha Dasgupta undoubtedly did a good job. There are definitely issues with extinction. The list of species that are threatened or species that only survive in highly circumscribed circumstances like zoos and those sort of things, is getting longer and longer. And that is definitely something that I am concerned about and I think we all should be.

I would view the Dasgupta review less about biodiversity but more on ecosystems in general. What it’s basically saying is that throughout most of the ecosystems that exist demand is exceeding the supply. Since you’re advocating development as one of the ways out of the problem of climate change, will this not conflict with further pressure on ecosystems?

I don’t think that development is necessarily good for the environment. Yet poverty places an enormous burden on the environment. But the intensification of agriculture and urbanization actually reduce the pressure on the environment. And that should be kept in mind out there.

I think you got me wrong there. I don’t think that development is necessarily good for the environment. Yet poverty places an enormous burden on the environment. But the intensification of agriculture and urbanization actually reduce the pressure on the environment. And that should be kept in mind out there. If you look at agricultural production throughout Africa, they get so little off their fields. It is low intensity agriculture, and if they were to intensify agriculture, they can do with a lot less lands than they need now.

Okay, but I guess you also saw the positive relationship between ecological footprint and income.

There are definitely things that go up,  as well as others go down. If you’re worried about nature, then the big impact is agriculture. And just the amount of area that you need for agriculture. If you’re talking lands, then biofuels and traditional biomass for heating and cooking, that’s a complete disaster. So if you move to modern fuels and modern construction materials and modern agriculture, you can actually dramatically reduce your environmental impact.

That’s true. But maybe not on the raw materials that we’re otherwise using in order to construct our houses, our cars, and our consumption lifestyle in general. Do you have a specific opinion on whether we are too far developed? Whether we should see some degrowth in order to put less strain on ecosystems?

The degrowth crowd, I think, is awfully irresponsible, and also completely naive. Degrowth is just an euphemism because they do not dare to say the real words, which is economic shrink. And to call for economic shrink in a world that is full of poverty – I think it’s just repugnant. It is morally wrong to say the economy should shrink. I can understand that a rich academic would say, “Oh, I have enough and I could do with less.” But at the same time you should be aware enough of the data to know that you’re in the top 1%. And for that top 1% to say to the other 99%, “You can’t grow anymore.” I don’t know how they dare to get these words out of their mouth.

And if they were only referring to the rich, and not to the poor, giving the poor the right to grow to a certain extent?

Then I say: go do your math. I mean if the 1% stops growing, but the 99% continue to grow, then the economy continues to grow. The idea that you can take the wealth from the top 1% and give it to the 99%.

Yep, I agree with the point. I had to ask… So, let’s go to a different topic. Do you know the concept of holidays or do you take your papers to the beach?

I am aware of holidays, yes. The family sleeps much more than I do. So there are times, early in the morning and late at night, that I am awake and they sleep. Also, I’m also the editor of a pretty big journal. And if you don’t keep up, then you’re in trouble. So yes, there’s always work.

Please feel free to suggest someone else who you would like to see in this series of interviews.

Maureen Cropper and Charlie Kolstad would be top of my list.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Charles Perrings

Professor Emeritus at Arizona State University

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Date of interview: November 2021

(download as pdf)

It provides me with a great pleasure to have Professor Charles Perrings on my Meet Top Environmental Economics series. Charles is Professor Emeritus at Arizona State University in the USA and directs the ecoSERVICES Group. He is a Fellow at the Beijer Institute, Royal Swedish Academy of Sciences, Stockholm, and the Past President of the International Society for Ecological Economics. He was the editor of the journal Environment and Development Economics and has written around 100 articles and 12 books. Charles has advised various national and international organizations, governments as well as research funding agencies.

His writings on nature and biodiversity and his holistic approaches to joining the environment and economics should be on the reading list of every environmental economist. I also enjoyed reading his general articles, such as Hanley, N., & Perrings, C. (2019). The economic value of biodiversity. Annual Review of Resource Economics, 11, 355-375 (PDF); or Perrings, C. (2014) Environment and development economics 20 years on. Environment and Development Economics, 19, 333-366 (PDF). There are always interesting and challenging policy lessons. So, please enjoy reading the interview, as well as the Express Views video below (also as a podcast version below).

Could you please be so kind and give me a brief background of yourself and your main research interests?

I have lived and worked in a number of different places: the National University of Lesotho; the University of Auckland; the University of Botswana; the University of California, Riverside; the University of York; and Arizona State University.  Until I moved to York in 1993 my appointments were all in Economics Departments.  At the University of York, however, I founded what was originally known as the Department of Environmental Economics and Environmental Management, and at Arizona State University I am in a School of Life Sciences that spans everything from genomics to the history and philosophy of science.

For most of my career, my research has focused on the causes and consequences of anthropogenic environmental change and, specifically, on anthropogenic biodiversity change—change in the richness and abundance of species and other life forms. This is a problem that has many dimensions.  The one I have paid most attention to is the introduction, establishment and spread of pests and pathogens, either deliberately or as an incidental effect of trade or travel.

I do have other research interests. Beyond the economics of biodiversity, I have papers in the economics of labor, economic history, ecology, political science, applied mathematics, and mathematical epidemiology. But these are often subsidiary to my work on biodiversity.

How did you end up as a researcher in environmental economics?

My dissertation was on the development of the copper mining industry in Central Africa.  It introduced me to two impacts of economic development that have been recurrent themes in my work since.  One was the effect of infrastructural and industrial development on the local environment.  The most immediate of these was the impact on tree cover—through the demand for wood both for charcoal used in smelting and timber used for pit props. The other was the effect of the concentration and movement of people on the emergence and spread of infectious disease.  The period I studied included the 1918-1919 Spanish Flu pandemic, when mortality rates in mining centers were as high as 20 percent.

Three other things turned out to be important, though. The first was being introduced to Buzz Holling’s work in Systems Ecology by one of my PhD students at Auckland, Martin O’Connor. It opened up what became a life-long pattern of collaboration with ecologists. The second was encountering David Pearce in 1981 or 1982 when I was working on Economy and Environment.  That connected me to the relatively small number of people who were then working in environmental economics and initiated a collaboration with David that ultimately led to my appointment at York. The third was meeting Karl-Gören Mäler and Partha Dasgupta at a Vatican conference in 1987. That was the precursor to my long association with what later became the Beijer Institute of Ecological Economics at the Royal Swedish Academy of Sciences.

What motivates you to do this kind of research? 

It just gets more and more important, and more and more interesting. It is hard to think of a set of public good or externality problems that matter more than the environmental consequences of the closer integration of the global economic system. It is also hard to think of problems that are as rich.

Which of your academic (or policy) contributions are you most proud of?

I’m not particularly proud of any of my scientific contributions. My first reaction on re-reading any of my past papers is to think of all the ways in which it could have been better, so ‘proud’ isn’t quite the right word. Will any of my scientific contributions stand the test of time?  I don’t know. I do have some papers from the 1980s and 1990s on resilience and sustainability that are still regularly cited, but not at the level one gets with multi-authored synthesis papers or assessments. It would be interesting to see if they are still being cited in another thirty years, but I doubt that I’ll be around to check.

In other areas, I have graduated a number of students over the years, many of whom have gone on to do some nice work. I guess I’m proud of them, especially those coming out of developing countries.  The department I founded at the University of York, now known as the Department of Environment and Geography, has developed into a fine cross-disciplinary unit.  I’m also pleased about that.  Finally, the years I spent with Diversitas culmninated in a five-year push to develop the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). I’m glad that the effort succeeded, and that IPBES is now providing policy makers with the best available data on the causes and consequences of biodiversity change.

If you were to give a list of articles that a young researcher in your line of research should read, what would it be and why?

I think I would focus on foundational pieces rather than recent articles.  Most graduate programs tend to focus on current literature to the exclusion of foundations, and I think that is a pity. Those who know me will not be surprised that at the top of my list of foundational pieces would be two papers by Harold Hotelling:

Hotelling, H. 1931. The economics of exhaustible resources. Journal of Political Economy 39:137-175. Hotelling, H. 1929. Stability in competition. The Economic Journal 39:41–57.

A 1981 paper by Deverajan and Fisher,

Deverajan, S., and A. Fisher. 1981. Hotelling’s “Economics of Exhaustible Resources”  Fifty Years Later. Journal of Economic Literature XIX:65-73,

described Hotelling’s 1931 paper as almost the sole source for the field of natural resource economics.  It turns out that his 1929 paper was also the source for the canonical median voter model that still holds sway in political science.  Hotelling’s papers are not particularly accessible, but my latest book,

Perrings, C., and A. Kinzig. 2021. Conservation:  Economics, Science, and Policy. Oxford University Press, Oxford,

develops a general theory of conservation that shows how the Hotelling model applies to assets of any kind.

Beyond the Hotelling papers I would list two books:

Clark, C. W. 1976. Mathematical Bioeconomics: the Optimal Management of Renewable Resources. John Wiley, New York, NY.

Mäler, K.-G. 1974. Environmental Economics: A Theoretical Inquiry. Johns Hopkins Press, Baltimore.

Both extend Hotelling. The first is the source of the dynamical models that are at the core of all subsequent work on renewable natural resources (Dasgupta and Heal’s 1979 book plays a similar role), and the second provides the key connection between the use people make of natural resources and their valuation.

Finally, I would list two papers by natural scientists:

Holling, C. S. 1973. Resilience and stability of ecological systems. Annual Review Ecology and Systematics 4:1-23.

Holdren, J. P., and P. R. Ehrlich. 1974. Human population and the global environment. American Scientist 62:282-292.   

The Holling paper explores the stability of equilibrium in ecosystems.  What makes it so seminal is his focus on the size of perturbations needed to dislodge the system from its current basin of attraction—still the best measure of resilience. The Holdren and Ehrlich paper is the earliest contribution to the modern concept of ecosystem services.

What advice would you give to young students who want to work in your field (ecosystem services, the economics of epidemiology, biodiversity)?

This is a very difficult question to answer.  Anyone wondering about the wisdom of working within or across disciplines knows that there are cogent arguments in both directions. Those who elect to work within a single discipline believe it allows them to explore the problems posed by that discipline in depth, and that those are the problems that matter. Those who elect to work across disciplines believe the problems that matter are beyond the reach of any one discipline, or the parallel efforts of different disciplines.  Such problems are inherently interdisciplinary, benefiting from the skills of people working in different disciplines but depending on feedbacks between disciplines. The problems I work in tend to be of this kind.

If we think about the choices younger people have to make, there is another complication. The path to tenure begins with the choice of PhD topic and advisor (and so university), and includes post-PhD appointments and publications.  There is no question that a disciplinary approach provides a safer and more secure path to tenure than an interdisciplinary approach. The usual advice would therefore be to hold any interdisciplinary aspirations you might have until you have tenure, and that is still the advice I give to most young people. There are, however, some who are constitutionally incapable of staying within the bounds of a single discipline, and who have the motivation and capacity to master the techniques of more than one discipline.  To those I say ‘go for it’, but do so with your eyes open.

Let’s think about policy makers. Policy makers don’t necessarily have the same technical backgrounds that researchers have. Which book or reference would you suggest a policy maker should read, if they wanted to know about research in your field?

There are policy makers and policy makers.  Some have as little difficulty reading the journals as you and I.  Others have neither the time nor the aptitude to do so. In this case, books are unlikely to be very helpful.  The primary sources of information for such people are summary papers in journals such as Nature and Science, the executive summaries in assessments such as the Millennium Assessment, the Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services, The Lancet commissions and the Dasgupta Review, or working briefs from staff responsible for bringing their attention to new results in the sciences.

Having said all that, I think that the Annual Review of Environment and Resources contains summary reviews that are accessible enough to be very helpful to someone trying to get a feel for the literature in the field.

What future direction would you envision for your field of research? And in particular, what kind of obstacles would you see there?

What I would like to see happen (no guarantee that it will) is a progressively deeper understanding of the many ways in which closer integration of the global system affects its evolution over time, where the term ‘global’ encompasses both the bio-physical and socio-economic components of the system. This is a big ask, though.  COVID-19, for example, is currently showing just how complicated the spatial and temporal epidemiological, economic, political, and cultural feedbacks affecting the course of the pandemic can be. Yet for all the reasons I have already mentioned, few of the brightest and best minds around have any incentive to tackle more than a small piece of the puzzle.

You have written extensively on biodiversity. What is your position on the Dasgupta Review?

I read and commented on every chapter as it was written and so watched it evolve into the final product. I’ve described it as a ‘must read’ for those interested in understanding the intersection between biodiversity and economics for a couple of reasons.  One stems from the fact that, as one would expect from Partha Dasgupta, there is an underlying view—a model—of the way that biodiversity and economic growth are connected. The model is used to draw conclusions about the economic consequences of biodiversity loss, and to provide an interpretation of current patterns of biodiversity loss. So it offers a theoretically consistent treatment of why biodiversity loss might matter for the economy.  The second is that it is also an assessment of an aspect of the problem that doesn’t usually attract much attention.  Dasgupta was supported by a team of people who were charged with summarizing available information not just on the patterns of biodiversity loss but also on the development of national biodiversity institutions, instruments, and policy.

Of course it doesn’t cover all dimensions of the problem.  It couldn’t.  We are as much challenged by the growth and spread of pests and pathogens as we are supported by the cultivation of beneficial plants, animals, and microbes, and that side of the story gets less coverage.  But the Review is still a tour de force.

What do you view as the main contributions of economics to solve problems related to biodiversity?

Biodiversity change is fundamentally an economic problem. By this I mean that its causes lie in economic decisions that take only partial account of impacts on species richness and abundance, and its consequences can be measured in terms of changes in welfare.  More particularly, its causes lie in the incentives people have in a world where property rights are far from complete; where governments subsidize the overutilization of natural resources, and discourage the conservation of species and their interactions on private lands; where externalities of trade are largely ignored, and where public lands and sea areas are systematically plundered by private interests.  

The solution to all of these sources of biodiversity change is necessarily economic. The establishment of protected areas or protective legislation, the assignment of property rights, and the development of institutions of governance at local, national, and international levels, are aimed at changing incentives just as much as the introduction of taxes, access fees, user charges and so on. To confront users with the social opportunity cost of actions that deplete biodiversity, or to calculate the value of actions that conserve biodiversity, one needs to understand their marginal impact on wellbeing. In a nutshell, there is no solution to any serious biodiversity problem that does not rest on economic foundations. 

Imagine you were the  president of the USA. What would your environmental policy look like?

This is too big a question. But if there was only one thing I could do it would be to initiate development of an integrated approach to the international governance of the biosphere. At the moment we have hundreds of bilateral or multilateral agreements impacting biodiversity and its role in biophysical processes that span national jurisdictions. We also have dozens of intergovernmental institutions responsible for individual pieces of the puzzle, none of which have a strong incentive to coordinate or cooperate with others. This is partly due to the reluctance of nation states to do anything that might cede sovereignty—a comment that applies to the USA as much or more than it does to any other nation state. I would start to roll that back, and start to build the capacity both to analyze international environmental problems at the right level, and to take collective international action at that level.

You have written quite a few books. Do you think they influenced your career? Do you feel they were worth investing the time (in contrast to e.g. writing articles)?

By most standard measures, writing books doesn’t pay. They don’t count for more than articles, and they tend to be cited less frequently. Whether you are writing a 1000 word commentary for a journal or a 100000 word book, you still add only one line in a CV. More than this, many disciplines, economics included, regard articles more highly than books.  So why do it?  The answer is that it offers the space to develop ideas in ways that are just not possible in journal articles. My new book, written with Ann Kinzig and referred to earlier, develops a general theory of conservation that is then applied to several different dimensions of the biodiversity problem. In principle we could have done the same thing in a dozen or more articles, but each would have been disconnected from the rest, and so would have to replicate much of the common ground. Nor could we have built the argument in the same way, step by step.

Of course it helps not to have to worry about building the CV.  Books, like interdisciplinary research projects, have fewer downsides the closer you get to retirement.

Economists, especially environmental economists, very often just do not get enough say when it comes to setting the policy agenda. How can we increase our say?  

I am not sure that we should have a role in setting the policy agenda. Whether policy concerns the conservation of natural resources in the public domain, the internalization of environmental externalities, or the supply and funding of environmental public goods, the role of environmental economists is to identify the discounted net social benefits of various options. The decision as to whether to put those options on the table in the first place should lie with people who have been elected to office. Economists can certainly point to the social costs of doing nothing, but I don’t see that they should have a role in drawing up the agenda.

I do think we should have more of a role in identifying the costs and benefits of alternative policies. However, this might simply argue for a change in the formal requirements for project or program appraisal, and through this for a change in the numbers of environmental economists in agencies responsible for evaluating and implementing policy.

Let’s go to a different topic. Do you know the concept of holidays? Or do you take your papers to the beach?

I know the concept well.  Ann and I regularly go camping and hiking in wilderness areas. I admit that I was once guilty of taking a book on differential topology on holiday to French Polynesia, but my recollection is that my reading didn’t last beyond the first Tahitian vanilla punch. Since I went emeritus this year, I expect to have even more time to relax in the future.

What is your favourite economics joke or anecdote from a conference?

For a long time there was a picture on the walls of the Beijer Institute in the Royal Swedish Academy of Sciences.  It may still be there for all I know. It was titled ‘Two roads to the Volvo Prize*’. The picture shows two people.  One is Partha Dasgupta, deeply serious, and turning the pages of a scientific paper. The other is Karl-Gören Mäler, equally serious, but pouring a glass of wine. My kind of science.

*Dasgupta and Mäler were awarded the Volvo Environment Prize in 2002.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/

Today is the International Mountain Day 2021. Being a mountaineer myself, a trait that I have inherited from my parents and grandparents, it goes without saying that I have over the years developed a passion and love for the mountains which I would say is deeply embedded in my blood and soul. The pleasure of being outside in nature, bare of human tracks and sounds, coupled with amazing landscapes and wonderful sceneries, provides a peace of mind that, at least for me, nothing else can. The mountain environment, due to its wilderness, also is one of the few places that still holds the potential for adventure, as it is not tamed like urban places. It provides us a mirror for our souls through nature’s purity and simplicity, something that our fast-paced lifestyle is hardly able to anymore these days.

“We cannot any longer underestimate the significance of mountain regions for the conservation of nature.”

Leave only footprints, take only memories – living according to this saying seems always so much easier in the mountains than in our modern society which is filled with advertising and consumption and things that somehow accumulate but are of limited need or practical use. How little we really need is something that one can easily figure out in the mountains, and how much we actually have is something that we notice again when we return from these. This dichotomy between life in the mountains and life in the rest of society could not be greater, and the implications for sustainability and attitudes towards nature cannot be overemphasized.

However, we humans have, for a long time, been taking more from nature than it can regenerate itself. The result is that the gap between what we consume and what nature can provide is widening. If we do not reverse this process, this will ultimately lead to the demise of nature and with it life on our planet as we know it. Currently, 10-30% of all the mammals, birds and amphibian species are threatened with extinction; 3/4 of all the fish stocks are over-fished; the bird population in Europe has decreased by 30% since 1970; and if we do not reduce our impact on nature and minimize climate change, then an estimated 70% of all species on this planet will face extinction. In addition, the regions on this planet that do not see a (significant) human interference, the so-called wilderness regions, have been reduced by a 1/3 during the past century.

“85% of the world’s species of amphibians, birds and mammals live in mountain regions.”

What, however, gets emphasized very little is how important the mountain regions are for the conservation of nature. Approximately 85% of the world’s species of amphibians, birds and mammals live in mountain regions. Around 50% of the world’s biodiversity hotspots are found in mountains. And more than 60% of all freshwater comes from the mountains.

This implies that we cannot any longer underestimate the significance of mountain regions for the conservation of nature. There are many ways in which mountain regions can be conserved, among which protected areas and sustainable tourism are the main ones.

The International Union for Conservation of Nature (IUCN) writes that “about 17% of mountain areas are protected representing 32.4% of the extent of the world’s terrestrial protected areas; nevertheless there are mountain areas of significance that are not adequately protected when considered at country, biogeographic realm, biome and ecoregion scales. For example, of the 6109 Key Biodiversity Areas located in mountains, 52% are less than 30% protected and 40.4% are completely unprotected. Nearly 40% of the world’s mountain ranges do not contain any protected areas.” Clearly, there is room for improvement here, and a key challenge is how to increase the percentage of protected mountain regions. If you are interested in more information, there is an interesting quarterly newsletter called the Mountain Protected Area Update, published by the World Commission on Protected Areas. The percentage of mountain areas that is protected is ultimately a political decision, but grassroot movements can go a long way to help motivate politicians to take the right steps. Political interests are shaped by lobby groups, and it is important to have sufficiently strong voices that oppose further development of mountain regions, such as in the form of ski resorts or urban centres. If we want to conserve nature and wildlife for our future generations, but also for its own sake, then we need to learn to take our hands as far off nature as possible, especially in mountain regions. We also do have a moral obligation to animals and nature itself, we should not forget that in our decision taking and policy choices.

The other way in which mountain regions can be conserved is via sustainable tourism. As the Food and Agricultural Organization of the United Nations notices, “[s]ustainable tourism in mountains can contribute to creating additional and alternative livelihood options and promoting poverty alleviation, social inclusion, as well as landscape and biodiversity conservation. It is a way to preserve the natural, cultural and spiritual heritage, to promote local crafts and high value products, and celebrate many traditional practices such as local festivals.” The point here is that if we cannot find a way to fully protect and conserve nature, in a hands off way, then at least we should try to find a way to live with it such that we leave only footprints. This also means reducing, or minimally to not construct additional mountain resorts that make it easier and easier to get to remote places. Yes, it is true that humans need to be as much exposed to nature in order to learn to love and appreciate nature, but that it is also important that it does not come at the price of destroying nature. Making access to nature easier will only result in shifting the barrier between what is an urban development and nature. We need to understand that nature should not be made convenient for us and that one can only truly experience nature if it is in its pristine form. Sustainable tourism is one way in which this pristine form can be guarded and in which we can hope to conserve as much nature as possible. We owe it to our future, and to all life on this planet.

Ingmar Schumacher Podcasts is made with Jetpack Podcast. Full show notes and every episode at https://ingmarschumacher.com/