An Interview With Kenneth Arrow, Part Three

This is the third and final installment of my interview with Kenneth Arrow. Part one is here and part two is here. In the section below we discuss climate change: Dr. Arrow was a lead author on several of the Intergovernmental Panel on Climate Change reports, which are considered one of the most authoritative sources for estimating climate impacts. My questions are in bold.

Conor Clarke: I want to ask you about your work on the Intergovernmental Panel on Climate Change (IPCC). Tell me about your work with that organization.

Kenneth Arrow: I was the leader on two papers, in the third round.

And was this, like your health care paper, a situation in which they presented a theorist with an empirical problem to see what happened?

I was asked by the Council of Economic Advisors to be one of the American representatives, and then I got involved in two other topics that the IPCC was working on -- the discount rate and uncertainty.

Tell me about that. The treatment of uncertainty strikes me as one of the most confusing things about climate change.

[Laughs] And almost everything else besides climate change, too!

But with climate change there is an awful lot at stake! And the time horizon is long, and you have the risk of these incredibly high cost but low probability events...
Well, the least that can occur still looks pretty bad, and I don't want to overdo the uncertainty question. I think that, even if you take a very conservative point of view, things are bad. 150 years from now, the average person will be a lot poorer then they would be otherwise be.

I think that's true of people in South Asia, but it's not clear to me from the results that it's true of people in the United States...

I don't know. You sometimes hear the argument that it won't affect the US that much because agriculture is only 3% percent of the GDP...

Yes! I spoke with Thomas Schelling a couple of weeks ago and he made that point exactly.

But the affect of the seashore is going to be major. If you have large portions of the Arctic ice disappear, the rise in sea level will be in meters and yards. If it takes place gradually we can move back and there is no tragedy. If it rises more quickly then I think there is a real possibility of bad consequences. And while the United States, I guess it is true, will not be losing half of the world's agriculture, you have to realize that if it's happening here it's happening elsewhere. Food is going to become more valuable around the globe. Food will become scarcer. It's not going to be 3% of the American economy anymore. If we replaced food with imports, the imports won't come easily or cheaply. The price of goods will shoot up if there is additional scarcity. So the cost could be a much bigger number than [climate change experts] Mendelson and Nordhaus find.

I agree with a lot of your description. But on the other side people suggest that we wait and see what happens, since technological change might be such that we can adapt to climate change with little cost. Or, growth might be such that, despite global changes, the rich world can redistribute away the negative affects of climate change in the poor world.

Those little things don't seem to work. The 50 years of experience we've had trying to bring poor countries up shows that. At some level they must develop themselves. It cannot be helped. In the recovery in Europe after WWII, American aid was a facilitator. But if you look at it closely, the bulk of recovery was done by Europeans. The Americans made a difference, and can make a difference if they are well organized. But normally the countries do this themselves. And if the country is weak it takes economic stress badly. What's clear is that Vietnam and Thailand are handling this relatively well -- Africa is not. Vietnam and Thailand aren't rich countries but they are better off and better organized than lots of other places that will suffer, like sub-Saharan Africa.

And on the spectrum of possible solutions to climate change, where would you position yourself?

We don't have much time left. We are moving towards temperature increases of around two degrees Celsius, which is going to have consequences in the tropics, and we will loose things like glaciers. That's not a theory; it's happening right now. It's not a prediction; it's happening right now. But you just sightsee near those glaciers. But the glaciers are a big source of water. And on the questions of water, in California we store our water in a snowpack. When that's gone, the rain will be the same but it won't accumulate. With warming temperatures the snowpack will now work. It might be possible to substitute with dams, but that's complicated. This is conjoined with a big energy problem and I think that we really have to encourage development in this area. Just waiting for technological improvement won't work. We need to encourage it.

And pricing carbon will encourage that kind of development?

Yes, the pricing of carbon will encourage innovation in energy. Maybe we can induce it with carbon prices. But I think it's important to have real research -- and direct investment in research -- to see what works and what doesn't. Some things seem plausible but haven't been explored.