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William Nordhaus on the Economics of Global Warming, Pandemics, and Corporate Malfeasance

The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World (book cover)

In this conversation, based on his book The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World, Nobel Prize-winning pioneer in environmental economics Dr. Nordhaus explains how and why “green thinking” could cure many of the world’s most serious problems — from global warming to pandemics. Solving the world’s biggest problems requires, more than anything else, coming up with new ways to manage the powerful interactions that surround us. For carbon emissions and other environmental damage, this means ensuring that those responsible pay their full costs rather than continuing to pass them along to others, including future generations. Nordhaus describes a new way of green thinking that would help us overcome our biggest challenges without sacrificing economic prosperity, in large part by accounting for the spillover costs of economic collisions.

In a discussion that ranges from the history of the environmental movement to the Green New Deal, Nordhaus explains how the spirit of green thinking provides a compelling and hopeful new perspective on modern life. At the heart of green thinking is a recognition that the globalized world is shaped not by isolated individuals but rather by innumerable interactions inside and outside the economy. He shows how rethinking economic efficiency, sustainability, politics, profits, taxes, individual ethics, corporate social responsibility, finance, and more would improve the effectiveness and equity of our society. And he offers specific solutions — on how to price carbon, how to pursue low-carbon technologies, how to design an efficient tax system, and how to foster international cooperation through climate clubs.

William Nordhaus is the winner of the 2018 Nobel Prize in Economics and is the Sterling Professor of Economics and Professor in the School of the Environment at Yale University. His previous books include The Climate Casino: Risk, Uncertainty, and Economics for a Warming World and A Question of Balance: Weighing the Options on Global Warming Policies. He lives in New Haven, Connecticut.

Dr. Shermer’s five questions:

  1. Is global warming real?
  2. Is it primarily human caused?
  3. How much warmer is it going to get?
  4. Is it an existential threat?
  5. What should we do about it?

Shermer and Nordhaus discuss:

  • the history of the environmental movement,
  • how and why the environment/global warming got bundled with politics & economics,
  • why all environmental decisions are economic in nature. Thomas Sowell: “Economics is the study of the use of scarce resources which have alternative uses.” Therefore, “there are no perfect solutions, just trade-offs.”
  • the tragedy of the commons/collective action problems/game theory solutions,
  • discounting the future,
  • How confident is he in climate models?
  • How do you calculate the “cost” of global warming over time?
  • positive and negative externalities,
  • rights of future generations to have a sustainably livable planet,
  • exo-civilizations: what kind of government and economy should we set up on Mars?
  • Kuznets Environmental Curve: “the environment gets worse before it gets better”
  • the Green New Deal,
  • Modern Monetary Theory and why he’s skeptical of it,
  • profiting in green technology,
  • carbon credits, green taxes, sin taxes, and
  • Milton Friedman and free-market environmentalism.

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This episode was released on June 2, 2021.

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