Grading Economics Textbooks on Climate Change – 2020 Update

Introduction

This is the fifth such review I’ve been involved in and it is almost certainly the last review I’ll be doing, for the simple reason that the vast majority of textbooks now have excellent content on climate change! (If desired you can skip directly to the report card, or read on for some context and big-picture thoughts.)

The state of affairs today is very different from that of 10 years ago—my previous reviews were in 201020122014, and 2017—much less 20 years ago, when I had an astonishing and hilarious email exchange with University of Houston professors Roy Ruffin and Paul Gregory about the wacky climate-skeptic claims (“no matter how much contrary evidence is presented, it just doesn’t matter”) in their now-defunct textbook.

In past years I have given out a Ruffin and Gregory Award for the Worst Treatment of Climate Change in an Economics Textbook, and I am pleased to say that no book merits that award this year. Instead, three books are sharing a “Most Improved” award:

  • Gwartney et al. is wonderfully thought-provoking now that it’s no longer full of conspiracy theories or excessive climate science skepticism, e.g., claims in previous editions that “the billions of dollars going into global warming research give scientists an incentive to maintain climate change as a public issue” and that “the earth has experienced both warming and cooling trends in the past, and the current warming trend may well be unrelated to the emissions of carbon dioxide and other greenhouse gases into the atmosphere.”
  • McConnell Brue Flynn, which may still be the 2nd biggest selling principles of economics textbook in the country, has a much-improved level of factual accuracy: gone are the claims that a $15 carbon tax would add “$1.63 to a kilowatt hour of electricity”, that global temperatures may rise by “2.2 to 10 degrees by 3000” (emphasis added), or that 20% of U.S. electricity production comes from petroleum (!).
  • Frank et al. focuses on recent IPCC reports and no longer asserts (on the basis of their own extrapolations from a single decade-old MIT working paper) that “we face a roughly 1 in 10 chance of global warming sufficient to extinguish much of life on Earth.”

Many other books have also improved, both in the treatment of climate change in the chapter on environmental economics and in the incorporation of climate change considerations in other chapters: long-run economic growth, game theory, tax policy, elasticities, etc.

Having said all that, I still have a bit of bad news: It remains remarkably common for textbooks to contain major factual inaccuracies, and many authors and publishers don’t really seem to care. If they cared then they would do a better job of sending drafts out to subject-matter experts who could catch obvious mistakes, such as the statement in Schiller and Gebhardt that the “greenhouse effect will melt the polar ice caps… within 60 years.” Heck, subject-matter experts might even catch less-obvious mistakes, like the Cowen and Tabarrok claim that “large energy firms” oppose carbon taxes, a claim that comes after they extensively discuss a carbon tax proposal that is supported by ExxonMobil, Shell, and BP. These kinds of mistakes are embarrassing and unnecessary and I don’t understand why authors and publishers allow them to persist. (It may be dog-food publishing, but still: have more respect for your own work and for the principle of comparative advantage!)

On a related note: Authors are still invited to email me at yoram@standupeconomist.com for free and confidential feedback on draft material related to climate change. I also recommend my 2014 book, The Cartoon Introduction to Climate Change, plus the treatment of climate issues in my two Cartoon Economics books. (Full disclosure: some of my books are published by FSG, a sister company of the textbook publisher Worth.)

PS. If you’re curious about my methodology for the reviews below: I looked at online versions of these textbooks (via VitalSource) and searched them for keywords like “climate change” and “global warming” and “pollution”. Grades are necessarily subjective, but, well, read on and judge for yourself! (See also the 2019 paper in Sustainability that John Chung-En Liu, Yating Chuang, and I co-authored: “Climate Change and Economics 101: Teaching the Greatest Market Failure”.)

Report Card (click any book for details)

Recommended

Krugman and Wells, Economics, 6th ed. (Worth, 2021) A+
Chiang, Economics: Principles for a Changing World, 5th ed. (Worth, 2019) A+
Case, Fair, and Oster, Principles of Economics, 13th ed. (Pearson, 2020) A+
Parkin, Economics, 13th ed. (Pearson, 2018) A+
O’Sullivan, Sheffrin, and Perez, Economics: Principles, Applications, and Tools, 10th ed. (Pearson, 2019) A+
Colander, Economics, 11th ed. (McGraw-Hill, 2019) A
Frank, Bernanke, Antonovics, and Heffetz, Principles of Economics, 7th ed. (McGraw-Hill, 2018) A
Mankiw, Principles of Economics, 9th ed. (Cengage Learning, 2021) A
Hubbard and O’Brien, Economics, 8th ed. (Pearson, 2021) B
Gwartney, Stroup, Sobel, and Macpherson, Economics: Private and Public Choice, 17th ed. (South-Western, 2021) B
McConnell, Brue, and Flynn, Economics, 22nd ed. (McGraw-Hill, 2021) B

Recommended with reservations

Cowen and Tabarrok, Modern Principles of Economics, 5th ed. (Worth, 2021) C+

Not recommended

Arnold, Economics, 13th ed. (Cengage Learning, 2018) D
Miller, Economics Today, 20th ed. (Pearson, 2021) D
Schiller and Gebhardt, The Economy Today, 15th ed. (McGraw-Hill, 2018) D


Krugman06

Krugman and Wells, Economics, 6th ed. (Worth, 2021)

Grade: A+ (4th edition: A+ )

 

From the 6th edition:

It’s safe to say that one of the most challenging problems that the world will face during your lifetime is climate change. Science has conclusively shown that emissions of greenhouse gases are changing the earth’s climate. On a global scale, greenhouse gases trap heat in Earth’s atmosphere, leading to extreme weather patterns around the world—drought, flooding, extreme temperatures, destructive storm activity, and rising sea levels. Climate change inflicts huge costs and suffering, as crops fail, homes are washed away, tropical diseases spread, animal species are lost, and areas become uninhabitable. Moreover, the burden of this cost will fall more heavily on poorer countries, which have fewer resources to cope with the change.

In 2018, a scientific report by 13 federal agencies warned that unmitigated climate change could lower U.S. GDP by 10% by 2100. One study estimated that 20% of world GDP would be lost under the same conditions. Economists and scientists widely recognize that the direct cost of fossil-fuel consumption greatly underestimates the social cost. In a World Bank study, Nobel prize–winning economists Joseph Stiglitz and Nicholas Stern estimated that the true environmental cost of carbon emissions ranges from $50 to $100 per ton as of 2017, and may climb as high as $400 by 2050.

The rise in Earth’s temperature began in the first half of the nineteenth century and has accelerated since the 1980s… The source of the vast majority of greenhouse gases is human activity—specifically, the burning of fossil fuels such as coal, oil, and natural gas, which are derived from fossil sources and are used to generate electricity or power vehicles.

Krugman has been paying attention to climate change for a long time—as far back as a 1997 Economists’ Statement on Climate Change and this 2010 New York Times Magazine article on climate economics—and the treatment in this book is terrific, starting in the introductory chapter.

Chapter 16 (“Externalities”) tackles the Social Cost of Carbon and other issues in a sidebar on “How Much Does Your Electricity Really Cost?” Other sidebars focus on carbon cap-and-trade systems and on international carbon comparisons. A fabulous bonus is Chapter 24 (“Long-Run Economic Growth”), which has a section on environmental issues that also does an excellent job of differentiating Malthusian resource scarcity concerns from climate-change concerns.

Minor quibbles: (1) the sidebar on Microsoft’s internal carbon tax in the tax chapter lacks context because that chapter comes before the externalities chapter, so it would be helpful to add a note about how this will come up in a future chapter; (2) a sidebar on international carbon comparisons says that a “more meaningful way to compare pollution across countries [than per capita GHG emissions] is to measure emissions per $1 million of a country’s GDP”, when IMHO it’s not “more meaningful”, it’s just different; (3)  the third quote above suggests that Nicolas Stern is a Nobel Prize-winner, which is not true as of this writing; (4) throughout the book (for example, in the last quote above) the authors suggest that burning fossil fuels is the only human source of GHGs, ignoring deforestation, methane from agriculture, etc.; and (5) the glossary entry for “fossil fuel” includes coal and oil but not natural gas.

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Chiang05

Chiang, Economics: Principles for a Changing World, 5th ed. (Worth, 2019)

Grade: A+ (previous edition: A+ )

 

From the 5th edition:

The primary causes of climate change are related to actions that emit greenhouse gases… The largest portion of greenhouse gases is carbon dioxide, which is created by fossil fuel usage, industrial production, and deforestation… The major impacts of climate change are in the areas of food security, water resources, ecosystems, extreme weather events, and rising sea levels.

The difficulty with addressing these effects is that unlike air or water pollution that can be seen today, climate change has a cumulative effect. In other words, this year’s CO2 adds to that from the past to raise concentrations in the future. Once CO2 levels reach a certain level, it may lead to extreme consequences that cannot be reversed. The global environment is essentially a common resource with many public goods aspects, and climate change is a huge global negative externality that extends long into the future.

Chapter 13 (“Externalities and Public Goods”) includes a wonderful and lengthy section on “The economics of climate change and sustainable development” that includes the quotes above, plus a terrific graph of global greenhouse gas emissions based on IPCC data. Elsewhere in the chapter there’s a great sidebar on “Cap-and-Trade: The Day Liberal Environmentalists and Free-Market Conservatives Agreed”, and the chapter starts with a picture of a calving glacier (and a graphic showing the decline in multiyear ice in the Arctic between 1988 and 2018) and a discussion of climate change and potential sea level rise.

Minor quibbles: A graphic of growing renewable energy production would be more informative if it also showed the (small) fraction of total electricity production that comes from renewables.

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Case13b

Case, Fair, and Oster, Principles of Economics, 13th ed. (Pearson, 2020)

Grade: A+ (previous edition: A+ )

 

From the 13th edition:

Clearly, the most significant and hotly debated issue of externalities is global warming. The 2007 Nobel Peace Prize was awarded to former Vice President Al Gore and the Intergovernmental Panel on Climate Change, a group of 2,500 researchers from 130 nations that issued a number of reports linking human activity to the recent rise of the average temperature on Earth. Most scientists predict that absent a change in climate policy, major adverse consequences such as dramatically rising sea levels are likely.

The control of carbon emissions is one area in which many economists have argued strongly for the use of a tax… Although we do not yet have a nationwide tax on carbon, we have seen a number of organizations using their own internal carbon “taxes” to change the behavior of their workers. Walt Disney and Microsoft are two of the leaders among U.S. companies in using carbon taxes.

In recent years, concern about the environment has led some people to question advantages of free trade… A study by the Tyndall Centre for Climate Change Research in Britain found that in 2004, 23 percent of the greenhouse gas emissions produced by China were created in the production of exports. In other words, these emissions come not as a result of goods that China’s population is enjoying as its income rises, but as a consequence of the consumption of the United States and Europe, where most of these goods are going.

[D]emand for clean air increases with income, when needs for food and shelter are better met. It should surprise no one who has studied economics that there are debates between developing countries and developed countries about optimal levels of environmental control. These debates are further complicated when we recognize the gains that consumers in developed economies reap from economic activity in the developing world. Much of the increased carbon emitted by Chinese businesses, for example, is associated with goods that are transported and traded to Europe and the United States. These consumers thus share the benefits of this air pollution through the cheaper goods they consume.

Chapter 16 (”Externalities, Public Goods, and Common Resources”) includes excellent material on climate change, and the topic also comes up in a host of other chapters on topics ranging from long-run growth (in an excellent section on “Growth and the Environment and Issues of Sustainability”) to international trade (in a section on “Free Trade or Protection?”).

Minor quibbles: (1) the book could use a more definitive statement connecting human activity to climate change instead of meandering quotes like “Reports of melting ice caps have fueled worry among scientists and others across the world about global warming”; (2) a quote about different types of air pollution—“A steel firm may produce carbon emissions as well as steel, contributing both to air pollution and global warming”—doesn’t correctly describe the issue because carbon emissions are not a local air pollution problem; and (3) some of the environmental material is getting pretty dated, e.g., the section on acid rain covers the 1990 Clean Air Act Amendments by saying that “Recently, the United States has employed an innovative “cap-and-trade” program to control emissions”.

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Parkin12

Parkin, Economics, 13th ed. (Pearson, 2018)

Grade: A+ (previous edition: A- )

 

From the 13th edition:

Burning coal to generate electricity emits carbon dioxide that is warming the planet. Logging and the clearing of forests is destroying the habitat of wildlife and also adding carbon dioxide to the atmosphere. These activities are negative production externalities, the costs of which are borne by everyone, and even by future generations.

The trends in local U.S. air quality and global greenhouse gas concentrations are starkly opposing… Figure 2 shows the global trends in carbon dioxide (CO2) concentration and temperature. Both trends are starkly upward… Scientists agree that the scale on which we burn fossil fuels is the major source of the rising CO2 trend. There is more uncertainty about the effect of the increase in CO2 on global temperature, but the consensus is that the effect is significant.

In 2007, the Supreme Court ruled that the EPA has authority to regulate greenhouse gas emissions.

Introduced in 2008 at $10 per metric ton of carbon emitted, British Columbia’s tax increased each year to its final rate of $30 per metric ton in 2012. The tax applies to all forms of carbon emission from coal, oil, and natural gas. The tax is revenue-neutral, which means that other taxes, personal and corporate income taxes, are cut by the amount raised by the carbon tax. Between 2008 and 2012, carbon emissions fell by 17 percent.

A lower CO2 concentration in the world’s atmosphere is a global public good. And like all public goods, it brings a free-rider problem

When 1 ton of coal is used to generate electricity, it emits 3.67 tons of CO2. The amount of carbon emitted from using coal and other fossil fuels has increased the atmospheric concentration of CO2 by 50 percent since 1800.

Our 2014 review gave the 11th edition of this book the first-ever A+ grade, citing “great climate science graphs and summaries, a fabulous comparison of local and global air pollution trends, and thought-providing discussions of the economics, including a ‘debate’ between Nicholas Stern and Bjorn Lomborg about whether we should be doing more to reduce carbon emissions.” All of that is still there, plus sections on carbon taxes in British Columbia and elsewhere.

The 12th edition, from 2015, got a lower grade because of a graph mix-up (a plot of global trends of CO2 and temperature reverses the labels on the two data sets) but that’s been fixed in the 13th edition.

Nitpicks about the 13th edition: If coal was 100% carbon, it would be correct to say that “When 1 ton of coal is used to generate electricity, it emits 3.67 tons of CO2.” But coal is apparently more like 60-80% carbon, so this quote doesn’t have the emissions numbers quite right. (For more on this, see the discussion at the end of the O’Sullivan review below about carbon taxes and C versus CO2 and 44/12=3.67.) The O’Sullivan discussion also explains why the quote above about the BC carbon tax would be better if it said the tax was introduced in 2008 at $10 per metric ton of CO2, not per metric ton of carbon. Also, I think the claimed 17% reduction in CO2 emissions in BC is probably overstated; the best analysis I’ve seen (focused on motor gasoline) is a 2016 working paper by Antweiler and Gulati: “We find conclusive evidence that higher fuel taxes and BC’s carbon tax are shifting car purchases towards higher fuel efficiency. A counterfactual simulation suggests that without BC’s carbon tax fuel demand per capita would be 7% higher, and the average vehicle’s fuel efficiency would be 4% lower.” (See also Murray and Rivers 2015, which estimates a 5-15% reduction overall, and the references in Rodio 2016.) Finally, note that the BC carbon tax is supposed to be going up again, and also moving away from revenue-neutrality.

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OSullivan10

O’Sullivan, Sheffrin, and Perez, Economics: Principles, Applications, and Tools, 10th ed. (Pearson, 2019)

Grade: A+ (previous edition: A )

 

From the 10th edition:

One of our most challenging environmental problems concerns climate change… To summarize, IPCC concludes that the climate is changing because of human activities, that continued emissions will cause additional warming and other costly changes in the climate, and that mitigation (emissions reductions) and adaptation are complementary strategies for controlling the negative consequences of climate change..

An ongoing environmental issue is how to respond to the problem of global warming caused by greenhouse gases. One approach is to tax carbon dioxide (CO2) fuels… Carbon taxes have been imposed by governments around the world. In Canada, the province of British Columbia has a revenue-neutral carbon tax of $30 per ton of CO2. The revenue raised from the carbon tax is returned to taxpayers through reductions in taxes on personal and business income.

Chapter 31 (“External Costs and Environmental Policy”) has an expansive treatment of climate change that includes terrific paragraphs on climate science, on British Columbia’s carbon tax, on “scrubbing” CO2 from the atmosphere, and more. Terrific work!

Plus there’s climate-related content elsewhere in the most book, notably a great “Applying the Concepts” sidebar in Chapter 22 (“Consumer Choice: Utility Theory and Insights from Behavioral Economics”). The sidebar is on “A Revenue-Neutral Carbon Tax” and has a terrific answer to a question that comes up all the time in climate discussions: “How would a ­simultaneous increase in the price of gasoline due to a [carbon] tax and a decrease in the income tax affect gasoline consumption?”

Fabulous work!

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Colander11

Colander, Economics, 11th ed. (McGraw-Hill, 2019)

Grade: A (previous edition: A )

 

From the 11th edition:

A good example of the central role that economics plays in policy debates is the debate about climate change. Almost all scientists are now convinced that climate change is occurring and that human activity such as the burning of fossil fuel is one of the causes. The policy question is what to do about it. To answer that question, most governments have turned to economists. The first part of the question that economists have considered is whether it is worth doing anything, and in a well-publicized report commissioned by the British government, economist Nicholas Stern argued that, based upon his cost/benefit analysis, yes it is worth doing something. The reason: Because the costs of not doing anything would likely reduce output by 20 percent in the future, and those costs (appropriately weighted for when they occur) are less than the benefits of policies that can be implemented.

An issue in which almost all the dimensions of economic policy analysis come into play is global warming. The issue is enormous, and a recent expert consensus estimate of the cost of global warming in terms of lost income was a 1 percent decline in global economic activity, which for the United States comes out to about $200 billion, or $610 per person per year.

The policy problems of dealing with climate change are formidable. The first is a major free rider problem… A second problem is that climate change is not bad for all areas. Some countries and areas within countries may actually benefit from climate change. For example, significant global warming will likely extend the growing season in northern countries and make areas that previously were almost uninhabitable because of the cold more pleasant. The costs of global warming are highly concentrated in low-lying coastal areas. This diversity of costs and benefits makes arriving at a voluntary agreement much less likely… A third problem is that the largest expected benefits to stopping climate change are in the future, while many of the costs are now, and people tend to discount future costs and benefits. A fourth problem is the lack of a clear cost/benefit analysis for various policy alternatives and the uncertainty of the success of various technologies. Cost estimates of various policies to become largely free of fossil fuel emissions by 2100 vary from 1 percent to 16 percent of total world output. (Were a cost-competitive fuel-cell-powered car or a fusion nuclear reactor developed, the use of fossil fuel would decrease significantly, and the cost estimate would be much less.)

The content in this book is great: thoughtful and thought provoking, with a good sense of where there’s consensus and where there’s disagreement. Chapter 8 (“Market Failure versus Government Failure”) includes an excellent section on “Climate Change, Global Warming, and Economic Policy”. There are also neat sidebars on “Economics and Climate Change” and “Economists and Market Solutions” in the very first chapter of the book.

Nitpicks: Regarding the third quote above, it’s not clear why “fuel-cell-powered” cars are really any different than the electric cars that are making inroads in the marketplace. Also I’d change “are” to “may be” in the (IMHO speculative) sentence about “The costs of global warming are highly concentrated in low-lying coastal areas.” And a sentence in the first chapter about how the 1970 Clean Air Act “capped the amount of pollutants (such as sulfur dioxide, carbon monoxide, nitrogen dioxides, lead, and hydrocarbons) that firms could emit” should probably leave out the hydrocarbons. (Yes the U.S. Supreme Court ruled in 2007 that carbon dioxide emissions are covered by the Clean Air Act, but in fact the applications of the Act—especially during its first three decades—were I think focused entirely on local air pollutants.)

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Frank07

Frank, Bernanke, Antonovics, and Heffetz, Principles of Economics, 7th ed. (McGraw-Hill, 2018)

Grade: A (previous edition: D- )

From the 7th edition:

Growing concentrations of carbon dioxide (CO2) in the atmosphere are widely believed to be a principal contributor to global warming. Concerns about the consequences of climate change have led to proposals to tax (CO2) emissions or require marketable permits for them. Critics of these proposals emphasize that forecasts involving climate change are highly uncertain, a fact they view as arguing against taking action. But uncertainty is a two-edged sword. Climate researchers themselves readily concede that estimates based on their models are extremely uncertain. But that means that although the actual outcome might be much better than their median forecast, it might also be significantly worse.

According to estimates published in 2013 by the Intergovernmental Panel on Climate Change (IPCC), the median forecast is for an average global temperature climb of 6.7°F by century’s end, in the absence of effective countermeasures. The IPCC also estimated that we face a 5 percent chance of temperatures rising by more than 8.6°F by 2100. Temperature increases of that magnitude would be accompanied by sea level rises that would make much of the world’s most densely populated coastal regions uninhabitable.

Early estimates by the IPCC suggest that a tax of between $20 and $80 per ton on carbon emissions would be needed by 2030 to achieve climate stability by 2100… Under a carbon tax, the prices of goods would rise in proportion to their carbon footprints. A tax of $80 per ton, for example, would raise the price of gasoline by about 70 cents a gallon, while a tax of $5 per ton would raise prices by less than 5 cents a gallon.

Climate scientists warn that increasing atmospheric concentrations of greenhouse gases threatens to cause catastrophic global warming. That risk could be averted by imposition of a carbon tax or equivalent carbon permit system.

The previous edition of this text, in 2015, committed “just about every sin under the academic sun” and won that year’s Ruffin and Gregory Award for the Worst Treatment of Climate Change in an Economics Textbook.

This new edition has a new chapter (Chapter 11, “Externalities, Property Rights, and the Environment”) that contains a totally revised section on “Climate Change and Carbon Taxes” that is much, much better. It’s a co-winner (with McConnell, Brue, and Flynn and Gwartney et al.) of the “Most Improved” award!

Nitpicks: There’s a typo in the first quote above, and the third quote could use a better example: to show that “the prices of goods would rise in proportion to their carbon footprints” it would be better to compare, say, the impact of a carbon tax on coal versus natural gas or renewable power, rather than the impact of an $80 carbon tax on gasoline versus a $5 carbon tax on gasoline.

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Mankiw09

Mankiw, Principles of Economics, 9th ed. (Cengage Learning, 2021)

Grade: A (previous edition: A )

 

From the 9th edition:

Cars cause smog. Moreover, the burning of fossil fuels such as gasoline is widely believed to be the primary cause of global climate change. Experts disagree about how dangerous this threat is, but there is no doubt that the gas tax reduces the threat by discouraging the use of gasoline.

Corrective taxes are unlike most other taxes… [M]ost taxes distort incentives and move the allocation of resources away from the social optimum… Corrective taxes alter incentives that market participants face to account for the presence of externalities and thereby move the allocation of resources closer to the social optimum. Thus, while corrective taxes raise revenue for the government, they also enhance economic efficiency.

A 2007 study published in the Journal of Economic Literature summarized the research on the size of the various externalities associated with driving. It concluded that the optimal corrective tax on gasoline was $2.28 per gallon in 2005 dollars… equivalent to about $2.95 per gallon in 2018 dollars. By contrast, the actual tax in the United States in 2018 was only about 50 cents per gallon.

The tax revenue from a gasoline tax could be used to lower taxes that distort incentives and cause deadweight losses, such as income taxes. In addition, some of the burdensome government regulations that require automakers to produce more fuel-efficient cars would prove unnecessary. This idea, however, has never been politically popular.

This textbook is excellent, including a terrific 2005 John Trevor cartoon, an “Ask the Experts” sidebar on carbon taxes, and a recent Chicago Tribune editorial about a “carbon tax and dividend” plan that Professor Mankiw is supporting. (As the founder of the Pigou Club, he’s a strong advocate of the use of environmental taxes to remedy externalities.)

The book would be even better, however, if there were a stronger treatment of climate science. And the chapter on environmental taxes is mostly disconnected from the chapter on taxation, which for example says this in the introductory section:

When the government remedies an externality (such as air pollution), provides a public good… or regulates the use of a common resource…. it can raise economic well-being. But these activities can be costly. For the government to perform these and its many other functions, it needs to raise revenue through taxation.

To its credit, the chapter on taxation does include a paragraph about how “not all taxes that alter incentives lead to deadweight losses”, but whatever weight this paragraph might carry is substantially reduced by a goofy example about how “if the wafting smell of pizza cooking makes passersby hungry and unhappy, a tax on pizza could enhance efficiency.” What’s needed here IMHO is to jog the reader’s memory by referencing pollution, not pizza.

Also in need of modification is a confusing sentence in the opening chapter of the book: “Thus, while pollution regulations yield a cleaner environment and the improved health that comes with it, this benefit comes at the cost of reducing the well-being of the regulated firms’ owners, workers, and customers.” This makes it sound like the overall costs of pollution regulation outweigh the benefits (after all, the firms’ customers might include everyone) when in fact the point here is simply to note that are costs as well as benefits.

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hubbard08

Hubbard and O’Brien, Economics, 8th ed. (Pearson, 2021)

Grade: B (6th edition: A- )

 

From the 8th edition:

The burning of fossil fuels  generates carbon dioxide and other greenhouse gases that can increase global warming.

Over the centuries, global temperatures have gone through many long periods of warming and cooling. Nevertheless, most scientists are convinced that the recent warming trend is not part of the natural fluctuations in temperature but is primarily a result  of the burning of fossil fuels, such as coal, natural gas, and petroleum. Burning these fuels releases carbon dioxide, which accumulates in the atmosphere as a “greenhouse gas.” Greenhouse gases cause some of the heat released from the earth to be reflected back, increasing temperatures. Worldwide annual carbon dioxide emissions increased from about 198 million metric tons of carbon in 1850 to 3,855 million metric tons in 1930 and to 33,444 million metric tons in 2017.

If greenhouse gases continue to accumulate in the atmosphere, according to some estimates, global temperatures could increase by 3 degrees Fahrenheit or more during the next 100 years.

Note that a Pigovian tax eliminates deadweight loss and improves economic efficiency, unlike most other taxes, which are intended simply to raise revenue and can reduce consumer surplus and producer surplus and create a deadweight loss… In fact, one reason that economists support Pigovian taxes as a way to deal with negative externalities is that the government can use the revenues raised by Pigovian taxes to lower other taxes that reduce economic efficiency. For instance, the Canadian province of British Columbia has enacted a Pigovian tax on carbon dioxide emissions and uses the revenue raised to reduce personal income taxes.

The vast majority of this book is terrific. Chapter 5 (“Externalities, Environmental Policy, and Public Goods”) starts with a page on “Are NextEra Energy and Green Power the Future?”; later on there’s a long section on “Does the United States Need a Green New Deal?” that includes a NASA graph of temperatures since 1880; clear descriptions of global warming, its connection to fossil fuel emissions and its global significance; and solid descriptions of policy approaches including the BC carbon tax and more. A good of the improvement in this book comes from comparing the text that accompanies the (excellent) NASA global temperature graph in different editions. In the 3rd edition (2009) the text reads “Do the higher-than-normal temperatures of the past 25 years mean global warming?” In the latest 8th edition (2021) the text reads “Scientists generally believe that the higher-than-normal temperatures of the past 40 years are due to global warming.” In my view that’s a significant improvement.

There are, however, a few areas for improvement: the “most scientists” in the first two quotes above should be shortened and strengthened to just “scientists”; the second quote above would be much stronger without the first sentence and the “Nevertheless” about how there have been warming and cooling trends over time; the “3 degrees Fahrenheit” number in the third quote above should be changed (a better ballpark for business-as-usual temperature change by 2100 is perhaps 3 degrees Celsius, which is about 5 degrees Fahrenheit; see also this BAU projection of 3 degrees Celsius over pre-industrial, and also note that the “during the next 100 years” language in the book should be clarified now that we’re no longer at the beginning of the 21st century); and the final quote should note that BC has reduced corporate income taxes as well as personal income taxes (and more recently has abandoned revenue-neutrality).

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Gwartney17

Gwartney, Stroup, Sobel, and Macpherson, Economics: Private and Public Choice, 17th ed. (South-Western, 2022)

Grade: B (previous edition: C- )

From the 17th edition:

Burning fuels such as coal, oil, and natural gas emits carbon dioxide. This emission causes no direct harm… [b]ut long-term concern about its environmental impacts has been growing since 1988, when James Hansen… told a congressional panel that he was “99 percent confident” that the global warming signal had arrived.

[Photo caption] Coal-fired power generators put large amounts of visible steam and invisible carbon dioxide into the air. Carbon dioxide is a greenhouse gas that may be warming the earth significantly.

While there is general agreement among scientists that higher levels of carbon dioxide contribute to global warming, there is continuing debate about the relationship. Some scientists believe that higher levels of carbon dioxide will substantially increase atmospheric temperatures, while others argue that the impact will be more moderate… Moreover, the earth has experienced cycles of warming and cooling prior to recent decades.

From an economic perspective, proper analysis of global warming and potential policy alternatives involves an examination of costs relative to benefits. Many believe that the costs of continuing the use of fossil fuels and the emission of carbon dioxide into the atmosphere are extremely high. Proponents of this view argue that increased carbon dioxide emissions will cause the Earth’s temperatures to rise by 5 to 10 degrees centigrade by the end of this century, if not sooner… Clearly, the cost of these events [extreme weather, climate-related diseases, hunger and malnutrition, and sea level rise of "perhaps 10 to 15 feet, in a relatively short period of time"] would run into the tens of trillions of dollars and have devastating effects on people around the world.

Others argue that the models used to project the large temperature increases have persistently overstated the impact of carbon dioxide levels on global temperatures. Proponents of this view believe that the projected future emissions of carbon dioxide will result in temperature increases of only 1 to 3 degrees centigrade during the next 50 to 75 years. Temperature increases of this magnitude will result in minimal increases in destructive weather events, and the rise in sea level will be approximately 1 to 3 inches per decade, as has been the case for centuries. Moreover, there will be some benefits from a warmer climate. For example, a warmer climate will result in a longer frost-free growing season in Canada and the northern parts of the United States, enhancing agricultural output in these regions… Further, people appear to have a preference for warmer climates. When they retire and have more freedom to live where they wish, many move to places like Florida and Arizona, seeking more warmth and less rigorous winters.

Why is the global warming issue so divisive? Wide variation in the expected costs and benefits provides at least part of the answer. Those who believe we are on a disastrous course that will result in massive destruction of both assets and lives of people cannot understand the failure of others to support their policies. In contrast, those who believe the threat is exaggerated cannot understand why anyone would want to spend trillions of dollars seeking to combat the cost of future events that, in their view, are highly unlikely. Still others believe harmful changes to the climate are occurring, but costly actions by the United States and other high-income countries are imprudent as long as China, India, and other developing countries continue to emit large volumes of carbon into the atmosphere.

If highly restrictive regulations limiting carbon emissions were adopted, how much would they cost? What benefits would they generate? How will future changes in technology impact carbon emissions? How will future technological changes impact the cost of reducing global temperatures? Experts differ widely with regard to their answers to these questions. Given the uncertainties and imprecision in the measurement of both benefits and costs, and the potential impact of technology both now and in the future, proper policy in this area is far from obvious.

Wow! This book was a two-time winner of the Ruffin and Gregory Award for the Worst Treatment of Climate Change in an Economics Textbook, and I was worried that James Gwartney was going to tarnish his amazing 50+ years at Florida State by failing to discuss climate change and sea level rise in a thoughtful way.

I’m not worried anymore: this book is mostly terrific. I still have a few nitpicks—the climate skepticism that dominated earlier editions still shows through on occasion, as in the second and third quotes above—but the vast majority of this book is thoughtful, balanced, and well-informed. There are good discussions of mitigation versus adaptation, of fracking, of carbon taxes and cap-and-trade, and more. I am very pleased to declare this book a co-winner (with Frank et al. and McConnell, Brue, and Flynn) of the “Most Improved” award!

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McConnell21

McConnell, Brue, and Flynn, Economics, 22nd ed. (McGraw-Hill, 2021)

Grade: B (20th edition: C- )

 

From the 22nd edition:

[B]urning coal generates substantial particulate and carbon dioxide emissions that may contribute to health problems as well as global warming. For this reason, many governments have instituted carbon taxes, tradable pollution credits, and tradable emissions permits.

Many governments have imposed Pigovian pollution taxes on carbon dioxide (CO2) in order to raise the marginal cost of burning fossil fuels and thereby offset the negative externalities imposed by carbon dioxide emissions. [The nearby chart] shows the percentage of carbon-dioxide emissions that are taxed at a rate of $35 per ton or higher in each of ten countries.

Governments around the world are interested in reducing air pollution, especially that which results from the carbon dioxide (CO2) gas that is released into the atmosphere when fossil fuels like coal and gasoline are burned… Tradeable pollution permits have worked successfully in several regions for several different types of emissions. They are an economically sophisticated way of overcoming the asymmetric information problem in pollution abatement in order to reduce emissions at the lowest possible cost.

After many years of mediocrity if not worse, this book is a co-winner (with Frank et al. and Gwartney et al.) of the “Most Improved” award! It could still use stronger language about climate science, but that’s a fairly minor point. The major point is that this book, which for many years was and perhaps still is the second-biggest-selling principles textbook in the country, has gotten much better.

I noted last time that McConnell retired in 1990, that Brue retired in 2009, and that Flynn ran for Congress in 2016 and 2018. But Flynn didn’t run in 2020, which may explain the improvements in this edition over the edition I reviewed in 2017.

PS. There was actually another edition published between this review and the previous review, and that (21st) edition was, like the previous editions, pretty much a disaster, epitomized by a graph claiming that petroleum was responsible for 20% of electricity production in the U.S. when in fact it’s responsible for less than 1%. (The latest [22nd] edition has a correct version of that graph.)

PPS. This is an aside, but I can’t resist mentioning the book’s discussion of population projections in various countries, including the United States. It contains this language:

Taking into account infant and child mortality, a total fertility rate of about 2.1 births per woman per lifetime is necessary to keep the population constant, since 2.1 children equals 1 child to replace the mother, 1 child to replace the father, and 0.1 extra child who can be expected to die before becoming old enough to reproduce.

Multiply by ten and this say that of one out of every 21 children is “expected to die before becoming old enough to reproduce”. That’s a child mortality rate of almost 5% (!!) when in fact the CDC says that less than 0.1% of people born in the U.S. die before the age of 35. Now, it is true that a TFR of 2.1 is considered to be “replacement”, but (at least in the developed world) that’s not primarily because of children dying: I’m no expert, but my googling suggests that about half of it is because there are slightly more boys born than girls—for complicated reasons, not necessarily related to selective abortion or parents’ preferences—so you need about 2.05 total births to get 1 girl baby. It’s also because of adult mortality (TFR is a “synthetic” rate) and, yes, because of infant and child mortality… but the language above doesn’t pass the laugh test.

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Cowen05

Cowen and Tabarrok, Modern Principles of Economics, 5th ed. (Worth, 2021)

Grade: C+ (previous edition: C- )

 

From the 5th edition:

In January 2019, thousands of economists including 27 Nobel laureates signed an open letter arguing that the best way to address the problem of climate change was a carbon tax. To quote the letter: “1. A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors toward a low-carbon future…”

The United Kingdom’s carbon tax raised the price of coal relative to other energy sources such as solar, wind, and natural gas… Other countries around the world have also introduced carbon taxes. Canada has a carbon tax and the revenues from the tax are rebated back to Canadian citizens. Mexico, Australia, and Norway also have carbon taxes…

There is a close relationship between using carbon taxes and tradeable allowances to solve the externality problem… A major difference between taxes and tradeable allowances (cap and trade) is not economic but political. With a tax, firms must pay the government for each ton of pollutant that they emit. With tradeable allowances, firms must either use the allowances that they are given or, if they want to emit more, they must buy allowances from other firms. Either way, firms that are given allowances in the initial allocation get a big benefit compared with having to pay taxes.

That’s not necessarily the best way of looking at the issue, however. First, allowances need not be given away; they could be auctioned to the highest bidder, as under some proposed tradeable allowance programs for carbon dioxide—this would also raise significant tax revenue. Making progress against global warming, moreover, may require building a political coalition. A carbon tax pushes one very powerful and interested group, the large energy firms, into the opposition. If tradeable allowances are instead given to firms initially, there is a better chance of bringing the large energy firms into the coalition. Perhaps it’s not fair that politically powerful groups must be bought off, but as Otto von Bismarck, Germany’s first chancellor, once said, “Laws are like sausages, it is better not to see them being made.” We can only add that producing both laws and sausages requires some pork.

[Question 17:] If greenhouse gas emissions are not cut, climate change could have very large future costs. Let’s assume that there are 100 equally sized countries in the world and that cutting greenhouse gas emissions will cost each country 10 but will create much larger world benefits of 500. Since the benefits of cutting greenhouse gas emissions far exceed the costs, why isn’t climate change in this scenario an easy problem to solve?

The first paragraph above is from a section called “Climate Change and the Carbon Tax” that quotes most of an economists’ letter and then has a long and thoughtful discussion about it. After that is another fairly strong section, “Carbon Taxes Around the World”, and then a section comparing carbon taxes with cap-and-trade systems (quoted almost in full in the 3rd and 4th quotes above). The final quote is from the terrific Q&A section at the end of Chapter 19 (“Public Goods and the Tragedy of the Commons”).

There is a lot of excellent material here, but I do have two nitpicks and then three items that merit serious head-scratching:

  • Following the first paragraph quoted above, the authors write that “Point 1 reminds us that carbon released into the atmosphere contributes to climate change” but they don’t actually have a good statement about climate science in the book. Unfortunately this is not really something that can or should be taken for granted.
  • The section on “Carbon Taxes Around the World” would be better called “Carbon Pricing Around the World” because it includes cap-and-trade systems as well as carbon taxes.
  • More generally, the the comparison of carbon taxes and cap-and-trade systems needs work. Like the 3rd quote above, it starts off fine but then ends up in a tangle because the authors miss the fundamental point about the economics: that, ignoring Weitzman-style uncertaintyanything you do with a carbon tax you can do with cap-and-trade, and vice versa. (For example, a cap-and-trade system with grandfathered permits is like a carbon tax with revenue given back to firms based on their historic emissions.) That’s the fundamental point about the economics, and it shouldn’t be confused with the “political” differences that exist about language, framing, etc.
  • Speaking of politics, the authors are totally wrong that a carbon tax “pushes the large energy firms [into] the opposition.” In fact, the economists’ carbon tax letter they quote at length was put out by an organization, the Climate Leadership Council, whose Founding Members include ExxonMobil, BP, Shell, and ConocoPhillips!!
  • The authors are also totally off-target in claiming that Mexico and Australia have carbon taxes worthy of the name. (They are also not quite on-target in their description of Canada’s carbon pricing policy; see here.) Perhaps the reference to Australia is to the carbon tax policy there that was repealed in 2014? That would fit in with the authors’ outdated discussion of the EPA’s trading program for sulfur dioxide (SO2), which was great while it lasted but effectively died about 10 years ago: the 2020 auction results look like the EPA equivalent of Myspace, with a clearing price of $0.01 and bidders including “Pierre Delecto” and “John Galt“.

I have hopes that future editions of this book will improve, but for now I am left wondering where the authors get their information, whether they read their own blog, and what (if anything) the authors’ mistakes indicate about the value of studying political economy.

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Arnold13

Arnold, Economics, 13th ed. (South-Western, 2018)

Grade: D (previous edition: D )

 

The phrases “global warming” or “climate change” do not appear even once, so this book gets the default grade of D because the general coverage of environmental economics is fine. (It does, however, seem unfair to have a supply and demand curve titled “A Corrective Tax Gone Wrong” given that there is no curve showing a corrective tax gone right.)

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Miller20

Miller, Economics Today, 20th ed. (Pearson, 2021)

Grade: D (previous edition: D- )

 

From the 20th edition:

Air pollution also adds to accumulations of various gases that may contribute to climate change.

In recent years, certain scientific research has suggested that emissions of carbon dioxide and various other so-called greenhouse gases could be contributing to atmospheric warming. The result, some scientists fear, might be global climate changes harmful to people inhabiting various regions of the planet.

[From a sidebar titled "In China, Lower-Priced Solar Energy Puts a Damper on the Demand for Coal"] During the past ten years… the prices of solar cells and panels that can be used to produce electricity have plummeted. As a result, firms have substituted in favor of solar power as a source of energy. Over recent years, China’s total consumption of coal, a key substitute item used to produce electricity, has declined at a rate exceeding 4 percent per year.

Did you know that… melting and purifying the silicon incorporated into all of the solar panels manufactured since 1975 has released more carbon gases into the atmosphere than have been saved by using the solar panels to generate energy? Most people who thought that using solar panels to cool or heat buildings would prevent injecting the air with additional carbon gases probably did not realize that solar-panel production processes generated such gases… How much of your weekly wages are you willing to sacrifice in efforts to reduce aggregate emissions from gasoline-burning vehicles?

This book—a previous winner of the Ruffin and Gregory Award for the Worst Treatment of Climate Change in an Economics Textbook—is very weak on climate science, overly skeptical when it comes to environmental issues in general, and factually challenged on all sorts of fronts. (Has China’s coal consumption really been going down at over 4% per year? No, it’s basically been flat. Has the production of solar panels since 1975 really generated more CO2 than those panels have saved? No, although it’s a bit more complicated than you might think.) It’s even pretty lousy on basic economics: a sidebar on California’s solar-panel requirement for new homes ignores that the value of those solar panels is capitalized into housing prices, and a section titled “Mixing Government Controls and Market Processes: Cap and Trade” confuses market-based instruments with command-and-control approaches.

On the plus side, the treatment of climate policy is quite up-to-date, with a decent discussion of the Paris Agreements (although the claim that the goal is to limit temperature increases to no more than 1.5°C should not include the phrase “by 2050”) and a decent analysis of the EU cap-and-trade system.

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Schiller15

Schiller and Gebhardt, The Economy Today, 15th ed. (McGraw-Hill, 2018)

Grade: D (previous edition: D- )

 

From the 15th edition:

As carbon dioxide is building up in the atmosphere, it is creating a gaseous blanket around the earth that is trapping radiation and heating the atmosphere. Scientists predict that this greenhouse effect will melt the polar ice caps, raise sea levels, flood coastal areas, and turn rich croplands into deserts within 60 years.

Gaseous pollutants (sulfur and carbon dioxides, etc.)… [also] shorten life expectancies.

Forget about littered beaches, smelly landfills, eye-stinging smog, and contaminated water. The really scary problem… is much more serious: some scientists say that the carbon emissions we’re now spewing into the air are warming the earth’s atmosphere. If the earth’s temperature rises only a few degrees, they contend, polar ice caps will melt, continents will flood, and weather patterns will go haywire.

The natural release of CO2 dwarfs the emissions from human activities. But there’s a concern that the steady increase in man-made CO2 emissions—principally from burning fossil fuels like gasoline and coal—is tipping the balance… A 2013 United Nations study concluded with 95 percent certainty that human activity (power generation, transportation, etc.) is increasingly responsible for the rising greenhouse gas concentrations and the climate change that accompany them.

Chapter 27 (“Environmental protection”) is a bizarre mix of unwarranted and factually inaccurate climate alarmism (“melt the polar ice caps… within 60 years”!) and unwarranted climate skepticism (mostly in tone—e.g., “some scientists say”—rather than factual content).

On the other hand, there are good sidebars about the costs and benefits of closing the Indian Point nuclear power plant in New York State (“Cut the power to save the fish?”), about CO2 cap-and-trade (“Paying to pollute”), and about the Paris Accord and Obama/Trump coal policies (“The war on coal” and “A ‘war on coal’?”). There’s also a decent discussion in Chapter 17 (“Growth and Productivity: Long-Run Possibilities”) on “Limitless Growth?” that mentions climate climate in a broader discussion of Simon/Ehrlich-type topics, but that discussion also claims (apparently incorrectly) that Malthusian resource scarcity was the genesis of the phrase “dismal science”.

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