Bryan Caplan was kind enough to introduce me to Alex Epstein, who was kind enough to send me a copy of his book, Fossil Future. I shared a draft of my review with Alex, and then he and I had a 2-week email exchange where we tried valiantly and in good faith to understand each other but ultimately didn’t make much progress (as with his interaction with Tyler Cowen), so here are five questions for Bryan, with my answers in bold (and then scroll down for details on my answers):

  1. Do you agree with Epstein’s claim (made on his blog) that the IPCC AR6 Synthesis Report “portrays climate danger as ‘a threat to human well-being’ even though the reports it’s based on say nothing of the sort”? My answer: No.
  2. Do you agree with Epstein’s claim (pages 85-86) that US Treasury Secretary Janet Yellen is making an “incoherent argument” when she says that “Our financial system must… be prepared for the best-possible case scenario: that we begin a rapid transition to a net-zero carbon economy”? My answer: No.
  3. Do you really want to stand by the claim, made in your lecture notes for Econ 309, that the “[e]ffect of carbon dioxide on plant growth” is one of the “greatly neglected positive externalities” from fossil fuel use? My answer: No.
  4. Would you give Epstein’s discussion of externalities (pages 170-172) a passing grade in an advanced undergraduate econ class? My answer: No.
  5. If you agree with Epstein that “climate scientists lack the causal understanding of climate needed to make meaningful predictions” (p333) then why aren’t you willing to double down on our bet about global temperatures—you know, the bet you’re currently losing badly? My answer: To paraphrase some slogans from President Johnson’s campaign against Barry Goldwater, “In your heart you think he’s right, but in your guts you know he’s nuts.” 

My detailed answers:

  1. Do you agree with Epstein’s claim (made on his blog) that the IPCC AR6 Synthesis Report “portrays climate danger as ‘a threat to human well-being’ even though the reports it’s based on say nothing of the sort”? My answer: No. The IPCC AR6 Synthesis Report SPM and the full Synthesis Report both say that climate change is “a threat to human well-being” and the underlying reports say the same thing, e.g., WGIII Chapter 1 says that “climate change poses a serious threat to development and wellbeing in both rich and poor countries”. Note that Epstein’s claim here isn’t that IPCC doesn’t prove that climate change is a threat to human well-being; his claim is that the Synthesis Report says this even though the underlying reports “say nothing of the sort“. (PS. For a related issue, see the longer discussion in my review of Epstein’s claim that IPCC Summaries for Policy Makers distort the underlying IPCC reports themselves.)
  2. Do you agree with Epstein’s claim (pages 85-86) that US Treasury Secretary Janet Yellen is making an “incoherent argument” when she says that “Our financial system must… be prepared for the best-possible case scenario: that we begin a rapid transition to a net-zero carbon economy”? My answer: No. Although it’s possible that Yellen is just another fanatic who’s ready to sacrifice the global economy and force everyone to freeze in the dark in order to cut CO2, it’s also possible (and IMHO probable) that Yellen is arguing that the financial system should be prepared for a “best-possible case scenario” in which renewables rapidly get better and out-compete fossil fuels, delivering cheap, low-carbon energy for the whole world, creating a challenge for the financial system by stranding lots of fossil-fuel assets.
  3. Do you really want to stand by the claim, made in your lecture notes for Econ 309, that the “[e]ffect of carbon dioxide on plant growth” is one of the “greatly neglected positive externalities” from fossil fuel use? My answer: No. You seem to get this from Epstein, who claims that the IPCC (among others) suffers from “systematic ‘CO2 benefit denial'”, of which the “most egregious instance” is “the well-established ‘fertilizer effect'” (p297). But see my review of Epstein’s book for a long list of IPCC references about the effect of carbon dioxide on plant growth.
  4. Would you give Epstein’s discussion of externalities (pages 170-172, the only pages listed in the index) a passing grade in an advanced undergraduate econ class? My answer: No. Epstein says that the claim that “the market doesn’t properly price the externalities of fossil fuels” involves “two massive fallacies: (1) ignoring the “positive externalities” of fossil fuels and (2) ignoring the massive, unpriced benefits (or “consumer surplus”) of fossil fuels.” Item (2) here is in fact not a fallacy at all, a point that should be clear to advanced econ undergrads and anybody else who understands the diamond-water paradox. (Water is more valuable than diamonds, but a glass of water costs less than a glass of diamond. This doesn’t mean that there is a “massive fallacy” in the market prices for water or diamonds; it means that prices reflect marginal benefits and marginal costs.) The economic theory concerning externalities absolutely takes consumer surplus into account: it’s inherent when you draw a downward-sloping demand curve! So I would flunk Epstein for failing to show any understanding of “thinking at the margin”. (This failure is also apparent elsewhere in his book, e.g., he focuses on the costs and benefits of policies that would totally eliminate fossil fuel use and doesn’t much consider the costs and benefits of policies that would somewhat reduce fossil fuel use.)  As for Epstein’s claim about the “positive externalities” of fossil fuels, a claim repeated in Caplan’s Econ 309 notes, this is a much more interesting claim, but ultimately also flawed. Epstein’s main example here is that R&D has “staggering positive externalities” (true!) and that fossil fuels boost R&D, e.g., by giving us more time for R&D. But the list of things that give us more time for R&D is long—coffee, toilet paper, and comfy socks come to mind—and the list of things that give us less time for R&D is also long, e.g., 4-plus-hour overtime Super Bowls! Are Epstein and Caplan suggesting that we try to internalize all these positive and negative externalities? I would expect advanced undergraduates to be more thoughtful in exploring these questions even if they don’t go all the way to understanding the General Theory of the Second-Best.
  5. If you agree with Epstein that “climate scientists lack the causal understanding of climate needed to make meaningful predictions” (p333) then why aren’t you willing to double down on our bet about global temperatures—you know, the bet you’re currently losing badly? My answer: To paraphrase some slogans from President Johnson’s campaign against Barry Goldwater, “In your heart you think he’s right, but in your guts you know he’s nuts.”