Nordhaus is dead: climate, that cost they put into an equation

William Nordhaus, the 2018 Nobel laureate in economics, has died at 85, Le Monde reports. According to the paper, he was the first economist to work on climate change, starting in the 1970s. He built a model, published in 1992, that seeks to measure the future costs of greenhouse gas emissions in order to determine the present price of emitting activities. The details of the model do not appear in the dispatch we have, so we will stick to that principle and to what it assumes.

From here on, this is our reading, not an established fact. First, the move is ingenious: bringing climate into economic calculation meant forcing the discipline to look at what it had treated as a negligible externality. We salute it without irony; the man is not the issue. It is the method that deserves scrutiny.

To convert a future damage into a present price is to assume that everything can be compared, that everything can be added up, and that one can trade off a loss against a gain like two lines on a balance sheet. Yet this "cost" is not a quantity of nature. It aggregates lives, harvests and submerged coastlines, and reduces them to a curve. This is, quite precisely, what we call commodity fetishism: relations between people, which decide what to produce, with what energy, and at whose expense, appear as relations between things, a "price of carbon" that seems to impose itself of its own accord. When we read that the "cost" of warming is so much, we no longer see the firms that emit, the states that subsidise, or the populations that pay.

Cost-benefit analysis has another property: one must set a discount rate, that is, decide how much a catastrophe in fifty years is worth compared with a dividend today. The higher the rate, the less the future weighs. This value, presented as technical, is a choice about distribution between generations, but also between classes: those who collect fossil-fuel profits today, and those who will suffer the droughts and floods, rarely the same people. Where the decision is a matter of power relations, the model offers a number to negotiate.

To this is added the question every pricing scheme raises: who pays? A price on emissions is passed on to consumers and to wages, while capital, for its part, seeks to protect its rate of profit. A model that optimises the "right" level of damage accepts, by construction, that there exists a tolerable level of damage. Tolerable for whom? Accounting does not say.

Nordhaus should not be faulted for putting climate on the agenda of his peers. The fault lies with mainstream economics for believing that measuring is enough to decide. The thermometer is not the doctor, and even less the owner of the clinic.