Extreme Arithmetic

To Swedish society, the first shock after Alfred Nobel died in 1896 was the will — the chief part of his dynamite fortune to support scientific research “in the wide sphere of human knowledge and human progress.” The next source of dismay was that the award was to be strictly international – no preference given to Swedes.

The greatest indignity, however, was that the prize for peace was to be entrusted, not to Swedish institutions, like the awards in physics, chemistry, medicine or physiology and literature, but to the Norwegian parliament, the Storting. The parliament would choose the prize committee, which in turn would bestow the award. “Your uncle has been influenced by peace fanatics,” complained the Swedish king to Nobel’s nephew, “and particularly by women.”

Very little is known with certainty about what Nobel really meant by this particular stipulation. Norway in those days was a reluctant junior partner in a union with the Swedish crown from which it would withdraw, nine years later, after 90 years. But the upshot of his decision was to set the Nobel Peace Prize on a different path from all the others. The ceremonies in Oslo tomorrow honoring Albert Arnold (Al) Gore Jr. and the Intergovernmental Panel on Climate Change will have a slightly different tenor from that of the more glamorous affair in Stockholm. Less pomp, more circumstance.

The Norwegians had to find their way. In 1901 they split the first award between Henri Dunant, a Swiss internationalist of the mid-nineteenth century influential in the founding of the Red Cross and powerful advocate for the rights of prisoners of war, who, for a time before his award, had been all but forgotten; and Frédéric Passy, a far better known French free trader and peace activist who had been caught in the middle of the Franco-Prussian War. The argument engendered by splitting the award between such disparate achievements has continued intermittently to the present day.

Slowly the Norwegians then traced out some broad categories – pioneer peace workers (including, recently, Willy Brandt, International Physicians for the Prevention of Nuclear War, Mikhail Gorbachev, the organizers of the Pugwash Conferences); human rights activists ( Martin Luther King, Amnesty International, Andrei Sakharov, Lech Walesa, the14th Dalai Lama); developers of international law (Woodrow Wilson, Dag Hammarskjöld); figures in successful mediation (Theodore Roosevelt, Henry Kissinger and Le Duc Tho, Menachem Begin and Anwar Sadat); humanitarians (Jane Addams, Albert Schweitzer, Mother Theresa). Only in 1987 did they begin to elaborate on their decisions, by issuing a citation accompanying their awards’ before that, there was only a name or names. This year the citation says of Gore and the Panel: “For their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.”

The Royal Swedish Academy of Sciences, on the other hand, has to be much cooler and more analytical with their awards for physics, chemistry, medicine and, since 1968, economics. (The writerly Swedish Academy gives the inherently political prize for literature.) It is not that the Swedes have shrunk from climate change altogether: Sherwood Rowland, Paul Crutzen and Mario Molina won the Chemistry Prize in 1995, for their work on atmospheric ozone depletion, on which the Montreal Protocol curbing the use of halogen hydrocarbons was based. But broad speaking, planetary science has been neglected, if only because it falls between the traditional categories (there was no award for plate tectonics, for example).

But now the Norwegians have forced their hand. It is time for the Swedes to give a prize in environmental economics. Not necessarily next year, or even the year after that. But things being what they are, such a prize is warranted as soon as possible, the better to govern debate on a most emotional topic.

It is not as though economists haven’t been working on the topic. The first sustained work on valuing the environment was performed by John Krutilla and Alan Kneese at Resources for the Future, an old-line Washington think tank, in the 1960s. Krutilla’s 1967 paper in the American Economic Review, “Conservation Reconsidered,” which argued that economic values should be imputed to all natural resources, regardless of whether they were though to be of economic use, was the dominating early landmark of the field. (When Volvo established its Environmental Prize in 1990, the first one went to Krutilla and Kneese. The pair waited in vain for the greater honor. Kneese died in 2001, Krutilla 2003.)

Consciousness of burgeoning environmental problems grew rapidly in the late ’60s. By 1970, James Tobin and William Nordhaus of Yale University were at work on the systematic accounting for natural resources dubbed “green accounting” (Tobin, a Nobel laureate for his work on financial markets, died in 2002). Soon the usefulness of models of computable general equilibrium devised by Herbert Scarf in calculating the costs and benefits of alternative policies would become apparent. The survey method known as “contingent valuation,” which had been proposed by S.V. Ciriacy-Wantrup as long ago as 1947, came to be commonly employed to establish values for non-market goods. The famous Club of Rome report on natural resource depletion in 1974 touched a raw nerve among economists; Karl-Göran Mäler and Partha Dasgupta began their work on analytical and applied environmental economics. The three-volume Handbook of Environmental Economics, edited by Mäler and Jeffrey Vincent, carefully lays out the antecedents of the latest work.

Natural scientists have been studying greenhouse gases and other mechanisms that may underlay global warming for more than half a century, with the result that the consensus about the changing composition of the earth’s atmosphere is by now virtually universal. Agreement that substantial warming is taking place is only slightly less complete. There are still knowledgeable skeptics about the reasons, however, mainly because past and potential changes in solar output are still mostly unknown. Very great differences of opinion among politicians and their advisers are the result. Only last week, the editorial page of The Wall Street Journal wrote, “For all the unproven claims about mankind’s contribution to global warming, here’s something that can be said with authority: If curbing emissions really is the goal, then the heavy-handed approach promoted by the UN and Europe isn’t the best way to do so.”

Because so long as even a handful of serious scientists remain unconvinced, at least half of the WSJ’s statement is technically true, and perhaps all of it – the case for causation is not completely proven, and there may be better ways to reduce emissions than the cap-and-trade systems that entrench established industries and privilege the political authorities that would regulate them. Under the circumstances, we need the clearest, deepest and most disinterested economic advice possible about the potential costs and benefits of global warming, and of the various policy responses that might retard the process.

Rapid reductions in greenhouse emissions right away? Or modest reductions at first, growing increasingly stringent over time? The Nobel Prize is hardly the last word in these matters of policy; in some sense, though, it is the first. The physics and chemistry of global warming may not yet be sufficiently well understood to warrant a finding; after all, the prestige of the prize is at stake. But the Swedes should do the world a favor and award the economics prize to the environmental economists who have created the tools to talk meaningfully about taking precautionary action in uncertain circumstances, before the physical science can be nailed down.