Provocation 236. Incentives and Climate Dec 4.

Over the weekend I was at a reception in Washington, and got to mill around  talking  with a number of economists – ten to be precise – IMF,  WB, Goldman Sachs, London School. and after formalities I asked”  “What’s your take on climate?”

Five said it could be coped with by coming technologies. Like what? Cheap electricity, taking co2 out of the air.  How will this happen? “If we get the incentives right it will just happen. We just have to get the incentives right to get the technologies.”  The other five just said incentives like carbon tax and cheap energy, no new tech involved About half held on to  their view, the other half had some doubt and fear  but were inarticulate about it.

This idea that incentives govern the economy is of course part of the market equilibrium model, but it stops short of material questions: Lets say humanity can produce cheap electricity. How do you produce enough and at what cost and what time frame, and what would it take to be able to use it, and what of the ugly politics?  “Its just incentives” is not good enough. It is magical thinking and prevents inquiry and serious innovation.