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Comment on My Fox News op-ed on RICO by Punksta

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Certainly Mann and Jones and the other Climategaters, and their university administrators who whitewashed the whole affair, were clearly seeking to deceive the public. RICO them too.


Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by Peter Lang

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-1=e

I should also point out that the chart I posted here http://judithcurry.com/2015/09/30/the-uncertainty-of-climate-sensitivity-and-its-implication-for-the-paris-negotiations/#comment-734515 uses the Nordhaus DICE-2013R default discount rate. And it shows that the costs would greatly exceed the benefits for all this century. Use more realistic assumptions for damage function, ECS, RCP etc. and the costs would exceed the benefits by much more. So, the discount rate is not the only thing that is exaggerated to try to justify the mitigation policies being advocated.

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“You are advocating for a discount rate to apply for 300 years for the whole world.”

The time frame just has to be sufficiently large relative to the choice of the discount rate. Eventually additional years become negligible in the social welfare function. As a rule of thumb, I think a time frame of 3 / discount rate is sufficient.

“What has been the average discount rate for the past 300 years for the whole world, not USA?”

The discount rate is something that you choose in a cost benefit analysis. It can be whatever you want. So this question is meaningless. Do you instead mean the real interest rate or the social rate of time preference?

“You should use private sector discount rates for mitigation policies.”

You are doing that if you are using real interest rates and following Ramsey’s equation.

“If we are using those discount rates for choosing energy policies to abating emissions, we should use the same discount rate for estimating the damages.”

Yes, you should use the same discount rate for benefits and costs.

“the two graphs showing the declining discount rates they are assuming for the future.”

I already answered this question and you are misinterpreting the graphs. Those graphs show the certainty equivalent discount rate for a constant discount rate under uncertainty. Also, this isn’t a future prediction of the discount rate since again the discount rate can be anything you want it to be. Rather, it is basically saying: Suppose the discount rate is a constant rate of X%, and suppose that there is uncertainty in the future; this is what we think the equivalent discount rate would be if we did not have uncertainty.

“are not representative of the whole world”

No but given that most of the world will develop over the next century, looking at the social rate of time preference in the developed world might give a better representation of the expected social rate of time preference for the world will be over the next century. Also, the social rate of time preference is a lot more robust than the real discount rate because it takes into account the fact that the real interest rate is affected by the growth rate of real GDP per capita.

If you want to construct some sort of model of social time preference as a function of life expectancy, make projections of life expectancy of the Earth, and use that, then I am open to that. Or if you want to justify a better rate of social time preference to use then I am open to that. But my point is that you want to make a combination of choices of the rate of social time preference and elasticity of marginal utility of consumption that satisfy Ramsey’s equation.

Comment on Week in review – science edition by Punksta

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Ice melting in West Antarctica “Because the tropics and subtropics have been warming faster than the Antarctic”.

Despite the global plateau of the last 18 years.

Comment on Week in review – science edition by mosomoso

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The World Economic Forum waxing sciency for lack of science: “Figure 2. Climate change in welfare-equivalent income change for a 2.5°C global warming…”

It seems one can claim to calculate anything these days, and there is now a jittery generation of literal-minded mechanists who really think that the world and reality will respond like in a computer game. They just need the right “settings” and the right kiddies pressing buttons.

Contradiction and complexity are just ignored. Too much sea ice around Antarctica in recent years? Just concentrate on the melty Western bit and pretend there isn’t an ash sheet the size of Britain near PIG. Block your ears and go nyah-nyah if you have to. Then factor in your collapsing ice to your sea level rise, nudge up the number you first thought of because you might have missed something, multiply by two because nobody ever checks, add a bit for social something-or-other…and publish!

Adults, please! I know I keep saying that…but where have the adults gone?

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“are comparable with the world average discount rates that have applied over the past 300 years.”

You can’t empirically measure discount rates that have applied over the past 300 years, because again the choice of a discount rate is a value judgement. However, you can measure real interest rates and rates of social time preference.

“but am totally unconvinced by using low discount rates”

You think that’s low? The Stern review used a 0 discount rate. Now that’s low/insane.

“risk free rates of return”

You want to use risk free rates of return to take into account the risk premium.

“discount rates that are higher for selecting abatement technologies in practice that for estimating costs and benefits of CO2 abatement.”

In practice, you are trying to maximize the potential pareto improvement, so you want to use the real interest rate. However, trying to maximize the well being of society involves consideration of the elasticity of marginal utility of consumption, which means you should use a lower discount rate than when you don’t take into account the elasticity of marginal utility of consumption.

Choosing to use the rate of social time preference as the basis for the discount rate is basically like saying ‘society should value the future the same as individuals in society value the future’.

“I am also aware of the much higher discount rates that apply in the developing world and will for all this century.”

Again, please distinguish between:
– real interest rates
– discount rates
– rates of social time preference

Differences in rates of social time preference are not that big and arguably can be mostly explained by life expectancy differences.

“I am also aware that the discount rates we choose for CO2 mitigation must be the same as we use for comparing alternative policies such as to spend the funds on health, education, infrastructure, and better governance for the developing countries.”

Yes, of course it should be the same.

Comment on Week in review – science edition by beththeserf

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Where have all the adults gone, tra, la,
long time passing? Cli sci has tricked them
every one, don’t think they’ll evah learn …
don’t think they’ll evahhhh learn.

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“And it shows that the costs would greatly exceed the benefits for all this century.”

1. Maybe Nordhaus’ choice of discount rate is too low. Certainly with a lower elasticity of marginal utility of consumption and a slightly different data set you could justify a higher rate of social time preference. 2-2.5% easily.

2. You are just looking at the net change in economic output (as far as I can tell). That doesn’t take into account changes in inequality in society. Maximizing social welfare and using a positive elasticity of marginal utility of consumption means that you are taking inequality into account. Given that equatorial countries are generally poorer than polar countries, mitigation policy also has an effect of transferring resources from richer countries to poorer countries.

“Use more realistic assumptions for damage function, ECS, RCP etc. and the costs would exceed the benefits by much more.”

I agree, but that’s irrelevant to the discussion on if the discount rate should be the rate of social time preference or not.


Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“Also, the social rate of time preference is a lot more robust than the real discount rate”

This should read:
Also, the social rate of time preference is a lot more robust than the real interest rate

Comment on Week in review – science edition by mosomoso

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Distrust and even derision of statistics used to be a mark of education, especially for us toffs. Now the educated are all percent-this and percent-that…and one gets more sense out of one’s serfs.

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by ...and Then There's Physics

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TE,
Can I use your time machine when you’re finished with it?

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by Peter Lang

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-1=e^

The default values in DICE-2013R for (rows 152 to 154 on the Base sheet in the Excel file):
• Consumption discount rate
• Risk-free rate of return
• Real rate of return on capital (with full risks)

are 5.2% in 2015, declining to 3.5% in 2100 and 2.2% in 2300.

What is the historical justification for this decline?

The current very low discount rates are no guide to the future. I’ve read they are the lowest in 5000 years. They are artificial and caused by US bureaucrats and agreements between central banks. They are not sustainable.

I’ll reread your comments tomorrow. Your comments are excellent and interesting.

I think it would be good if you could explain all this in a post. Can I suggest you ask Judith if she’d like you to write a post to explain it? Faustino was intending to write a post on discount rates, but wasn’t able to. It would be very timely given the upcoming Paris UN climate conference.

Comment on Week in review – science edition by ulriclyons

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“New paper: Sun controls “Indian temperature variability, in part indirectly through ENSO, but on >1 time scale. [link]”

Solar flares? that’s barking up the wrong tree. El Nino very regularly occur at the known slow solar wind periods through the sunspot cycle. The slowest being around 1 year past sunspot minimum, e.g. 2009/10, 1997/89, and some but not every solar cycle has slow SW at sunspot maximum, and where that occurs, so will an El Nino episode/conditions.

Comment on Week in review – science edition by ulriclyons

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by beththeserf

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… and then there’s phantasmagoria,

Say attap, pay heed ter RS, CG and SB,
no sich thing as wealth generated by top
d
o
w
n
wealth creation, print money schemes,
they’re jest hot – air – dreams.


Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“The default values in DICE-2013R for (rows 152 to 154 on the Base sheet in the Excel file):
• Consumption discount rate
• Risk-free rate of return
• Real rate of return on capital (with full risks)
are 5.2% in 2015, declining to 3.5% in 2100 and 2.2% in 2300.
What is the historical justification for this decline?”

Those are real interest rates. They are calculated from lines 148-150.
Line 149 determines the rate of social time preference and is constant at 1.5%, which stems from B16.
Line 150 is the ratio of marginal utility and is calculated from line 126 (consumption per capita) and B19 (elasticity of marginal utility of consumption, which is 1.45).

Modify B16 and B19 if you want to chance the choice of social time preference and elasticity of marginal utility of consumption.

“I’ve read they are the lowest in 5000 years.”

Well given that the population growth rate and even the GDP per capita growth rate are expected to slow down over the coming century that isn’t that surprising, although I question the meaning of interest rates from 5000 years ago. Another reason to expect low interest rates is that life expectancy is declining; although that isn’t factored into the DICE model.

“They are artificial and caused by US bureaucrats and agreements between central banks. They are not sustainable.”

I wouldn’t pay too much attention to short term interest rates (which obviously diverge from the Ramsey equation are are closer to the Taylor rule https://en.wikipedia.org/wiki/Taylor_rule). But long term interest rates should satisfy Ramsey’s equation.

“I think it would be good if you could explain all this in a post. Can I suggest you ask Judith if she’d like you to write a post to explain it?”

I have an open invitation for a guest post from Judith Curry on exactly this topic.

I would like to do one eventually, but right now I need to concentrate on obtaining employment so I don’t starve to death.

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by -1=e^iπ

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“which obviously diverge from the Ramsey equation are are closer to the Taylor rule”

Should read:
which obviously diverge from the Ramsey equation and are closer to the Taylor rule

Comment on The uncertainty of climate sensitivity and its implication for the Paris negotiations by Peter Lang

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-1=e^

Modify B16 and B19 if you want to chance the choice of social time preference and elasticity of marginal utility of consumption.

I am not wanting to change the default inputs. I am seeking empirical evidence to demonstrate that:
1) historically discount rates have declined over 300 years at the rate Nordhaus has used as the default value in DICE-2013 and
2) they are now down to 5.2% average for the whole world, and
3) risk free rate is appropriate for investments in mitigation policies given there is no evidence whatsoever they will provide any measureable benefit ever. Given this it seems appropriate that money lent for mitigation policies should be loaned by private sector as they, not bureaucrats and politicians, are best able to assess all the risks.

Comment on Week in review – science edition by aaron

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Concentration may have fallen, but are people living more where they are higher?

Comment on Week in review – science edition by Arch Stanton

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