John Gibbons: Higgins was right with magical thinking view of economists

President Michael D Higgins hit a raw nerve with his comments during a recent address to the think-tank TASC, with the backlash fierce and the speech described as ‘lazy’ and an ‘uninformed spiel’. Picture: Maxwells

Hell hath no fury like an economist scorned, as President Michael D Higgins has discovered in recent days. The backlash to his recent address to TASC, the think-tank, has been fierce, with economists queueing up to describe it as “lazy” and an “uninformed spiel”.

Having read President Higgins’ 3,600-word address in full, I am at a loss to understand what provoked such a venomous reaction. Apart, that is, from the fact that he hit a raw nerve.

When he said that “a fixation on a narrowly defined efficiency, productivity, perpetual growth has resulted in a discipline that has become blinkered to the ecological challenge — the ecological catastrophe — we now face”, he was simply stating the blindingly obvious.

When Higgins added that a new ecological-social paradigm is needed, one that acknowledges the “limits to resiliency, the limits of the world’s natural resources”, this too is self-evident. The famous 20th-century US economist Kenneth Boulding observed wryly that anyone who seriously believes exponential growth can go on forever in a finite world “is either a madman or an economist”.

The abject failure of mainstream economics to even acknowledge, let alone take account of the ongoing destruction of the biosphere is addressed in a recent paper from the European Environment Agency (EEA) titled ‘Growth Without Economic Growth’. The accelerating global declines in biodiversity, ecosystem losses, the rising tide of pollution and climate change resulting from uncontrolled emissions is all “tightly coupled to economic activities and economic growth”.

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This will, the EEA warns bluntly, all end badly. Human civilisation is “currently profoundly unsustainable” and drastic changes are now essential if disaster is to be averted. Yet the assumptions underpinning economic models used by our state agencies such as the Economic and Social Research Institute (ESRI) are that economic growth, typically of the order of 3% per annum forever is both inevitable and desirable. This is despite the fact that such infinite growth is as dangerous as it is impossible.

While a 3% growth rate might sound innocuous, this translates into a doubling of the economy every 23 years or so. Where are ecological and resource limits factored in? Where do these models, upon which the state makes its medium and long-term plans, take into account the fact that five of the nine critical ‘planetary boundaries’ have already been breached, according to researchers at the Stockholm Resilience Centre?

Devastating weather events

However, it’s when it comes to climate change that mainstream economics comes most spectacularly unstuck. Prof William Nordhaus is known as the father of climate economics and has dominated the field for decades, culminating in his 2018 Nobel Prize in Economics.

During his acceptance speech, Nordhaus dropped an almighty clanger in describing a 4C increase in global average surface temperatures this century as “optimal”, in other words, this is the point at where the costs of addressing climate change are balanced with the costs it imposes on societies.

This is, alas, delusional nonsense. As we have already seen, with average global temperatures having risen by just under 1.2C, we are witnessing a sharp uptick in devastating extreme weather events. The Intergovernmental Panel on Climate Change (IPCC) states that beyond 1.5C and certainly once 2C is reached, one or even a domino of catastrophic and irreversible climatic tipping points will have been crossed.

One, for instance, is the collapse of the West Antarctic ice sheet, which will deliver a global sea level rise of three metres, causing trillions in economic damage, displacing tens of millions of people and blighting many of the world’s coastal cities.

But, according to the world’s top climate economist, this is all just hunky-dory. If we reach Nordhaus’s “optimal” 4C global temperature rise this century, this will be accompanied by large areas of the Earth’s surface becoming too hot for human habitation, triggering billions of climate refugees. We will also see widespread famines and wars triggered by the collapse of much of the world’s food system.

Surreal forecasts

Lest you think Nordhaus is an outlier, the section of the IPCC report dealing with forecasting the economic impacts of climate change is equally surreal. It projects that several degrees of global warming this century will only shave a few percentage points off (never-ending) economic growth, which will improbably be largely unaffected by mass migration, coastal inundation, famines, droughts, and conflicts.

It is important to stress that this Pollyanna reasoning by neoclassical economists enjoys almost zero credibility among Earth scientists whose work is overwhelmingly based on observed reality, yet it is economists who have the ear of politicians, media, and policymakers.

This magical thinking would be risible were it not so deadly serious. How many of the Irish economists who have sniffily critiqued the “lazy spiel” of President Higgins have gone on the public record to challenge the pitifully lazy and uninformed climate projections of Nordhaus and his economic acolytes?

John Gibbons is an environmental journalist and commentator

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