Episode 51 – Event Horizon: A Climate In Crisis with Steve Keen

If you thought you understood the urgency of climate change, our guest, Professor Steve Keen, will shatter those illusions. We’ll be straight with you, this is not an easy episode to hear – but you need to listen anyway. How can we deal with the effects of climate change if we don’t understand the urgency? Professor Keen won’t sugar coat it but he can back up every statement with facts, figures, and astute analysis.

Throughout the interview, he refers to – and debunks – the work of William Nordhaus, who won the Nobel Prize for Economics in 2018 “for integrating climate change into long-run macroeconomic analysis.”

From Left Foot Forward:

“When future generations ask why humanity delayed taking action against climate change for so long, Nordhaus’s model will be one of the prime suspects. The model, known as DICE – Dynamic Integrated model of Climate and the Economy – is a dangerous gamble for humanity’s future. Nordhaus’s transgressions are immense. His ‘damage function’ which he uses to estimate global warming damage is incorrect and uses data that has nothing to do with climate change. Despite this, the Intergovernmental Panel on Climate Change (IPCC) uses his model to advise governments about the economic impact of global warming.”

Nordhaus’s sins trace back to his attacks on 1972’s “Limits to Growth” study. The predecessors to our contemporary climate deniers dismissed its findings, yet it has been proven remarkably accurate. In this interview, Professor Keen compellingly compares facts to fancy. As his home country of Australia is ablaze, he explains why this was predictable. What you learn in this episode will enrage and probably depress you. We can’t afford to ignore it; ignorance is not an option.

Professor Keen is a Distinguished Research Fellow at UCL, the author of Debunking Economics (2011) and Can We Avoid Another Financial Crisis? (2017), and one of the few economists to anticipate the Global Financial Crisis of 2008, for which he received the Revere Award from the Real World Economics Review. His main research interests are developing the complex systems approach to macroeconomics and the economics of climate change.

@ProfSteveKeen on Twitter

www.patreon.com/ProfSteveKeen

Macro N Cheese – Episode 51 
Event Horizon: A Climate In Crisis with Steve Keen 
January 18, 2020 

Steve Keen  [intro/music] (00:00:02): 

The most extreme instance of the impact of climate change on life right now is actually in my home country, in my hometown, where there’s fires that are larger than several European countries, which have been burning nonstop for two months and look like they’re going to continue burning for another two.  

When we realize the consequences of that, and we start to experience what Australia’s experiencing right now, then at some point there’s going to be a “holy shit” moment. And the market certainly can’t react fast enough. And I can’t see our politicians doing it either. I think it’s going to be something the military gets into. 

Geoff Ginter [intro/music] (00:00:33): 

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese, with your host, Steve Grumbine. 

Steve Grumbine (00:01:34): 

Yes. And this is Steve Grumbine with Macro N Cheese. Today I have Professor Steve Keen joining me. Professor Steve is a distinguished research fellow at UCL, the author of “Debunking Economics” in 2011, and “Can We Avoid Another Financial Crisis?” in 2017, and one of the few economists to anticipate the global financial crisis of 2008, for which he received the Revere Award from the Real World Economics Review.  

His main research interests are developing the complex systems approach to macroeconomics and the economics of climate change. He has over 80 refereed publications on financial instability, money creation, logical and mathematical flaws in conventional and Marxian economic theory, the role of energy in production, and many other topics.  

He is ranked in the Richtopia list of the world’s 100 most influential economists. He designed the open-source system dynamics program, Minsky, which is the first program to allow monetary economic models to be designed visually. He has previously been professor of economics at Kingston University in London and the University of Western Sydney, Australia.  

He is active on Twitter as @profstevekeen and is crowdfunding his non-mainstream research into economics via Patreon. See him on https://www.patreon.com/ProfSteveKeen. And with that introduction, welcome to the show, sir. Thank you so much for taking your time to be with me today. 

Steve Keen (00:03:20): 

Good to have a chat, Steve. Unfortunately, there’s a lot to talk about in the current world. 

Grumbine (00:03:25): 

Actually, it’s very terrifying and we normally talk a lot more about just economics here, but there’s so much going on right now. It’s really, if you have your eyes open, it’s really a terrifying time to be alive. 

Keen (00:03:41): 

Yeah. And I’m particularly saying that because what I’m now researching predominantly is climate change and doing both positive and negative work on that. The negative being pulling apart the work of, works, like Ed Nordhaus, and the positive being trying to bring energy properly into the model of economic production that economists use that they can actually see the fundamental link between economics and ecology, which at the moment they are completely blinded to. 

Grumbine (00:04:09): 

Talk to me about that. Obviously we’ve got in the United States, got folks pushing for a Green New Deal. Over in UK, unfortunately, we’ve got a Tory invasion. These guys aren’t looking at the environment at all. And then we’ve got Australia right now burning up. This is very near and present. It’s right here right now. Not in the future, not some other time. It’s right now. 

Keen (00:04:34): 

Yeah. This is the thing which I mean, particularly dealing with the way that mainstream economists have worked on climate change ever since Nordhaus dived into the debate and trashed the work of one of the world’s great engineers, Jay Forrester, who was the person who built the technology behind “The Limits to Growth” study; and he disparaged and totally misunderstood and disparaged both the technology and the report itself.  

And then what’s happened is a bit like a cuckoo who, you know, kicks a frozen egg out of the nest of a hummingbird and whacks its egg inside there instead. You’ve got this cuckoo of neoclassical economics in climate change – so-called climate change economics research – and it’s incredibly bad. I’ve never seen anything this bad in my whole 50 years of critiquing mainstream economics, any form of economics for that matter, including Marxian.  

And it’s just delusional.And they’ve been particularly pretending that everything is in the far distant future to start with. Everything is trivial as well. And well, they’re wrong on both fronts, everything is happening now and it’s gigantic. And, of course, the hardest thing for me to take is the most extreme instance of the impact of climate change on life right now is actually in my home country, in my hometown, where there’s fires that are larger than several European countries, which have been burning nonstop for two months and look like they’re going to continue burning for another two.  

And it’s just horrific to watch what’s happening. And all this stuff is completely trivialized by mainstream climate change economics. 

Grumbine (00:06:02): 

So let’s start with that, the horrors of what’s going on today. We have to look back to how we got here. The malfeasance of these neoclassical economists cannot be understated. I mean, hey, look, I’m an activist. I’m more than willing to say, throw them in jail. I mean, they’ve done malpractice to society.  

It’s not just these banksters. It’s these economists that are literally lying us into the death throees. I mean, this is horrible. How did we get here? 

Keen (00:06:31): 

It really starts from, I mean, the economics itself in general’s got this obsession with equilibrium modeling and the people who built The Limits to Growth study. I’ve spoken several times with Randers, who is one of the three authors along with the Meadows, a husband and wife team, and they actually believed that the economists would welcome the technology they developed, which is known as system dynamics.  

They thought it would free the economist from having to shoehorn everything into equilibrium, when in fact in the real world, most processes are well outside equilibrium. And they actually literally expected a positive reception. And of course they got trashed instead starting with the paper by Nordhaus back in 1972, I think, which was entitled Measurement Without Data, where he ripped into the predecessor to The Limits to Growth study, which was done by Jay Forrester and totally misinterpreted it, totally misunderstood the underlying logic and then drove – it was basically, went on the warpath against the entire argument that there were limits to growth, and began from the position, and this was the thing you can find with a paper of his from 1991, not far from the first paper he wrote, but fairly indicative.  

In doing what he called an enumerative study of the impact of climate change, by which he meant take the Environmental Protection Authority Report from 1988 and then processing the numbers he found in that work at an estimate of the impact of climate change on the economy. He literally said he couldn’t see how a three degree temperature increase could have any more of an impact on the economy than to reduce it by one quarter of 1%, compared to what it would have been in the total absence of climate change.  

That was the starting position. And he finally said, if you’re going to allow for, you know, unknowns, things which haven’t been properly quantified, you might get to the stage where a three degree increase in temperature might cause a two degree fall in GDP over what it would have been – I’ve got to give an emphasis on this – over what it would be in the complete absence of climate change.  

So it’s not saying, “so, you know, if we discount the enormous future damages, we come down to just a 2% fall in GDP for a three degree increase in temperature because we’ve discounted the distant future.” No, he’s saying in the distant future without climate change, GDP would be 2% higher than it would be with climate change. That’s how trivial he saw it all as. And then what I’ve been is go inside and seeing, well, how did you get to these bloody numbers? And my initial expectation, what I’ve been critiquing, the use of an equilibrium framework – I haven’t even got to that yet.  

It’s these fucking stupid assumptions that he’s made. Fucking stupid. And I’ll give you my favorite, this particular paper, which is 1991 paper on counting the cost of climate change. First of all, he broke American industry down into three subsectors. One would be heavily exposed to climate change, lightly exposed, and no exposure.  

Now he put agriculture predominantly in that heavily exposed, 3% of GDP. He put another 10%, which is largely the impact of sea rise level, mainly on the value of real estate, on coastal real estate, and the cost of having to build levies to prevent the water drowning valuable real estate. He put that at 10% and that included electricity costs as well.  

The remaining 87% of industry he said would not be effected because it takes place in controlled environments, by which he basically meant it happened indoors. Let that sink in: 87%. He estimated the damage would be zero because it takes place in controlled environments. He used the extreme example of clean rooms for producing semiconductors; but it fundamentally meant he left out all manufacturing, all mining.  

Mining! Would you believe – all mining, all services, all government work, et cetera, et cetera. So 87% – zero! Then of the . . . 

Grumbine (00:10:26): 

Sounds like DSGE (dynamic stochastic general equilibrium) 

Keen (00:10:28): 

DSGE is reasonable compared to this crap, okay. This guy is the lowest of the low, except for some of his colleagues in the same bloody area, which was Richard Tol being my favorite there. So he’s knocked it down to 3% of the economy heavily exposed, 10% moderately exposed. And the rest is going to get through scot-free, even with a three degree increase in temperature.  

And bear in mind, we’re at the one degree level, roughly, now with already… You know, I think anybody with their eyes open is seeing dramatic effects and of course the worst ones being right in my home country right now. So then he has a table where he converts these, you know, given this the 3% exposed heavily, 10% moderately, what are the numbers?  

And he comes up with an estimate of the damages to agriculture of being between $10 billion damages and $9 billion benefit because of carbon dioxide fertilization, yada, yada, yada, things like that. So he has a range of minus 10.7 plus 9.7. There’s the impact on agriculture, and now bear in mind. That’s what he called the heavily exposed area, but heavily exposed isn’t going to have, you know, it could be a positive for the heavily exposed.  

Then he has a figure of $1.65 billion per year as the impact of climate change on electricity demand, negative impact on GDP. Now $1.65 billion, I don’t need to tell you, that’s a trivial percentage of American GDP. Okay? And then he has about $5 or $6 billion, all up, for the damages from sea level rise.  

And that’s pretty much it. They’re four numbers that he gives in this table. Most of them are sort of vague. There’s just a plus or minus, there’s no actual number provided. Now, fortunately, he included on that table a reference to saying the numbers are derived from the EPA 1998 report, which was a draft of the report submitted in 1989 to Congress on the impact of climate change.  

And thank God for the internet. I couldn’t find the draft, but I found the 1989 report. And I went looking to see, where did he get these numbers from? Now, the bottom of the thing said workings done by the author to convert these from divisions used by the EPA into elements in the national accounts, workings available on request.  

Well, nobody’s ever requested them, I’m sure. Okay? So I went on to look. Now the agriculture number that he’s implying that he’s taken these and processed them. Okay? But the agricultural number is exactly what’s in the report. The report says between minus 10.7 and plus 9.7. It’s a 1991 paper called the Economics of the Greenhouse Effect.  

And table five in that article would get potentially severely impacted: he has farms, forestry, fishery, moderate impact, construction, water, transportation, energy, and utilities, real estate, et cetera. Negligible: manufacturing, and mining, other transportation, communication, financial insurance, and balance real estate.  

He had some of the exposed, the stuff on the coastline, trade and other services, government services, rest of the world; that’s table five. And he has table six: and he has impact estimates for different sectors for doubling of CO2. So taking it from 280 to 560, and that he implied would be that this stage he was guessing, which is pretty much in line with climate scientists that would increase temperatures by three degrees at a time.  

On farm’s impact of greenhouse warming and CO2 fertilization in 1981 dollars, minus 10.6 plus 9.7. Now that’s exactly the number that’s used in the EPA reports. He hasn’t touched that at all. Electricity demand, minus 1.65 billion. The sources of table six underlined in data summarized in EPA, 1988.  

Translations of national income accounts by the author, details all available on request. Well, I go taking a look and you know, where’s this 1.65 million figure from? Well, it’s not there. What is actually there is this quote. This is from the EPA: “annual electricity generation in 2055 was estimated under the transient scenarios to be four to 6% greater than without climate change.  

The annual cost of meeting the increase due to global warming,” I’m going to jump over a little section here, “was estimated to be 33 to 73 billion.” Now the minimum of that is 20 times what he used and there’s a range there and he hasn’t given range. He’s given a precise number. The clause I left out, and I think this is what he used as an “out” to generate the number that he wanted was assuming no change in technology or efficiency. 

Grumbine (00:14:57): 

That’s preposterous. 

Keen (00:14:59): 

It’s fucking preposterous. It is criminally bad. Now, what do you think he’s done, he’s saying, well, here’s the EPA, assuming that there’s going to be this huge increase in costs 33 billions, a lot more than 1.65, 73 billions, more than twice that again. They said “assuming no change in technology or efficiency.”  

Well, I think he applied the magic source of technology and said, well, let’s just assume, and there’s going to be a nice increase in efficiency over time and working out what he’d need to assume to say that in terms of 1986 dollars, which is what they were using was working in 1981 dollars, which is a trivial difference.  

But he had to use an enormous rate of technological improvement to say that over time that 33 billion, you take the minimum figure would become 1.65, let alone the $73 billion figure. So to actually reduce in terms of comparing 1989, which is when the report was published for 2055, which is when they were saying what the cost would be.  

You’d need to have a rate of technological improvement of 4.5% per annum, to 5.8% per annum to bring it down to 1.65 billion. That’s the only way that he could have done that. Now 1.65 billion, which is the figure he used was equivalent to 0.07% of America’s GDP. But if you use the 33 to 73 billion number they used, that’s between 1.3% and 3% the GDP.  

So they had a significant figure and he turned it into a trivial one. And the only way that I can see he did it is by using technology source, but a technology source, which if you look at it in terms of what the actual normal rate of increase in technological productivity is – the neoclassicals call labor productivity – well I’ll just call it the output to labor ratio.  

The normal rate we use is between one and 2%. If you use the rate of one and a half percent per year for technological improvement, and you use an average at the range, they used the 33 to 73. So he’s 53 billion. I come out with a figure which is $20 billion, not 1.65, and that’s equal to 0.8% of GDP at that particular time.  

So he’s trivialized 0.8% 0.07%. Now that’s one number. Another number is what he’s done with stuff on the cost of the increase in sea level. And there’s the three figures that go together. They’re coming out to about 5.29 billion. There was no such set of figures in the EPA report. The only thing I could find was an estimate of the capital costs of, you know, adding extra levies, raising houses, raising roads, et cetera, et cetera.  

And they gave a range between – again, they were guessing what the sea level rise would be – so if sea level rise, this is the EPA report, interestingly using centimeters rather than inches, a 50 centimeter rise. They said it’d be possibly between 32 and 43 billion in terms of the capital cost necessary, a 200 centimeters to a meter rise would cost 119 and 309 billion.  

So these are the only figures I could find on the actual issue, which he said the cost per year was going to be 5.29 billion. Now, if you think about, if you’re actually going to build barriers to prevent sea level rise affecting real estate and so on, then you’re going to have to be maintaining whatever capital you put in there and your normal depreciation.  

And that’s anything up to six, 10% per annum, but you’ve also got a rising water level over time. So you’ve got to mention it’s going to be even higher than that. So I’ve said, if you wanted to turn this range that the EPA actually provided between 32 billion and 309 billion, depending upon the level of seawater rise, then you’ve got to at least presume you’ve got a maintenance cost of five or 10% of your capital costs.  

If you use seven and a half percent for an average of those two and use the average of the two amounts between 32 and 309 billion, you come up with $25 billion, which is another 1% of GDP. 

Grumbine (00:19:04): 

It just amazes me how frequently people don’t even consider upkeep maintenance of infrastructure as part of their models, not just modeling for economists, but modeling for every aspect of our society. It’s never considered. And right there is a major source for employment, if you want to even think of employment. That’s another subject. 

Keen (00:19:28): 

But what you’ve got here is somebody who comes out and says that the impact of climate change that may be one quarter of 1%. And if you look at the numbers, he was justified leaving aside the fact that he left out 87% of American history to begin with of the part he considered, he was justified in reaching a figure of close to 2%.  

The fact that stuff occurs indoors doesn’t stop fires demolishing factories, as we’re seeing happening in Australia right now, wiping out electricity sources. All this transitional stuff was completely left out of the equilibrium thinking in the first place. But if you say, well, let’s just take, you know, you said, it’s going to be one quarter of 1% looking at 13% of industry, in fact, you should have said, it’s 2% looking at that 13%.  

So that means you’ve got to take the other 87%. You’ve got to multiply pretty much by a factor of seven. So you’re talking about a 14% fall in GDP. That’s a serious number. Now it’s entirely shoddy. First of all, shoddy stuffing up and fabrication of numbers using the EPA study. Then it’s just arbitrarily leaving out 87% of industry on the naive belief that because you’re under a roof, you won’t get affected by climate change.  

That’s the standard of work you’re dealing with when you’re reading this stuff. And it is just, it’s like having to remark on an extremely bad student’s essays. And there’s an infinite supply of the bastards because you’ve got all these papers. You’ve got the others, from the other about 15 members of the cabal of neoclassical economists who produce this stuff.  

And what they all do, they just basically said, Oh, well, you know, William left out the manufacturing and services and government. So we’ll do the same thing. They framed the whole thing. All their estimates are based on absurd ideas, such as, “because manufacturing occurs indoors, it won’t be affected if the global temperature rises by six degrees.” 

Grumbine (00:21:26): 

So let me ask you this question, given the fact that got this situation where we’re living it right now and all the economics profession outside of the small little heterodox world is completely pushing bad framing, pushing the incoherent thoughts of yesteryear, and they’re coupling them in today. How can we even begin to make change? How can we begin to alter the course of that with such a small voice? I mean, how do we approach… 

Keen (00:21:59): 

We don’t. 

Grumbine (00:21:59): 

We don’t. 

Keen (00:22:01): 

It’s just going to happen because this is like what’s happening in Sydney right now, or in Australia in general. Their estimates so totally underestimated the impact of climate change. I’ll give you another important area. People think that they’ve taken the data of scientists and then translated it into economic impact.  

No, they’ve made the stuff up. This particular sort of study where they claim to read through science papers and then work out the impact of these science predictions in terms of percentage of GDP. This is the standard of that part of the work. Well, the underlying assumption, this turns up in this particular paper as well, is that climate change, or when you have an incredible increase in the amount of energy we’re retaining from the sun – and that’s fundamentally what carbon dioxide does – energy which would be reflected into outer space is captured by an increase in the greenhouse gas, meaning that you retain more of the sun’s energy.  

It’s not the amount of energy we pump in, but that’s an issue as well, it’s the amount of energy which is only reflected from the sun, which will instead be captured. And the amount of energy you’re talking about is quite appropriately astronomical. That energy level will increase the turbulence in the atmosphere, the turbulence in the ocean, that allow chemical processes in both, which weren’t possible the temperatures we’re at to occur.  

This is all ignored. And they simply say, we can use current climate and current temperature and GDP data to extrapolate from what happens if you change the temperature of some part of the planet today, or if you compare two spots in the same country. They compare Miami to New York and compare New York to Dakota.  

That comparison will tell you what’s going to happen if temperature changes by, you know, six degrees on average for the planet. It tells you nothing of the sort, but that’s what they’ve actually started from that presupposition. And again, if I can just find, I’ll read again, part of this report. Table five shows a sectoral breakdown in the United States national income subdivided by sectoral sensitivity.  

The most sensitive sectors are those in which output depends upon climatic variables. At the other extreme are activities such as cardiovascular surgery or microprocessor fabrication in clean rooms, which are undertaken in carefully controlled environments that will not be directly affected by climate change.  

And he says, it isn’t just, you know, cardiovascular surgery, it’s manufacturing and mining, other transport and communication, finance, insurance, and real estate, trade and other services, and government services – all left out of the story. And then says that, you know, we find that people thrive in a wide range of climates.  

It’s all using current GDP and climate relationships, which are trivial and weak, to say what’s going to happen if we drastically increase the amount of energy we’re retaining from the sun and completely changed the dynamics of our atmosphere and our oceans. 

Grumbine (00:24:53): 

So where do you go with this? Is it we’re completely screwed? I mean, what is the net here? 

Keen (00:25:00): 

Ultimately? Yes, we are screwed because if we’d actually taken The Limits to Growth seriously, pretty much 50 years ago now, it’s coming up to 50 years, we would have tapered back on population. We would have tapered on energy consumption. We would have started moving towards non-greenhouse gas generating energy consumption to begin with.  

We would have had a whole range of policies which were recommended in The Limits to Growth. I think from Randers, I think there were 14 different scenarios, two of which led to continued growth on the planet without leading to ecological breakdown. We would have been dealing with a far smaller problem we have now.  

Instead because we’ve delayed by 50 years, which is pretty much two generations, population has more than doubled and energy consumption per head is more than doubled. So the load we’re putting on the planet just in terms of energy consumption, is four times what it was back then. And the planet is now starting to respond to that.  

To me, the thing which is completely missed out in their thinking is the role of retained energy in determining the circulation patterns in the atmosphere and in the ocean. And if you look at the planet right now, there were three major… I’m not an expert in climate change itself, but I’m just looking at what I can see from looking at research into the impact of retaining energy in the paleontological record.  

And in each hemisphere, there are three major circulation patterns. One is called a Hadley cell, and that is rising air at the equator, taking moisture and heat up and then dumping it roughly 30 degrees north and south. There’s two Hadley cells. Then there’s the intermediate latitude cells, which are sort of 30 to 60.  

And then you’ve got the polar, which is 60 to 90. And they’re each pretty much self contained. There’s a bit of mixing, but not a lot. As you add energy, you’re going to change the size of those cells and what appears to be happening – and this is what all the climate change models predicted – an increased level of drought around about the 30 degree mark, because you’re going to be changing where that cell comes down because the larger energy retained.  

That’s what’s causing the high levels of drought in Australia right now. It’s affecting areas which are currently agriculturally productive. And it’s forcing where agriculture, currently, has to move by tens of kilometers per year to maintain the same sort of ideal temperature level far faster than, you know, crops can be moved.  

But it means – and this is what we’re seeing in Sydney – areas that used to support forest can no longer support forest. What happens? They burn. And these runaway effects now, I mean, like in Australia’s case, for example, the fires in the last three months have pretty much increased Australia’s carbon emissions by 50% over what they would be without the fires.  

So we’ve got what they call tipping points. And we are really amplifying feedback. Things which mean that what we’re doing is amplified by nature’s response to what we’re doing. And they’re already hitting. Now Nordhaus claims to have considered tipping points, but if you look at his most recent articles in the American Economic Review, one of them, he says that the impact of a six degree increase in temperature will reduce GDP by 8%.  

Now, when you look at what the scientific literature says, six degrees will basically drive most mammals extinct, including us. And that’s the level of trivialization they’ve done. So we are screwed. There’s no way I believe that we can get around this in the sort of market-oriented approach that these guys are on about. Once we realize the serious damage that climate change is doing, it’ll be war-footing stuff. 

Grumbine (00:28:44): 

It’s absolutely terrifying. So let me ask you, you see a push for what we’re calling a Green New Deal. Obviously, it doesn’t come close to addressing… Still not strong enough. And it’s maybe too little too late. 

Keen (00:29:03): 

Yeah. 

Grumbine (00:29:04): 

Where do we go from here, Steve? Where do we go? 

Keen (00:29:07): 

Well, that is the problem. It is too little too late. And it’s a bit like believing you have a market-oriented approach to defeating Hitler. No, you can’t. You’ve got to go on military. You have to have rationing on a grand scale. So there’s actually a… I made a comment on Twitter, I think, about the need for bringing in carbon rationing at some point, as there’s a prelude to what we’re going to have to cope with in climate over the next 10 to 20 years.  

There’s actually a website already where someone has had the same realization I had, earlier than me. And it’s called total carbon rationing. But I think we’ll be on a war-footing at that point. We realized that the damage is far greater from a far smaller level of increase in temperature than these guys are talking about.  

Just to give you the idea again, this is a quote from Nordhaus. Climate Change Projection with Minimal Policies, which is a paper in the American Economic Review, August, 2018, and he’s talking about his damage function. This leads to a damage of 2% of income at three degrees Celsius and 7.9% of the local income at a temperature rise of six degrees. That’s trivial. 

Grumbine (00:30:13): 

Indeed. 

Keen (00:30:13): 

What we’re seeing instead is that the serious ecological and social breakdown starting to happen at one degree, with Australia being the most extreme example right now. And when we realize that we simply cannot let this continue for the one and a half, two degree, which has already potentially baked in.  

We have to go into reverse. Then I think we’re going to see rationing. We’re going to see potentially military takeovers, and we’re going to see geoengineering because, at one point, we simply can’t let all of this continue. The problem is we’re retaining more heat from the sun. We have to reflect it.  

And it’s actually easier to reflect that heat than it is to reduce the carbon footprint straightaway. So I can see whether it’s done by international agreement or by rogue states, we’re going to have people attempt to do geoengineering to reflect sunlight back into outer space and therefore reduce the impact of the increase in temperature while we come to grips with what we’ve done with the level of carbon we’re generating, 

Grumbine (00:31:11): 

I understand there’s some things out there like deep water filtration, where they are able to go down, you know, on the coastal lines, pull the cold water from down deep, filter it out to provide drinking water, but also use it for irrigation and things like that. Are these technological advances potentially a mitigating factor, or are they completely…. 

Keen (00:31:36): 

That’s one I would not touch. Okay. Fair enough. For the simple reason that there’s an excellent book by a guy called Mark Lynas called Six Degrees published in, I think 2007 or 2009. And what he did in that book was assemble an enormous number of papers by paleontologists, fundamentally, about what the climate was like at different levels of carbon dioxide and temperature change compared to today.  

And he went back through papers about what it was like one degree warmer, two degrees, three, four, five, and six. Now what he mentioned at six degrees was disturbances with what he called methane hydrates, which are on the floor of a lot of the oceans. Under enormous pressure, methane and water compressed together into a coalesced product, which can’t exist at higher temperatures or lower pressures.  

And it appears that the six degree increase in temperature level in the paleontological record, the temperature rise ultimately hits the bottom of the ocean. These methane hydrates start to break down and/or float. The methane comes toward the surface as a gas in its own right. As it of course is coming from an enormous pressure way, way down, by the time it gets to the surface, you have an explosion of methane comparable to a small-yield nuclear bomb.  

That was apparently happening at the six degree increase level. Now what’s scaring people is that that’s all looking at times when there was something like a massive outflowing of basalt, you know, which gave us the Himalayas and huge components of the current planet. But that was over like a 10,000 year period.  

We’re doing it over a hundred. So the danger is that what we’re doing is going to disturb those systems far faster than was done previously. The tipping points that caused these breakdowns could be at lower temperatures, given the speed at which we’re rising the temperature. Now on that particular front, if you wanted your little idea a moment ago, I do not want to play with that.  

To me, the more likely one – and it’s much, much cheaper too – is the idea of feeding sulfur dioxide into the stratosphere. Sulfur dioxide reflects sunlight. So the most likely form of geoengineering we’re going to see is that we haven’t got planes that can do it yet, but it’s not going to be hard to build them.  

And it’s not expensive. You’re looking at something well under a hundred billion as a cost of doing that. And I think at some point when we realized just how out of control the planet is, then that’s the first thing that’ll be attempted to try to right the system. But of course the impact of that in terms of what it’ll do to an already screwed up climate, but it will have feedbacks that affect the rest of the planet as well.  

So the potential for conflict that I see coming out of this is gigantic. 

Intermission (00:34:32): 

You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization, dedicated to teaching the masses about MMT or modern monetary theory. Please help our efforts and become a monthly donor at PayPal or Patreon like, and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter and Instagram. 

Grumbine (00:35:21): 

Let me ask you, because I am… You know, I never realized how much of a proponent I’m becoming of more centralized thinking because too many chefs in the kitchen and people aren’t coming to the right answers. And sure this is going to sound totalitarian, and I’m okay with that, I guess, just as we’re spit balling here. But when I look at a government’s ability to fund its needs, I don’t know that cost is really the big deal in terms of finance. 

Keen (00:35:52): 

It’s just mobilization. Creation and mobilization of resources. 

Grumbine (00:35:55): 

Exactly. It’s terrifying to me to think of a market-driven solution to survival. I don’t even want to think about, I don’t even want to hear about it. It’s almost, it makes my skin crawl to think we’ve got to figure out a profit motive to survive. It’s ridiculous. 

Keen (00:36:12): 

Before I got involved in specifically reading this garbage that Nordhaus and Tol and friends pump out on climate change, I used to make the line about thinking about the idea of the use of carbon price to, you know, stabilize the economy and the ecology. I said, what price of carbon is going to stop Antarctica melting?  

Now nobody knows that. It isn’t a conceivable concept. We could know the amount of carbon that could be likely, the volume of carbon and the quantity we could know the level that is most likely that Antarctic would melt. So we’re more likely to have better rationing than we are to price properly. But even so we’re already saying like, apparently one I’m just…  

Not long ago during the southern hemisphere summit, there was one day when 15% of the surface of Antarctica was melting. Now the surface of Antarctica is not the entire bulk of Antarctica. The ice slabs are several kilometers deep, but to have 15% of the surface melting. And normally it doesn’t get above zero.  

For 15% of it to be melting it shows you the scale of change that’s going on. And when we realize the consequences of that, and we start to experience that as Australia is experiencing right now, then at some point there’s going to be a holy shit moment. And I can’t see our – the market certainly can’t react fast enough and I can’t see our politicians doing it either. So I think it’s going to be something the military gets into. 

Grumbine (00:37:36): 

More frightening. So let me ask you this. As we’re looking at the Green New Deal that’s being put forward, what impact, if any, does this have? Is this just window dressing or is this at least a step in the right direction? 

Keen (00:37:54): 

It’s a step in the right direction, but the steps needed are far larger than you can just do by saying, let’s have a Green New Deal. It’s partly humanity’s problem as well. We’ve got plenty of examples of failed societies in the past, you know, Rome being the obvious big one, but the Mayan civilization, Teotihuacan in Mexico as well.  

All these civilizations have failed. The famous poem, Ozymandias, look upon my work, you mighty and despair, and there’s nothing but desert all around. That’s been part of our history. So we tend to live on trends, which are unsustainable and champion them until they break down and even afterwards.  

If you’ve ever read Jared Diamond’s book Collapse, the story of the collapse of Easter Island is fascinating because we all know the Moʻai statutes that are there, which are actually enormous full human statues, not just heads buried in the ground, staring out to sea. There was some religious cult that generated that and to get the Moʻais to where they were, they had to cut down logs and roll them so that they could move the statues into position.  

Somebody cut down the last tree, the betraying the belief that that it could go on indefinitely. Went, right to the stage where there are no more trees left to roll the bloody statues. Then another cult, okay? But this cult involved a young man jumping into the water and swimming across to an island off the coast of Easter Island to grab eggs, I think from eagles and bring the eggs back.  

And the first person that came back with the egg was the king for the next year. That one lasted for some length of time as well. But the fact that we could actually live in an island where your culture depends upon trees existing, what you’re doing is destroying the trees and you keep on going until the stage where there literally are no trees left.  

So we think we’re an intelligent species, but we’re a belief-sharing species. That’s what I fundamentally see humans as doing. And we will have an elite hierarchical society based on exploiting a particular aspect of the environment, which we push past the point of sustainability, past the point where it breaks down. And then we have a collapse. And that’s what I see as going through here. 

Grumbine (00:39:56): 

So with the move to renewable energy, it’s still too little too late? 

Keen (00:40:01): 

Yeah. I’m working with a guy called Tim Garrett who’s an atmospheric physicist in Utah and Tim has taken a thermodynamics approach looking at the nature of capitalism. It’s very interesting, completely alternative angle to not just neoclassical, but even the work that I do. And he sees the economy fundamentally as a heat engine.  

His original research is actually in clouds and the formation of snowflakes. But if you look at a cloud, a cloud has to have an energy source of water evaporating. There’s got to be heat on the ocean that lets a cloud form. And then the cloud dissipates that energy and it has to dissipate the energy by dumping the energy back into the environment.  

So he has this idea of a plateau, which is where the energy source is, then a gap between the plateau and society, and the gap itself lets us exploit the free energy to enable us to do production and consumption. And then the width of the interface with that energy source is what determines how big society can be.  

So we’re expanding our exploitation of fossil fuels and so on. And then to use the energy, we’ve got to dump the waste into the environment. And he said that’s what he fundamentally sees us as doing. Now when he looks at attempting to quantify his approach, of course, carbon dioxide reduces the capacity to exploit that gap.  

The more carbon dioxide you’re dumping and the more you’re raising the temperature of the environment, it’s harder to exploit. And you then also undermine your capacity to exploit that energy in the very first place. So he said, if we’re going to try to replace the level of carbon dioxide-generating energy production we’re doing right now, we need to be building a nuclear power station a day.  

Now, of course we’re not doing that. So the speed of the transition again is far faster than we’re prepared for. And even the Green New Deal. I mean, it isn’t set up yet at the moment to build one new nuclear power station a day, but that’s the scale of production we’d need to avoid the type of breakdown that Tim’s models predict in the future. 

Grumbine (00:42:01): 

So let’s talk about that for a second. The idea of nuclear power. I see many people saying this is the absolute right way to go. And then you’ve got an entire movement against any kind of nuclear power whatsoever. There’s no consensus. So in order to make a move, you have to have some sort of a decision maker, somebody willing to make a call. We don’t have that so we’re stuck. 

Keen (00:42:30): 

Now, it may be a mixture. I mean this isn’t necessarily one or the other. I mean, in my Patreon blog, I’ve got quite a large number of engineers, which I’m grateful for, on this side. And some of them are pro-nuclear and anti-renewables in terms of the capacity to generate the level of energy density that an advanced civilization needs. Others, the other way around. There’s a big battle going on. 

Grumbine (00:42:52): 

Sure. 

Keen(00:42:53): 

I have been persuaded by the engineers that nuclear should be part of the mix. And particularly if we could go back and develop the thorium reactors we actually started with. The very first effective reactor was a thorium reactor. They haven’t been developed because America wanted nuclear weapons. So we went to uranium instead, which you could generate plutonium, and refined plutonium, and make bombs out of the ore.  

You can’t do that with thorium. It doesn’t have the same life cycle to give you a stable, dangerous chain reaction isotope. But we haven’t done the technology. There is no such thing as a thorium reactor right now. So if we’re going to do it, we’ve got to actually design the technology. Now it might take 10 or 15 years.  

If you’ve seen Elon Musk talking about what it’s like to build a car versus building a factory that makes a car. It’s one thing to come up with a concept of a thorium reactor. It’s another one to build it. So even if it is true that thorium reactors would outdo nuclear, we don’t have the technology for it.  

Even if we say, let’s go uranium at the moment, we don’t have enough engineers. We don’t have enough factories that can produce a nuclear reactor. Ever since Chernobyl and Fukushima, we’ve reduced the level of our capacity to produce that sort of resource. It’s easy to produce -relatively easy to produce – solar cells and wind, but the argument that’s been made by a lot of the engineers on one side of that debate is that you don’t get enough energy density out of those.  

And I think my position would be, we’ve got to throw everything we can at it to do both, particularly to finance the innovation necessary to get thorium working, if we ever get it working. And I know there’s one company talking about that, it’s actually in the Netherlands, that believes they could build, I think it’s 45 megawatt thorium stations in something the size of a shipping container, because it doesn’t need the radioactive shielding you need for uranium.  

I would work on getting that done at the same time as putting in massive amounts of our available carbon-based energy into producing solar and wind.. And then at the same time, ration our energy consumption, a drastic drop in consumption, so that most of what we use is to design alternative sources of energy. 

Grumbine (00:45:05): 

So let me ask you. With the inefficiency of fossil fuels and the dirtiness of fossil fuels and the impact of fossil fuels on our climate, by shifting to cleaner, and when I say cleaner, I mean, let’s say completely clean, hypothetically carbon-neutral energy. I mean, are we talking about the same kind of reduction in production that we would need, or there’s some trade-off in there, isn’t there? 

Keen (00:45:35): 

Yeah. There’s a huge trade off because it really is a case where you, given the amount of carbon dioxide we’re generating courtesy of our energy consumption to support our level of civilization right now, once we realize we simply cannot allow any more carbon to get in there, then you’ve got to say we’ve got to, you know, produce no more carbon going into the atmosphere.  

And we’ve got to start reducing the impact of the carbon that is there. Then you’ve got to do either geoengineering and/or massive rationing at the same time to reduce our energy overhead so that we can actually, you know, survive with one-half or one-third or one-quarter the energy while using most of that remaining energy to produce non-carbon based power systems in the future.  

There’s no way a price system is going to cope with this. It has to be rationing. And even that’s not enough. The scale of the changes that are necessary go well beyond what any market system can talk about. It has to be a command system. 

Grumbine (00:46:36): 

This goes back to your military question. I mean the chief polluter in the world right now are militaries. Just the sheer output that they pump into the atmosphere is just astronomical. Their fuel usage, et cetera. Talk to me about that. I mean that right there, it seems like it’s the cat chasing its tail. 

Keen (00:46:59): 

Yeah. I mean, because, yes, they’re one of the major polluters without a doubt, but they’re also the only ones who can enforce rationing. If you need to say, look, we are on a war footing, then you don’t do a war footing with the market economy, you do war footing with the military. The only way I can see survival here is the military-enforced rationing system and/or equally, military command about what we put our money into.  

It’s like back in the Second World War, we put our time and money into building armaments, tanks, and developing nuclear weapons. The same level of focus has to be on producing technology to replace our current energy systems and drastically reducing the load humans put on the planet. And that’s something no market system is going to do that.  

It has to be something which is controlled by a military, which can enforce rationing and can enforce where resources are devoted. 

Grumbine (00:47:50): 

Sovereign states and different militaries. We all live in this bubble. It’s not like we can avoid each other, even, you know, the work that’s done on the other side of the world is going to impact us at some point. What does that look like? 

Keen (00:48:06): 

Well, that’s the other trouble. If you look at countries in terms of sea level rise and failure of water systems, then the ones that I was expecting to have the first obvious signs of climate breakdown were Pakistan, India, and Bangladesh. Now Sydney has beaten them, okay, because the impact of the fires in Australia is just incredible.  

But if you do start seeing a breakdown of the Himalayan water system and you see a sea rise level in Bangladesh as well, and you have the antagonism between Muslims and Hindus in general, which is amplified at the moment with Modi in India. You put that mix together, and you’ve got two countries with nuclear weapons…  

I just see enormous potential for conflict. And also, in a sense, potential for blackmailing the rest of the world and saying, unless you do something about it, we’re going to use them. 

Grumbine (00:48:56): 

The water, in and of itself. You watch these silly Kevin Costner movies and you think Waterworld, but in reality, I mean, that’s kind of what we’re looking at, isn’t it? 

Keen (00:49:06): 

Yeah. Water is going to become more difficult to manage because a huge part of our system is based upon glacier fed water systems and the monsoon systems as well. If you relocate where the monsoons occur, which you do by increasing the temperature level of the ocean and the atmosphere, if you reduce the scale of glaciers by increasing the temperature and making the glaciers unstable, then you’re going to get political conflict coming out of that because those societies are not going to put up with mass starvation and just go away quietly.  

And in Pakistan and India, we have two antagonistic countries right next to each other with military weapons, with nuclear weapons. And ditto for China for that matter? So, you know, none of this stuff is going to have in any sense a peaceful resolution, which means, again, you’re back to saying, how… Well, the military will do something. It’s got to be discussions not about Modern Monetary Theory, but modern military theory. 

Grumbine (00:50:09): 

You know, it’s interesting you say that. I’m looking at this, and I realize the Brexit debate that went on in the UK showed a lot of populist angst with identity for country and so forth, and wanting controlled immigration, and there was a lot of concerns about the working class versus blah, blah, blah.  

And in reality, what you’re describing to me here is the potential for mass climate refugees fleeing fires, floods, all kinds of different ecological disasters. And, with closed borders and other things like that, we’re talking about wide-scale annihilation. We’re not just talking about, Hey, I like my borders, I mean, we’re talking about very inhumane… Talk about this refugee thing that’s here already, 

Keen (00:51:07): 

Well, there’s now climate change refugees within Australia right now. If you look at the impact of this bushfire. Towns which have never been affected by fire in their history are now being evacuated. So, towns like – most people wouldn’t know it, but a town called Eden, which is well-named, on the south coast of New South Wales -that got an evacuation order today.  

Mittagong, which is a town not far from Sydney, about 10,000 people, very middle class to upper class town, that’s being evacuated. This is a town of 10,000 people turning into a ghost town. So we’re seeing internal refugees. The danger is when you have refugees, which are going to push between national boundaries.  

And again, that’s why I see Bangladesh as such a litmus test here because butting right on to India and relying on the monsoons, relying upon the melt from the glaciers, and being hit by rising sea level, the one place they can go, Muslims into India? One does not go into the other. So then you have, well, what does Pakistan say if that starts happening? And it’s incredible potential for human conflict. 

Grumbine (00:52:10): 

I want to find some modicum of hope here. 

Keen (00:52:13): 

Hmm. 

Grumbine (00:52:13): 

I mean, where can we derive any hope? Without hope there’s no point. Where’s the hope in this. There’s gotta be something we can hope for. 

Keen (00:52:23): 

Well, the hope is that… It’s hard, I mean, the hope is that if we realize this and chuck the current fetishists out of the way, which is, basically, the neoclassical economists. And we have some severe, we’re not going to wake up to it unless there is severe impacts. Sydney is actually doing us a favor in some ways, Australia is doing us a favor because what has been a climate change-denying policy over there is rapidly finding it’s under attack and able to be destroyed politically in the next two years.  

And the scale of the damage is so great. People who are going to go through this, some of them are going to blame Greenies that’s happening partly. They’re saying it’s because Greenies didn’t let us burn off… Which is garbage, but that’s a sort of explanation people come up with when they want to hang onto their own belief system and not admit that the climate is changing and destructively so.  

But fundamentally it’ll be a huge shift in this country, in Australia, saying, we have to take it seriously. We’ve got to stop this and stop it as soon as possible. Two or three more catastrophes like that around the planet. And then again, Bangladesh may be one of them. The thing is you have to have the catastrophe with not having a normal human reaction of going into outright armed conflict.  

And that’s the part that scares me. You know, I just… How are we going to get to the point where we don’t have armed conflict between nations over this, is a huge question mark. And to me, in some ways it involves hoping the military gets together at a international level and starts working out what to do because they know the politicians and the economies are not going to do it for them. 

Grumbine (00:53:56): 

Wow. I wonder as we talk through this, we’ve got, it must be like a human need to not look at our own mortality. It prevents us from staring this in the eye. But this is here and now, and it’s near and dear and I have children and I love them and I want to do right by them. And I throw my hands in the air and I say, my goodness, is there nothing that we can do? I mean, I don’t find pleasure in saying, well, we fought the good fight. 

Keen (00:54:33): 

No, I want to win this. Yeah. 

Grumbine (00:54:35): 

I want to know what we can do. 

Keen (00:54:37): 

Yeah. I mean, we can drastically cut back on our energy consumption in a forceful way. So one thing that I’m discussing with this person who established this total carbon rationing site is that we could potentially use the fact that we have developed cryptocurrencies and central bank digital currencies to bring in a two price system so that everything had to be bought both with money and with carbon rations.  

And carbon rations could be handed out on a per capita basis. So everybody gets exactly the same carbon ration. And you could set that up initially much, much higher than the current average for the country. So you could set it at the stage where everybody gets a ration which is say 10 times the annual per capita consumption of carbon of that economy.  

That that would mean whenever you bought anything would have two prices, the money price and a carbon price. And as you ran out of one, you could trade for the other. Now of course, most people would not be affected. 99% of the population wouldn’t be affected if the allowance started at, say, 10 times the average, but the 0.1% would be effected and they’d run out of the carbon and have to buy carbon rations off other people, the 99.9%.  

They could set it up in such a way that it was a redistribution system. And then if it became necessary to really drastically reduce consumption, then you drop that level from 10 times down to let’s say one or two, and then you can enforce enormous levels of rationing and say, we’re going to enable you to have enough carbon to survive, but not much more than that.  

And then you could reduce energy consumption by a factor of two or three, plus with a drastic reduction in standard of living as well. Forget about growth in this situation. Again, it’s like going into a war. That could be done. The fact we do actually have solar technology, wind technology, wave technology.  

We have engineers who can do, like in 10 years, SpaceX has gone from not being able to get a rocket off the ground to landing them on their asses successfully. A huge focus on engineering to develop thorium reactors, things of that nature. That’s the thing I’ve got hope in. And we do have the engineering.  

We do have knowledge in that field. That could mean we could develop fairly rapidly. Once we realized how serious the situation is, then it’s a massive devotion of resources towards doing that in the same sense that was done with the Manhattan Project for much more destructive reasons. That is what gives me hope, but we have to realize the situation is serious.  

And the real thing that gives me despair is the failure to realize that, and economics has provided enormous justification for a lack of awareness about the dangers which we’re walking into. 

Grumbine (00:57:16): 

The economic profession has failed us on healthcare, on education… 

Keen (00:57:20): 

Incredible. On everything. 

Grumbine (00:57:20): 

Has failed us on the environment. It’s failed us in every meaningful way. And that in and of itself is probably why I do these shows. Just to expose that and hope and pray people like yourself are able to bring these things out there. People hear them and at least begin changing the conversation. 

Keen (00:57:39): 

Yeah. 

Grumbine (00:57:39): 

We need to do far more than change the conversation. I mean, just look, the IPCC came out a couple years back and said we had 12 years. I think, what, we’re at 10 and a half now, if that was even the real story, if that wasn’t just window dressing. And here we are now, we’ve really taken next to no steps to mitigate this.  

And so if that 12 year was a real legitimate timeframe, we’re at 10 and a half and it takes an awful lot of time to mobilize and ramp up and build production, do whatever it is we have to do. For example, thorium reactor or whatever else it is that we would be putting in place. There’s no consensus.  

There’s no impetus other than watching Australia burn or watching California burn or watching places like Syria become bloodbaths. It’s very discouraging, I’m not gonna lie. 

Keen (00:58:31): 

Yeah. The only positive is the engineering positive. So while I was a critic of the idea of geoengineering for some time, I now think it’s inevitable. And if you look at the scale, this is another thing with a certain amount of hope to it, though it’s not exactly a hope, which is going to let lots of people avoid dying unpleasant deaths.  

But it would not be a large effort to generate a fleet of planes that could seed the atmosphere with sulphur dioxide and reflect back two or three degrees worth of temperature and start freezing the planet again. So that we actually re-establish the ice which we’re destroying at the moment and reverse the increase in temperature from the carbon dioxide.  

Then we’ve got to start taking this stuff out of the atmosphere. Again, engineering has some concepts in that front. You can turn – at great cost of energy, which is half the problem – you can turn carbon dioxide into methane, combining it with water, not exactly easy, but it’s something which is feasible, but it’s all now about engineering.  

It’s not about economics and, fundamentally, economists have led to that situation because they trivialized the dangers of the crisis and imagined that basic simple market interventions, like putting a price on carbon, would be enough to avoid any problem whatsoever. Totally wrong. And now instead, we’ve got to rely upon the engineers rather than the economists. 

Grumbine (00:59:51): 

It’s almost as if they were fronts for the 1% who are trying to keep their profits up to maintain this balkanization of the haves and the have nots, all at the expense of our existence. 

Keen (01:00:03): 

Yeah. I mean, what actually tends to happen instead is that – and I’ve seen somebody who works in this field make this point – that the coal lobby and the oil lobby and so on, don’t actually pay people to say things they don’t believe. What they do is they find somebody who says stuff that’s compatible with what they’d like to be true and they finance them.  

So people like myself don’t get a cent, and never will, from petroleum and coal and so on; but Nordhaus may well. And I’d like you look at the most outrageous of this mob, it’s Bjørn Lomborg, the so-called “skeptical environmentalist.” He’s got funding coming in from all sorts of climate change-denying, coal lobby type organizations.  

Pays himself about, apparently, three quarters of a million euro a year salary to continue arguing against taking any significant action on climate change. So it’s just a case of they’re willing to fund anybody who believes what they’d like to be true. And then that’s where Nordhaus fits in because he does believe what they’d like to be true: that climate change will have a trivial impact.  

Again, just to give you a feeling of this guy, I’ll find his comments on the end of his paper. This is the one from 1991. “We estimate the net economic damage of a three degree warming is likely to be around one quarter percent of national income, one quarter of 1% of national income, but the United States, in terms of those variables, we have been able to quantify.  

I said, we might raise the number to around 1% of total global income to allow for those unmeasured, non-accountable factors. Although such an adjustment is purely ad hoc. It is not possible to give precise error bounds.” And this is the punchline, “My hunch is that the overall impact upon human society is unlikely to be larger than 2% of total output.” Three degree temperature increase. 

Grumbine (01:01:42): 

That is a punch line. 

Keen (01:01:44): 

That’s the mindset of this crowd. 

Grumbine (01:01:46): 

Look, can we name names? Who are these people so we know as activists who the enemy is? 

Keen (01:01:52): 

Okay, Nordhaus was clearly the most important one. There’s about 300 studies that have been done, what they call the marginal cost, or the social cost of carbon, that sort of thing. But in fact, there’s only a group of 15 people who are responsible for the base research behind this, which is this whole idea of estimating the impact of climate change on the economy like Nordhaus has done.  

Okay, some names. Richard Tol, he’s a prick, quite happy to be called one, I imagine. A guy called [Zili] Yang, [Erica] Plambeck… Hope is actually one of the more reasonable people, Chris Hope, he’s decent and he’s not an economist, but he’s been involved in some of this work as well. [Robert] Mendelsohn who’s a colleague of Nordhaus’s.  

[Joseph] Boyer, [Katrin] Rehdanz and [David] Maddison. I was just reading off names. One of their tables is [Francesco] Bosello and [Roberto] Roson. Looking at the primary authors, there are 18 studies that are used to make this trivial estimate of the impact of climate change. Nordhaus produced five of them.  

Maddison produced three. Tol, Mendelsohn, and Hope and Rehdanz are in two each together. So what you get is 18 studies that come down to being done with just eight superficially independent groups of researchers. But Nordhaus and Mendelsohn are colleagues at Yale. [Sam] Fankhauser, a guy called Fankhauser, Maddison and Tol work with [David] Pearce, who’s now dead, and Rehdanz is a student of Maddison.  

So the names are trivial. If you want to find the actual core names, then you go to the IPCC working group to AR5 report. And I can send you the link to this. Table 10.1 from the supplementary materials and you can find the names there. It’s a number of people that could sit around a dinner table. It’s not a large group of people, but they’re the ones primarily responsible. 

Grumbine (01:03:40): 

Wow. A big impact in the wrong direction. All right. So Professor Keen, I want to thank you so much for taking the time with me. And I really hope that we can get back together again in the future. This has been incredibly powerful for me. It’s given me a lot to think about, and to be quite honest, I walked into this thing excited to talk to you.  

And I’m leaving out of here with a very, very heavy heart. I feel like I know that I want to focus in this area; and yet I feel like I’ve been insufficient in my, you know, in my attention. And that’s got me feeling very sad. I’m just going to be . . 

Keen (01:04:18): 

Well, I wish I’d got onto this stuff before I wrote “Debunking Economics” because, you know, I knew the neoclassicals would have done a bad job, but I thought it would have been a case of using equilibrium models when you should be using a non-equilibrium model. I haven’t even got to the fact that they’re using the Ramsey growth model for this stuff yet.  

It’s just these incredibly stupid assumptions that they’ve made to trivialize the problem – that 87% of the industry can be ignored by the assumption that Nordhaus has made in this particular paper. The idea that you can use current GDP and temperature data to predict what’s going to happen with climate change.  

It’s lazy, it’s stupid. It’s using what are actually category assumptions. Assumptions which if they’re false, sorry, are conclusions and calling them simplifying assumptions. And that’s the ultimate neoclassical disease. That’s the real tragedy of this that it’s not even that their models are inappropriate. It’s the mindset they’ve got that you can use a simplifying assumption, which is actually a fantasy. 

Grumbine (01:05:11): 

And on that note, Professor Keen, how do we track you down? What are you up these days? What is the latest work you’re on? 

Keen (01:05:21): 

Well, actually this is by far the main thing that I’m working on, but at the same time, I’ve got a couple of books I want to write as well. So I’m doing one at the moment, a cartoon book, which is called “On the Money,” at the moment, a cartoon book to explain money creation. So I’m working on that.  

The book I’m doing on climate change is called “The Economics of Extinction and the Extinction of Economics,” and I hope to have that finished by the end of 2020. And then I’m working on a book for Polity Press called “Economics Matters Because,”which is a book for school students on what economics could be.  

And then ultimately a new edition of “Debunking Economics,” which will include this work on energy which is something I haven’t had in previous additions. And all of this stuff I’m producing gradually and being supported by Patreon in doing it. So I have a website, as you mentioned beforehand, and patreon.com/profstevekeen. 

Grumbine (01:06:09): 

Very good. I look forward to talking to you again in the future. I’m really appreciative of your time and I hope you’ll come back soon. 

Keen (01:06:18): 

I will. Good to talk to you. 

Grumbine (01:06:20): 

As well. 

End credits [music] (01:06:27): 

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives. 

Coming Soon

• Download Audio (mp3)