George Reisman |

Environmentalists talk of avoiding trillions of dollars of property damage that will allegedly take place as the result of global warming and rising sea levels and urge that we spend trillions of dollars starting now, to avoid the loss of even more trillions later.

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The alleged losses are supposed to occur overwhelmingly after 2100, when sea levels will allegedly have risen by 2 feet from today. In the thousands of years following 2100, the rise is supposed to be as much as 190 feet. (See https://bit.ly/2SR7BoO )

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In urging such action, the fear mongers ignore such facts as that at a mere 5% interest rate, $1 trillion 1,000 years in the future has a present value of much less than 1 cent. 500 years in the future, its present value is $25.43. (Use the formula $1 trillion ÷1.05^1,000, ^500.)

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If it is foolish to spend $10 to get $5, it is absolutely insane to spend trillions to save the present equivalent of pennies, or less. Which is what the environmentalists/green new dealers want us to do. Two dinners at McDonalds is more valuable than $1 trillion in 500 years.

-RW

Value does not work that way.

ReplyDeleteThe present discounted value to me of $1 at the end of a year may arguably be that of $0.96 to-day. But the value of $0.96 to me to-day is not the value of $0.96 to you to-day, and the value of a $1 to you at the end of a year is not the value of $0.96 to me to-day.

Dr Reisman's calculations are essentially like those engaged in finding policies that are called “potentially Pareto-improving”. They are genuinely Pareto-improving if winners compensate any losers, but if that compensation doesn't occur, then really the business has degenerated to a pretense that the monetary unit has the same value to all the affected parties.

It doesn't. Value isn't even interpersonally commensurable; there is no X and Y such that we can say that X has the same positive value to one person as Y has to another person.

That doesn't mean that we should embrace the policies that Dr Reisman proposes; it simply means that this specific basis for rejection is fallacious.

Please excuse me, I meant to conclude:

ReplyDelete“That doesn't mean that we should embrace the policies that Dr Reisman opposes; it simply means that this specific basis for rejection is fallacious.”