Comments on: Right-wing hacks in action, part CXXXIV (Arnold Kling edition)

By: John Quiggin » The equity premium and the Stern Review

John Quiggin » The equity premium and the Stern Review — Sat, 09 Dec 2006 22:16:30 +0000

[...] Brad DeLong carries on the discussion about discounting and the Stern Review, responding to a critique by Partha Dasgupta that has already been the subject of heated discussion. As Brad says, all Dasgupta’s assumptions are reasonable, and his formal analysis is correct But … The problem I see lies in a perfect storm of interactions: [...]

By: Crooked Timber » » The equity premium and the Stern Review

Crooked Timber » » The equity premium and the Stern Review — Sat, 09 Dec 2006 06:22:47 +0000

By: Club Troppo » Friday’s Missing Link

Club Troppo » Friday’s Missing Link — Fri, 08 Dec 2006 02:45:48 +0000

[...] Close to zero? – John Quiggin In yet another round of the controversy over discounting in the Stern Report, Megan McArdle refers to Stern’s use of “a zero or very-near-zero discount rate”. Similarly Bjorn Lomborg refers to the discount rate as “extremely low” and Arnold Kling complains says that it’s a below-market rate. [...]

By: Jonathan Goldberg

Jonathan Goldberg — Wed, 06 Dec 2006 02:09:22 +0000

This whole analysis makes me queazy. I’m not comfortable with the continuity assumptions being made. As Daniel noted, parenthetically but astutely: “(and no possibility of the economy being devastated by climate change either).” If I understand correctly (not having the patience to wade through the whole report), taking out insurance against catastrophic change is part of Stern’s rationale.

I tend to be a zero-discount person myself, because I disagree with the assumptions about fungibility needed to justify a positive rate.

As for Arnold Kling, I gave up on him when he wrote that he wasn’t sure that economists should let themselves be “bullied” into accepting the reality of global warming.

By: Crooked Timber » » Close to zero?

Crooked Timber » » Close to zero? — Wed, 06 Dec 2006 00:25:07 +0000

[...] In yet another round of the controversy over discounting in the Stern Report, Megan McArdle refers to Stern’s use of “a zero or very-near-zero discount rate”. Similarly Bjorn Lomborg refers to the discount rate as “extremely low” and Arnold Kling complains says that it’s a below-market rate. [...]

By: John Quiggin » Close to zero?

John Quiggin » Close to zero? — Tue, 05 Dec 2006 22:55:54 +0000

By: asg

asg — Mon, 04 Dec 2006 21:38:08 +0000

Aaaaaaaaaaand, with this post, Crooked Timber officially jumps the shark. Maybe next season will be better. See you next year!

By: engels

engels — Sun, 03 Dec 2006 14:16:59 +0000

In the kingdom of the blind, the one-eyed man is Kling.

By: Robin

Robin — Fri, 01 Dec 2006 15:47:44 +0000

On the issue, Delong’s comments and Partha Dasgupta’s response in the comments over at BDL’s Semi-Daily Journal are worth a look.

http://delong.typepad.com/sdj/2006/11/partha_dasgaptu.html

By: Daniel

Daniel — Fri, 01 Dec 2006 11:37:56 +0000

I think that Stern himself may have made an honest mistake, in that perhaps he did not realize what a large order of magnitude was involved in a seemingly trivial assumption about interest rates. But that does not excuse the team as a whole. Either (a) someone on the team knew what they were doing and tried to pull a fast one or (b) no one on the team understood the impact of the interest rate assumption. In the former case, it was a swindle; in the latter case they were not really competent to issue the report.

This is bullshit, Arnold, and if Chris is withdrawing the charge of “hack”, I will happily now take ownership of it based on this comment alone. As you know, the Stern team spent a lot of time and effort justifying the choice of the discount rate precisely because they were aware of its importance for the overall numbers. Dasgupta’s argument is that the criterion which Stern uses to judge intergenerational equity is insufficiently inegalitarian (which is precisely Chris’s point). It certainly isn’t a claim that the discount rate methodology is technically wrong. Give over.

By: Daniel

Daniel — Fri, 01 Dec 2006 11:33:31 +0000

No. I mean the inequality between person A in the present time and person B living in the future who has not been born yet. That is the crux of Dasgupta’s complaint.

If people two hundred years from now will be so wealthy (due to other technological advancements and such)

This can’t be Dasgupta’s argument. His model is one with a single technology which generates a deterministic 4% return forever. There is no technological change at all in his model (and no possibility of the economy being devastated by climate change either).

By: T.R. Elliott

T.R. Elliott — Fri, 01 Dec 2006 04:10:14 +0000

I have to say, my gut reaction to Arnold Kling has always been that he’s a right wing hack (supporter of Iraq war, wants us to bomb Iran, and other right wing fiascos).

And if you take a look at his language:

“intellectual swindle that Stern is attempting to pull off”

and

“The Stern Review is arguably the policy equivalent of biweekly mortgage conversion. I hope that is not true for the anti-global-warming crusade as a whole”

Notice that, according to Kling, (a) Stern is consciously trying to pull off a swindle and (b) Kling maligns the entire global warming community as crusaders.

His language is always like this. It’s rather annoying, making anything he writes that might be intelligent indigestible to anyone with half a sense of dignity and etiquette.

I first realized his hackdom when I stumbled upon his completely erroneous cheerleading for shale oil—which he later corrected when James Hamilton published some real analysis on the topic.

What is really ironic is the way they threw me off the EconLog board when I incorporated Kling (and Caplan’s) style into my contributions. They told me something about my disruptiveness and that then provided some garbled argument about how they needed to incentivize my behavior by throwing me off.

By: rwoqiw

rwoqiw — Fri, 01 Dec 2006 02:36:44 +0000

Brad DeLong has an . Dasgupta assumes all growth in consumption comes from previous savings. If you assume that some growth comes from technological advances that are not controlled by investment decisions, the equation changes a great deal. DeLong throws in some numbers and gets 22% savings, rather than 97%.

By: John Quiggin

John Quiggin — Fri, 01 Dec 2006 01:59:45 +0000

As I pointed out above, the long-term real riskless bond rate is now, and has historically averaged, between 1 and 2 per cent (current 10-year Treasury is 4.5 per cent, core inflation about 3 per cent). This is the same as the discount rate you get with an eta of 1, and a long run growth rate for per capita income of between 1 and 2 (IIRC, Stern uses 1.75 per cent). So, if your criterion is matching the market interest rate, Stern is spot-on.

By: Arnold Kling

Arnold Kling — Fri, 01 Dec 2006 00:10:28 +0000