Great analysis as always. It's unsurprising that results are so sensitive to the discount rate given the long time horizons, though I have a hard time thinking about how much to value future lives lost. The cost of offsetting future lives lost depends on the discount rate but also the cost of saving a life in the future, which might be much greater than saving one today. But in scenarios where the cost to save a life is much greater, incomes are likely to be higher, so the excess mortality due to climate change will be lower.

I also have two possible concerns in mind that could have significant effect but weren't listed. One is the cost of air pollution, which results in millions of deaths per year today: https://ourworldindata.org/data-review-air-pollution-deaths. It's different from looking at CO2 in general because coal has a vastly larger effect on air pollution than natural gas, but is relevant to some aspects of decarbonization. Another is the small contribution of climate change to existential risk, which is harder to quantify.

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Super piece, Maxim.

For readers interested in more detail, here's a link to Bill Nordhaus Nobel Prize lecture at Yale after receiving the award in 2018 in economics. https://www.nobelprize.org/uploads/2018/10/nordhaus-lecture.pdf

We'll try to be brief. But you've hit a sore spot for us ("Social Cost of Carbon").

Readers can see Nordhaus' ranges (cost/ton)and discount rates at Table 1 and 2 on pp. 16 & 18. Those tables, as well as your piece and Friedman's work, make it clear that there are two easy ways to jack up the "SCC". And a third that helps, too but should be irrelevant. You and Friedman note all three. (The "why?" Charlaticians do this we'll get to at the end of our comment).

One reduce the discount rate. Two, reduce the future avg. surface temp reduction goal. Moving the goal posts out further (note Nordhaus stops his analysis at 200 years, and focuses on to yr 2100 principally, for most of the reasons you mention above) - 300 YEARS! - also helps. Especially when you reduce the discount rate.

The wide ranges and the assumptions show the folly of it all.

But increasing the SCC has a political advantage for ideologues. We're going to make a connection here you might not have made to date: the analogue for ideologues (some of the same ones with climate change) is Covid-19(84).

Ready? It's about fear and the concept of "The Precautionary Principle".

> SCC = > climate change damage estimates

> climate change damage estimates = greater perception of risk (frequency/severity)

> perception of risk = > fear

> fear = > receptiveness to "The Precautionary Principle"

Increase the perception of risk enough, The Precautionary Principle can be weaponized so citizens will willingly accept (or clamor for) a whole host of things they would not ordinarily consider but for the subterfuge. These include (but are not limited to) the promise of government protection, agreeing to higher costs and/or lower living standards, sacrificing human prosperity and even justify withholding resources from the developing world, all under the name of saving humanity and the planet.

Or, in the case of Covid-19(84), sacrifice their freedoms. Remember what former NY Governor Cuomo said in the height of the Covid-19(84) lock down panic in summer 2020 as he forced state nursing home to accept sick, elderly patients who'd tested positive. "If my policies save even one life of a New Yorker it will have been worth it! (It didn't) .

We are a team of environmental industry professionals who finally had enough of this insanity. We're not hard to find (click the link next to our name).

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Jan 21·edited Jan 21

I'm skeptical that the inflation-adjusted treasury bond rate reflects people's time value of money. US government bonds are considered to be risk free. People choose to invest in all kinds of things with risk, however, like stocks, corporate bonds, and startup businesses. I think a higher rate is more realistic.

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David Friedman isn't an economist. He might know about economics from a certain ideological standpoint. But he isn't trained in the discipline, he thinks about it from a anarcho - capitalist way. Unless you think that title is inherited like a house is, he isn't. Anarcho - anything is impractical. You might as well call Alan Moore, writer of V for Vendetta an economist as well.

He's also very, very close to being a climate change denial guy. I'm sure he's very careful with his language so as to bring up plausible deniability. But when you look at they way he frames things, he certainly serves that purpose.

Everything 'inspired' by what he's writing should be read with those things in mind.

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Great post that digs into some critical assumptions.

I do think that setting high discount rates on problems that have moral relevancy can be tricky. As Derek Parfit wrote:

"Why should costs and benefits receive less weight, simply because they are further in the future? When the future comes, these benefits and costs will be no less real. Imagine finding out that you, having just reached your twenty-first birthday, must soon die of cancer because one evening Cleopatra wanted an extra helping of dessert. How could this be justified?"

I wrote a post about this issue myself (https://passingtime.substack.com/p/chasing-infinities). I work in clean energy finance and so I use discount rates every day at my job to make decisions. But in setting discount rates, you have to choose between Pascal's Mugging yourself and being okay with being Cleopatra in the above example.

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