They tricked us into thinking it was too expensive to fix the climate crisis

On psychological consequences of inaccurate economic models trying to tell us that it's better to let temperatures rise than take action now.

Welcome back to Climate Psyched, the newsletter where we explore all things psychological, behavioral and emotional related to the climate and ecosystem crises.

For the past few weeks I’ve been traveling by train through France, watching the incredible tide rise and fall by the Normandy coastline, eating galettes and watching small villages swirl by outside the window, thinking that train traveling is truly amazing.

During the last Climate Psychologists meeting we had before the summer holidays, as the Swedish soil grew drier and drier, we laid out a strategy for how to tackle a summer filled with extreme heat, drought and climate anxiety. But suddenly the rain started falling, temperatures decreased and closing in on August it’s thus far been fairly typical Swedish summer weather back home. No one’s happier about that than the climate deniers, crying out “what happened to the ‘climate crisis’, I would sure like some of that global warming now!”

As anyone who’s paying the least bit of attention beyond your own rainy backyard knows, the climate crisis is letting itself be known all over the planet right now. Catastrophe after catastrophe after catastrophe, bringing with them enormous suffering as well as material costs.

Which brings us to this post’s main question: How could we get tricked into thinking that it would be too expensive to make the transition into a sustainable world? We’ll try and explain some psychological consequences of some very flawed economic models.  

Situation

In the past few months, extreme weather events and temperature records are succeeding each other, too many to even mention. As I type these words we’re on day 27 of global heat record. In the words of Greta Thunberg: People are suffering. People are dying, entire ecosystems are collapsing. Right in front of our eyes. Climate scientists have seen this coming, but a lot of people have not, due to inadequate risk models.

In a recent article in Financial Times, it was noted that several economic models, when making estimates of future costs of climate related impacts, had not accounted for, well, climate related impacts.
In the article it says:

For example, an assessment of global gross domestic product loss in a so-called “hothouse” world of 3C higher temperatures by a group of 114 central banks and financial supervisors, known as the Network for Greening the Financial System, did not include “impacts related to extreme weather, sea-level rise or wider societal impacts from migration or conflict”.

Yes, you read that correctly.

In 2018, economist William Nordhaus received the prize in economic sciences in memory of Alfred Nobel, a highly prestigious prize. But any climate aware person will gasp at his prediction that the optimal level (for the economy that is) of global warming would be between 3 and 4 degrees Celsius, that about 90% of GDP will be unaffected by climate change, because it happens indoors, and that a warming of 6 degrees C would only lower GDP by 8,5%.

Yes, you read that correctly too.

Nordhaus’ DICE model has been heavily criticized by several scholars, but the framing of climate policies and intervention as being too expensive to adapt immediately, and that it makes more economic sense to delay action and let temperatures keep rising, has heavily influenced a lot of climate politics for several years. It’s a partial explanation to why climate politics hasn’t been keeping up with actual climate change.

Explanation

Let’s look at some psychological implications of the framing “it will be too costly to phase out emissions”.

The psychological researchers Amos Tversky and Daniel Kahneman (who’s also received the economics prize in memory of Nobel) several decades back discovered that people value possibilities and risks very differently depending on how information is framed, and that it matters significantly how models and policies are framed.

We’ll take a closer look at one of the experiments they conducted:

In the experiment, the researchers asked participants to make a choice based on the following information:

Imagine that the US is preparing for an outbreak of a rare Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed.
Assume that the precise scientific estimate of the impact of the programs is these:

• If program A is adopted, 200 people will be saved.
• If program B is adopted, there is a 1/3 chance that 600 people will be rescued and a 2/3 chance that no one will be rescued.

Which of the two programs would you prefer?

Another group had to choose between the following two options:

• If Program C is adopted, 400 people will die.
• If program D is adopted, there is a 1/3 chance that no one dies and a 2/3 chance that everyone dies.
Which of the two programs would you prefer?

Let's break this down: If program A is adopted, 200 people will be saved. If program C is adopted, 400 people will die. Program A and C impose exactly the same conditions, but in program A the benefits are emphasized and in program C the risks are emphasized.
How do you think the participants chose? In the first group, 72% preferred program A, while only 22% in the second group preferred program C.

They made different choices depending on how the information was presented. People tend to try and avoid losses, more than aiming for the wins.

This has to do with people generally being loss aversive, meaning that we perceive losses as more costly than we perceive gains as beneficial. In other words: losing 1000 euros makes us angrier than gaining 1000 euros makes us happy. This generally means that when something is framed as a potential loss, we become less prone to choosing that alternative.  

Translated into climate: if we frame climate interventions and policies as costly, highlighting the economic losses, rather than the costs of business as usual, then people might (inaccurately) both perceive the implementation of policies as too costly and become more aversive to them. From a psychological and behavioral perspective, we need economic models that don’t trigger people’s loss aversion.

Another pitfall of the mainstream climate economy discourse is that different costs oftentimes have been pitted against each other: if we deal with climate we will have less economic resources to deal with healthcare or education. When two alternatives are pitted against each other people have a tendency to gravitate towards status quo (we’ve written about the fictional status quo and status quo bias here), but this also plays into our biased perception of risk, influenced by loss aversion.

Pitting climate costs against other societal costs is inaccurate in at least two ways:
1. state resources aren’t limited in the same way as a private economy (something that economists such as Stephanie Kelton have written extensively about),
2. climate isn’t a separate issue from everything else. We cannot choose between climate and other issues, because not dealing with the climate crisis will make all other issues worse (and more costly!).

But perhaps the most daunting thing about the “too expensive”-framing is that it drains us of hope. It makes us believe that even though we have all of these solutions, all this knowledge and technology ready at hand, we still can’t do enough because some researchers have said that it would cost too much. Now, that’s not only wrong, it’s just plain dangerous.

Action

• Read up on some of the criticism of mainstream climate economy models, for example this widely spread paper by professor Steve Keen: The appallingly bad neoclassical economics of climate change, as well as economic models that challenge the mainstream perspective and frame our possibility to act around what actual human and natural resources we have on hand, for example Kate Raworth’s Doughnut Economics, and Marianna Mazzucato’s Mission Economy.

• Whenever you have the opportunity, frame climate action to highlight the gains we’ll get by taking action, and the losses and costs we’ll encounter by business as usual.

• And if I may be so blunt: stop listening to mainstream climate economists and keep taking collective action to speed up the climate transition!

  

We have a few more weeks of vacation ahead of us, but Climate Psyched is back in August. As always, please leave a comment if this post triggered any thoughts or reflections, or a like if you liked reading this (it helps us know what you appreciate about Climate Psyched). Feel free to share with anyone you think might appreciate the post.

Thank you for reading and see you in August!