Home > Climate Change, Hurricane Sandy > Hurricane Sandy and Climate Change

Hurricane Sandy and Climate Change

One of my pet peeves as a professional economist is how often I see individuals do economic analysis despite the fact that they have absolutely no credentials in the social science of economics. I regularly hear lay persons say economic nonsense when they do economics “without a license” but occasionally they do get it right. These expressions of ignorance occur with respect to other academic disciplines as well and climate science is one area where the public is regularly offered the opinions of individuals with no professional credentials in the field.

I recently observed comments in the media by Al Gore and Michael Bloomberg, neither of whom has professional expertise in climate science, that Hurricane Sandy provides evidence of climate change. There is absolutely no reason why any of us should be interested in their opinions on this subject, any more than we should be interested in their opinions on what medical treatment we should receive to cure any of the ailments that we have. We should be interested in the opinions of practicing professionals in the field of climate science and Roger Pielke, a professor at the University of Colorado, has recently written (see his article on hurricanes) on the lessons to be drawn, if any, from the latest hurricane to come ashore in the U.S. There are several noteworthy aspects of his article.

One is that he practices economics without credentials in the field but, in this case he gets it right when he says that by providing taxpayer-backed flood insurance at below-market rates, the government encourages people to locate in risky areas. That is, the insurance provides an incentive for individuals to take on more risk. I have previously written about this phenomenon on this blog when I discussed the economic notion of moral hazard. So this program by the government illustrates the perverse effects of economic incentives and, in the case of this program, we learn that the insurance results in riskier behavior by the owners of the insurance as compared to what the owners would do if they purchased unsubsidized insurance in private markets.

Second, Professor Pielke has studied the data on hurricane activity and he points out that we are actually in a time period of below-normal hurricane activity. He states that, in 1954 and 1955, three large hurricanes came ashore in the U.S. and each of  these hurricanes did more damage than did Hurricane Sandy. His article contains many more interesting insights to be gleaned from data on hurricane activity.

Finally, this article on hurricanes reveals another useful lesson. It is enormously valuable to simply look at good data to find out what has happened in the past. Just looking at the data, without drawing any inferences from it, is a necessary first step enabling sensible and informed discussion about what can be learned from the data. It is simply a waste of time to discuss what to do about hurricanes when we have no knowledge of the data on past hurricanes and when we do not have the professional credentials needed to interpret the data.

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Economics One

A blog by John B. Taylor

The Grumpy Economist

One economist's views on economic policy.

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