An excerpt from my latest IER post:
Nordhaus’ terrible predictions about the energy sector in his 1973 paper have serious implications for present policy. William Nordhaus’ DICE model is one of three Integrated Assessment Models (IAMs) that the Obama Administration’s Working Group selected to estimate the “social cost of carbon.” This value in turn is used by EPA and other federal agencies to run cost/benefit analyses on proposed regulations. It is extremely alarming, to say the least, that the same guy who claimed in 1973 that optimal resource usage would have the U.S. “virtually exhaust” its domestic petroleum supplies over the next seven years, is one of three experts who are implicitly influencing regulations with his model of world energy markets that runs through the year 2300.
When it comes to Alan Greenspan warning about budget deficits, price inflation, and the need to cut government spending, Paul Krugman is happy to ask, “So has the ex-Maestro reconsidered his views after having been so wrong for so long? Not a bit.” Too bad Krugman won’t apply the same criterion to Nordaus, who thinks his computer simulations provide justification for imposing massive new taxes on the energy sector.