The GAO’s Whitewash on “Social Cost of Carbon”
I know some of you may be vaguely interested in the climate change policy debate, but you realize there’s a lot of reading to get up to speed you would have to decide which person is fudging the facts etc. If that’s you, I’ve got just the blog post you’ve been waiting for.
In this post at IER, I use the just-released Government Accountability Office (GAO) report to show that the Obama Administration’s Working Group on the “social cost of carbon” clearly ignored two of the government’s own guidelines when doing cost/benefit analyses. This isn’t up for debate; I let the GAO itself establish the rules, and then quote from the GAO report itself to show the Administration ignored them. What’s hilarious is that the GAO report doesn’t take a stand on whether this is legitimate; it merely says that it describes what happened.
There’s no point in excerpting, you just need to follow the link if this interests you.
What can average Americans do about this inconsistency in government procedure? And what is the most realistic discount rate here?
Also, very interesting that some posts on this blog get over 170 comments, and some get fewer than five.
Philippe and LK trigger about 75% of those comments. Those posts with 2-15 comments, typically those two are absent.
They did not follow the rule to use a 7% discount rate. Fair cop. But it seems pretty universally agreed that a 7% discount rate is not appropriate. It seems to be difficult to establish what rate is appropriate. Dealing with relatively distant future events presents lots of problems deciding which to use, but as far as I can tell almost nobody thinks 7% is appropriate. So whilst you have caught them out not following their own rules, it does not add much to the debate about how to deal with it.
This discount rate thing is important, but I do not know what you think is the appropriate rate. As you have said before, this is as much philosophical as economic, as whatever rate is selected there are apparent contradictions with what people seem to believe is “right.” However, we cannot simply dodge it, as that is simply to accept an arbitrary rate anyway.
I would guess you think market rate is the only appropriate one.