Viewpoint: Economic Theory and Climate Change Policy

Frank Ackerman, Steve Bernow, Irene Peters

What is the appropriate role for economics in the development of climate change policy? Ideally, when formulating public policy, decision-makers should rely on expertise from a variety of disciplines, economics among them. Yet economics is often looked upon as the ultimate arbiter of policy choices, because it seems to offer something the other sciences do not: a theoretical framework capable of valuing the consequences of different policy choices with a single metric. This paper argues that this practice is not legitimate, and that most economic policy assessment models, in their current forms, are biased against non-marginal policy changes such as those required to meaningfully address the challenges of climate change.