When, years from now, the errors and follies of the economics profession are disdainfully listed, the object of greatest derision will not be the finance theorists for whom efficient and complete markets were as real as “actually existing socialism” was to fanatics of a different stripe; it will not be regulators who thought regulation was uncool. No, the biggest failure of economics in these two decades will have been on climate change.

After all, we economists may already have screwed up the planet beyond repair. The Kyoto agreement, fashionable now to deride, was nevertheless the best hope to move the United States’ emissions to a permanently lower level; but a well-publicised revolt by Bill Clinton’s economists, who claimed the benefits would not outweigh the costs, effectively stalled its ratification.

That’s a phrase that economists use often: the balancing of benefits and costs. On almost every occasion, it is useful. Why is this one of the occasions where it is not?

Mainly because we have real trouble quantifying — especially in terms of money — the costs of climate change. Economists chronically undercount things they can’t monetise. So those things are ignored or minimised. Strangely, the years of worrying about how to account for non-monetary household work in national income haven’t taught us anything. So we scoff at “exaggerated” future costs from warming. For years mocked as dismal killjoys by everyone else, we have picked on solemn, doom-prophesying climate scientists like the second geekiest kid at school sneers at the geekiest. A profession central to which is working out the cost of the opportunity foregone has a massive failure of imagination when it comes to climate change costs.

... contd.