Monday, June 09, 2008

Climate Change Economics brought to Heal

Geoffrey Heal is a respected commentator on the economics of climate change usually from a corporate perspective. He has recently published a NBER working paper that is part meta-analysis and part suggestions for future research.

In addition I have recently been sent Heal's new book "When Principles Pay: Corporate Social Responsibility and the Bottom Line". This is my current academic/leisure reading given its accessible and equation free text.

When Principles Pay: Corporate Social Responsibility and the Bottom Line

In the NBER paper a great deal of time is spent looking at the crucial issues of discount rates, uncertainty and risk aversion. The costs of action and inaction are then carefully spelt out. An excellent overview article.

I agree with the very final sentence of the paper:

It is very clear that most of the models analyzed to date are so aggregated as to miss many important issues.

The NBER pitch is as follows:


What have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.

Returning again to the book, the content is particularly interesting from a globalisation perspective and motivates a considerable of amount of the research that myself and co-authors are currently investigating.

Stories of predatory lending practices and the reckless destruction of the environment by greedy corporations dominate the news, suggesting that, in business, ethics and profit are incompatible pursuits. Yet some of the worst lenders are now bankrupt, and Toyota has enjoyed phenomenal success by positioning itself as the green car company par excellence. These trends suggest that antisocial corporate behavior has its costs, especially in terms of the stock market, which penalizes companies that have poor environmental track records and rewards more socially conscious brands.

Recommended reading.

For an interview with Geoffrey Heal see:




Emmanuel said...

This book sounds interesting and I'll surely borrow a copy when our library has one.

Also see the widely cited meta-analysis of the relationship between corporate social and financial performance by Orlitzky, Schmidt, and Rynes (2003).

Rob Elliott said...

Emmanuel, thannks for the comment. If you want to borrow the book just pop by my office and pick it up.

Offer open to University of Birmingham employees only ;-)