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2015 Leontief Prize Winners
Duncan Foley and Lance Taylor
"Macroeconomics in the Age of Climate Change"
President Anthony Monaco, Neva Goodwin,
Duncan Foley, Lance Taylor, William Moomaw
On March 23, the Global Development and Environment Institute (GDAE) awarded the 2015 Leontief Prize to Duncan Foley and Lance Taylor for their groundbreaking modeling of the macroeconomic impacts of climate change.
Tufts’ President Monaco opened the event, held at Tufts’ Fletcher School. GDAE Co-Director Neva Goodwin introduced the prizewinners, lauding them for their “creative and often innovative search for whatever tools and approaches will be most useful in finding real answers to real problems.” (Watch Dr. Goodwin’s introductions of Dr. Foley and Dr. Taylor)
Global Warming and the Pitfalls of Welfare Economics
Dr. Foley’s talk refuted the idea that policies to control climate change will require significant sacrifices on the part of the current generation. In fact, as greenhouse gas emissions represent an uncorrected negative externality, continuing along a business-as-usual path is inefficient. Correcting this externality, such as through a carbon tax or tradable permit system, will create large net gains that can be distributed amongst current and future generations in a variety of ways. Thus while policy debates regarding climate change typically focus on the problem of distributing costs, the actual challenge is how to distribute an economic benefit. Dr. Foley noted that while policies to address climate change will be costly, perhaps 2% of world output, investments to address climate change are ultimately welfare-enhancing. Losses to the current generation can be offset by an increase in consumption of low-carbon goods and services, financed by borrowing. Future generations would pay the interest on this debt, effectively compensating the present for the bequest of a stable climate. With effective compensation schemes, the large available net gains imply that no one need make any sacrifices to address climate change. Thus there is reason to believe that politically viable climate policies are possible.
Watch Dr. Foley’s lecture | Read Dr. Foley’s lecture
Greenhouse Gas: Long-Run Growth and Collapse
Dr. Taylor centered his presentation on the long-term economic impacts of rising greenhouse gas emissions. He discussed the results from a demand-driven model of growth and climate change to show the benefits from reducing greenhouse gas emissions. The model he presented was adapted from a traditional predator-prey model and adjusted to allow output to be determined by effective demand along Keynesian lines. It integrates several facts left out of mainstream models, such as persistent unemployment and the link between productivity growth and labor energy consumption. Dr. Taylor presented a simulation for the business-as-usual scenario showing that a macroeconomic output crash caused by the damaging effects of climate change in the second half of the twenty-first century would result in substantial unemployment. He then looked at growth when the price of carbon is set at $44/ton of CO2 and a mitigation outlay of 1.25% of world output in order to stabilize the atmospheric CO2 concentration. In the mitigated solution, the economy would stabilize with high wages (per unit of labor) and high employment in the long-term.
Watch Dr. Taylor’s lecture | See PPT slides from Dr. Taylor’s lecture
The awardees closed the event by engaging the audience in a lively conversation ranging from topics of decarbonizing the economy and the fossil fuel divestment movement, to incentivizing the equitable allocation of public goods.
Watch the Question & Answer Session
The day after the event, The Boston Globe ran a profile of the award winners.
Watch interviews with the 2015 Leontief Prize Winners
Interview with Lance Taylor
Interview with Duncan Foley
About the Leontief Prize
GDAE inaugurated its economics award in 2000 in memory of Nobel Prize-winning economist and GDAE advisory board member Wassily Leontief. The Leontief Prize for Advancing the Frontiers of Economic Thought recognizes economists whose work, like that of the institute and Leontief himself, combines theoretical and empirical research to promote a more comprehensive understanding of social and environmental processes. The inaugural prizes were awarded in 2000 to John Kenneth Galbraith and Nobel Prize winner Amartya Sen.
GDAE was founded in 1993 with the goal of promoting a better understanding of how societies can pursue their economic and community goals in an environmentally and socially sustainable manner. The Institute develops textbooks and course materials, published on paper and on its web site, that incorporate a broad understanding of social, financial and environmental sustainability. The Institute also carries out policy-relevant research on climate change, the role of the market in environmental policy, and globalization and sustainable development.
In addition to Amartya Sen and John Kenneth Galbraith, GDAE has awarded the Leontief Prize to Paul Streeten, Herman Daly, Alice Amsden, Dani Rodrik, Nancy Folbre, Robert Frank, Richard Nelson, Ha-Joon Chang, Samuel Bowles, Juliet Schor, Jomo Kwame Sundaram, Stephen DeCanio, José Antonio Ocampo, Robert Wade, Bina Agarwal, Daniel Kahneman, Martin Weitzman, Nicholas Stern, Michael Lipton, C. Peter Timmer, Albert O. Hirschman (posthumous), Frances Stewart, Angus Deaton, and James K. Galbraith.