Paul Krugman: Depression Economics and Climate Policy

http://krugman.blogs.nytimes.com/2014/06/27/depression-economics-and-climate-policy/?_php=true&_type=blogs&_php=true&_type=blogs&smid=tw-NytimesKrugman&seid=auto&_r=1&

(snip)
Ross Douthat attempts to justify the reform conservative backdown on climate policy; John Quiggin isn’t persuaded. But there’s one argument Quiggin, somewhat surprisingly, doesn’t make: Douthat has the economics all wrong.
http://crookedtimber.org/2014/06/26/douthat-squares-the-circle-on-climate-change/#more-33257

Douthat’s essential point, as I understand it, is that economic troubles make this a bad time to take on the burden of climate adjustment, that they strengthen the case for waiting to see if we can get by doing less and using cheaper approaches.

But that’s exactly backwards. Yes, we’re having tough times — but the toughness stems from insufficient demand, which has led to an oversupply of both labor and capital. Here’s the real cost of government borrowing:



Climate action would mainly involve investment — especially investment in new or retrofitted power plants, replacing coal-fired plants with lower-emission sources. In good times such investment would mean diverting labor and capital from other useful activities. But in the post-2008 economy we’ve been awash in unemployed labor and capital with no place to go. This is an ideal time to be doing a lot about climate!