Integrating economic analysis and the science of climate instability

Scientific understanding of climate change and climate instability has undergone a revolution in the past decade with the discovery of numerous past climate transitions so rapid, and so unlike the expectation of smooth climate changes, that they would have previously been unbelievable to the scientific community. Models commonly used by economists to assess the wisdom of adapting to human-induced climate change, rather than averting it, lack the ability to incorporate this new scientific knowledge. Here, we identify and explain the nature of recent scientific advances, and describe the key ways in which failure to reflect new knowledge in economic analysis skews the results of that analysis. This includes the understanding that economic optimization models reliant on convexity are inherently unable to determine an "optimal" policy solution. It is incumbent on economists to understand and to incorporate the new science in their models, and on climatologists and other scientists to understand the basis of economic models so that they can assist in this essential effort. (c) 2005 Elsevier B.V. All rights reserved.