Scholars Gather to Celebrate Martin Weitzman’s Contributions to Environmental Economics

October 16, 2018

Scholars Gather to Celebrate and Honor Eminent Economist Martin L. Weitzman as He Retires From Harvard University

Written by Doug Gavel for the Harvard Environmental Economics Program

A recording of the symposium can be found by clicking here.

Many of the world’s most eminent economists and climate scientists gathered Thursday, October 11 at Harvard Kennedy School to celebrate and honor the career of Martin L. Weitzman, professor of economics at Harvard University, who is retiring following four decades of research and writing which have illuminated thought and policy across a broad range of important disciplines. During his retirement, Weitzman will serve as a Research Professor in Harvard’s Department of Economics.

The October 11th event, “Frontiers in Environmental Economics and Policy: A Symposium in Honor of Martin L. Weitzman,” was organized and hosted by the Harvard Environmental Economics Program, with additional support from the Harvard University Center for the Environment and the Mossavar-Rahmani Center for Business and Government at the Kennedy School. The symposium was moderated by Robert N. Stavins, the A.J. Meyer Professor of Energy and Economic Development and the director of the Harvard Environmental Economics Program.

Stavins began the symposium by introducing the afternoon’s keynote speaker, William D. Nordhaus, the Sterling Professor of Economics at Yale University, who earlier this month was awarded the Nobel Prize in Economics for his work on modeling the economics of climate change and related public policies.

Nordhaus summarized Weitzman’s contributions by stating that he “has changed the way we think about economics and the environment.” Speaking before more than 200 assembled guests, Nordhaus went on to praise Weitzman for his impressive body of work, including his series of studies on the share economy; his research on the Soviet Union and central planning; his seminal 1974 paper, “Prices vs. Quantities,” which provided fresh insight on how regulatory policy can best be leveraged to maximize public good; and his work on so-called “fat tails” and the “dismal theorem,” which questioned the value of a standard cost-benefit analysis when conditions could result in catastrophic events, even if the probability of such events is very low.

But Nordhaus devoted much of his talk to highlighting Weitzman’s extraordinary contributions to the field of environmental economics, in particular, the economics of climate change and climate change policy. It was Weitzman’s “revolutionary” series of papers on the ideal measures of national income, Nordhaus stated, that focused early attention on the need to take the harmful impacts of pollution into account when tabulating the gross domestic product (GDP), a concept referred to as “Green GDP.”

“Our output measures do not include pollution,” said Nordhaus. “They include goods like cars and services like concerts and education, but they do not include CO2 that is pumped into the atmosphere.”

Nordhaus explained that pollution abatement measures are often blamed for causing a drag on the economy, but aren’t credited for the health and welfare benefits that they create.

“If our incomes stay the same but we are healthier, and live a year longer or ten years longer, that will not show up in the way we measure things,” Nordhaus remarked. “But we can apply these Weitzman techniques to value improvements in health and happiness.

“Those who claim that environmental regulations hurt growth are completely wrong because they are using the wrong yardstick,” Nordhaus continued. “Pollution should be in our measures of national output but it should end with a negative sign, and if we use green national output as our standard, then environmental and safety regulations have increased true economic growth substantially in recent years…For this important insight we applaud Martin Weitzman, a radially innovative spirit in economics.”

Following the keynote address by Nordhaus, Stavins welcomed fellow economists Maureen Cropper, Lawrence Goulder, Michael Greenstone, Charles Kolstad, Richard Newell, Robert Pindyck, and James Stock for a lively panel discussion. To each panelist, Stavins posed a question about a different aspect of Weitzman’s key contributions – ranging from climate change policy to biodiversity and fisheries management.

Kolstad, a senior fellow at the Stanford Institute for Economic Policy Research, lauded Weitzman’s “career of significance and importance.” Newell, the president and CEO of Resources for the Future (RFF) and a former student of Weitzman when he studied for Ph.D. in Public Policy at the Kennedy School, cited Weitzman’s “Prices vs. Quantities” paper as a “gift that keeps on giving” for economists and policy makers invested in improving regulatory policy.

Goulder, the Shuzo Nishihara Professor of Environmental and Resource Economics at Stanford University and a former colleague of Weitzman in the Harvard Department of Economics, commended Weitzman’s 1998 paper on declining discount rate profiles, noting that it has affected public policies in Denmark, France, and Norway, and the public discussion in the Netherlands, Sweden, and elsewhere. “It’s important,” Goulder stated. “It really affects decisions as to how much we should invest in infrastructure, in mitigation, and other things.”

Pindyck, the Bank of Tokyo-Mitsubishi Professor of Economics and Finance at the Sloan School of Management at MIT, cited Weitzman’s prescient 2007 paper “Subjective Expectations and Asset-Return Puzzles” for its significant influence upon the later modeling of the economics of catastrophic climate change.

Stock, the Harold Hitchings Burbank Professor of Political Economy at Harvard University, also credited Weitzman for the “tremendous influence” his ideas have had upon the formation of public policy in the United States and around the world, citing the nine-state Regional Greenhouse Gas Initiative (RGGI), and the Clean Power Plan introduced by President Obama in 2015.

Cropper commented on a unique area of Weitzman’s contributions – in the field of fisheries management, arguing that his modeling work in Iceland and elsewhere has affected thinking and discussion around the use of taxes and quotas to regulate local fishing industries. “This is another example of the use of a simple model and treatment of uncertainly that really did start a conversation among fisheries economists when it came out,” she said.

Greenstone, the Milton Friedman Professor in Economics at the University of Chicago, reflected on how Weitzman’s theoretical insights were fundamental as the foundation for sound empirical analysis. “Marty’s work is really the very best theory work,” Greenstone remarked. “It takes something you are kind of confused about, and then after you read it, you can’t understand how in the world you were confused beforehand. It just clarifies things in a way that is really beautiful.”

After the panel discussion, Weitzman thanked Nordhaus and the panelist for their comments, and offered his responses to what he had heard. This led to a spirited exchange.

Finally, Stavins presented Weitzman with a book filled with 60 testimonial letters from fellow scholars, including Harvard President Lawrence Bacow.

“When I was an undergraduate in the economics department at MIT, you were a bright and rising young star. Later, as a faculty member, I routinely assigned your papers to my environmental economics students. Your scholarship and your leadership enriched their experiences — and mine — tremendously,” Bacow wrote. “It is an honor to acknowledge your extraordinary contributions to the field, and to thank you for shining a light for all of us.”

The book also included copies of the full schedule of events hosted by the Harvard Seminar in Environmental Economics, launched by Stavins and Weitzman 26 years ago, covering 52 semesters and 400 seminars. In comments later, Stavins called Weitzman a “treasure” for Harvard University, whose “scholarship is absolutely breathtaking.”

Following the Symposium, Weitzman took several minutes to reflect on his remarkable career, recognizing that while he has pursued projects across multiple disciplines, his research would often hit dead ends.

“I'm drawn to things that are conceptually unclear, where it's not clear how you want to make your way through this maze,” he said. “It's difficult to describe a creative process, but I get some sort of an inspiration…Most of the time it's a waste of time because I can't formalize it, so I try and try and just nothing comes of it. But occasionally it clicks and since it's typically in an area that's been understudied, that's why it's so dispersed across different fields.”

Weitzman spoke proudly of his work in environmental economics, stating that he “took a decisive step in that direction a few decades ago…getting into the forefront rather than…following everything that went on.” Yet he admitted that he is not very optimistic about the current pace of efforts to combat the harmful mid- and long-term impacts of global climate change.

“It’s not merely sufficient to cut back on carbon emissions or to stabilize carbon emissions. We've more or less done that in the last few years, although it could go either way,” he said. “The stuff that does the damage is the stock of carbon dioxide. To get the stock of carbon dioxide to go down, it has almost nothing to do with stabilizing the flow. You have to get the flow down to net zero. That's what's so difficult. And the public does not realize that. Victory on the flow front doesn't translate into victory on the stock front, and that's what counts.”

As is akin to his style, Weitzman did not reveal his future plans, saying only that they remain to be determined. But certainly for those in attendance at Thursday’s symposium, there are hopes that Weitzman will continue contributing to the academic and policy discussions surrounding climate change and other critically important environmental economic issues that define our times.

Written by Doug Gavel for the Harvard Environmental Economics Program

A further account of the symposium by Professor Stavins can be found on his blog. 

See also: 2018