Right in the Short Run

Yes, says Alex Tabarrok:

Here’s one idea which has got me thinking. In the debate over the economics of global warming the correct discount rate to apply to future generations is a key variable with those arguing that we should do something now, implicitly (and explicitly) arguing for a low discount rate. But if we count future generations highly we ought also to be in favor of reforming social security. Investing social security in the stock market “royally screws” current retirees but increasings the savings rate which will be benefit future generations. Thus, a low discount rate ought to weigh in favor of doing something about global warming and investing social security funds in the stock market. Not many people come out consistent on these grounds (I think Brad DeLong is one of the few.) I know, I don’t but Landsburg has got me thinking.

This is an interesting way to look at things. Some responses:

1. We should choose the reform that, on the margin, provides the most intergenerational benefit. Where global warming falls in this regard, I do not know, but Social Security is clearly swamped by Medicare in its long run shortfall.
2. Social Security reform only benefits current and future Americans, while fighting global warming benefits everyone.
3. There is, as Martin Weitzman calls it, a “left tail that carries most of the weight of expected marginal utility” to global warming outcomes in the absence of reform. We don’t know just how bad a world without global warming reforms will be in a century, but it could be very bad indeed. The distribution of marginal utility from an unreformed Social Security system is very tight and not particularly negative.
4. As for shirking on promises made to current Social Security recipients by investing cash that was destined for them into the stock market, then paying it out to future generations: doing so would royally screw anyone who was counting on Social Security for retirement. Future generations would not forget this sudden change, and would have to discount their SS payments by the likelihood of being screwed out of them — if it happened once it can happen again! This dynamic effect could swamp the benefit of screwing the current generation.

I believe reason 3 is why Tabarrok thinks Brad Delong is consistent. Check out Delong’s post, in which he reviews Martin Weitzman’s article.