AN ELEMENTAL ECONOMIST
This
week saw the unusual spectacle of a prominent economist turned salesman. Hawking the prospect of an economic downturn on the scale of the great depression unless the world slashes greenhouse gas emissions, Sir Nicholas Stern, the UK government's adviser on the economics of climate change and development, sent a stark message to the world.
The costs of doing nothing about climate change were present and permanent, he said: “We calculate that the damages from business as usual would be equivalent to at least 5 and up to 20 per cent of consumption a year.” In contrast, the costs of removing most of the risk were 1 per cent of gross domestic product a year. “That is manageable; we can grow and be green.”
As if to reinforce the sales pitch, Tony Blair, the prime minister, added: “What the Stern review shows is how the economic benefits of strong early action easily outweigh any costs...for every ￡1 we invest now, we can save at least ￡5 and possibly much more.”
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Sir Nicholas' 600-page report made waves in many parts of the world. His photo was on the front page of the South China Morning Post; it led the television news in Hong Kong, European governments took notice, and American blogs, if not the mainstream media, dissected the simple message that doing nothing about global warming costs more than taking action.
Naturally, the report was not without its critics, including some eminent climate economists. Richard Tol, professor at Hamburg University, described the findings as “alarmist and incompetent”. Meanwhile, some US commentators accused Sir Nicholas of joining the crazy gang of environmentalists. Sir Nicholas would cheerfully concede he is part of a “crazy gang”, but this would strictly be his long-standing passion for Wimbledon Football Club, which earned that nickname in the 1980s as it rose from being a minnow to win the FA Cup in 1988. But in every other respect there is nothing crazy about Sir Nicholas' past or reputation.
Born 60 years ago, he was a brilliant mathematician who earned a first-class degree from Cambridge University. While studying at Peterhouse College, he met his wife to be, Susan, 40 years ago this Sunday. His concern for world affairs was shown by his active participation in the United Nations society at Cambridge. His talents were spotted by professor James Mirlees, now Sir James and the 1996 Nobel laureate for economics, who recalls Sir Nicholas' transition from maths to economics as one of the quickest he ever encountered. “He was bright enough that new and difficult concepts weren't burdensome,” Sir James says, adding, “he was concerned to do things that matter for the world.”
His political convictions led him into development economics. Rather than studying countries from afar, he made a point of living with the poor for long periods, such as an eight-month stint in Palanpur, a village in north India, in 1974. During a stint in China he developed a passion for green tea, cups of which still fuel him through the day.
As his career progressed, Sir Nicholas developed a reputation for efficient management, a rare talent among academic economists. In 1994 he became chief economist at the European Bank for Reconstruction and Development. Seen as a safe pair of hands he was appointed World Bank chief economist in 2000, at a time of institutional turmoil. Joseph Stiglitz, the previous incumbent and 2001 Nobel economics laureate, had “thrown all the balls into the air and created havoc”, according to a senior global economic policymaker. Sir Nicholas was quickly able to develop a good working relationship with James Wolfensohn, the then president of the bank. This was no small feat. Mr Wolfensohn has a reputation as an extremely difficult but often brilliant man, prone to shout at staff.
With such a track record of success in bringing top class economics into difficult bureaucracies, everyone thought his move to the UK Treasury in 2003
