In my view, the entire premise of this article is wrong. It takes, as an assumption that GDP is a good measure of human well-being. And furthermore, that there is a fixed amount of it -- that if we "spend" a certain amount of GDP to mitigate global warming, then we will be that much poorer. Both of these are so completely wrong that it is a wonder that Mr Lomborg can write this stuff without embarrassment.



We have known for a long, long time that GDP and similar economic measures are a very poor basis for public decisions. E.F. Schumacher wrote eloquently about this in the early '70s. (Small Is Beautiful, 1973). In example after example he showed that economics gives you the wrong answer. But we don't need Schumacher to understand this. Consider: When some idiotic banker leverages his bank to the max, and then drives it over a cliff into bankruptcy, all of those bad investments are *positive* contributions to GDP. When the Federal government then bails out that bank, that is a further *positive* contribution to GDP. Those contributions will be numerically huge compared with ordinary folks producing real goods and services for one another -- every time. So, a policy maker who is trying to maximize GDP will ALWAYS favor those idiotic but huge contributions over real people doing real stuff. Let me summarize: GDP maximization gives you the wrong answer -- every time.



As to the second point, consider our current situation: almost every nation in the world is currently below full employment. Nor is capital "fully employed" in these countries. This means that each of those national economies has idle capacity that could produce more goods and services. Let's suppose that we "spend" 5% of GDP to produce new green energy products. That means that GDP just grew by 5%. The labor and capital that went into those new products was otherwise idle. So, there is no "crowding out". But wait, there is more! Almost everyone (i.e., even those dinosaurs at the IMF) now recognize that in our current situation the economic multiplier is much greater than one -- probably closer to 1.5. That means that our 5% investment in green products actually increases GDP by 7 or 8%. My point with the GDP arithmetic is really simple: all of this talk about "spending" some percent of GDP is just nonsense, because as you make such investments the underlying base from which the % is computed can be *caused* to shift dramatically -- by amounts that are sometimes larger than the investment.



To make an analogy, suppose you had a bank account containing $1000. And suppose that you must decide whether to withdraw $100 for some purpose. However, this is a strange bank. After withdrawing $100, your balance is now $1150. With regard to green energy investment, we are in an analogous situation.



And, by the way, notice that my analysis does not depend on the fact that the investment is in green energy. Even really stupid societal investments (in our current situation) will have a multiplier greater than one.

