The approaching storm (Stern Report, The Guardian UK)

[jpak]

http://business.guardian.co.uk/economicdispatch/story/0,,1936049,00.html

The climate report may have politicians clamouring to alter policy but economists have seen it coming for years, says William Keegan

The much-heralded Stern review on the economics of climate change is an attempt to transform microeconomics into macroconomics.

Whereas macroeconomics deals with policies affecting the entire economy, and connections between economies, microeconomics, as the very name implies, is the study of parts of the economy - for example the economics of the firm, of housing, of education, and of what economists call labour and product markets.

Another typical example of microeconomics is the fashionable area of road pricing, when governments and local authorities levy parking and congestion charges with the twin aims of deterring traffic jams and raising revenue.

Traditionally there is a balance to be struck: if governments are too successful at deterring certain types of consumption and behaviour, they will be short of revenue. A typical example is the taxation of alcohol and smoking: it is meant to deter damage to our health ( or drunken behavior) but it also brings in tidy sums of taxpayers money.

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