Opinion
Oppenheimer’s project should inspire climate action urgenc
Summary
We’re in a similar race against time but this emergency differs as a challenge since both governments and markets must act
Christopher Nolan has directed a biopic on the physicist Robert J. Oppenheimer to worldwide acclaim. Oppenheimer led the famous Manhattan Project to build an atomic bomb during World War II, though he was later hounded for his political views. Here was a government project that delivered successfully despite a tight deadline. It underlines the old truth that even though markets are better when it comes to coordinating activity in complex modern economies, governments can sometimes run focused projects better than the private sector does. This is especially true when the social return on an investment is higher than the private return.
Can the success of the Manhattan Project be replicated in the case of another emergency that has to be dealt with right now under a tight deadline—climate change? The past few weeks have seen a torrent of news on deluges, heat waves and forest fires across the world. Monsoon rains have wreaked havoc in some parts of India, while some other parts are bone dry. Various measures show that this is the hottest year since climate data began being recorded on a regular basis.
Another example that is offered as a model for the green transition is the Apollo Programme, the successful US government initiative to send astronauts into space during the 1960s—and more ambitiously to put humans on the moon before the Soviet Union could. The US National Aeronautics and Space Administration (Nasa) received an equivalent of 0.7% of GDP in the 1960s and employed 400,000 people at the height of the space race.
A new paper by Shawn Kantor of Florida State University and Alexander T. Whalley of University of Calgary examines the impact of the US space programme on the country’s economy. The two economists have used declassified documents to identify which types of technologies were being backed by government assistance after 1958, the year that the space race became a reality after the Soviet Union successfully launched Sputnik. They then trawled through patent records to find out which geographical areas in the US specialized in these technologies prior to 1958.
Among the interesting findings is that productivity grew in US counties that already had the relevant technology capabilities. There is also evidence of local productivity spillovers to other firms in the county. But they also find more limited impact on aggregate productivity across the US economy when compared to the impact of more traditional fiscal spending. One broad lesson from this is that targeted sectoral spending in the pursuit of specific geopolitical or climate goals may have a positive impact on productivity in those specific sectors; the evidence as far as the entire economy is concerned is less clear.
This naturally leads us to the question of whether lessons from the Manhattan Project and Apollo programme are relevant for the ongoing green transition. The common thread running through all three moments is that there is a massive task to be completed while racing against time. A big push is needed. However, there is also an important difference between the challenges of building an atomic bomb and sending people into space on one hand, and tackling climate change on the other.
The government was the sole user of the new technology in the former two cases, even though various parts of the production process had to be farmed out to different companies, universities and research laboratories. The green transition involves a far wider arc of change, since it will involve the adoption of new technologies by almost every part of society: firms, cities, citizens. The government is no longer the only potential user of the new technology. In other words, the challenge of climate action arises on both the demand side and supply side.
In more practical terms, the green transition will involve aiming investments at new areas and a combination of subsidies and a carbon tax to incentivize technology adoption—actions for both the state and market to take. The stock of capital across the world may have to be replaced faster than the normal rates of depreciation may imply. Such a huge mobilization of resources in relatively quick time will also come with attended risks, including the ever-present question of the ability of governments to pick technologies through industrial policy better than markets can.
The current challenge of the green transition is unlike the atomic bomb project in important respects. The cinematic parallel is not the biopic Oppenheimer, but another movie directed by Nolan. Interstellar opens with a stark depiction of the ecological collapse of our planet. Famine looms over the land. It is a climate shock. Economist Tyler Cowen memorably described the movie in a blog post he wrote in 2014: “A negative productivity shock hits the global economy, and various bad consequences ensue, including the idea trap. Behavioural factors exacerbate the course of events. Some degree of mean reversion ensues, to specify that degree would involve spoilers."
The protagonist of Interstellar has to leave our planet to search for a new home for the human race, with lots of the time-bending and mind-bending turns that Nolan loves to depict. The current state of climate change is unlikely to lead such dramatic quests, but the urgency of the challenge cannot be denied.
Niranjan Rajadhyaksha is executive director at Artha India Research Advisors, and a member of the academic advisory board of the Meghnad Desai Academy of Economics.
