Day Seven: Everything You Need to Know About Global Warming in Thirteen Days

"7) The biggest cost of all from global warming is likely to be the accumulated loss of biodiversity. This features nowhere in economic cost-benefit analysis because, not surprisingly, it is hard to put a price on that which is priceless."

This is one of the greatest weaknesses of economics.  In general, when economics has trouble placing a value on something, it just assigns it a value of zero.  Nothing skews the results more than that.  In this case, biodiversity is valued at essentially zero in economic analyses, but its actual value is incalculably large.  Talk about a discrepancy!  E.O. Wilson's book, The Creation: An Appeal to Save Life on Earth may not be the best book on this topic, but it comes from one of the greatest minds to ever think about biodiversity. . .or nature in general, for that matter.

[This one of a series of daily posts I am drawing from Jeremy Grantham's Summer 2010 Investment letter.  Mr. Grantham is on the Board of Directors of GMO LLC, a global investment firm with over $100 billion under management.  Mr. Grantham takes a large, worldview perspective on investments--with an eye toward long-term trends.  He is right-on about the impact of global warming.]

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