What Should We Really Be Doing About Global Warming? A Freakonomics Quorum

We have blogged occasionally about different pieces of the global-warming puzzle (see here, here, and here), and we touched on the subject briefly in a New York Times Magazine column. It is an extraordinarily interesting issue, to say nothing of its importance and complexity, in part because there are so many foundational economic principles at play: not just supply and demand, but the presence of externalities, unintended consequences, etc. We will address a couple of those issues in our next Magazine column, which comes out this weekend. (BTW, all of our earlier Times columns are now available for free here.)

In the meantime, we thought it would be a good idea to host a Freakonomics Quorum in which we asked a few smart people a very straightforward two-part question: What should the U.S. government be doing about global warming, and what should individuals be doing? Here are their answers; many thanks for their time and thoughtfulness.

Ben Ho, an assistant professor of economics at Cornell’s Johnson Graduate School of Management and former energy and transportation economist for the White House Council of Economic Advisers:

Two crucial points are regularly overlooked in the debate about climate change:

1. Not all responses are equally cost effective.

2. Only a global response has any chance of stabilizing carbon in the atmosphere.

It should be obvious that for any problem, some solutions are more effective than others. Despite what some fearmongers may have you believe, it is not the case that anything we do to reduce greenhouse gas emissions is worth the cost. We could, for example, ban all oil and coal use worldwide. That would halt emissions, but few would believe the resulting economic fallout in terms of poverty and starvation to be justified. Economists have estimated that any policy intervention that costs more than about one penny per pound of carbon dioxide saved is probably not cost effective. (As a point of comparison, burning a gallon of gasoline emits about 20 lbs. of carbon dioxide.) If saving a gallon of gasoline will cost you more than 20 cents in time or effort, there are better uses of your time that would do more to combat global warming. Policy makers should heed the same guideline.

Another crucial point on which most experts will agree is that the U.S. will account for only a tiny fraction of emissions in 2050. Chinese greenhouse gas emissions have already surpassed those of the U.S. Recent E.P.A. estimates suggest that in order for global carbon dioxide emissions to stabilize, three quarters of future reductions would have to come from developing countries like China and India. Many advocates argue that a carbon tax or carbon cap in the U.S. would lend the U.S. the moral authority to persuade the rest of the world to follow. However, history has shown that moral authority alone is insufficient to cause countries like China to act against their own interests.

One policy that is potentially both cost-effective and global in its impact is the advancement of technology. Nearly all emissions of greenhouse gas come from either oil for transportation or coal and natural gas for heat and electricity. As an energy economist for the White House Council of Economic Advisers, I was exposed to hundreds of magical inventions for harnessing renewable energy. One firm has developed algae that can transform carbon dioxide from smoke stacks into ethanol for your car. Another produces electric cars that get the equivalent of 100 miles per gallon but drive like sports cars. More exotically, inventors have imagined generators that harness electricity from the aurora borealis or from tropical storms. Some are already in limited production, but none are yet cost-competitive for global deployment.

While none of these technologies are projected to significantly replace fossil fuels any time soon, forecasters are notoriously myopic when it comes to revolutionary shifts. While hoping for innovation may be an improbable dream, it is no more improbable than hoping that diplomats will be able to convince other countries to slow their development by voluntarily curtailing emissions. On the other hand, further innovations could make renewable power so cheap that China, India, and the rest of the world would find renewable fuels more attractive than fossil.

While my exposure in government to the multitude of energy innovations has heartened me, the same experience has also taught me that politicians and bureaucrats are not suited to judge which technology among the hundreds is best. The proper role of government is not to pick technologies, but to create the right market environment for innovation to flourish. Thus far, the U.S. has fostered innovation impressively. Going forward, the U.S. has to maintain the right mix of research centers, smart regulation, education, targeted taxes, and targeted subsidies to make sure our engine of innovation does not falter.

Colin Camerer, professor of business economics at Caltech and a leading light in behavioral economics and neuroeconomics:

Government? Climate warming is certainly the mother of all externalities, both global and intergenerational. It is also a perfect storm of behavioral economics phenomena: the culprit has no face. (Perhaps a feverish, angry Mother Nature on Oprah would help.) Loss aversion and habit formation? Nobody wants to give up anything. The change, if it’s occurring, is slow and invisible. (Think frogs dying in slowly boiling water, except it’s us ribbitting.) Judgments of reasonable sacrifice are instinctively self-serving: rich people have earned their Hummers; poor countries grasping the bottom rung want their one-channel MTV.

One argument which I have found surprisingly absent is the apocalyptic version of Pascal’s wager: if there is a genuine strong change, we should move swiftly to combat it, and if there isn’t, swift movement to cut carbons would not be so bad (it could spur innovation, etc.). If you think the evidence is unclear, that’s not an argument to do nothing unless the evidence will become clearer soon — which it won’t. As such, your view is still an argument for doing something nowm because the cost of a false alarm is small and the cost of a missed threat is large. Big reforms are like an insurance policy: you pay insurance for peace of mind, but you also hope your money is wasted, and there is a small irreversibility from having sacrificed up front.

Voluntary demand-side reduction at a large international scale won’t work. Besides the problem of free-riding, people (and countries) who are helpfully cutting back get annoyed when others aren’t. You see this clearly in lab experiments on contribution to public goods in “commons dilemmas” — people help out at first, then get mad that others aren’t helping, and express their anger by not helping. One useful tool is a serious carbon tax (choose your favorite number, double it, hope for something in between, and find a politically popular way to earmark some of the revenue to R&D that won’t be supplied privately).

Even better is an international permit trading system (and yes, it should be international, since local systems won’t equalize the cost across countries). Get past the moral indignation of issuing licenses to pollute. Firms and governments that will pollute will do so whether you like it or not, but at least a trading system rewards the good guys. Trade-able permits also put a sharp price on the value of reducing carbon, which is a good way to monetize the valuation of carbon-reducing technology, and hence to make the value of innovation clear and encourage it.

Individuals? If you feel great about reducing your own carbon footprint, please do. But unless you are a symbolic individual whose behavior influences others through a newsy social process — thanks, Brad Pitt — yours is a small contribution. Do that, but also read the news, educate your neighbors, crusade, organize, and vote.

Adam Grosser, a general partner at the venture capital firm Foundation Capital:

The U.S. government has the opportunity and challenge to dramatically recast its role in the energy consumption life cycle. Two major roles for leadership are quite obvious — one short-term, and one long-term. (Sadly, as we all are painfully aware, motivating legislators to commit to a national goal longer than a single election term is ferociously difficult.)

In the near-term, the government needs to mandate conservation targets, and then assist the population in successfully reaching them. For example, according to the Department of Energy, up to 30 percent of America’s additional electricity needs for the next decade can be met through advanced conservation techniques such as Automatic Metering Infrastructure or Demand Response Programs. More progressive countries such as Canada have legislated that these available technologies be deployed in less than two years.

More importantly, the government has a moral responsibility to dramatically increase the funding of basic research that will lead, over some period of decades or centuries, to fundamental changes in primary energy generation. Private industry can only afford to innovate at a scale or time frame that will lead to incremental change — unless someone is hugely lucky or un-statistically insightful. It is the purview of the Federal government to exert leverage against monumental and seemingly intractable challenges.

At the individual level, the most important activity is to be critical and observant. Ask a lot of questions: Do I need to drive to the store for a lemon? Do I need to have all the lights on in rooms where I’m not? Can the kids ride their bike to soccer? Become educated: Is your primary dwelling as efficient as it can be? Am I driving a vehicle that demonstrates my commitment to efficiency? Is solar an option? Can I better understand my family’s personal energy profile? Educate your kids. It’s a seemingly intractable problem, and it will take several generations to fix this mess. It’s really important that your three-year-old is energy conscious and aware. We’ve been profligate — and can only repent so much. It will be up to youth to innovate and atone for our consumption.

Jason Pontin, editor and publisher of the M.I.T.-owned Technology Review:

I don’t have very much to say about what individuals can do about climate change; indeed, I am skeptical that individuals can do very much by themselves.

Carbon dioxide emissions, which are responsible for anthropogenic climate change, are what economists call a negative externality — that is, a harm done when the parties to some transaction do not bear its full costs, and a socially undesirable good is overproduced.

Put more simply: until carbon dioxide has a cost, it will always be cheaper for coal companies to emit it than to capture it.

What can we do? Negative externalities can be addressed only by governments, through policies and international agreements. But what policies would best support a long-term energy strategy is a topic much debated by environmental economists. Limits on carbon dioxide emissions have disadvantages, even if supplemented with a system for trading emission credits. Such regulations are inflexible and often technologically ill-conceived, and they offer energy producers little incentive to reduce emissions below the levels allowed. So far, they have not worked very well in Europe.

An attractive alternative is a Pigovian tax, in which policymakers impose a price on a negative externality. Such a tax would create a cost for carbon dioxide where none existed, and so provide energy producers with an incentive to reduce emissions. Pigovian taxes have been used to reduce pollutants and discourage “sinful” behaviors like smoking, but they have one obvious disadvantage: because there is no exact mechanism for valuing a negative externality, it is possible to tax an undesirable good so much that levels fall below what is socially optimal. (After all, we will need carbon dioxide-emitting energy sources for the foreseeable future.) Still, Pigovian taxes on carbon dioxide emissions would have signal advantages over any alternatives: they would respond to changes in the production costs or price of energy, and they would generate government revenues.

The details of an international energy strategy are all still to be determined. But we have the means to save our civilization. As for what individuals can do to forestall climate change, the answer is simple: they should demand that their governments put some price on carbon dioxide. Oh, and they should consume less stuff.

Graham Hill, founder and CEO of Treehugger.com, and his TreeHugger team:

TreeHugger would propose that the government not look for a silver bullet, but rather silver buckshot. A successful ecosystem is one in which flora and fauna evolve with millions of different strategies to pass their genes onwards, achieving healthy competition and an overall balance.

We need to take a similar approach with global warming, and work against the human tendency for large, one-size-fits-all, Hail Mary approaches. Rather, we need to create the right conditions for a wide variety of locally adapted solutions to emerge, even if we can’t know in advance what the most successful ones will be.

People often talk about saving the planet. But really, the planet will be just fine without us, and the issue is more whether our species will be smart enough to survive the climactic and biological changes we are wreaking on ecosystems. A successful virus needs a host to be able to replicate its genes. Humanity is risking killing the golden goose, and therefore risking its chances for long-term survival.

At TreeHugger, we do not claim to have a perfect understanding of the political and financial systems that govern our world, but we suggest that the following rules of the road would help us get ourselves out of this predicament.

In short, incentivize the good, disincentivize the bad, and make the important metrics extremely visible. This will align people’s self-interests with those of nature, and instead of constantly asking people to pay more and sacrifice to do the right thing, even those who don’t care will make the right choices because that will be what is less expensive and more convenient.

1. Carrot.

Create Opportunity for the Good: the government needs to help jumpstart various industries by making it appealing for them to do so. We need to incentivize R&D in many areas such as renewable energy and transportation, high efficiency buildings, less impactful agriculture, energy conservation technologies, and many more. This would only be fair since the government has helped the fossil fuel industry at its beginning.

Make the Good Cool: social mores are critical in changing behavior. In the 1970s, it was considered acceptable to litter; now it isn’t. Why? Fines, great public service announcements, and the fact that people could see and/or were educated about the declining state of the environment. Programs that help to highlight heroes in this area and promote respect for people that live greener than others should be supported. We might even propose an Apollo-type program to rally people around an inspiring common goal.

2. Stick.

Make the Bad Cost More: one of the problems with our current system is that the true costs to humanity are not built into the pricing of things like gasoline. We need to “internalize” those costs back into the market system to disincentivize consumers and corporations from consuming and investing in environmentally degrading technologies, fuels and habits. In the short term, the bare minimum is to stop subsidizing harmful practices.

Make the Bad Uncool: the government should support efforts to cause more and more environmentally negative actions to be looked down upon. In the same way that someone who litters on the street or in a park is looked down upon or confronted, we need things like private jets, gas-guzzling cars, monster homes, wasteful companies etc., to be shunned.

3. Metrics.

We’d also propose that metrics are very important. In management they say, “what gets measured, gets done,” and we support this idea. We believe that putting a major focus on metrics such as carbon emission levels and who is helping and who is hurting could help galvanize the movement. Imagine if all media would regularly report on our recent carbon emissions and how we are doing according to a master plan, as well as recent successes and failures.

What should individuals be doing? This is a more difficult question, as it depends a lot on your specific situation. In the same vein as above, here are some suggested rules for the road:

Understand the Landscape: take the time to use a carbon calculator and understand where your big impacts are such that you can be strategic about where you place your efforts. Turning that business trip into a few conference calls may make a bigger difference than recycling for a year.

Send a Message to Business and Government: vote with your dollars by researching the best environmental option for as many purchases of products or services as you make (after concluding that you actually need to make the purchase). Look for sustainable organic food and other consumer items that at least are trying to have a smaller carbon footprint and are moving the needle in the right direction. Use your consumer voice to let businesses know that you want environmental products and services.

Small is Sexy: as a general rule, going small will be good for the environment and likely your pocketbook. Think small cars, small houses, products and packaging made with less materials.

Know your Real Needs: too many of us rarely stop to think about what we really need, and we end up making wasteful choices that are also more costly. If you haul heavy loads once or twice a year, why drive a big truck the remaining 364 days? Why not rent or borrow when you need it? The beauty is that once you cut the things you don’t need out of your life, you realize that maybe you don’t need such a big house, and you have more money left over to spend on organic food, high efficiency appliances, solar panels, etc.

Keep Resources in Closed Loops: many projections show the future Earth’s population stabilizing at around 10 billion people. With that many of us, we can’t afford to single-use resources. We need to recycle materials and compost biological matter. As individuals, we need to reduce as much as possible what we send to the landfill, and as a society we need to move toward designing everything with disassembly and recycling in mind.

Create Community, Share Information: everybody likes clean air, clean water, clean soil and a stable climate. When people are informed about the issues and know that solutions exist, they are likely to take positive action. Always keep learning, share what you know with friends, and consider joining local organizations, national movements or online communities. Climate change can’t be solved with a top-down approach only, so the more people join in, the closer we get to the green tipping point.


Will

This panic is laughable. Nobody brings up the point that the increase in CO2 is a result of increase in temperature. It's not the other way around as Al Gore and other fake scientists will have you believe. Increases in global levels of CO2 does not cause increase in temperature! Icreases in global temperature cause in increase in C02.

I fear what these types of posts do to increase the willingness of the public to destroy the backbone of our powerful economy based solely on inconclusive evidence.

Stan Preston

So let me get this straight. Earth's biosphere has been depositing carbon deep into the lithosphere for 500 million years, making the Earth's climate gradually cooler and less productive. During the last 3 million years, there have been cycles of ice ages with increasing severity. We are presently in the lull between two of those ice ages, the return of which woudl be far more catastrophic to human societies than an asteroid impact. Yet, we have discovered technology allowing us to warm the planet, increase its biological productivity, and possibly stave off the coming of the ice.

And we are arguing about how to save ourselves from this bright future.

Rita: Lovely Meter Maid

Everything I've just read makes me want to live in the biggest house I can find and drive the most appallingly, gas-guzzling atrocity of a Hummer I can get my hands on.

Fortunately, sweet reason prevails over my foolish, emotional reaction of childish immaturity, because I realize something in all this that Really matters to me:

there is No way in hell I can afford a huge home and a big, gas-guzzling Hummer.

However, I Can turn off the water when I brush my teeth and take extremely quick, timed showers (thankyou, Cate Blanchett and Jennifer Aniston).
But we can do more: give up showering and teeth brushing completely. You will look and smell appalling, but if that's what needs to be done...

I am concerned about global warming, but I think I'm also realistic: big business is going to have to feel the pain in a very real way for anything truly effective to be done in terms of the pollution and rampant over development which are harming our world. Profit is the motive beyond any other concern, at this point.

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Cliff

In the spirit of NNT's Black Swan, we should question whether people creating vast models that claim to predict the future especially when alarmist claims result in future funding might be significantly overstated. Climatology is a science likely to be full of huge errors.

frankenduf

I seriously don't understand why we don't have electric cars as an option- the very first cars were electric!- and with today's technology, as Mr. Ho points out, the efficiency is on a level with oil- why not just subsidize the mass production, which will also help US cos compete with foreign?- I mean, whoever makes the best electric car will make a fortune in the long term, no?- am I crazy, or will Moose and Rocko from GM show me where my logic needs fixin'?

Mike Roddy

First, people should disregard the first two comment posts. They most likely were financed by Richard Scialfe or the American Enterprise Institute. Reputable climatologists and geophysicists, as well as policy analysts, would not even take these posters seriously.

There is a partial global warming solution available now that would have more impact than requiring that every new car purchase next year be a hybrid. It would be to disallow wood two by four construction of housing, causing a switch to light gauge steel studs for structural support.

The US currently consumes 27% of the earth's wood products, in spite of having only 2% of the planet's woody biomass. We are clearcutting unsustainably to make up the difference, and over half of the product goes to house construction. IPCC calculates the annual burden of deforestation worldwide at 20%; the Stern Report figures 30%. By immediately slowing deforestation, and making industrial clearcuts illegal, trees will grow larger, sequestering substantially more carbon even in the first year of this program. Secondary climate impacts of industrial logging are creation of hot microclimates, changes in cloud patterns, and ongoing CO2 decay of wood products sent to the marketplace. This is all well documented by science; the figures have a significant range, but the basics are not in dispute.

Requiring auto energy efficiency, by contrast, will take many years to take effect due to the many inefficient cars already on the road.

A long term benefit to halting wood construction would be making houses that are far more durable, reducing the need to keep repeating the huge resource investment in building housing.

It's true that steel production overall requires slightly more embodied energy than wood per unit, but this is reversed for 100% recycled steel, which is 60% of the market: embodied energy is 4% less than wood according to a timber industry study, 20% less according to the Canadian Sheet Steel Institute.

All of this information is not well disseminated in this country, due to the influence of the American timber industry.

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Mike Scott

Your panellists fail to note that a carbon tax should be capable of being negative -- if you're taxed on taking CO2 out of the ground and releasing it into the atmosphere, you should be paid to take CO2 out of the atmosphere and put it into the ground.

Cliff

Frank,

I don't think anyone took the electric car seriously until the hybrid. Before the hybrid, the electric car was not a popular idea, because consumers always thought what will happen those couple days a year I drive to grandma's house or I switch to a job that requires a longer commute. Will I be stuck on the side of the highway? Those worries plague consumers.

When the hybrid came out people realized that if you include a small gasoline or diesel generator on an electric car, that you can recharge it from home most of the time, but those few times you go on a trip it can use regular fuel too.

So soon you'll see plenty of plug-in hybrids.

kevin

so, i'm supposed to believe two guys named Will and Stan instead of "overwhelming global scientific consensus"?

do you guys just troll blogs for global warming posts and attempt to debunk legitimate science?

frontfloat

Great quorum. Great thinking. Avoiding the "yeah buts" raised in other comment as well as the Petition Project, I think of a comment made on CNBC's Squawkbox by a guest hosting CEO - the truth about cause global warming is irrelevant. We now need to figure out how to adapt to the conventional wisdom and make money from it.

Neema

I find it quite funny that Colin Camerer, an economist, says that individual efforts to reduce carbon emissions are "small contributions," but he encourages people to vote. Voting is the definition of a small contribution (miniscule is more like it), as it is EXTREMELY unlikely that the election would be decided by one vote.

Will

I'd recommend that everybody checkout the documentary, "The Great Global Warming Swindle." It's up on Youtube in 8 different segments.

It goes a long way to discredit most of the so-called evidence out there today. The movie interviews a lot of leading climate scientists at major US, Canadian, and European universities.

The doc also shows how certain groups stand to profit enormously from global warming hysteria and will do anything to prop up the fake science that will ensure them future grants, profits, and media exposure down the road.

theo

I don't know even a sizable portion of the research on global warming. I don't know if it's a problem or not. I don't know what reasearch to rely on and what research to mistrust. I hear conflicting statements and viewpoints on our enviornment problems and solutions regularly, and I'm honest enough to say that I really just don't know which, if any, of the viewpoints I believe.

I do know a few things though.

1) Numbers, graphs, statistics rarely mean anything. With a large data-set, a relatively smart person can make his research say whatever he wants. A very intelligent man can present it in such a way that it sways the opinions of Millions. As a result, I have a natural distrust for statistical 'proofs' of any variety.

2) And this is the important one: Humankind is egotistical, arrogant, and often downright stupid. We have the privlege of believing that it's our right, and oftentimes our responsibility to change the world we live in to suit our needs. In answer to this arrogance we accept blame that may not be ours, and responsibility that often isn't ours.

To all the enviornmentalists out there who are trying to 'fix' things, and particularly to the ones who support any single, radical change of activity: Sit down and shut up. I do not believe there is a single person or group of people on this planet who even begin to understand the vast complexities and inter-related cycles of our global environment. If you think you do, you're either very arrogant, or a simpleton. It is suicide to attempt to make major integral environmental changes to a system that you don't understand. Would you condone a surgeon who operates on the heart without understanding the rest of the cardiovascular system?

We don't understand the system, we don't understand the true impact of any of our actions. Without understanding we are children playing with the ecology of the world, and playing with very big and dangerous toys.

I want cleaner energy to. I do what I can to limit my impact on the ecology. I support recycling and health-driven activities. I think everyone should. but until we really know what it is we're doing, I think we all need to back away from the big World-Fixer-2000 (beta) machines and focus on a) understanding the true picture, and b) making a difference in our own lives and ways.

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Anonymous

The tax on carbon emission is a perfect method on many fronts. 1) It will encourage people to use less carbon-emitting energy, 2) It will encourage investment in non-carbon emitting energy technologies and sources, 3) It will reduce the need for other taxes. If implemented in a predictable, gradual fashion, say over the course of 20 years, it can be largely accommodated as people make significant energy related decision over that period -- they will buy more efficient cars and houses, change their usage habits and invest in alternative non-carbon energy sources. And, perhaps best of all, it will ultimately reduce the amount of money we send to the guys in the middle east who want to wipe us out.

Stan Preston

Re: comment 9

I completely accept the "consensus" that global warming is happening, that humans are causing it, and that if we wanted to badly enough we could stop it.

However, I do not know of anybody who has seriously tested the hypothesis that the current rate of warming is a *bad thing*. Sure, it will have bad effects on some people, and probably even worse effects on some other species, which will become extinct. But the effects of another glaciation would be many, many times worse. We don't know how to predict when the ice will return, but we have good evidence for decade-scale climate shifts during the last glaciation, so it might be rapid.

We know that the growing population will absolutely be insupportable in the case of a slight global *cooling*. It seems to me that continued *warming* is absolutely safer.

Rob

Neema,
While it is true that voting is likely to not have any impact on the outcome of an election, that does not necessarily mean that voting is not worthwhile (even when voting for a sure loser). Many other benefits may arise from voting. For instance, should a small but significant portion of voters cast ballots for the Green Party, policymakers may take notice. Likewise, other citizens may take the Green Party and its policies more seriously.

From a strict rational choice perspective a citizen should rarely, if ever, vote. However, many people obviously do not adhere to such a perspective (as so many people do vote). Are people simply naive, and don't realize that the probability their vote will change an electoral outcome is extremely small or do people see benefits of voting outside of electoral outcomes?

I agree that it is surprising to see such an argument from an economist, but I believe that his encouragement for us to vote is warranted.

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Evan

At the University of Chicago we have a little slogan: 'That's all well and good in practice, but how does it work in theory?'

Yeah, I think it is pretty stupid too. But it seems to me that when theories and practices evolve simultaneously (i.e. the last 100 years of supposed correlative human impact climate change), we can economize on the practice or invest in the theory.

Either way, I think the littering anecdote is helpful; there is nothing like relentless legislation to proselytize my self-interest. That being said, I feel like my generation needs a space race; we're bored! Give us a challenge! (And lots of grant money, of course.)

David

> If saving a gallon of gasoline will cost
> you more than 20 cents in time or effort,
> there are better uses of your time that
> would do more to combat global warming.

That presumes that I would and could find those better uses and do them instead.

Not quite the slam dunk one would think....

Not That You Really Care About Facts

Some climate scientists believe that global warming will actually wind up accelerating the next Ice Age, at least for Europe, by shutting off the Gulf Stream.

Steve

Never trust a projection that goes more than five years out.

The reality is that things happen to confound even our best predictions.

Global warming, the Social Security "Crisis", and all these similar doomsday scenarios based on long-term projections all have about as much chance of being accurate as any of the predictions that someone in 1960 might have made about what the world would look like today.

I guess all this stuff is just an indication that we're living in a golden age - there just aren't enough big problems for us to worry about today, so we have to turn our attention to fictional future ones based on extrapolation of current trends.