Why your kids’ trust fund portfolio should short coastal real estate

Climate stabilization is net cheap, so humanity should buy a lot of it.  But it’s expensive gross: the costs are high. (No, Virginia, we will not all get richer than we are now conserving energy and making windmills.  If low carbon methods were cheaper, we would be using them.  We will just be a lot less poor and desperate than we are headed to be if we stay on our current course. ) It also gores some specific rich, powerful oxen (the fossil energy industry, for example), and it isn’t fair: it’s outrageous that the developing world can’t have a couple of nice fossil-fueled centuries, just because the west stole all the atmosphere’s CO2 capacity to make Europe and North America rich.

It’s worse than that, so much worse that the chances the world will achieve it or even come close seem to me overall small.  First, climate stabilization is a prisoners’ dilemma.  For any jurisdiction smaller than China, the benefits of buying it are enormously diluted because the atmosphere is well mixed and we all experience the climate.  For California citizens, for example, to invest $100 to achieve $1000 worth of climate benefits looks like a good deal, until you realize that Californians will only get about $5 of those benefits; even the whole US,  about $50.  So a hard-headed benefit cost calculation for any single nation or government faces a tremendous hit on the benefit side: the Australians James writes about are good people doing the right thing to their cost.  The hard truth is that if Californians think the rest of the world will step up and deal with climate, our best bet is to do nothing and enjoy our free-rider’s share, and if we think the rest of the world will not, our best bet is to do nothing and not be chumps; at least we’ll save the stabilization costs to spend on adaptation.

It’s also a NIMTO (“not in my term of office”), and a NIML (“not in my lifetime”) for most people of voting age.  Climate change is slow, greatly delayed from the actions that cause it, and the really big costs are decades away.  No candidate will have climate benefits to show before the next election, or the end of his term, from a vote that might make a difference.  At least in the US, we used to be willing to spend money for the benefit of future generations, but we now have (for example) national candidates who have learned, from polling and focus group research, that there are votes to be had asking seniors to throw their children and grandchildren under the retirement bus. We have (for example) adult voting cohorts happily defunding the education of their kids. The Sonny Corleones have won the argument: enlistees in WWII weren’t the greatest generation; they were “…chumps, because they risk their lives for strangers.”

I worried when we elected a senator from a coal state and from a corn state as president; Obama was the better choice overall, and the better even on environment specifically, and of course he wouldn’t be able to do anything if he lost the election touting a carbon t_x, I know. But that’s where we are: anything at all about climate in the debates from either side?

Finally, it’s big and awesome and different from anything in our lived experience.  I won’t experience much of it, but I don’t even know how to think about 160m Bangla Deshis on the hoof looking for a place to live in a very crowded neighborhood.  What will a worldwide famine, not a localized one, look like when Argentina, Brazil, the US, and Russia all have a bad crop year together? We will have a military able to defeat everyone in the world at once, but exactly how will that be useful when the southern half of Florida goes under water?

The Easter Islander who cut down the last palm tree was just obeying sound market signals of value, doing his part to optimize social welfare. Because he was not a chump or a sucker, and never did any more than he had to for other people, he was the winner, because he was the last guy with a palm tree still standing.  If his descendants had survived, no doubt they would celebrate his Randian merit and put his portrait over the fireplace.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

44 thoughts on “Why your kids’ trust fund portfolio should short coastal real estate”

  1. The hope has to be that local effects will be strong enough to provoke action by key players: smog deaths in China from coal pollution, droughts and hurricanes in the USA. That’s why I’m opposed on principle to Matthew’s adaptationist heroes. It’s mitigation or nothing. Roll on the plagues.

    Also, mitigation is getting cheaper all the time, as the Aussies are finding out.

    1. Well, here in CA it has to be about 200:1; in Australia almost 400:1. Think they’re getting that kind of B/C payoff from their climate policy?

      1. The way you break a prisoners’ dilemma is by someone going first, like the small boy in the miracle of the loaves and fishes. That can (but doesn’t always) trigger a viral phase change in neighbours from Hobbesian mistrust to Lockean confidence, and others follow. Example: German and Danish energy policy in the EU. It’s called leadership; and that’s why Obama’s lack of it on this issue is so tragic.

        The Aussies are internationalists: for reasons no doubt rooted in their colonial history, they combine assertive competitiveness (as in sport) with a certain insecurity and need to impress outsiders. The proponents of their carbon tax don’t see themselves as acting alone, but as part of a world movement which their action will accelerate. They plan to link their carbon tax to the EU emissions trading scheme; as does China, which has recently increased its 2015 solar energy target by 40% to 21GW. Can the club of activists get the USA, Brazil and India on board, and persuade the Chinese leadership – facing widespread local environmental backlash – to commit to actual carbon reductions? Far from certain, but the odds are much closer to evens than your hyper-altruistic 400:1.

        The dilemma becomes moot if mitigation, taking local (intra-state) environmental benefits into account, has nil or negligible cost under current technology. This is now the case with wind and solar energy in reasonably favourable locations.

    1. Cheaper for who?
      The folks who would pay the price for adaptation are not the same who would pay for stabilization.

      1. The gross cost of a big population displacement (and that was with total land area constant) in south Asia was pretty gross the last time it happened (in 1947).

        1. Adaptation really isn’t a choice, it’s now a forced necessity.

          You can either adapt at a premium now, and inherit a world where civilization as we know it can probably still prosper…
          (And that includes carbon taxes and Brett’s (see below) solar shades and seawalls and thorium reactors and solar solar solar.)
          Or you can adapt later at a more costly price where the world and civilization as we know it (7+ billions) is drowned in bathtub as big as the seven seas.

          So the question confronting your species is simply and starkly put:
          You can pay moderately now or severely later, which one is it going to be assholes?
          That’s your fuggin’ choices. That’s your only frickin’ choices.

    2. Adaptation isn’t cheaper than stabilization. But stabilization is global: as Michael says, everyone (or most everyone) has to do it for it to work. Adaptation is local. It can be done country by country, even, in some cases, city by city.

      For the United States, some adaptation can even be achieved by internal migration. Over the past 60-70 years, the US has seen massive migration from the north and midwest to the south and southwest, which it has absorbed fairly well. If, over the next 60-70 years, there’s an equivalent migration from the areas more severely affected by climate change to the areas more mildly affected, it’s likely that that, too, could be absorbed. The US is a mobile society: as Reagan put it, people vote with their feet.

  2. I see no hope that California is making a sensible decision to do this on its own. Nor would Heilongjiang be, nor Inner Mongolia, nor Szechwan, nor Anatolia, nor Sao Paolo, if they adopted expensive anti-climate change measures. Maybe China as a whole, but their decisions don’t really seem to be taken at the national level. Ours (USA) are designed to be, and Mike as you point out, benefits would have to be about 20 to 1 for USA national decisions to net benefit us, most of the costs we are undertaking as a nation benefit Chad and Belarus. International deals on cap & trade seem to have gone to fraud and money in someone’s pockets.

    My guess is that all the cheap-to-pump oil will be pumped, and our best bet is to do research on good alternative energy supply mechanisms and to give the research away to all who might use it, in hopes that we can make it not pay to bring coal from a mile down, or oil from under 12000 feet of water off Brazil.

  3. Our best hope is to research climate modification techniques, like orbital sunscreens, which don’t require world-wide collective action to accomplish. Basically, if everybody has to agree to do something for it to happen, it’s not happening.

    In the mean time, for God’s sake, if you really think this is serious, embrace nuclear power. It’s the only alternative to fossil fuels that’s working now, and capable of powering an industrial civilization world-wide. Unless your goal it to end industrial civilization, (I think it is for many environmental activists.) there’s no good reason to keep opposing nuclear power.

    1. I was actually following for a minute until I got to Unless your goal it to end industrial civilization, (I think it is for many environmental activists. then I realized it was all a pose.

      1. Actually Dan the pose began here: if you really think this is serious…

        David Brin has a word for these sorts.
        He calls them ostriches.
        I suggest the we differentiate the word like so: climate ostriches.
        And in Brett’s case, perhaps it might be further differentiated: Smugly certain climate ostriches.

        Brett’s pose goes like this:

        That somehow, what the laws of physics have to say about the concentration of CO2 in a planet’s atmosphere might not apply to earth’s atmosphere. (I guess that’s because the earth is “exceptional” or something like that.) But if, if, if, if… you’re stupid enough to think those physical laws might apply, why you better get up and push like hell for nuclear power because (while we can’t be certain global warming is real) we can be smugly certain nuclear power is the only real answer.

      2. The proper consideration for Brett is to ignore him. He can’t get a fact correct to save his life, and should be treated as a troll.

    2. Geo engineering brings to mind a song:
      “There was an old lady who swallowed a fly…”

      I do fear solutions that cause more problems than the solve.
      My notion is that we should avoid pumping more CO2 into the air to make any cure, whether geo-engineering, or adaptation, easier.

  4. Brett has a point – nuclear is better than the alternatives. But the others don’t cover some key affects of increasing CO2 (like ocean acidification). And cheap power means other problems – like nitrogen overload – get worse. We have to lower the total footprint, so some windback of industrial civilisation is inevitable. Of course, than does not have to mean “less civilised”, just “less industrial”.

    1. The idea of some sort of engineering solution to global warming is deeply and fundamentally wacky.

      While a large part of the engineering personality is a belief that all problems have a “rational,” technocratic solution this is not so.

      Dumping stuff into space to counter the stuff dumped into the atmosphere and oceans is not rational. More pollution does not resolve earlier pollution.

    2. And so, after denying this is the motive, you work your way right back around to insisting on deindustrializing human society. Only a smallish minority are willing to accept, let alone want, that industrial civilization be wound back. And yet, time after time, we find that environmentalists are demanding it be part of any solution, to the point where they work against any solution which wouldn’t accomplish it.

      Cheap power is not a problem, it is essential. The cost of energy is worked into everything in our society, either directly or indirectly. The cost of energy is a fundamental driver of human welfare. To demand that energy be expensive is to demand that people be poor and miserable. It’s as simple as that.

      You think cheap energy means cheap fertilizer, which means nitrogen overload? Try to do something directly about the nitrogen, instead of strangling civilization to deal with it.

        1. i wonder if brett understands the differences between voluntarily slowing down and reducing our dependency on industrialization over a 25-50 year period and being forced into a sudden deindustrialization caused by an ecological catastrophe. at 50, i may or may not live long enough to be effected by the most drastic impacts of climate change but my children and grandchildren and the students i teach will live in a world being created by today’s energy and ecological choices. brett is betting the quality of life of his child on his bet that climate change is illusory and that even if it isn’t that a short term engineering fix will save the day. i’m not willing to make that bet.

          1. I think I understand the word “voluntarily” a lot better than you, frankly, as very few people outside Mother Earth News are talking voluntary winding back of industrial society. As in, “Me first, and no coercion.”

            What I’m betting is that there are only three options on the table: Illusory, engineering fix, and disaster. And the idea that people are going to massively change their societies in the way you want, on the scale you want, is just laughably unlikely.

          2. so you’re opting for disaster. i understand that, the history of humanity has many more examples of that kind of ending.

            and i do believe that working out the kind of reductions and changes i’m talking about through our social and political institutions does justify the use of the word voluntary.

          3. btw brett, i responded to your assertion that it was i who was faiing the turing test on the gun control thread.

          4. Nav, I’ve now responded on that thread, but I’m trying to avoid commenting on threads three deep behind the current front page.

        2. so Brett, you run by my question and reply to a following query.

          You don’t get to get away with impugning the honor of folks here quite so easily.

          1. MK, I understand that, where multiple means are available, the choice of means says something about motives.

          2. Well BB, you may have thought that.
            You did not SAY that however.

            And you still assume the motive. It strikes me you are not listening to others, and only projecting your prior thoughts onto them.

          3. It seems to me that one must always to some extent infer motives, because people aren’t always upfront about them, even with themselves. Particularly when they’re asking great sacrifice of others, who might not share your motives.

            Nuclear is so clearly the answer if one wants to avoid CO2 going into the atmosphere, AND maintain an industrial civilization, that the rejection of it implies that you don’t want one, or don’t want the other. Didn’t take you very long at all to demonstrate you don’t want the second.

          4. BB,
            when you say “Nuclear is so clearly the answer …”, you are making an axiom that many others dispute.
            Even among the GW harm avoidance advocates that _approve_ of nukes, there is recognition that nuclear power is not going to be sufficient, and carries substantial risk.

            By focusing on your “The answer”, you blind yourself to the true motives of others.

          5. BB, now you are just being obtuse for the sake of argument.
            Come back to the non-spite based discussion, for our sake. You included.

  5. Michael: “No, Virginia, we will not all get richer than we are now conserving energy and making windmills. If low carbon methods were cheaper, we would be using them. We will just be a lot less poor and desperate than we are headed to be if we stay on our current course. ”

    I don’t think that this is a sound statement. We’ve put far more money into the fossil fuel industry than into renewables. What things would look like in 50 years of really pushing renewable infrastructure and technology is different from where we are now.

    And even before climate change costs are considered, the ‘cheaper’ methods are ‘cheaper’ because we subsidize them.

    1. Agreed. Certainly, the reasoning from “we are not using low carbon methods” to “low carbon methods are not cheaper,” or at least to “low carbon methods are substantially more expensive,” is not sound. There are established players with vested interests here; there’s no reason to think that we have attained a market outcome that’s efficient minus externalities.

      It also seems worth mentioning that, if not for some quirks in the Senate rules and the Republican Party’s commitment to the destruction of the governing process whenever they lose an election, the ACES bill would have established an emissions-trading program. It’s not clear that the problem is a structural prisoner’s dilemma given the facts of climate change, when the main obstacle in the US has been the actions of a crazed death cult that rejects those facts.

    2. Even before you get into climate change, fossil fuels have huge externalities that most people don’t talk about. Everything from the cost of the military required to keep sea lanes safe for shipping billions of barrels around the world (how can that possibly make sense) to health effects to the early replacement of building stock and infrastructure damaged by atmospheric acids. People are really good at not ascribing costs to their sources.

    1. I understand the moral imperative to avoid catastrophe, but the ecologist in me sees a typical population explosion and crash happening with human population, just like every other animal on earth.

  6. Won’t we be way richer, almost right away, if we get off the oil/war/particulates disease bus? And putting under-employed people to work on new-energy stuff will immediately fund healthier families that think, learn and do much better. That’s gotta be something that will make us all richer right away.

  7. When I was a kid, it used to be a hallmark of conservatism to say that it is unwise to fiddle with complex systems. Now, conservatism is all about reality denialism and orbital sunscreens and whatnot.

  8. By the by, recent Easter Island research suggests two points strongly at odds with the “cut down the last tree” narrative. First, the initial settlers did find lush palm forests, but what killed them was likely domesticated rats, who proliferated and ate the palm seed extensively, eventually preventing the trees from reproducing. Second, the islanders were actually eking a stable and adequate agricultural sustenance out of very difficult terrain at the time of European contact; http://www.amazon.com/Statues-that-Walked-Unraveling-Mystery/dp/1439150311

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