Climatopolis Revisited

Perhaps thanks to Andy’s nudge, some of the themes of my Climatopolis book are now being discussed in Business Week and Harvard Business Review’s Blog just posted my piece here.   I was disappointed when my 2010 book focused on free market solutions to climate change adaptation made everyone nuts but the big themes of the book are holding up strong.  Will well meaning national government help to build more robust and resilient coastal cities?  Or does moral hazard lurk?   In a world where the climate is changing, how do we incentivize people to make “better” choices for themselves and for society?   Having more “skin in the game” would be one nudge but there are certainly others that need to be discovered and implemented.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

12 thoughts on “Climatopolis Revisited”

  1. I suggested on the last thread that I don’t find the whole moral hazard argument compelling. Are New Yorkers making unwise decisions to stay in the area because they don’t bear the full cost of climate change-induced disasters? Well, maybe. But aren’t South Dakotans making unwise decisions about their behavior because they don’t bear the costs of theose decisions as well? Moral hazard for thee but not for me? The assumption you operate on, that it’s all New York’s fault, is just wrong.

    The city is where it is. Moving it isn’t particularly practical, so it could easily be that NY, and other areas, need to be fortified or made more robust, or whatever you call it. But I see no good argument why the costs should be borne locally. Tell some of those red-state Senators that taxes are going up to protect New York from their climate change stupidity and maybe we’ll change a few minds.

    And by the way, do you really think the big problem here is that lots people in NY, or NJ, are sitting around saying, “We’re not going to spend a lot to protect ourselves, because FEMA will come clean up if there’s a storm?” Maybe ten people are, but I’d like to see actual evidence beyond textbook models that this is a major issue in this case. We’re not talking about property damage to deserted and unduly cheaply insured vacation homes. We are talking about the possibility of personal injury or death, and destruction of permanent homes and livelihoods, and huge property losses.

  2. When you throw around junk like “free market solutions” you might as well be the Heritage Foundation in the 1990s. Your dumb microeconomics is going nowhere. If you want to save the climate get familiar with leftist political action.

    1. Please refrain from introducing your own meaningless “junk” to these comment threads. If you can substantively refute Mr. Kahn’s positions, please do so. Otherwise, I suggest you do as I do and just read those who know what they’re talking about. You might learn something about a) the subject in question, and b) the structure and function of rational discourse.

      1. You think Kahn deserves better? In this very post he dismisses his critics as “nuts”, and at this point doesn’t post anything except links, self-promotion, and suggestive questions, because he knows if he posts anything more substantive he would get torn apart like he used to.

        1. IIRC, Kahn started here with an example of ‘adaptation’, where the costs were not counted. Not good for an economist.

  3. I’m not sure just how much more skin people can have in the game. This sounds a lot like the days when people pontificated that making medical care cheaper would lead people to overuse it, because it’s such fun to be in a hospital or a doctor’s office.

    What would be interesting would be some kind of realignment of longterm incentives. For example, a decision to stop insuring or protecting certain coastal areas should be accompanied by a clawback of the net present value of losses from the original developers and their successors.

  4. The opening lede of “Climatopolis: How will climate change impact urbanites and their cities?”

    Without being overly dramatic, climate change is coming. The concentration of carbon dioxide in the Earth’s atmosphere is approximately 390 parts per million by volume as of 2010, and rising by about 1.9 parts per million per year (Wikipedia 2010). Recent efforts at the December 2009 Copenhagen Climate Conference and in the US Senate during the summer of 2010 have failed to overcome the fundamental free rider problem – no one individual or nation has an incentive to unilaterally reduce emissions.

    “No one nation has an incentive to unilaterally reduce emissions” ???
    You make want to rework that founding premise:

    •Saudi Arabia reveals plans to be powered entirely by renewable energy:

    •The Great German Energy Experiment:

    •South Korea Doubles 2013 Emissions Reduction Target

    Should I go on? Australia’s recent unilaterally decision perhaps?
    No. Enough already…

    Suffice it to say many nations and many individuals are keen to reduce green house gasses because it is the correct thing to do.
    They don’t appear to need to be “incentivized” (which I suppose is a modern American eco-talk for “morality in action.”).
    The problem isn’t so much with the world failing to act because it lacks monetary incentives.
    The problem is with one country and one political party within that country holding back transnational progress.
    Act the risk of sounding mean with a meme, but for purposes of accuracy in sloganeering: “Its the Republican party in your country, stupid!” They’re the villains. They’re the cowards. They’re the criminals…

    1. I know that amnesia and complete lack of history is a prime american trait, but does anyone else remember when the big deal wasn’t that fossil fuels were bad for us, it was that we were running out of them, and hence alternative energy sources were necessary for continued economic growth? That’s still kinda true. So all those investments in carbon-neutral and net-zero technologies aren’t just about saving the planet, they’re about saving money for people who expect to still be around past quarter-after-next.

    2. Exactly.

      And the “reduce moral hazard” approach to policymaking lets them off the hook.

      If you know who the arsonists are, you don’t leave them alone and tell building owners to put in better fireproofing.

      How about a revenue-raising carbon tax with some of the revenue going to FEMA and some going to help coastal cities adapt?

  5. Market solutions to collective action problems almost always involve making sure the poorest and least capable of change are the victims of circumstance. For that, I call them barbaric.

  6. I think there are some interesting points raised in these comments (of course, mine are particularly telling).

    I wonder if Kahn intends to address them, or has done so previously, or thinks they are not worth discussing.

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