Individualism and Climate Change Adaptation

We haven’t agreed to collectively reduce our greenhouse gas emissions so each individual will have to figure out how to cope with climate change.   Different people will pursue different strategies.   This thoughtful piece  responds to a slightly wild recent Washington Post piece that sketched how the author is “getting ready”  as a lone wolf.   Capitalism’s price signals of scarcity and its innovation incentives will help us to adapt.   The short version of my optimistic thinking  is posted  here.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

16 thoughts on “Individualism and Climate Change Adaptation”

  1. The more you write, the more convinced I am that your analysis is fundamentally misspecified.

    But by all means, try to sell books. The near future is all you’ve got. Make the most of it.

  2. The problem with your analysis is that no sensible person doubts that market forces will help us adapt, so it isn’t very interesting to me. I think the important question is how adequate those forces are to the challenge. There is not even any theoretical reason to think that market forces will save the coral reefs or the huge number of species threatened by climate change. Nor is there much reason to think that market forces can react correctly to the future behavior of a non-linear climate system that is not completely understood.

    If the climate system changes relatively slowly, market forces may be enough to preserve a reasonable standard of living for people, but I can’t say that seems like a wise bet, and it’s still too bad for the reefs and polar bears.

  3. Cascading ecosystem failures that markets have no precent for isn’t a good bet for your kids or grandkids. But we won’t be around, so who cares, really?

    Cascading ecosystem failures that have no precedents for markets seems like a bad bet for your kids and grandkids. But what the hey, we won’t be around so who cares, really? And the rich will be OK. They certainly are hoarding for the event, so they are adapting just fine.

    It may be an argument, but is it a moral argument? We report, you decide.

  4. “Capitalism’s price signals of scarcity and its innovation incentives will help us to adapt.”

    Not likely, if flooding renders one’s land uninhabitable (or kills them outright).

    Not likely, if you become too poor to obtain food (the destiny of most on the planet as food production declines). If anything, capitalism in the face of scarcity will result in even more rewards for the wealthy, and even greater poverty for everyone else. “Innovation incentives” will only go so far in the face of mass destruction of arable land coupled with declining petroleum and natural gas reserves.

    The “adaptation” in the face of the above that is most likely to occur is not something the dedicated capitalists want to consider as possible, because it is quite unattractive to contemplate the hordes of the hungry who will refuse to take “no” for an answer.

  5. The most likely scenario, if the models aren’t totally screwed up, is a temperature change equivalent to moving roughly 50-200 miles south, over a period of two to three generations. The most likely response is just that people move North by about that same distance, on average, and given the time frame, the changes will be seamless. Farmers will gradually adopt different crops, Canada will become a bigger agricultural producer, young couples will settle down a little further north, and nobody will even notice.

  6. So, aside from speculating in farmland in the Matanuska Valley, I should do?? Matthew Kahn, I think you are pretty clearly right: China and India will not refrain from burning any fuel we leave on the table, we will no longer be the biggest player. And there is a general attitude in Chinese people with whom I have talked that they are damned if they are going to make their development more difficult to make up for the earlier profligacy of America and Europe. Probably the best thing we can do to limit carbon emission is to work harder (‘new Apollo Program!) on alternative fuels, in hopes that availability of alternatives at a reasonable price will make the most difficult-to-extract fuel uneconomic. For our own consumption, I think shifting road funding from general and gasoline taxes toward variable (and high!) tolls would put the incentives toward car pooling in a big way. To the extent that the mortgage tax exemption encourages houses larger than people would otherwise buy, getting rid of it might help – I kind of hate the mortgage tax exemption on equity grounds, so any excuse to drop it is good… The ethanol subsidy is nuts, and starves people. Back to adaptation: if we expect sea level rise, stop issuing flood insurance for any new building at an elevation below 20 feet above sea level?

  7. Brett, can you explain to us how does a society that is currently mobilized by hating migrants suddenly accept migrants in a warmer world? Will this happen by the GOP going away and the ‘hate migrants’ distraction going with it? What about other parts of the world where migrants are frowned upon? Will man-made climate change release some sort of fairy dust from the tundra and we’ll magically get along?

    IOW: comedy skits do not make for good policy.

  8. Brett :

    Go to Iowa, Illinois, Ohio, Indiana and find a farm.
    Measure the topsoil depth. You’ll need a yardstick.
    That topsoil is the result of
    milions of years of glaciatial deposition
    followed by ten thousand years of grassfires.

    Now go 200 or 300 miles due north.
    You’ll find yourself on the Candian Shield.
    Measure the topsoil depth (if you can find any).
    There may or may not be an inch of soil over the
    solid bedrock.

    Good luck growing your crops anywhere
    north or east of Duluth.

  9. I have to admit that I’m a pessimist.

    Here’s the problem as I see it: the structure of the global economy is built around a network of transportation, which needs a low unit price of gas to function. Any change in the price of a gallon of gas threatens that transportation net, and with it the structure of asset prices and wealth tied to that transportation system.

    More narrowly, the all-powerful oil industry consists of a great chain transport, refining, and distribution, built up over a century and a half, the profitability of which depends on continuing or even increasing throughput.

    Anything which threatens to increase the price of gas, or to reduce the worldwide throughput of oil processing and distribution, will have an immediate impact the wealth and power of people, who are used to having a great deal of both. They have every incentive to resist. Up against that, the “incentives to innovate” — which are formally their mirror image — will be frustrated, possibly for a long time to come.

    You might look “optimistically” at the Macondo blowout and the consequent destruction of ocean fisheries as “innovative”; similarly, you might look upon frakking natural gas as “innovative”. I see them as environmentally destructive, and I note that they represent an escalation of environmental destruction in the face of environmental catastrophe.

    The Republican Party’s “tea party” fanatics find their economic and psychological base in the anxieties and resentments of the ex-urbs and suburbs, which are most vulnerable to a change in the energy basis of the economy. I think that’s why you see Republican “tea party” governors making such a show of nixing major transit projects in Wisconsin, Florida, and New Jersey. Stopping-the-train is right up there with breaking unions and letting the public infrastructure rot, on the agenda of these very powerful groups.

    The strongest “incentive” in the circumstances is to take big, big risks to keep the price of fossil fuel energy — at a low-enough rate to keep the ex-urbs alive, and throughput at a high enough level, to keep the power of Big Oil alive. It is a desperate game, by desperate rentiers.

    We are caught in a bad political and economic equilibrium. It’s like a landlord, who is maintaining his cashflow, at the expense of building maintenance. It will end in delapidation or arson.

  10. I admit I’ve used the Joel Hanes argument many, many times. Nonfarmers who claim moving ‘200 miles north’ into country not farmed in millennia (if at all) IME are utterly incapable of comprehending that vast swaths of land now unsuitable for farming are not places for people displaced from vast swaths of land newly unsuitable for farming. Nonetheless, the ‘we hate immy-grints’ argument is more satisfying to me, at this time, in this place.

  11. Of course, under Brett’s plan, China will have no problem accepting many millions of Indian immigrants. Nor will Canada be troubled by the Americans moving north. etc.

    And BTW, “200 miles north” really means “about 3 degrees north,” doesn’t it? Or three degrees south in the southern hemisphere. Even without taking Joel Hanes’ excellent points into account, it looks to me like, as a matter of geometry, you’re compressing the population. The Earth is not flat, after all.

  12. Bruce,

    One quibble with your logic: I don’t think the world’s oil industry (as a whole) cares how many BARRELS of oil it extracts, processes, or sells; it’s DOLLARS that constitute revenue and profit. Cut the number of barrels in half and double the price price per barrel, and revenue stays constant. Profit might even increase, since it may well be that you need fewer total workers to process half as much actual oil.

    I don’t dispute anything else in your comment. I only suggest that the oil industry (as a whole) won’t lose money due to dwindling oil supplies. As long as it maintains political power, the physical quantity of oil hardly matters to its bottom line.


  13. No, Tony, while your observation might be true for “the oil industry as a whole”, that’s not how the world works; the oil industry is not a whole. And, as the physical throughput of oil slackens, different parts of the industry will be affected in dramatically varying fashion.

    It is a very long, elaborate chain that locates oil resources, drills for and extracts oil, transports it, refines it into products, distributes those products, and, finally uses those products productively. And, for many parts of the chain, throughput matters a lot. An oil refinery, for example, depends on its scale of operation to keep unit costs low. Oil tankers and oil pipelines similarly depend on scale, in a way that is even more obvious in the geometry — a half-filled oil tanker is not cheaper per barrel delivered, and oil tankers are not so easily re-purposed or discarded; competition to transport diminished oil supply combined with surplus capacity could make that part of the business very, very unprofitable.

    In the U.S., before the first oil crisis in 1973, gas stations had friendly attendants, who filled your gas tank and checked your oil for you, and most gas stations doubled as a garage for a mechanic. Fairly rapidly, in the 1980s, the number of gas stations was reduced by a third or more, and most became convenience stores. The economics of the business now dictates self-serve and that the operators make their profit on the grocery. That was a dramatic restructuring, and I think the common-sense explanation is that Americans wanted and needed a continued low price for gas, to keep the cheap-gas economy of the suburbs and rural areas going. To make that work, individual gas stations had to get by on much smaller margins, which meant more throughput, less labor, and a side business to draw profit from the traffic. As Professor Kahn notes, capitalism is adaptable.

    I really don’t think a dramatically higher price for oil is sustainable. What we are likely to see, I believe, is what we have seen several times already: a dramatic increase in the volatility of oil prices. Peak oil is really, really here, and oil companies are not going to financing any general increase in the production/distribution chain, which means that the buffers, which might have dampened prices are simply not there.

    In time, we may see dramatically higher prices for the finer grades of refined product. Jet fuel might rise some in relative price, as the quality of available raw petroleum degrades. But, dirty oils will remain cheap. And, mostly, what capitalism generates, I fear, contra Professor Kahn, is dirtier oil and dirtier methods of using it, as the imperative of maintaining a low unit price, to keep an oil-consuming economy going, is satisfied by risk-taking and externalities, risking the ecology and environment.

    When, eventually, the power of oil falters on straitened circumstances, we might see a political shift, to adopt an institutional regime that forces a higher price, and that higher price will drive a dramatic shift to a different energy/environment basis for the economy. But, even then, there’s a serious danger that, as the first world adapts, the second world will sink into a dependence on the abuse of cheaper oil, made cheap as the first world abandons its former drug of choice.

  14. While I appreciate Bruce’s scenario and cautions about scale etc., let’s open up the picture a bit.

    What other sectors depend upon oil? Right! Food. From industrial ops that fertilize with N fixed in the Haber process and vast farms put down rows according to the tractor, to the Indian subcontinent folks who depend on fert and pumps to mine groundwater (never mind the Se), our food chain needs oil.

    Next, our materials sector needs oil (nylon, polypropylene, various plastics). The Dustin Hoffman character should have told us we’d have “plastics” for only a short time.

    We have already seen food riots in the past several years, and they are not even due to oil shortages yet – they are due to large-scale droughts in grain-growing areas.

    The military has been scenario planning for these eventualities for about a decade. They – contra Brett and Matt – know that mass migrations of displaced folks won’t be met by shiny, happy faces with their arms in wide welcome positions. Throw on high food prices, higher material prices, higher inequality and lessened ability to migrate to employment and the rich individuals will have to build their walls higher and beef up their solar arrays to keep the unemployed engineers (but not economists) from more than just their wi-fi.

  15. We aren’t going to literally “run out of” oil any time soon. Rather, the cost of extracting fossil fuels will rise. My fear is that the rise in cost will not be reflected in price, for the same reason that the full cost of using fossil fuels has never been incorporated in price: we have built a economic system, which depends on the availability of energy at a certain, low price-point, to function. That system has a lot of powerful stakeholders, who would forfeit significant wealth in a rapid transition to a system, which used significantly less fossil-fuel energy. The temptation to keep to that price-point will lead to environmentally catastrophic capitalist “adaptations”. We will undervalue the externalities and the depletion costs, because that’s what individualism accomplishes.

  16. “the cost of extracting fossil fuels will rise.”

    Yes exactly, with resultant effects on the sectors I mentioned. Causing further stress on the populace above and beyond simple climate change. Making it all the more unlikely shiny, happy people will greet immy-grints with open arms.

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