Yesterday, I received 15 copies of my new book titled Adapting to Climate Change. I am delighted and I want to sketch out a few of the ideas I discuss.
Back in 2010, I published my Climatopolis book. To help generate attention and interest in that book and to distinguish it from many other climate change books, my smart editor nudged me to the full title; Climatopolis: How Our Cities Will Thrive in our Hotter Future.
I quickly learned that the word “Thrive” reduced book sales and increased critic anger. I continue to wonder how the book would have been received if the same book had a more bland title such as; Climatopolis: The Future of Cities in our Hotter Future.
You can read a 2 page overview of the book posted here. You can read many reviews from following this link. You can read more favorable reviews in Nature, The Economist and the Financial Times.
The thesis of my 2010 book can be simply stated. The world is urbanizing and cities have an intrinsic adaptation advantage relative to being an exposed rural farmer. When we urbanize, we grow richer and we invest in more human capital. Skill is crucial for adapting to any new challenge whether it is COVID19 or climate change.
As the world urbanizes, we choose which city to live in. This competition between cities to attract footloose people and jobs fosters climate resilience. Those cities that fail to adapt to local risk will suffer a population exodus and economic decline. This creates incentives for local land owners to invest in private self protection and public self protection to offset this risk. Local elected officials will increasingly prioritize these challenges.
In places that fail to adequately adapt, rents decline and this raises the real purchasing power of the poor who remain there. They can use their higher purchasing power to purchase market goods (stronger air conditioners) to help them offset the risk.
We are not passive victims here. We have substantial means to cope with emerging risks.
The net effect of these microeconomic adjustments is that each day we grow stronger in our ability to withstand the harder punches that Mother Nature is throwing at us. We are increasingly aware of the “known unknowns” associated with these punches.
My new 2021 Yale Press book represents the sequel to my 2010 book. While this book is written for a general audience, it is more academic. There are no jokes. There are no cultural references. I extensively cite the peer reviewed recent academic economics literature. I read many, many economics papers and I try my best to synthesize what I have learned in recent years. Young economists will also see that I point out many fruitful research paths.
In modern environmental economics, there is currently a “missing middle”. Currently, there are a group of climate macro-economists writing down equilibrium models of how the world’s economy will evolve over hundreds of years in the face of climate change. This approach builds on Bill Nordhaus’s Nobel Work (see Tony Smith of Yale) for an example. Second, there are a large number of NBER Reduced Form working papers presenting correlations documenting the past impacts of weather conditions on outcomes. Here is an example of my work and here is a paper called “Heat and Learning”.
The gap my book fills is that we do not have a “big think” overview of how capitalism evolves as different households, firms and governments cope with the new risks they face. The Economics of New Goods is a key field but it has been ignored in climate change adaptation economics. As I discuss in chapter 1 of my book, there is an asymmetry in modern climate discussions. We celebrate the rise of Electric Vehicles and solar panels that decarbonize the economy. These are New Goods but we ignore the rise of new goods that fuel adaptation.
My book represents a return to my University of Chicago Price Theory roots as the ideas of Gary Becker, Robert Lucas and Sherwin Rosen are emphasized. As rational economic agents are increasingly aware of the risks they face, their individual demand adds up to sufficient aggregate demand to unleash adaptation innovation. My book provides a microeconomic approach to thinking through how the economy’s adaptive capacity changes over time.
One final point. The second half of my Yale Press book tries something ambitious. I pivot to the future and discuss new “rules of the game” that would accelerate our climate change adaptation progress. For example, I believe that the U.S needs to encourage more renting (over home owning), we need more up zoning of land on “higher ground” and we need road pricing. I also am a supporter of relaxed international migration limits. These are examples of “new rules of the game”.
As I think back to my 2010 Climatopolis book, I didn’t have enough discussion of “new rules of the game” to accelerate adaptation. I did discuss the importance of allowing water prices to rise in drought plagued places and to allow insurance prices to rise in places facing increased climate risk. My new book is stronger on such political economy issues.