Economics Lessons from Snow Melt on Mount Everest
Snow melt due to warmer temperatures has many implications for water supply and flooding but I want to focus on a single issue in this post. The Wall Street Journal reports that melting ice and snow is making climbing Mount Everest more dangerous. The microeconomist studying climate change adaptation asks; “for every person on earth, how much would they be willing to pay for Mount Everest’s climbing risks to not increase?”
We can partition the world’s 8 billion people into three sets. The 99.99% (including me) who would never consider climbing Mount Everest. Ignoring “existence value”, I do not directly lose out because of the changing risks on Mount Everest. A second group are the rare people who stubbornly will always try to climb Mount Everest. Suppose there are 1000 people in this group.
Suppose that the objective increase in the death risk from a climb is 3 percentage points. This means that 30 climbers (.03*1000) could die because of climate change making the climb harder. If these individuals are aware of the risk, and they are determined to make this climb, they can invest in precautions to protect themselves such as better equipment, better training and emergency plans. The cost of adaptation for them equals their extra expenditure on adaptation gear plus the extra risk they face multiplied by their Value of a Statistical Life.
Now why are these 1000 people “addicted” to climbing Mount Everest? When economists teach econ 101, we teach our students that each person has a utility function that allows one to consistently rank consumption bundles. For example, if I offer you 4 beers and 12 slices of pizza , do you prefer that to 12 beers and 4 slices of pizza? How does climbing “Mount Everest” enter one’s utility function?
In studying different consumers, economists posit that some goods are complements (such as left shoes and right shoes) while other goods are substitutes (taking a vacation to Florida versus going to Georgia for a vacation).
In the Mount Everest case, why don’t the 1000 people believe that there are substitutes for the Mount Everest thrill that they can substitute to? If they are extreme athletes, why aren’t there other events such as doing a Triathlon in Hawaii that could substitute for the Everest climb? If people are more flexible with respect to their willingness to substitute then we can more easily adapt to new risks such as Snow Melt on Everest.
My model here is that these 1000 people like to challenge themselves and they like to boast to their friends that they tackled one of the world’s great challenges.
So, note that the real utility function here is defined over ; Utility = U(self esteem, exercise)
How people gain self esteem and how people exercise changes over time. JFK didn’t have access to a Peloton Bike. As capitalism and ecotourism locations develop new alternatives, Mount Everest faces more competition for these 1000 people and they are protected from climate change damage to Mount Everest because good substitutes emerge.
To wrap up, there are 3 groups in society;
#1 Never Everest Climbers
#2 Everest climber “addicts”
#3 Those at the margin seeking thrills and safety who will consider alternatives for climbing Everest.
Everest climbing has become riskier. We adapt by anticipating the risk and preparing to offset it and by seeking substitutes. The lessons here generalize. Read my 2021 Adapting to Climate Change book!