How Do Capitalists Respond to Anticipated Rising Heat?
Jeff Goodell has published his new book about the past, present and future consequences of high heat and it is generating buzz.
I was first introduced to Jeff Goodell’s work when I read his 2013 Rolling Stone piece where he said Goodbye to Miami predicting its demise. Ken Griffin and many other successful people disagree.
In this 2015 Lecture, I quote Goodell’s work.
Here is a link to his new book.
While we each follow each other on Twitter, we have never spoken. I want to share my perspective on the heat challenge.
Global greenhouse gas emissions are growing and will continue to grow for decades as the developing world’s incomes catch up to ours. The decarbonization of rich nations will only slowly contribute to the decarbonization of the rest of the world because the scale of economic growth in Africa will be larger than the greening of “technique” in such developing areas. Technique = emissions/$ of GNP. The U.S is a shrinking part of the global economy and our main impact on global decarbonization is through technology development and transfer. Green power generation requires ample land and there is an open question of where this land for renewable power will be sited around the developing world. I also worry that the rich world’s fossil fuels will simply be exported to the rest of the world; Leakage!
Since global GHG emissions will continue to rise, global average temperatures will rise for decades. We must adapt to this threat. In my microeconomics work, I have argued that urbanization helps all of us to adapt. Urbanites are richer, better educated and work in doors and have access to more markets. Urban areas compete to attract workers and firms and those areas that fail to adapt will suffer a brain drain and a loss in local real estate asset values. This competition facilitates adaptation. This was the theme of my 2010 Climatopolis book. Journalists such as Jeff G downplay the role that competition plays in protecting all of us.
In the past, high heat did kill but the advent of better and better (and cheaper and cheaper) air conditioning has protected more and more of us. The urbanization of the world economy moves more and more people to safety even in the face of high heat. Of course, extreme heat in Middle East on the hottest days can stop air travel but we now have Zoom and can be productive in our emerging WFH economy. Outdoor workers are harmed by heat heat exposure but they can be protected either by working at night or by wearing the growing number of “spacesuits” that can be purchased to protect them.
My research agenda focuses on the induced innovation hypothesis. As for profit entrepreneurs anticipate that we face a problem such as high heat exposure, this provides an incentive for the next Musk to devote the time and effort to devise solutions. Her efforts here are not charity! The profit motive drives this risky activity. So, I congratulate Jeff Goodell for his work documenting the challenges we have faced in the past because of high heat. Such journalism does not preview our future! His role as the “Paul Revere” helps entrepreneurs to smell future profits.
In my 2018 paper, I argued that climate deniers raise the cost of climate change because they do not demand adaptation solutions and this lowers the profits from adaptation innovation. Most people like Goodell would argue that climate deniers hold back the economy by not supporting the “Green New Deal”.
Market forces will play a key role in helping us to adapt as more people use their own resources to protect themselves through private markets. That’s the main theme of my 2021 Adapting to Climate Change book and my 2018 paper.
The empirical prediction of this work is that the economic costs of high heat in the future will decline over time as we get ever better at adapting to Mother Nature’s punches. We are not passive victims here. Markets , not governments, are the central actor determining our quality of life progress in the face of a serious threat.