How the "New Economy" Helps Us to Adapt to Events Such as the June 2023 Northeast PM2.5 Spike
I woke up this morning in smoky Washington DC. The Canada smoke has drifted over the Northeast cities and I do worry about my parents in New York City. In our 2023 economy, how have different people adapted?
I predict that over the last 2 days that many eligible workers engaged in WFH and limited their time outside. Rather than going to shop, those who are sensitive to pollution could use Apps to have food delivered to them. The news broadly reported that a bad air pollution haze had settled on the cities and it was obvious from being outside that these are bad days to be outside.
One’s menu of adaptation strategies differ. An outdoor worker faces a greater threat than a middle aged lawyer who can work from home over the last few days. This example highlights that one’s ability to adapt to pollution spikes hinges on your income. Reducing poverty helps poor people to protect themselves from the serious challenges that we do face. Climate change creates an imperative to reduce poverty. The human capital theory offers an optimistic vision for how we reduce poverty in every nation.
Adaptation pessimists downplay that capitalists are always looking to design and market more products that people want. If more people expect that they will face summer heat waves and PM2.5 spikes due to wildfires then they will spend more money on protective equipment. Firms will compete for this market and higher quality and cheaper products will become available. This is the optimistic prediction of the Boskin Report that the BLS over-states inflation because the quality of products (think of televisions, cell phones, air conditioners) improves over time.
Go to Amazon’s webpage and look at the air filter options.
All around the world, more people will need these devices. This huge market creates an adaptation competition but even Nobel Laureates such as William Nordhaus ignore this induced innovation point in writing out their models of the cost of climate change. The microeconomics of innovation offer many insights here.
Richer people always have access to the best stuff but our past track record with mass production highlights how key products become more affordable over time (especially when government regulation does not limit entry barriers). This increases my optimism that more poor people will be able to afford these products over the next decade.
The net effect of such defensive investments is that future PM2.5 spikes will cause less damage to our health and quality of life. The vaunted climate damage function flattens over time because we proactively seek to protect ourselves and for profit firms respond to this increase in aggregate demand.
To wrap up, WFH increases our flexibility to reconfigure our workdays and to switch our plans to accommodate a shock.
After the Camp fire in 2018 we purchased some fire hose and a three- way fire hydrant value from a local firm- Primo Supply - Pumps, Fire Equipment, Water Treatment and more... They had a great assortment of respirators and masks as well. We used a couple Air washers to clean our indoor air when the smoke and or smog got up to about an AQI of 100.
Unfortunately, our insurance carrier didn’t take our adaption activities into account when setting our rate. Our insurer didn’t cancel our fire insurance like lots of folks in the area, but our rate did increase 20 to 40% a year for the last three years we were in CA. https://www.mtdemocrat.com/news/fire-insurance-getting-harder-to-find/ Our risk rating wasn’t as high as folks in the pines as we lived in mixed forest location with a fair amount of open space around the buildings. The wood used to build the place was sourced locally and milled within a couple miles of the homestead back in the 80’s (1880’s).
We moved out of CA before the last years Mosquito fire. https://www.mtdemocrat.com/news/el-dorado-county-files-suit-against-pge-for-mosquito-fire-damages/
It will be interesting to see if the equipment failure(s) is similar to the failure that devastated Paradise, CA years earlier. The Mosquito fire started on the highest CAISO grid use day on record. I take it that the fire insurance policy at our old place has jumped yet again after yet another failure on the transmission system.
https://www.cbsnews.com/sanfrancisco/news/homebuyers-in-northern-california-high-fire-zones-see-insurance-rates-go-through-the-roof/ "We've gone up about $2000 each year when it gets renewed," said John. His home insurance went from $2100 at purchase to $8400, even though he has done everything he can to harden the house and create a defensible space.
"We've taken out over a hundred trees and I mean, these were all cedars and pines that were over a hundred feet tall. It just killed us," said John."