Jeff Goodell’s new book is titled The Heat Will Kill You First. It is outselling My 2010 Climatopolis book so it has my attention. Here is a book review posted to Amazon.
As I read this heart felt review, I see no sign that the author thinks about the role that markets play to protect us from anticipated threats.
In the past, we have worried about plane crashes and now deaths per mile of flight have fallen sharply. We have worried about deaths from driving and deaths per mile of driving have fallen sharply. Deaths from natural disasters continue to decline even though there are more people on the planet exposed to the shocks.
How is this progress taking place if life is “going to hell”? The answer is that market capitalism provides incentives for entrepreneurs to tackle the new challenges we face. In 2020, the rise of the COVID vaccine and the rise of WFH technologies are just two of the most recent examples.
Capitalism solves problems when we allow it to get to work! We do face rising heat. Poor people around the world face the greatest risks. I can’t think of a scenario where Musk and Bezos truly suffer from the high heat. They can always substitute and go somewhere or do something to offset the heat. People not as rich as those two have more limited adaptation options to choose from.
BUT, our menu of adaptation options grows every day because of innovation, and risk taking by entrepreneurs. Go to the Amazon webpage and take a look at the ever growing set of products that you can buy to protect yourself. You are right, these products aren’t free but their quality adjusted price falls over time. This allows people who are middle class and even poor to afford them. Governments can use tax dollars to subsidize the purchase of such products for the poor.
The key is to educate people about the risks they face so they demand the products and are willing to pay for them. Such individual demand when added up across 8 billion people leads to a huge aggregate demand for climate risk offsetting products. This huge market creates the right incentives for risk takers to enter the arena and to compete to build something great. If 5000 entrepreneurs enter this competition, we only need 1 to succeed. Many people who don’t study economics, don’t think about “order statistics”. Society doesn’t need the average entrepreneur to succeed here. We just need 1 research team to make a breakthrough designing something good and this winner will be the next Tesla.
The world’s entrepreneurs are educated, risk loving, and have access to data and Venture Capital to launch. Goodell’s book plays the role of a “Paul Revere” here alerting the capitalists about their future possible gains. This is why I am so optimistic about our future.
At the same time that these research elites do their work, individuals are trying their own coping strategies; Working at night, taking more showers, taking siestas. The adaptation permutations here are almost infinite but the New York Times and other authorities simply declare that we face an existential risk.
I am an adaptation optimist and I’m a carbon mitigation pessimist. Yes, the U.S and Europe will slowly reduce their GHG emissions but these nations are a shrinking share of the global economy. Yes, the rich world will transfer green tech to developing countries but it will still be cheaper for the developing countries to burn fossil fuels as they demand more power. Global GHG emissions will continue to rise because of the free rider problem. Adaptation is the central issue going forward. The microeconomics perspective is the right way to think about the challenges and opportunities here. Read my stuff.
Will the Developing World’s Growing Middle Class Support Low Carbon Policies?
Matthew E. Kahn & Somik Lall
WORKING PAPER 30238
DOI 10.3386/w30238
ISSUE DATE July 2022
As billions of people in the developing world seek to increase their living standards, their aspirations pose a challenge to global efforts to cut greenhouse gas emissions. The emerging middle class are buying and operating energy intensive durables ranging from vehicles to air conditioners to computers. Owners of these durables represent an interest group with a stake in opposing carbon pricing. The political economy of encouraging middle class support for carbon pricing hinges on offsetting its perceived negative income effects. Rising environmentalism in the developing world could also increase support for credible GHG reduction policy. We quantify these effects as we estimate Engel curves of durables ownership, compare the grid’s carbon intensity by nation and study the demographic correlates of support for prioritizing environmental protection.
I'm slightly tempted to write a snarky comment along the lines of "how refreshing! An economist putting all hopes on the market solving THE problem, so long as we let it do its thing. And feeling optimistic about it!". But instead I want ask you what I (in my infinite ignorance) think are proper questions:
1) Will those savvy entrepreneurs take the risk of putting out these marvelous adaptation goodies for the "bottom billion", the world's poorest and most vulnerable to climate impacts, when there is not a fortune to make? 2) What do you make of what the IPCC calls "limits to adaptation"?