Some Volcano Economics
The recent Iceland Volcano provides a scary natural experiment for testing whether the pace of adaptation is accelerating. The Volcano increases local air pollution. Does this pollution spike cause less health damage in late 2023 than if the same eruption had taken place in 2013 or 1993? The adaptation hypothesis posits “yes”.
https://www.nature.com/articles/s41467-021-22432-5
This is the link to the paper I tweeted out above.
Note the interplay between government providing information as an “Early Warning’ about an emerging public health threat.
If people trust government, they update their beliefs and take actions in terms of time spent outside and time and effort invested to reduce their air pollution exposure. They can put on masks and run air filters and keep their windows closed. They can evacuate the affected area.
Researchers need to do more work measuring these nitty-gritty adaptation steps. How much $ do these steps take? How effective are they in reducing the morbidity risk caused by the volcano eruption?
So, the public health researcher uses the chain rule from calculus and stares at the following set of equations;
(ΔSickness/ΔPM2.5)*(ΔPM2.5/ΔEruption)
And views these two equations as “laws of physics”. An economist looks at the first equation;
(ΔSickness/ΔPM2.5) and sees a reduced form damage function.
The slope of this function represents the marginal damage caused to a family if outdoor PM2.5 increases. The point of my research is that the marginal cost of adaptation is getting ever cheaper over time so an optimizing decision maker invests more in adaptation (is not a “passive victim”) and takes steps to protect her family such as ones listed above. As more people seek out such solutions, market capitalist firms enter the market and compete in the adaptation space to make higher quality products that further flatten the sickness gradient. This competition helps the disadvantaged to also adapt. Environmental scholars tend to ignore this dynamic adaptation margin.