Why Will Summer 2024 Be More Enjoyable than Summer 2023?

Hint: Supply side adaptation, experimentation and innovation

CNN has published an overview reminding us that summer 2023 was nasty in terms of crazy weather shocks that disrupted travel plans, and increased mortality and morbidity risk. The piece embraces the “passive victim” mindset that posits that as Mother Nature punches us harder that we do not respond to the anticipated tough shocks that we face. By ignoring our ever increasing adaptive capacity, this piece is overly dramatic.

Suppose that parts of Europe do become too hot and too nasty during summer times. The owners of hotels and restaurants in those areas will suffer a drop in tourist revenue if their areas fail to adapt to the new risks. These profit maximizing firms become adaptation stakeholders. Unlike with the carbon mitigation challenge, the free rider problem is much less severe here. If parts of Greece fail to adapt to the serious challenges they face, then this creates new opportunities for other pretty areas in other nations to attract tourists. Perhaps Croatia will become a destination or perhaps some part of Portugal will become a destination for these tourists who no longer go to Greece. Do you see this “cross-elasticity” effect? The New York Times always ignores this point. One place’s challenge is another place’s opportunity. This was a key idea in my 2010 Climatatoplis book. Competition protects individuals who seek exciting, safe places to live and visit. The pessimists implicitly believe that we are unable to produce safety in a world where Mother Nature is causing trouble. Note the implicit Leontief logic here that we can’t substitute away and use human ingenuity to protect ourselves.

Even professional economists ignore supply side innovation and experimentation as a source of expanding our menu of opportunities that help to protect all of us from emerging threats. If wildfires increase local PM2.5 levels, then this creates an incentive for firms who produce good air purifiers to prosper.

The reason that pro economists focus on the short run effects is because academic journals demand clean “cause and effect” empirical studies. Young researchers know the incentives in our profession and they avoid deep thoughts about the medium term effects (i.e supply side responses that muddy up their predictions). They are also politically astute. The young economists anticipate that they are more likely to generate headlines for their causal effects findings if they find horrible scary stuff. The New York Times likes those headlines and young people supply them but this short run stuff doesn’t capture the really interesting dynamics here.

If some airlines such as Southwest cannot deliver reliable summer travel service, then people will substitute to other leisure activities close to where they live or they will substitute airlines. We always have a choice. We always have substitution possibilities that protect us from emerging threats.

Implicit in all of the doom and gloom is that people have a slim menu of substitution options to protect themselves. For the poorest of the poor, this is true. But, the middle class have an ever growing set of options for adapting that does not have to include taking the Bezos rocket to Mars.

The empirical prediction based on this column’s optimistic take is that a family’s willingness to pay to not face extreme weather is actually shrinking over time because our economy’s supply of adaptation strategies is growing. I recognize that as we grow richer that our value of a statistical life increases but the death risk from weather shocks declines each day. This column has sketched out my microeconomic logic for why I believe that at the person level that the Social Cost of Carbon is declining over time.

My 2021 book expands on this theme.

Here is a video about my book.

The industrial organization of climate change adaptation efforts is an interesting subject. Many young people in academia implicitly embrace the claim that firms are myopic and are not thinking ahead about emerging profit opportunities. Musk was a dreamer who anticipated a rising trend. Is he all alone on our big planet? If 1 in a million people has some sense of where the world may be going, then there are 8,000 Musks out there who can dream big and get to work designing the set of products we do need so that urbanites in the year 2100 can have a good life and pursue their own goals of being comfortable, healthy and raising children who flourish.