I want to congratulate my father for his being recognized tonight by NYU for his 50 years of contributions to their great Medical School. My father has spent his whole career there.  He is a loyal guy. I'm more of a free agent but I see the benefits of building lasting bonds with one institution rather than continually switching universities.  With that drum roll, permit me to change topics. 

Climate change policy to be focus of Oct. 4 conference


September 29, 2010

Leading economists, analysts, and executives from academia, the state government and industry will discuss the impacts of climate change and Assembly Bill 32 on California’s economy and the environment during an Oct. 4 conference, sponsored by the University of California Giannini Foundation and UC Davis-based UC Agricultural Issues Center.


"California's Climate Change Policy: The Economic and Environmental Impacts of AB 32" will be held from 8:30 a.m. to 4:30 p.m. at the California Museum, 1020 O St., in Sacramento.


Assembly Bill 32, or the Global Warming Solutions Act of 2006, set the 2020 greenhouse gas emissions reduction goal into law. It directed the California Air Resources Board to begin developing discrete early actions to reduce greenhouse gases, while also preparing a scoping plan to identify how best to reach the 2020 limit. The reduction measures to meet the 2020 target are to be adopted by the start of 2011.



"It is important in the current economic and political climate that Californians have the best possible information about the impacts of AB 32 on the California environment, climate change and job creation in California," said Colin Carter, director of the Giannini Foundation and a UC Davis professor of agricultural and resource economics. "We are pleased to have assembled some of the best and brightest minds in the state and nation to inform the debate on AB 32.”



Slated to speak during the conference are researchers who have contributed to the California Air Resources Board's economic analysis of AB 32 impacts, as well as those who have offered independent reviews of that analysis or their own economic assessments.



Speakers include Lawrence Goulder, Stanford professor of environmental and resource economics; Matthew Kahn, UCLA professor and author of “Climatopolis: How Our Cities Will Thrive in the Hotter Future”; Mark Newton and James Nachbaur of the California Legislative Analyst’s Office; and Robert Stavins, director of the Harvard Environmental Economics program.



UC speakers will include Meredith Fowlie, UC Berkeley assistant professor of agricultural and resource economics; Dan Sumner, UC Davis professor of agricultural and resource economics and director of the UC Agricultural Issues Center; David Victor, director of the UC San Diego Laboratory on International Law and Regulation and author of “Climate Change: Debating America’s Policy Options”; and David Zilberman, UC Berkeley agricultural and resource economics professor.



A.G. Kawamura, secretary of the California Department of Food and Agriculture will be the luncheon speaker.



The conference registration fee is $35 and includes lunch. More information and registration are available at the Giannini Foundation website: http://giannini.ucop.edu/AB32/AB32conference.

REPEC offers monthly rankings of which economists are on the rise versus which are slipping down the vertical quality ladder.  While it doesn't count my 3 books, I'm mildly comfortable with my REPEC ranking
here .  But, Amazon offers an hourly update of who is "hot" and who is "not".  The market is saying that there are thousands of more popular books than Climatopolis.  Market's don't lie. You can see my competition posted here at  Climate Change Books

Below, I report a graph of the share of Congressional Seats that the Midwest has held over the last 200 years.  In the year 1800, the Midwest had a 0% share.  It's share peaked at 36% in 1890 and now stands at 21.6%.  With the 2010 Census coming out, the Midwest is concerned about losing political clout.  The wild non-linear dynamics in this graph highlight how population mobility across regions shapes politics.  But, it also highlights that linear extrapolation is silly when predicting the future.  Climatopolis predicts that this region's share of the nation will grow as climate change impacts coastal cities and South West cities.  Fargo is in this set of states!  There is plenty of land there to build anew.  Join me in purchasing a few acres of land now before the coastal city slickers show up!  Migration and Innovation will help us cope with our hotter future.   I discuss these themes at length in Chapter 7 of Climatopolis.


NY Times Source

It is hovering over 100 degrees here in Los Angeles.  I have not been invited to Malibu to any beach parties to stay cool.   How are people coping with the heat?   My son's school doesn't have air conditioning but the school is being pro-active to beat the heat.


Dear Parents,


It's going to be a hot week! We want to reassure you that the XX School is taking several steps to accommodate the high temperatures  and to ensure the health and comfort of our students:


1. We are closing the blacktop during lunch time.

2. The PE coaches are changing their activities to accommodate for the

heat.

3. We have distributed spray water bottles, of the sort used at the  Jogathon, to help keep children cool.

4. We are distributing extra fans in as many classrooms as possible.

5. Where feasible, classroom lights will be turned off to lower the room temperature

6. In classroom morning meetings, teachers and teaching assistants  stressed the importance of staying hydrated, and they will continue to  encourage children to drink water throughout the day.

We encourage you to send water bottles this week to help keep students hydrated.

Best,

XX

 
This all sounds reasonable and not so expensive to comply with. 
 
This summer the temperature reached 120 degrees in Baghdad  .  Demand for electricity was high.  Is the state willing and able to provide necessary infrastructure for coping with the heat?  Improvements in solar could decentralize the grid and allow for competition in order
to provide greater reliability and to avoid state monopoly issues. 
 
If our friends to predict the weather on a week to week basis can foresee a heat wave coming, then this "heads up" will make it even easier for to adapt.  Different people will have access to different coping strategies and merely to due to self interest -- such individuals will seek out the right strategy for themselves.
 
 
 
 
 
 

Wired Magazine   and AARP's Magazine  report on Climatopolis.

The future of cities in the face of climate change is a midly interesting topic.  Climate scientists should share the microphone with micro-economists on this subject.  We (the economists) have some interesting things to say on this subject and we certainly like to talk.

Today was my first day of classes for the fall 2010 term.  I was actually happy to be teaching again but it was hot outside.   110 Degrees in Los Angeles!  People were suffering in the heat.  Now, a reasonable question is; "how much would everyone in the city be willing to pay for it to have been "merely" 90 degrees today?"

What will be the amenity costs of climate change?

This paper argues that cities South of Chicago will suffer and that the national loss will be on the order of a 3% drop in income.  That strikes me to be a small number. 

Will there be "heat wave" deaths in Los Angeles?  I certainly hope not.  My "advanced Google searches" over the last week reports no stories on this topic.  Los Angeles has opened up air conditioning centers and people have taken precautions.  This is what a richer city can do when faced with an unexpected shock.

Most people agree that income insulates urbanites against Mother Nature's blows but then some Climatopolis critics say that rising income will merely exacerbate the greenhouse gas emissions level making climate change even worse.    There is some truth to this but there are reasons to push back against this pessimism;

1.  Greater income ===>  improved universities ==> research ideas ==> uncouple GHG emissions from economic growth (i.e the rise of the electric car, and renewable power generation)

2.   educational attainment rises in richer nations and education is likely to make us more patient and more patient voters may be more willing to tackle the collective action problem of reducing greenhouse gas emissions.  So, if India and China continue to develop then in the near future --- their middle class will be more likely to support a carbon deal out of national self interest.

3.  Richer urbanites have fewer children than rural people;  the urbanization of the world population will slow world population growth.

4.  There are scenarios under which fossil fuel prices rise as developing nations consume the existing stock, anticipating this creates incentives to innovate to substitute away from them.  I recognize that the anticipation of rising fossil fuel prices creates incentives to also search for more (in the tar sands in Canada).  So, this is the amazing race --- given anticipated scarcity --- this race for fossil fuel substitutes (that are green and low GHG) versus finding more fossil fuels (with the resulting GHG emissions).

Some quotes from the BBC News concerning the August 2010 Moscow Heat Wave.

"Those who remain in the city of 10.5m people were being urged to wear face masks if they ventured outdoors, and to hang wet towels indoors to attract dust and cool the airflow. Most apartments in the city lack air conditioning and there are media reports of wealthier citizens moving out of their homes into hotels, shopping malls, offices and private cars."

So, if Moscow will face more heat waves --- then its residents will install air conditioning to protect the population.  This Article  tells an interesting "cobweb" story about the firms selling air conditioning units. Because 2009's summer was cool, these firms held low amounts of air conditioning inventory and were surprised by the demand during the July 2010 heat.  The lessons learned from the Summer of 2010 will convince them to hold larger inventories to sell to people seeking to beat the heat and this competition will mean that equilibrium prices of air conditioners will be lower and more people will be able to afford them.

Moving forward, Climate scientists will be better able to predict heat waves a few days before they unfold and spreading this information to people will allow them to choose their best coping strategy.  Businesses in Moscow could offer air conditioning to allow people to escape the heat.  For example, movie theaters offer AC.

Now, these coping strategies will require electricity.  So -- in this case adaptation efforts exacerbate mitigation efforts.

Will the City of Moscow protect the urban poor against the heat waves? In New York City, there are community cooling centers where people can go on hot days (read this).  Does NYC invest in this because it is wealthy or because it "is nice"?   This is an example of how a wealthy city
can use its resources to help its residents to cope with climate change.  Moscow will pursue similar strategies and future heat waves will cause less death and pain.

Global greenhouse gas emissions keep rising.  Yes, the world's poor would enjoy an improvement in their standard of living if climate change does not unfold.  Climate change's blows will be less severe if we can restrain our GHG emissions.  But, the free rider problem lurks and I predict that GHG emissions will continue to rise.  Taking this as given, what happens next to the urban poor?  Will there be mass death all over the developing world caused by climate change?  If we anticipate that the answer is "maybe", what do we do now? Does this moral imperative nudge any swing voters to now support carbon regulation?  I wish this was the case but I don't believe this.  Self interest governs much of our behavior.

Some Climatopolis reviewers (see this example) have hinted that I lack a moral code for promoting an anti-poverty agenda for helping the poor to cope with climate change.  Am I a "bad person"?  I don't think so.
I view people as self interested and taking actions that help them to achieve their goals. If we could engage in social engineering to change Rush Limbaugh's preferences then it would be easier to fight climate change but I don't believe that Rush will be operated upon by "green" doctors.

Climate change will not abruptly destroy our society in the next several decades.  We have time to simultaneously seek out mitigation and adaptation strategies.  Our science nerds will develop ways to uncouple energy production from greenhouse gas production. Our transportation fleet will swap out electric cars for gasoline cars.  These mitigation efforts will help to attenuate the link between world GNP growth and world GHG growth.    On the adaptation side, it is a fact that richer people will have an easier time adapting to climate change.  They will have greater access to a variety of coping strategies ranging from migration, to the types of homes they live , to the types of products (air conditioners and electricity) that they can afford.

There are plenty of urban poor people in the world.  If you want to protect them from climate change and if we are unable to solve the free rider problem (i.e signing a credible global Carbon Cap agreement), then the only way to protect the urban poor is to help them to grow richer.  The logic is obvious.   Go to China or India and you can meet 100s of millions of people who have been lifted out of poverty by embracing free markets ,  isn't this a success story?  Climate change actually creates a moral imperative to embrace free markets and globalization.   Consider the alternatives.  Bill Gates is worth $50 billion dollars. If he gives it all way to every person on the planet, they would each receive $7.  This is a silly example but my point is that private charity is not going to solve this problem.  Skill development, education and integration into the world economy offers the urban poor their best start.

So again, here are my basic points;

1.  climate change is a real threat that grows more scary the more CO2 we release
2. we are showing no signs of capping our CO2 emissions
3. given 1 and 2, we must prepare for climate change adaptation and out of self interest we have the right incentives to do so.
4. the poor have the least ability to cope with climate change
5. there is no law of physics that the poor must remain poor.  The American Dream is playing out around the world and this should be celebrated and encouraged.  We are not passive victims in the face of changing circumstances.

Here is a list of history's deadliest natural disasters.  The world's population is growing and climate change is likely to increase the quantity and severity of these events.   Given these realities, how could the death count actually decline?  In my 2005 paper, the  Death Toll from Natural Disasters, I document the negative correlation between deaths from disasters and national per-capita income.  If over the next 40 years, poor nations open up their economies to world trade and grow --- then my estimates suggest that natural disaster deaths could fall sharply.    This very nice  paper by Kellenberg and Mobarak argues that for quickly urbanizing poor nations that some of my optimism is over-stated.  This merits more research.

My new book Climatopolis argues that on top of the direct income effect that new information (generated by climate scientists) about the exacerbated risks that coastal areas face and areas facing heat waves face will provide strong incentives encouraging self interested people to protect themselves.  The combination of rising income and increased information about natural disasters will help to protect people all over the world and raises my confidence that the death count from natural disasters could fall over time.  This would be direct (observable) evidence that we are adapting to climate change.

Do you smell a new "Simon vs. Ehrlich Bet"?  details

Climate change will be a world public bad.  Paul Samuelson has taught us that our aggregate willingness to pay for a public good is the sum of individual willingness to pay.  So, how much are each of us willing to pay to avoid climate change?  This depends on your circumstances (endowments, information, preferences) and the severity of climate change (is atmospheric CO2 levels at 400 ppm or 750 ppm or 1000 ppm). 

Most environmental economists have adopted a "macro" perspective in analyzing climate change. Prominent examples include  Nordhaus and Weitzman.   Such macro approaches implicitly assume that there is no relevant within variation.  For example, the Nordhaus RICE model examines how the United States will be affected by climate change.  But within the United States, there is likely to be huge variation in how different parcels of land are affected by climate change.  There will be locations badly hurt and other locations much less affected.  Climate scientists (not economists) will identify these.   If we move economic activity gradually over time to the less affected areas, what does this mean about the long run costs of climate change? I think that we will over-state them.

I wrote Climatopolis because I saw a "hole" in the literature.  There is so much attention focused on carbon mitigation that microeconomists haven't written much on adaptation.  Given that we have made very little progress on capping global emissions (they continue to rise), it is the job of the microeconomist to explain and predict how different individuals will cope with climate change.  Climatopolis fills this gap.

It optimistically argues that for any given level of warming that urbanites around the world have access to a set of coping strategies (i.e migration and innovation) that will help to lessen the impact of climate change on our urban life.  This doesn't mean that climate change is good.  This doesn't mean that we "easily handle" climate change.   We are not fatalist passive "victims" in the face of anticipated challenges. We are self interested and forward looking.  This helps us to protect ourselves against an anticipated but uncertain foe and lowers the aggregate costs that it will impose on us. 

Macro researchers posit a structural production function mapping temperature into per-capita income.  This is one strategy for creating a "closed loop" such that rising average temperature lowers an economy's overall well being. My point is that individual choice and self protective actions means that this mapping is not a "structural equation".  Over time, the impact of temperature on per-capita income will decline because of private actions.

How much will our actions help to shield us from climate change's risks?  You should win a Nobel Prize if you can answer that. Climatopolis isn't that ambitious. It merely seeks to start a discussion and to help nuanced people think about how our future will play out even if the international free rider problem proves impossible to overcome.

Some critics of Climatopolis haven't actually read the book.  I'd suggest reading page 237. "I do not intend for this book to lull moderates ino thinking that "since we can adapt, we don't need to mitigate." ... "Reducing carbon emissions now will make the future challenge to adapt easier to face."

An individual's willingness to pay to avoid climate change depends on how her life (and her children's life) will be affected by climate change.  Each household will have to envision the extra risks and discomforts that climate change will introduce.  If you can easily move to a city facing little risk and rent a nice apartment there, then you suffer little.  Conversely, if you are stuck in a flood zone and unable to move --- you will suffer greatly. 

Climatopolis argues that climate science will improve and provide more accurate leading indicators of what risks we face and that self interested households will respond to this information and firms will respond by innovating to develop products to  help households cope with climate change. In this sense, the evolutionary nature of capitalism protects people in both the developed and developing world.  In the developing world, further economic development over the next 50 years will protect billions of people.  Again, I would ask my critics to read my paper The Death Toll from Natural Disasters  . The best way to help protect the poor from climate change risk is to help their nation's grow their per-capita GNP.  

Given today's technologies, such development will exacerbate the mitigation challenge. It is my hope that as nations such as India and China develop that their middle class will support carbon regulation and this help create a political basis for an international treaty.    I discuss this on pages 146-151 of the book.