Casey Mulligan on the Economics of Hurricane Irene

Paul Krugman will agree with this Casey Mulligan post?  While these two leading economists do not always agree, I am confident that there is a microeconomic consensus concerning how self interested individuals respond to new risks.  I must admit that I like what Casey had to say about my Climatopolis book at the end of his article.

Economists are optimistic about our future.  This optimism doesn't simply represent wishful thinking.  Instead, we posit that both people and firms have strong incentives to think through what new risks climate change will pose.  People will respond using their knowledge and resources to reduce the threats they face. For profit firms will respond by investing and developing products that people will want to buy that will help them to cope in our nastier future.  The net result of this dynamic process is that capitalism will be a very good friend of climate change adaptation.