Sunday, August 05, 2012

The Economics of Heat Waves

NYU's Erik Klinenberg has an opinion piece in the NY Times today about heat waves.  He hopes that a byproduct of the heat is "shock and awe" such that the Congress takes action on mitigating carbon.    I own (and have read) his Chicago 1995 Heat Wave book but his piece today is over the top.  I share his hope that there be a "silver lining" such that disasters stimulate government regulation.  I have written a JRU paper on this subject but let's take a look at his writing.

Here is its last paragraph.

"Americans’ growing concerns about global warming will mean nothing if our national leaders are unwilling to seize the moment and do something about it. No city wants to be the next Chicago, and no urban government should go without the kind of acute-heat emergency plan that Chicago has today. But the question that may determine the life and death of future generations is whether we will face up to the larger heat emergency before the political climate changes once again."

The 2nd sentence of this paragraph contradicts the topic sentence.  If city leaders are aware that climate change is a challenge and that the populace is more likely to suffer a nasty impact then such leaders will take steps to protect the less fortunate by investing in cooling shelters and other social goods that help the poor cope on hot days.  Richer people have every incentive to invest in adaptation strategies to cope with hot days.  If rich people can take care of themselves and if local governments invest to protect the less fortunate, then will future heat waves cause "mega deaths" in the United States? I don't think so.  Unlike in 1995, we now have Twitter and other real time smartphone info that keeps us in the loop about the challenges we face.  Mayor Bloomberg in NYC has introduced 311 so that people can report issues to local government and such information flowing helps to protect the public.  

Note that he immediately turns to government to solve our problems.  I recognize that he is a sociologist but he can't forget about the benefits of free markets.  As a smart dude he should think about how self interested individuals respond to new risks that they understand and how capitalist firms respond when there is a demand for solutions.   Heat waves can be mitigated by intuitive strategies of "green space" and access to cooling and planning your day to protect yourself.  For those who do not have such freedom, local government can certainly play a constructive role and in a richer society there will be more resources to help the less fortunate.

As I have blogged about before, his worthy emphasis on deaths from heat waves never discusses "harvesting".   Were the people who died in the heat waves likely to have died soon after in the absence of the heat wave because they were already very sick?  Economists have studied this question using the following methodology.

Imagine if the heat wave occurs on July 5th 1995.  Suppose that the researcher sees a spike in deaths during the time interval from July 3rd to 10th 1995 but then in subsequent weeks such as July 11th 1995 to July 18th 1995 , we observe a decrease in deaths in cities that experienced a heat wave on July 5th but no subsequent heat wave. Based on these data patterns, a statistician would label the deaths from the heat wave as "harvesting" because the heat wave shifted by one week forward the death date for people who were already quite sick.   Why does this morbid discussion matter?  It matters because scientists who care about the social cost of heat waves need serious measurements of how much time affected individuals lost.  If a person who died in the heat wave would have lived on for 40 more years, we need to estimate this versus if this person would have lived for 2 more weeks.  To see a peer reviewed paper on this subject, read this.