Wednesday, December 12, 2012

Skiing and Climate Change Adaptation

The NY Times reports that existing ski resorts are suffering because climate change has reduced the number of winter days below 32 degrees and the snow isn't sticking around.    The tone of the article is that this is a disaster.   A couple of obvious points:

1.  Leisure activity is a zero sum game. If people in Boston stop going for leisure to a Vermont Ski Lodge then maybe they will substitute and travel to Mexico for a Winter Vacation.  The money that was spent in Vermont doesn't vanish it would go to Mexican hotels and tourist spots.  This helps Mexico to develop and offers global benefits in terms of reducing world income inequality and creating global stability.    It is possible that these ski resort visitors will substitute a domestic vacation to Miami.  The NY Times devoted no attention to "who wins" when climate change takes place.  The Times doesn't have an economic model of what is the next favorite alternative for people who go to local Southern Ski resorts.  Will these people go to Canada to Ski?  Will they go to Mexico?  Their $ doesn't vanish it just gets pocketed by somebody else.  While ski resorts with no snow will be vacated, there are other ski resorts that will attract more business and their hotel rates will rise.

2. At the end of the article, the NY Times points out that profit seeking ski resorts are adapting by creating their own snow so this raises the question of why the Times even wrote this article?  Does the Times have an investment in Ski Lodges near Boston?

3.  As transportation costs fall for short flights, people can access a variety of destinations even if they are further from where people live.  So, the people of Boston won't go for a 150 mile icy drive to access the Mountains in Vermont.

Of course there are incumbent losers from climate change .  Ellen Hanak and co-authors have already documented this in this paper.  Her paper's abstract:

"We use a hedonic framework to estimate and simulate the impact of global warming on real estate prices at North American ski resorts. To do so, we combine data on resort-area housing prices from two sources--data on average prices for U.S. Census tracts across a broad swath of the western U.S. and data on individual home sales for four markets in the western U.S. and Canada, each available over multiple decades--with detailed weather data and characteristics of ski resorts in those areas. Our OLS and fixed-effects models of changes in house prices with respect to medium-run changes in the share of snowfall in winter precipitation yield precise and consistent estimates of positive snowfall effects on housing values in both data sources. We use our estimates to simulate the impact of likely climate shifts on house prices in coming decades and find substantial variation across resort areas based on climatic characteristics such as longitude, elevation, and proximity to the Pacific Ocean. Resorts that are unfavorably located face likely large negative effects on home prices due to warming, unless adaptive measures are able to compensate for the deterioration of conditions in the ski industry."

My point is that we always have alternatives.  You can take another job, another spouse, move to another city, eat at a different restaurant.  If Mother Nature changes your choice set by removing certain alternatives, are you really made worse off?  The answer is "no" if your favorite alternative is a close substitute for your favorite choice.   If I wasn't teaching at UCLA, where would I be teaching?