Sunday, January 27, 2013

Climate Change Adaptation by Income Group: The Cartoon Version

The NY Times has some talented people on payroll.  Brian McFadden creates great cartoons.  Below, I reproduce one from today and critique the substance of his cartoon.   Similar to others at the NY Times, he needs to consult his econ 101 notes.

By its very nature, a cartoon can't convey much nuance.  He is implicitly saying that climate change impacts will exacerbate existing inequality.  The 1% will be better able to handle climate impacts than the 99%.  He forgets that the 99% are growing richer over time and that absolute income (not relative income) is a key in helping individuals to adapt.   The world economy will grow by 4% this year in per-capita income.  This means that world per-capita income doubles in 18 years.  Rising incomes help all of us to adapt to climate change.

As the 1% grow richer, their governments collect more tax revenue and can provide public goods to shield the population.   McFadden also ignores price effects.   In capitalism, new products and cheaper products are always emerging (think of your cellphone).  The 99%'s purchasing power  of climate adaptation friendly products will increase as entrepreneurs look at this cartoon and see that there are opportunities for those who innovate.   Such innovation will lower the real price of adapting to climate change.  Products we need such as access to reliable electricity and home materials that are resilient to flooding will become cheaper due to induced innovation.

Note the guy in the upper middle right panel who is eating a rock. While that's funny, McFadden forgets that international trade in agricultural products guarantees that this 99% dude won't have to eat a rock.  His local supermarket will continue to be filled with tasty affordable stuff. It will just be grown elsewhere in the world as climate patterns shift.  For the dude on the lower left panel whose insurance rates have gone up, why hasn't he read the fine print of his contract? If he moves to higher ground, he won't need to pay those higher rates. If he builds his home with materials that minimize flood risk and fire risk, competitive insurance markets will quote him a good rate.  He is not a victim here even though the cartoon portrays him as one.

I have recorded a youTube video of my thoughts about this cartoon. Here it is.  This is lecture #33 in my series.