Thursday, February 07, 2013

How Do Rats Adapt to Natural Disasters?

The NYC rats must have read my Climatopolis or at least they are acting as if they read my book!  The NY Times profiles the rats and documents that in the midst of Hurricane Sandy that they moved to higher ground.   I'm not surprised but I'm surprised that you are surprised.

Migration is a big piece of the adaptation solution.  We are always rebuilding our cities. Depreciation is always taking place and we are always investing.  For those who have invested in infrastructure and real estate in areas that are now at risk, I say;   "You made this bet --- you bear the incidence of the "new news"."  Had the coastal property gone up in value these asset owners would have kept the capital gains.  U.S capitalism will be much stronger if investors flip two sided coins.  Right now we have two many default options embedded in our system with bankruptcy for firms, loan default for home owners, and FEMA and Cuomo bailouts for coastal residents.  This is the danger of behavioral economics -- it allows adults to pretend to be innocent children when the team they bet on loses the Super Bowl  , the "victim" can say;  "I didn't know what I was doing".  Yes, a subset of people are in this category but there are other who can solve a strategic game and mask their true "type" so that they too can receive a bailout.  This mixture of government moral hazard and free market capitalism is ugly and tends to retard adaptation efforts and efficient investment in our overall economy.  Place based politicians (such as Coastal Governors) have strong incentives to embrace benevolent paternalism as they seek to rebuild in the risky areas (their area).  Let my people go!

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