Saturday, March 23, 2013

Iceland in the Year 2050

The NY Times reports a type of James Bond story as a mysterious Chinese zillionaire seeks to purchase a large amount of rural Iceland to erect a snowy golf course.   Do you smell Dr. No?  I don't.  I see a climate change adaptation bet.   Arbitrage is to buy low and sell high.  Perhaps because he read Climatopolis, Huang Nubo is making an investment that could earn a high return if Iceland's quality of life improves relative to the rest of the world as climate change plays out.    New challenges create new opportunities.  While the NY Times views this story as just "weird", I think it is a nice example of how those who form expectations of the future act upon those expectations.  Mr. Nubo could lose on this investment but he is experimenting and there are plausible scenarios under which he will become even richer.  

It is certainly possible that his "golf course" is an attempt by China to claim property rights to minerals that might be under the ground but any land owner always has this option.  I ask my students to solve for a price of gasoline such that Beverly Hills home owners would knock down their homes and drill for gas underneath the surface.  

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