The book jacket states; "The World's leading economic thinker on climate change analyzes the economics and politics of the central environmental issue of today and points the way to realistic solutions.""Nordhaus is the world’s clearest, best informed and most serious thinker on climate change policy. There is more insight and good sense advice in this volume than in many libraries. This book should be as central to climate policy debates as climate change is to humanity’s future."—Lawrence H. Summers, Charles W. Eliot University Professor and President Emeritus at Harvard University(Lawrence H. Summers 2013-06-04)
"Bill Nordhaus is one of the world’s pioneers in applying economic reasoning to the harrowing problem of climate change. Before there was the UN climate treaty, the recent rounds of IPCC reports, and the Stern Review, there was Nordhaus’ path-breaking thinking, modeling, and research on the subject. His new book, The Climate Casino, marks a long-awaited update and synthesis of this work for the public and students everywhere. His core conclusion – that we must act and act now – is carefully explained with Nordhaus’ trademark vigor, clarity, and thoughtfulness."—Jeffrey D. Sachs, Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University(Jeffrey D. Sachs 2013-06-26)"
The book is ambitious and covers a lot of ground but I'm puzzled by why climate change adaptation and the role that cities will play in helping the majority of the world's population to adapt to climate change receives so little attention. Chapter 13 covers both adaptation and geo-engineering but within that chapter adaptation receives less than 1.5 pages of coverage (see page 150). On page 96, there is a brief discussion of the role of air conditioning in India and the positive role it will play in helping new urbanites to adapt to increased climate change induced summer heat. On pages 120 and 121, Prof. Nordhaus acknowledges that the spatial distribution of economic activity plays a key role in determining the economic costs of hurricanes and natural disasters. He points out that we can move to higher ground. Migration as an adaptation strategy is briefly discussed on page 72.
Here is a direct quote from the last paragraph from chapter 10 of his book.
"The need for far-sighted strategies to deal with coastal settlements for both hurricanes and sea-level rise is one of the major challenges in dealing with climate change. Orderly planning can reduce the most dangerous impacts significantly, but the process of adaptation is likely to be politically contentious and messy."
Why?
In my 2010 book Climatopolis, I argued that capitalism will facilitate the process of adaptation. If there is significant sea level rise, we will move away from our coasts unless place based politicians and FEMA subsidize coastal living. Yes, we like coastal living and yes there are current property owners who want their coastal properties to be fortified using other tax payer's money. But, the simple rational expectations logic doesn't go away. As climate change manifests itself, this new risk will lead to falling coastal home prices and real estate developers will build new housing on higher ground. Cities such as Manhattan (in an extreme case) will reform on higher ground. There will be losers (the incumbent home owners) and there will be winners (the developers and land owners who own on higher ground).
Note that Professor Nordhaus places "good planning" as the key here while I would suggest that the free market sends the right signals to facilitate this transition. I would hope that he celebrate the power of the invisible hand yet I do not see any discussion of how capitalism helps us to adapt to climate change in skimming his book.
Take a look at Prof Nordhaus' index for the book and urbanization doesn't even merit an entry. Yet, in the year 2030, 60% of the world's population will live in cities. Spatial considerations receive too little attention in his book. He tends to focus on the impact of climate change on agriculture. Agriculture will be impacted but with world markets in agriculture and the ability to keep inventories much of the idiosyncratic climate risk can be averaged over. Again, the key issue here is how capitalism evolves to protect us from an emerging threat.
It appears to me that Professor Nordhaus approaches the climate change challenge from the perspective of top down central planning. What do nations have to do to address this global externality? I 100% support a carbon tax today but I do not see a roadmap through which the world adopts this policy. Take a look at my 2013 paper on USA carbon politics.
As greenhouse gas emissions continue to rise, the role of the micro economist is to think through how self interested households and firms will respond to this emerging challenge. How does capitalism evolve in the face of a new anticipated but vague challenge?
Climate Casino is an impressive book and I hope that Nordhaus and Weitzman win the Nobel Prize in Economics for their contributions to environmental economics. That said, our best scholars must be held to a higher standard. I would ask Dr. Nordhaus to consider the following thought experiment. Consider your grandfather and the tools and markets he had access to in order to cope with the challenges of climate change. Now think of your grandchildren's grandchildren. Directed technological change (a topic Nordhaus has worked on) will play a key role in helping us to adapt to the new challenges. In 2014, critics are questioning capitalism as a way to order our society. Climate change offers a terrific test of the power of capitalism to be a powerful source of good in everyone's life. Nordhaus appears to view climate change as an engineering problem rather than as an adaptive challenge that we anticipate and respond to.
I do not believe that the words "rational expectations" appear in this book. Is Professor Nordhaus in the Behavioral Economics camp or does he embrace the Chicago worldview of the power of unfettered free markets?