When I'm back in LA, I will read and blog about this new article that claims that climate change could impose a trillion dollar loss on our coasts by the year 2100. Two things I would ask readers to think about. One is discounting, at an annual interest rate of 3% this future loss has a present discounted value today of $78 billion dollars. Second, sit down and read my recent paper . I would bet $10,000 that the authors of this paper ignore the following points;
1. endogenous depreciation
2. general equilibrium
Endogenous depreciation is the idea that if sea level rise is expected to swamp coastal properties then owners stop investing in their upkeep and the actual sea level rise causes less damage when it occurs because the finite lived and depreciating asset that gets destroyed wasn't actually worth much at that time.
General equilibrium: if coastal Florida floods, other pieces of real estate rise in value because demand is deflected there. These gains in value in the inland higher ground places were caused by the flooding along the coast. In this sense, a type of "zero sum game" emerges such that the losses predicted by the people such as the authors of this report are balanced out by land price gains on higher ground.
Climate scientists who are forecasting the impacts of climate change on the economy and people would be wise to take a course in economics. Self interested individuals have choices and anticipate the shocks that are likely to take place. We have many options where to build our future cities so that the current distribution of economic activity vastly over-states where we will be in 100 years. We are not the Titanic. We see the iceberg. Read Climatopolis.