Singapore to LA on Singapore Airlines is an easy 16 hour trip. I had never been on an airplane with only Business Class seats. Classy! I slept three hours on the plane and arrived in LA at 6pm. Stayed up until 9pm and then slept until morning and now I am fine. My journey around the world is now complete and all I have left is dirty laundry and some great memories.
As I skimmed through my emails this morning, I saw a new NBER paper by MIT's great economist Robert Pindyck called the "Climate Dilemma".
Here is a paragraph he writes about climate change adaptation.
"Third, climate change will occur slowly, so that there is considerable potential for
adaptation. In the case of agriculture, we have already seen this in the U.S. during the 19
th century as settlers moved west and had to adapt crops to new and very different climatic
conditions. (The recent book edited by Libecap and Steckel (2011) provides several detailed
examples of this kind of adaptation.) Flooding is a potential hazard of climate change if sea
levels rise substantially, but here, too, we have seen adaptation in the past (with the dikes of
Holland perhaps the best-known example). This does not mean, however, that adaptation will
eliminate the impact of climate change – it is simply another complicating factor that makes it
very difficult to estimate any kind of loss function."
Notice his implicit optimism in the first half of the paragraph then the implicit shrug of his shoulders in the last sentence. To my surprise, he is unwilling to really explore this issue. I agree with his last sentence but it is a lazy sentence for a great economist to write down. What do the words "complicating factor" mean? I have never stated that adaptation will eliminate the impact of climate change but I have argued that capitalism offers an evolutionary means for mitigating its greatest impacts and this is crucial in a world of rising GHG emissions.
In the next sentence he writes;
"It may be that the relationship between temperature and the economy is not just
something we don’t know, but something that we cannot know, at least for the time horizon
relevant to the design and evaluation of climate policy."
I agree with this. It is not a structural relationship --- through new investments and learning the reduced form relationship between temperature and the economy will become flatter over time! For example, Greenstone is doing work right now in India that the relationship between extreme heat exposure and death rates is dampening over time indicating that adaptation is taking place. This "slope" at any point in time is not a structural parameter (i.e is not a law of physics). That's adaptation and no theorist can model this evolutionary process except to conclude that adaptation progress will continue to take place. The key question is how to set up incentives and "rules of the game" that accelerate this learning and experimentation process.
