The September 2013 issue of the Journal of Economic Literature has a great Glaeser book review of Moretti's New Economic Geography of Jobs and also features a China pollution paper by myself and Siqi Zheng but the best paper is written by Pindyck. Wow! For those who call themselves energy and environmental economists, I suggest that you carefully read it.
Note that on page 867, he begins to discuss climate change adaptation as he discusses the "Loss function" associated with changing world temperature.
For example, the Nordhaus (2008) DICE model uses the following inverse-quadratic loss function:
L(T) = 1/[1 + π1*T + π2*T*T]
Weitzman (2009) suggested the exponential quadratic loss function:
L(T) = exp[−β(T*T)]
Where T = average temperature.
You don't have to be Robert E. Lucas to know that the Lucas Critique applies here. Why are the parameters time invariant structural parameters in these Loss functions? You don't have to have read Climatopolis to anticipate that we will restructure our economy so that the marginal loss with respect to temperature decreases over time as we urbanize, innovate and use scarce resources more efficiently.
