It's Getting Hotter. So Why Not Put Your Faith in the Free Market?

by James Williams

9 September 2013

Viewed through the lens of economic theory, climate change doesn't look so bad. Or does it?
cover art

Climatopolis: How Our Cities Will Thrive in the Hotter Future

Matthew E. Kahn

US: Jun 2013

Even as a sizeable, if dwindling, number of United States elected officials and a still significant portion of the general public deny or remain skeptical that human activity is causing climate change, the issue and its attendant concerns have undergone a massive transformation in the environmental community in the last decade or so. No longer is the question: Is climate change really happening? Nor is it: How can we stop it? Rather, it is: How can we live with it?

This shift in priorities reflects either a massive retreat or a clear-eyed acceptance of the inevitable, depending on your perspective. In either case, carbon emissions don’t show signs of slowing down anytime soon and their accumulation in the atmosphere is so entrenched that the effects will be felt no matter what the coming decades hold in terms of policy changes and other attempts to reduce the use of fossil fuels.

The apocalyptic rhetoric of much environmental literature—one thinks here of the gloomy prognostications of Bill McKibben, for example, who has taken it upon himself to rename the planet “Eaarth” to indicate just how climatologically different the world has become—makes it easy to fall into despair. Indeed, such rhetoric often seems to serve no purpose but to cause despair of a particularly self-abnegating and masochistic kind, lamenting as it does the miserable mess humanity has made of the world. 

Another strain of thought on the matter takes a completely different tack. Instead of hectoring humanity to amend its carbon-producing, fossil fuel consuming ways it asks provocative and controversial questions: Will climate change really be so bad for the world? Does it necessarily spell the doom of humanity? Will it introduce new opportunities for human thriving?

Assessments in this category tend to view climate change as simply another opportunity for humanity to practice its most essential quality: technological and political adaptability to profound change. Bjorn Lomborg, whose 2001 book, A Skeptical Environmenalist, remains controversial since its publication, is probably the most accomplished writer and thinker in this vein. Lomborg’s optimism about humanity’s potential to make the best of a difficult situation is a substantial counterweight to dire prophecies of inevitable collapse.

Matthew Kahn, a professor of economics at UCLA, is thoroughly in this camp. Early on in Climatopolis: How Our Cities Will Thrive in the Hotter Future (first published, in hardcover in 2010) he acknowledges the fact of climate change and the significant (though not, for Kahn, catastrophic) changes it will effect. He does so, however, in the context of a conviction that no amount of denunciation will lead people to change their behaviors. High carbon producing lifestyles are simply too integral to modern life, at least in the first world:

...Driving is not our sole source of greenhouse emissions. When we turn on the lights, eat a steak, order a coffee, take a shower, send an e-mail, and do countless other little things during the day, they all result in extra greenhouse gas emissions.

Are you ready to cut back? If so, are you willing to cut back that much? If you answered “yes,” you are probably kidding yourself. Evidence shows that very few people have cut back on their carbon-producing activities at all. Most of us are “free riders,” hoping someone else will the heavy lifting so we don’t have to. The fundamental free rider problem is that each of us hopes that everyone else will cut back and allow us to keep “Hummering” (or Corolla-ing) along. Which is to say that attempts to reduce or reverse our carbon output—to mitigate the damage that we’ve already done—aren’t going so well.

This statement is not likely to win Kahn much goodwill, but it’s honest and acknowledges a vexed truth that much environmentalist literature either ignores or skirts around: carbon-producing technology makes life quite comfortable and facilitates all kinds of human flourishing—and not just for egregious energy gluttons. Moreover, people in under-developed countries are trying to secure access to such abundant energy, and the lifestyles such abundance allows, for themselves, as well. Thus, our behavior is not going to change soon, or easily.

So where does Kahn go from this frank acknowledgment of the central conundrum facing humanity and the planet? In a surprisingly optimistic direction. Basically, climate change won’t be the end of the world, though it will present profound challenges and will cause substantial changes in population distribution, civic infrastructure, and economic opportunities. Moreover, Kahn grounds his vision in the future of cities, so often portrayed in much environmental literature as the great Satan of the world—nightmares of industry and consumption and harmful human activity. Instead, Kahn argues, they will be the seedbeds of technological innovation and economic dynamism that will enable a successful adaptation to a hotter world.

In essence, Climatopolis is descriptive and predictive rather than prescriptive, and Kahn’s program is to speculate about how people will respond to climate change instead of telling them how they should. And he sees them responding through the lens of an economic theory whose basic tenet is that people are rational actors in their own self-interest and that they will respond to climate change in rational ways: moving from flood prone areas on America’s coasts to (literally) higher ground or the Midwest, for example, and driving the market for more energy efficient appliances.

Whatever choices they make, they will assume certain risks in the hope of enjoying certain benefits. Some will profit; some will lose. Some will bet right; some will bet wrong. Such is life, from the economic viewpoint, where perfection is not possible and contingency, luck, and best guesses are the way of the world. For the most part, though, countless choices on the individual level—undirected by any surpassing state or other authority—will add up to a generally successful heading off of potential crises and adaptation to ones that do happen. 

Response to Kahn’s book will likely hinge on how comfortable one is with this viewpoint. Readers who find his point of view callous, shallow, even unethical will likely dismiss the work. Readers who share Kahn’s essential worldview will likely find it a convincing, or at least plausible, account in an area that is too often befogged by angry moralizing and dystopian obsession. Without choosing ideological sides, it’s fair to say that while Kahn’s overall argument is compelling, substantial problems persist throughout Climatopolis.

Most basically, Kahn has a maddening habit of interlacing his account with references to celebrities, fictional characters, Hollywood disaster movies, and so on. Homer Simpson is his stand-in for the everyman who isn’t smart enough to care about climate change in any grand sense but is smart enough to take practical measures to look after himself and his kids. Perhaps the aim is to lighten the dour mood that pervades so much environmental writing, but the habit renders the tone often superficial. More significantly, reference to fictional characters in a work that purports to predict how actual people will behave often serves as shorthand that stands in for actual research or modeling.

Indeed, research is sorely lacking throughout. Instead, Kahn offers speculation that while sometimes interesting often seems profoundly simplistic: if cities in California become too hot or find themselves under water, then smart people will head to Detroit, far from the worst effects of climate change, thereby reviving the fortunes of that ailing city; if we’re using too much water in a time of shortage, price hikes will make people more careful consumers; climate change might make it more difficult to produce fresh fruit but the market for dried fruit will rise commensurately.

Kahn’s speculations aren’t necessarily incorrect (though, being speculations, they’re not necessarily correct, either), but they’re presented with a nonchalance that doesn’t exactly inspire confidence. Economics may be, as Kahn acknowledges, “the dismal science”, but one would hope at least for more science, more concrete analysis, more complex consideration, especially when the issues at hand are so consequential. 

Climatopolis: How Our Cities Will Thrive in the Hotter Future


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