Climatopolis: How Our Cities Will Thrive in the Hotter World

Climate change will pose major challenges for nations around the world. The risks to the agriculture sector from heat waves and drought have been well studied by economists. My new book titled Climatopolis (Basic Books 2010) focuses on how cities around the world will cope with climate change.

I am not a climate scientist. Instead, I am an environmental and urban economist. This book uses basic microeconomics to think about how self interested households and firms respond to the anticipated but uncertain threat of climate change. We know that “we do not know” what climate change will mean for our cities and our nation. Since climate change threatens to disrupt our day to day lives, it creates incentives for households to seek out adaptation strategies and this creates new market opportunities for forward looking entrepreneurs.

Climate change bundles several challenges ranging from the increased probability of severe heat waves, to increased likelihood of drought. Coastal areas are likely to experience more and more severe natural disasters such as floods and hurricanes. The consequences of such events will hinge on a city’s geography, income, and institutions. In my 2005 paper titled “The Death Toll from Natural Disasters”, I documented using data from 73 nations over the years 1980 to 2002 that richer nations suffer much less death when natural disasters take place. The recent earthquakes in Chile and Haiti offer a salient contrast. Measured on the Richter scale, Chile suffered from a much worse earthquake than Haiti but the earthquake caused much more death in Haiti than in Chile. Income and education enable individuals to access a variety of coping strategies when “worst case” scenarios arise.

Throughout this week, I will return to the theme that economic development will help poor countries to adapt to climate change. My book stresses this irony. Free market urban growth has caused climate change (by allowing billions of people to achieve the American Dream, see Jared Diamond’s book Collapse) but capitalism will help us to adapt to climate change’s blows. Why? As I will discuss later this week, it will foster directed innovation and the diffusion of new products ranging from floatable homes to renewable power that will help billions of people to cope in the face of climate change. Global free trade in ideas, goods and labor flows will help adaptation efforts.

Climate change will pose new risks for cities. Recently, The Economist published a generally favorable review of Climatopolis but pointed out that I had ranked Moscow as likely to be a climate change resilient city. In my short list of “resilient cities”, I had focused on cities unlikely to suffer from major sea level rise that are located at northern latitudes. Martin Weitzman’s work on climate change catastrophe has influenced my thinking and thus my rankings. The Economist was quick to point out that even “safe cities” can and will suffer due to climate shocks caused by climate change.

Climate scientists will continue to make progress researching how climate change will affect different geographical areas around the world. While climate science is still a new research field featuring much uncertainty, I am confident that a consensus will form and the predictions based on modeling in this field will be common knowledge due to the Internet and the diffusion of information. If a consensus does not emerge, then a key issue will be whether households and governments know that “they do not know” what risks climate change implies for their city. Risk averse decision makers will plan for worst case scenarios and this will protect them.

Citizens and politicians in cities such as Moscow have a strong incentive to know how the probability of hot summer days has changed over time due to climate change. Self interested households have the right incentives to learn about how changing climate conditions will affect their quality of life.

As we individually learn about the day-to-day challenges climate change poses for different cities, city residents will take pro-active steps to adapt to changing circumstances. Yes, the Moscow heat wave was deadly but the “silver lining” of this shock is that the city’s residents learned that it is at risk and I predict that it will make costly investments now to lower the impact of the next heat wave. This basic logic is why I am optimistic about our urban future. We have the right incentives to learn and to adapt to our changing environmental conditions.

A maintained assumption in my book is that climate change’s impact on our cities will take place gradually. If New York City residents wake up in January 2011 and there has been significant sea level rise causing mass flooding of Manhattan, then there is little that the residents of Southern Manhattan can do to adapt. The basic premise of Climatopolis is that we are forward looking, self interested individuals. We foresee the challenges that climate change will pose for our cities and we have the right incentives to make investments now to protect ourselves from its most severe impacts. These investments will help us to adapt to living in the hotter world. In tomorrow’s post, I will focus on migration both within cities and across cities and even across national borders as a key investment strategy for adapting.