Climatopolis is an optimistic book that previews how we will individually and collectively adapt to climate change. If the world could cap global greenhouse gas production, then adaptation would be much easier. But, the world’s population and per-capita income continue to grow. Without being overly dramatic, climate change is coming. It would certainly be easier to adapt to climate change if we could stabilize global carbon dioxide levels, but I believe that the fundamental global free rider problem means that it will continue to rise. How will we respond to this anticipated but uncertain threat?
The neo-classical economics perspective views people as if they are Mr. Spock from Star Trek. This vision treats people as forward looking decision makers with rational expectations. Rational expectations does not equal perfect foresight. Instead it means that people use all currently available information in forming their best predictions of the future. Such aware individuals know “that they do not know” and invest in learning to update their priors through Bayesian updating. As climate scientists learn more and this information becomes public knowledge this information influences our investment decisions along a variety of margins including migration patterns, and the products we purchase.
In contrast, the upstart group of behavioral economists would say that most of us are Homer Simpsons who represent a set of climate change deniers or technological optimists who figure that some nerd will come up with a magical fix if and when climate change really unfolds. This view of men and women fosters a pessimistic view of our ability to adapt to climate change because it hints that a global “Titanic” day of reckoning awaits us.
But, imagine a diverse world in which for every 100 citizens; there are 97 Homer Simpsons and 3 Spocks. The self interested second group can and [...]