Matthew Kahn Answers Your Climatopolis Questions

Last week, we solicited your questions for Matthew Kahn, the author of Climatopolis: How Our Cities Will Thrive in the Hotter Future. His answers, covering everything from water scarcity to Moscow’s recent heat wave, are below. A big thanks to Matt – and to everyone who participated.

How is it to do research on a subject that most people have such zealous views about?- Eric H

My book uses the logic of microeconomics to examine the future of our cities in the face of climate change. It melds insights from urban and environmental economics. While I think of myself as a “scientist,” I knew that this book would have ideological implications. The Right dismisses any argument that takes climate change seriously, and I do take this problem quite seriously. I’ve been a pinch sad that the liberal environmentalists view my book with great suspicion. To “solve” the climate change problem, we need to simultaneously mitigate and adapt, and my book explores the adaptation option. We have chosen not to mitigate our carbon emissions, so this moves adaptation to center stage.
As I explain in the first chapter of the book, titled “Too Much Gas,” I believe that climate change is a real threat. Unfortunately, I am convinced that international and federal efforts to cap our greenhouse gas (GHG) emissions will fail due to the free-rider problem. Given that GHG emissions will continue to rise, we need to start to discuss how the world’s economy will adapt to climate change. Most of us live in cities. Thus, it is natural to ask: “How will urbanites in rich and poor nations be affected by climate change?” In Climatopolis, I argue that proactive migration and capitalism-induced innovation will help to protect urbanites in both the developed and developing world.
My optimism will anger many liberals who believe that we are doomed victims of Mother Nature’s coming blows. This victim mentality helps to create an “urgency of now.” This group worries that an adaptation optimist such as myself may lull political moderates into voting against carbon mitigation now. That is not my goal. I support mitigation now, but I am a realist. My goal is to start a debate about the evolutionary nature of the urban free market economy to reinvent itself in the face of a scary, uncertain but expected future challenge. We know that “we do not know” what climate change holds in store for us, but we can plan for the worst. When billions of people seek solutions, this creates a huge market opportunity for entrepreneurs who can cater to their desires. If the world had one bald guy, there would be no R&D to develop Rogaine. In a world with 7 billion bald guys, Rogaine will be discovered. I am a technological optimist. Climate change will cause a new demand for energy efficient products, and new urban infrastructure. Such demand will create supply! In this sense, free market capitalism will protect us from climate change’s blows. I can see how that point could drive some folks nuts.

Given the heat wave in Russia this summer, do you still think that Moscow will be a good city to move to after the effects of climate change become more significant? – bc

My middle name is not Nostradamus. I did not foresee the horrible Summer 2010 heat wave that killed thousands in Moscow. Joe Romm and his followers have jumped on this example as “proving” that I can’t see the future. I admit that I will never be selected by the NFL as the next “Jimmy the Greek,” but permit “Matt the Nerd” to respond. While I do not have a crystal ball, I do believe that people are rational and self-interested and will grope around to identify new coping strategies as they learn about the new challenges they face caused by climate change.
In Climatopolis, I argue that urbanites are Bayesians who will continuously update their probability assessments as new information arrives. In English, this means, “fool me once, shame on you; fool me twice, shame on me.” The silver lining of the Moscow heat wave is that the next heat wave will cause much less death! The people of Moscow have learned that nasty heat waves are a new reality in our hotter world and will now buy air conditioners and develop coping strategies to be ready for the next heat wave. Future buildings in Moscow will be built to cope with winter cold and summer heat. Improvements in ventilation will lead to architects designing new buildings incorporating insights from nations closer to the equator. We learn from experience. To quote The Who, “We won’t be fooled again.” Ideally, urbanites in other cities do not have to experience such a heat wave to update their assessments about heat wave risk. Such probability assessment research is a standard approach in compensating differentials research. You can survey the population concerning what they believe the risk of lung cancer is for smokers and non-smokers. There is a paternalistic justification for smoking taxes if smokers underestimate the cancer probability. In a similar spirit, if the population in cities such as Moscow systematically underestimates the probability of heat waves in the face of climate change, then public health workers can improve urban quality of life by educating the public and hence affecting their self-protective behavior. So, BC — you can continue to hang with V. Putin in our hotter future.

Also, the issue with cities in global warming is not Manhattan but Bangladesh. I don’t see Bangladesh having the resources to do much. – jonathan

Brown University’s Vernon Henderson has posted the World Cities Database. Looking at Bangladesh, I see more than 70 cities. At least three of these cities have over 120,000 people. These include Chittagong, Dhaka and Khulna. For each of Bangladesh’s cities, I would like to know how many square miles of land within each of these cities can withstand significant sea level rise? If global greenhouse gas concentrations rise to 900 ppm, what parts of these cities will be under water? Of course, there is a huge amount of uncertainty in the current climate models, but recent improvements in these models have allowed for higher resolution such that we can disaggregate the specific threats posed by climate change to more narrowly defined geographical areas. For the land that is unlikely to face sea level rise, if we built up that land at Hong Kong style population density, how many people could live in such cities? It is obvious that this is where a benevolent planner would choose to locate these urbanites.
Today, the World Bank celebrates the sharp reduction in Bangladesh’s poverty. Richer people will have more strategies to cope with climate change. In Climatopolis, I argue that climate change is likely to accelerate urbanization in developing nations such as Bangladesh. Urban households have fewer children than rural households. So, urbanization can have a causal role in reducing the number of victims caused by climate change.
But, suppose that I am wrong and Bangladesh’s quality of life declines dramatically. Many environmentalists have written pessimistic reports about millions of “environmental refugees.” A microeconomist would point out that migration is an investment choice. The rational household will tradeoff the benefits and costs of migration. For example, as India and China develop, their growing middle class may desire low skill services that Bangladeshi migrants could supply. As China ages due to its one child policy, it may be actively looking for millions of young migrants to move to Southern China. In this sense, immigration represents a “gains to trade” in the international labor market. People from Bangladesh will have choices over where to move to. Mobility across nations helps to protect the people of Bangladesh from challenges their nation may not be able to escape. My grandfather immigrated to New York City from Poland in 1923. Immigrants have played a key role in the growth of the United States. Why won’t a similar dynamic play out in Bangladesh? I realize that I am glossing over ethnic and religion assimilation issues, but if there are significant economic gains to such trade then I am optimistic that these costs can be borne.

I find it interesting that the 5 “safest” cities mostly have a proximity to the Great Lakes (Salt Lake City being the exception). My question to you – are these “safe” cities designated that way because of access to fresh water? I’d love to hear your comments on water access and climate change. It seems to me the smartest people in Southern California wouldn’t have an answer to the Colorado river drying up. -?Dave

In Climatopolis, I discuss in detail in chapter three the challenge of water in arid Los Angeles in the face of climate change. Leading climate scientists predict that Southern California will have less access to water because of melting of the Sierra Nevada snowpack. The microeconomics here aren’t too hard. If climate change constricts the supply of a scarce resource, then maybe it shouldn’t be priced at a .5 cents per gallon! Imagine if Budweiser was priced like that. At .5 cents a gallon, my fellow home owners in Los Angeles have the greenest of green lawns, waste water like bandits and fill their swimming pools to the brim. My expectation is that climate change will force the municipal water authorities to more sanely price this increasingly scarce resource. As water prices rise, people will follow my wife and rip out the grass in their yards. Half of urban water use is outdoor use. As water prices rise, people will seek out more water efficient appliances, and this induced innovation will help to mitigate the “water crisis.” Correct price signals will go a long way to helping us to adapt. This is the point of Climatopolis. Basic microeconomic logic goes a long way in predicting our urban future. Now, we know that California agriculture is a major water consumer. I spend a little time in Climatopolis talking about the obvious adaptation margins here. California will reduce its production of water intensive agriculture, and farmers will have access through water markets to sell their water to thirsty urbanites, and economists will celebrate that this scarce resource will finally be allocated efficiently across sectors.
Suppose you are right, and the Colorado River dries up. In Climatopolis, I assume that such a dramatic event would occur gradually. We would see this coming. We know we have access to a variety of strategies for increasing our water supplies, ranging from moving water from agriculture to cities to desalinization. Each of these strategies has costs, but a proactive people who anticipate the coming challenges have the right incentives to “be prepared.”

I don’t know about the author, but I didn’t “choose” to live where I live (Albany). I was forced there by the nature of my work – as a worker with a highly specialized skill set, there are only a handful of employers in the country who can hire me and/or can afford me. I would love to live in Manhattan or San Francisco or D.C., but I didn’t have a whole lot of choice. I suspect most workers don’t get to choose where they work via some wonderful free market system – maybe economists do, but I suspect they have the same issues as well. Most workers are stuck where their family ties are, or where their employer sets up shop. – Dr J

Permit me to speak about my family. When we lived in Boston, my wife had a great job, and I had a good job. We didn’t like the weather and we wanted to live better. Los Angeles offered us this opportunity, and we love living in West Los Angeles. The problem is that everyone agrees that West Los Angeles is great. The average home near UCLA costs $1.3 million dollars. I noted a few months ago that you can trade one Westwood home for 100 Detroit homes, but few choose to make this trade. In Climatopolis, I argue that in terms of long run investments, it might be wise to buy up property in the Detroit area. When the year 2070 rolls around, Detroit’s more temperate winters and flood-proof zones may make it a much more attractive place to live than today.
You argue that you are locked into living in a specific city because of the industry you work in. But why is your industry located there? There is no reason why Detroit has a monopoly on making cars, or Hollywood has a monopoly on making films. In the past, firms were locked into locating in specific locations due to natural advantages or early initial conditions such as where the key inventor was born. This point is emphasized in Paul Krugman‘s Nobel Prize-winning work on economic geography. In contrast, today few workers are tied down by the “exogenous” location of where their industry tends to agglomerate. Harvard’s Ed Glaeser argues that the future of cities is as “consumer cities.” Cities that can attract and retain the skilled will have a bright future, and the skilled want high quality of life. While there has always been this “chicken and egg” issue of whether workers follow firms or vice-versa, there is a growing realization that, in our economy, skilled workers choose where they want to live, and footloose jobs follow them, and then a “snowball” emerges. Climate change will shake up the rankings of which cities are “hot and which are not.” Those cities whose climate bundle suffers and who are not proactive in handling natural disaster risk will fall down the quality of life rankings. Their land owners will suffer an asset loss, and they will lose the skilled. Mayors who recognize that the “golden goose” for their tax base is the skilled have an incentive to “climate proof” their cities to maintain their quality of life in the face of climate change.