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Green Economics

The real cost of climate change

There is a lot of money to be had in innovating new ways to adapt to climate change

By Guest blogger / November 21, 2011

Texas State Park police officer Thomas Bigham walks across the cracked lake bed of O.C. Fisher Lake in San Angelo, Texas. Kahn argues that climate change will impel entrepreneurs to innovate adaptations.

Tony Gutierrez/AP/FIle

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I missed this piece by Joe Romm about future Dust Bowls caused by climate change.  Here is a dramatic quote from this subtle thinker;

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"Most pressingly, what will happen to global food security if dust-bowl conditions become the norm for both food-importing and food- exporting countries? Extreme, widespread droughts will be happening at the same time as sea level rise and salt-water intrusion threaten some of the richest agricultural deltas in the world, such as those of the Nile and the Ganges. Meanwhile, ocean acidification, warming and overfishing may severely deplete the food available from the sea….

Human adaptation to prolonged, extreme drought is difficult or impossible. Historically, the primary adaptation to dust-bowlification has been abandonment; the very word ‘desert’ comes from the Latin desertum for ‘an abandoned place’. During the relatively short-lived US Dust-Bowl era, hundreds of thousands of families fled the region. We need to plan how the world will deal with drought-spurred migrations (see page 447) and steadily growing areas of non- arable land in the heart of densely populated countries and global bread-baskets. Feeding some 9 billion people by mid-century in the face of a rapidly worsening climate may well be the greatest challenge the human race has ever faced."

Joe has provided us with the "early warning" of the challenge we will face.  We should thank him for this.  Note that he is quite pessimistic about induced technological progress.  What do capitalist firms do all day long?  A lazy view is that they play the cliche "bad guy" role that OWS focuses on as the "Fat Cats" sit around and count their $.  A more nuanced view is that there are millions of entrepreneurs thinking about what will be the next "big thing".  If food production will be the next big thing, then $  from venture capitalists will flow in.  Will we continue to grow food the way we have in the past in the same locations that we have used? Perhaps not.

International trade in agriculture offers a diversified portfolio of exporters.   Inventories offers another strategy for protecting us from shocks.  In Climatopolis, I used the example of dried fruit as a simple example of this point.   Much of the pessimism about human adaptation to climate change comes from not appreciating the path of endogenous innovation.  Smart people are aware that the future will not be like the past and that climate change poses real risks.  Such anticipation is the first step to helping us to adapt.

For 30 years, economists have written about investment being a function of future expectations.  In the case of climate change economics, rational expectations lives on.  If Dr. Romm is right, he should be investing his family's money in promising companies whose efforts can feed the world in the future.  Under his scenarios, the price of food will start to rise and this will trigger demand and supply responses.  The "doom and gloom" that he predicts will unfold is much less likely in a world featuring capitalist free markets and globalized trade and international migration.   Of course, we should reduce our GHG emissions now but given that this is not happening it it time to embrace adaptation strategies and capitalist growth is our best adaptation strategy.

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