Saturday, January 8, 2011


Just finished Matt Kahn's book, Climatopolis: How Our Cities will Thrive in a Hotter Future. His main goal, as he states often on his blog, is to introduce some microeconomics in the climate change discussion. He does in a couple of places, however to me a large portion of the book came off as attempts to make more specific predictions than he was capable of making. A few comments:

On page 86, Kahn highlights the important changes in air quality in California brought about since the 1980s by good regulation. Among economists, there are plenty of examples of when regulation fails and produces unintended consequences. However, I never hear economists commend regulation for doing basically what it was supposed to do. With Cali regulations, there is still the complaint that they hit the poor disproportionately hard, but nonetheless the air in LA is much cleaner than it was 20/30 years ago and I think good regulation is at least a small part of that story.

Specifically on page 194, but truly throughout much of the book, Kahn at least hints at the idea that climate change presents the world with a lot of zero-sum decisions. For example, I see Kahn claiming that (basically) Buffalo, Cleveland, and Detroit will likely all be made better off by climate change; LA, Miami, and New York will likely be made worse off. I wish this would have been a major explicit theme of the book - the contrast between problems posed by climate change (where there are winners and losers) and economic problems (where there are winners and... winners). One of the most important and misunderstood aspects of economic life is the fact that it is NOT zero sum. I enjoyed the contrast and would be interested in a book/article/paper by Kahn that emphasized the difference (and implications) in greater detail.

On page 201, Kahn talks about "the victims" of climate change. Throughout Chapter 3 he also talks about the victims, stating that he is not interested in helping those who do not take into account the risk of climate change if they suffer the consequences. There is a definite parallel to the recent bank bailouts and the idea that some cities might get bailed out by the federal government if climate change does present us with a day of reckoning. Kahn hopes that governments can precommit not to protect those who suffer, but recent history suggests that is an impossible task.

Last thing - I want to commend Matt for his discussion of the role of insurance in human adaptation to climate change. I thought that was the most interesting section in the book and wish it wasn't buried at the end. If I had to recommend one portion for those who don't want to read the entire book, that would definitely be it.

Sunday, January 2, 2011

Greg Mankiw's Latest Column is Mostly Nonsense

Normally, I enjoy reading Greg Mankiw both on his blog and in the New York Times. His writing is thoughtful and clear, and although his blog does not allow comments, I do appreciate his explanation why (he's blogging for himself, not for me, and policing comments was too costly for a personal hobby). A recent controversial column, on marginal tax rates, elicited such a large response he even got involved in the conversation.

However, I want to disagree with the sentiment of his most recent column. On my reading, his advice to President Obama is basically that it will be easier to work with Republicans if the President simply becomes a Republican, by (for example) taking a more long-term view of the economy and not using government as a tool for redistribution. This is just silly. Obama was voted in on the Democratic ticket. Voters could reasonably expect him to support typical Democratic policies, such as redistribution of income. Changing course would be a disservice to the voters, who chose the President in part because of his party affiliation.

Greg - it's obvious that by becoming a Republican, or at least making policies that coincide with Republican ideals, it would be easier for the President to work with Republicans. But that's not a realistic or useful policy prescription. Stick to the last point (don't cast the Republicans as your enemy) and focus on how the two sides can find middle ground to make meaningful changes in deficit reduction, entitlement reform, and the future of our nation.

Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty