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Adaptation, Prices, and Climate Change

Both the Atlantic (not yet online) and Sports Illustrated (HT: Michael Rizzo) feature cover stories on global warming. The Sports Illustrated piece is a bit of a stretch. They have a long tradition of trying to be about something more consequential than sports. Does global warming have anything to do with sports? Sure:

The next time a ball game gets rained out during the September
stretch run, you can curse the momentary worthlessness of those tickets
in your pocket. Or you can wonder why it got rained out — and ask
yourself why practice had to be called off last summer on a day when
there wasn’t a cloud in the sky; and why that Gulf Coast wharf where
you used to reel in mackerel and flounder no longer exists; and why
it’s been more than one winter since you pulled those titanium skis out
of the garage.

Global warming is not coming; it is here.
Greenhouse gases — most notably carbon dioxide produced by burning
coal, oil and gas — are trapping solar heat that once escaped from the
Earth’s atmosphere. As temperatures around the globe increase, oceans
are warming, fields are drying up, snow is melting, more rain is
falling, and sea levels are rising.

All of which is changing the way we play and the sports we watch.

  It’s a bit of a stretch. A huge stretch. And of course it’s a stretch in one direction only. It could have been written this way:

The next time you get to enjoy throwing a baseball in February or enjoying a December game at Chicago’s Soldier Field instead of viewing it mostly as a rite of passage or a test of your toughness, thank global warming.

Oops. Not scary. The cover of the magazine is the way to go—a Florida Marlin (the baseball kind) in thigh-deep water in the outfield of the Marlins’ stadium. I’m going to save the cover. It will be either the crow I eat in 25 years as a repentant ex-skeptic or the poster to share with friends who thought the experts were right all along.

Over at the Atlantic, recent EconTalk guest Gregg Easterbrook has the courage to stretch in both directions, looking at who might lose, yes, but also who might benefit from global warming. There’s some good stuff in it. Lots of interesting speculation for example, on land values and how Buffalo might again become the place to be, while Arizona real estate plummets in value.

Toward the end, he offers this insight into coping with global warming:

The market has caused the greenhouse-gas problem, and the market is the best hope for solving it. Offering market-incentives for the development of greenhouse-gas controls—indeed encouraging profit making in greenhouse-gas controls—is the most promising path to avoiding the harm that could befall the dispossessed of developing nations as the global climate changes.

He then goes on to say that because global warming is already here, adaptation is also important.

Crops that grow in high temperatures, homes and buildings designed to stay cool during heat waves, vehicles that run on far less fuel, waterfront structures that can resist stronger storms‚the list of needed adaptations will be long, and all involve producing, buying, and selling. Environmentalists don’t like talk of adaptation, as it implies making our peace with a warmer worlds. That peace though, must be made—and the sooner businesses, investors, and entrepreneurs get to work, the better.

Well said, but there is one more key point to make. Prevention, if it is indeed prudent, is likely to require collective action, government action, internationally imposed action. Action that is going to have all the rent-seeking and other mistakes that come from centralizing power. Adaptation comes from the market, as he calls it—from individual action. It is self-organizing. We don’t need to exhort entrepreneurs to come up with cooler homes or better crops. Their own self-interest will push them to discover those innovations and at the right pace. And sooner isn’t necessarily better with adaptation. Sooner comes at a cost of foregone other innovations and uses of time and energy and the sweat of the brow. Entrepreneurs have an incentive to take those costs into effect. Politicians don’t. So don’t worry. All the adaptations that you can make money from will come into being without any exhortation. Money talks. Loudly, but not too loudly.

One more thought on adaptation and the role of prices. If the worriers are right, if global warming really does threaten to make Miami uninhabitable, we’ll see real estate prices in Miami start to fall as Easterbrook points out. The fact that they are not falling means that people do not believe the worriers. So someone is wrong. Either Al Gore or the guy who is paying the going rate for a lot in South Beach. My impulse is to choose Al Gore as mistaken simply because there is no consequence for him being wrong and the purchaser of the real estate has a much greater incentive to act on an inconvenient truth.

But maybe people are myopic. Maybe they inadequately perceive the risk of one-time events. Maybe it will take a while for all those Sports Illustrated covers to sink in. Even so, if sea levels really rise, eventually buyers and sellers of land will catch on. The demand for Florida real estate will go down and the prices will start to fall. The prices elsewhere will rise. Not uniformly. Some places will go up more than others. These changing prices will encourage some people to go to Buffalo and others to Omaha. Some people will leave Florida quickly while others will stay for a while as the waters rise.

The changes in the price of real estate will not happen overnight. They will happen gradually over time, giving people the signals about which places are relatively attractive and which places are less so. This adaptation will take place without any centralized direction.

When the price of land in Miami starts to fall relative to the rest of the country, then you’ll know people are taking global warming seriously. That is one more piece of evidence you can use to figure out whether any political action will take place. Until that happens, bet on the status quo politically.