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Air Conditioning and Urban Adaptation to Intense Heat
Saturday, March 28, 2015 17:01
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On Thursday night, I gave an after dinner talk for a group of NBER economists. My talk focused on the impact of climate change on urban economic growth and urban quality of life. I argued that urbanization and the system of cities will together greatly help us to adapt to the emerging threat of climate change. Below, I provide my notes for my talk.
“Among a number of 20th-century luminaries asked by the Wall Street Journal in 1999 to pick the most influential invention of the millennium, he alone shunned the printing press, electricity, the internal combustion engine and the internet and chose the air-conditioner. He explained that, before air-con, people living in the tropics were at a disadvantage because the heat and humidity damaged the quality of their work.”
Note the optimism. Note the ability of a physical place to protect itself from a threat. Economic development offers this possibility. As air conditioners become cheaper, this same effect will be observed in every city around the world and the impact of climate change caused heat on death and lowered productivity will be sharply attenuated.
NBER dinner
·Thank Don , remarks will be brief!
·Two major issues related to cities and climate change
·1. How does urban growth and a specific city’s urban form affect GHG emissions?
oBillions moving to cities. Cities raise our income due to learning and specialization and trade
oEngel curves and the resulting GHG emissions; Davis and Gertler’s work, cars everywhere, fridge, air conditioner, Catherine Wolfram’s work. Growing urban middle class all over the world is buying energy consuming durables that improve their private quality of life but exacerbate the climate change challenge given that fossil fuels are used to produce the electricity for these products.
oGlaeser and I on carbon footprints for cities around the world that differ in climate and in compactness.
·2. How will climate change impact urban economic growth and urban quality of life?
·My thesis is simple; urbanization greatly helps us to adapt to climate change especially within nations with a large system of cities that provide choice and competition.
oHow far do cities go to protecting us? That’s the empirical question.
oMy remarks build on ideas I first presented in my 2010 Climatopolis book! Also build on many NBER scholars’ recent work.
·The right micro approach is to adopt an expenditure function approach within a Gary Becker Household production function framework;
owe seek to be safe, healthy and happy;
ohow does climate change’s shocks and trends affect each of these?
oFor every shock that urban households can experience due to climate change, loss in consumer surplus?
oRole of capitalism and new products to protect us from that shock
·Income insulates us;
oDeath Toll from natural disasters - my 2005 RESTAT paper
oHeat waves — The Greenstone and co-authors work on air conditioning reducing the “sting” of heat waves, USA 20th Century and true in India, my time in Singapore; Cities and air conditioning go hand in hand
oThe urban poor and adaptation; If income protects us, will those with less income be able to protect themselves? As quality adjusted prices for sturdy housing, cell phone, air conditioning, fridge decline then even poorer urban people will have the capacity to protect themselves.
New Threats
Sea Level Rise in coastal cities such as Miami and New York; Durable capital and endogenous maintenance; Lego pieces and option value of disassembling; Known unknowns and how plan for them
System of cities; if coastal cities do a bad job adapting, skilled people will leave and urban growth in these cities will slow. This creates an incentive for local leaders to step up and be pro-active.
Zoning in cities. Climate scientists will improve their modeling predictions and will identify where is “higher ground”. We need to change local zoning laws to allow for upzoning in safe areas. Glaeser has noted that the whole world can live in Texas at medium population density. There is enough land. Yes, sea level rise will lead to the loss of coast line but there will be a pecuniary externality as higher ground land will rise in value. A type of zero sum game.
High Frequency Reoptimization and the Smart Phone
·Matt Neidell’s work on self protection and real time information; Internet
·Frank Wolak work on dynamic pricing and keeping the grid from blacking out, same for water pricing;
Migration and Urban places versus people
·Urban people versus urban places ;
oThose cities that do a bad job adapting will suffer home price loss (Rosen) , mayor will have less property tax revenue.
oMigration costs and voting with your feet; Timmins and Kennan and Walker; place based people how help them? The elderly and the less educated face higher migration costs
o FEMA creates spatial moral hazard . Why are we subsidizing living in risky areas?
Urban Production and climate shocks disruption to the economy
·Extreme weather events and team production, who must meet face to face to create output? My conjecture is that the productivity impact of extreme climate events will shrink over time as more economic takes place in indoor cities which are insulated from such shocks. Professors get more work done on a nasty day. No team production , and thus can work at home.
·Air conditioning in LDC firms; as human capital rises; firms will endogenously supply air conditioning. My work with Josh Zivin on urban TFP in the face of shocks, Chicago’s productivity on a very snowy day; who can work from home? Who really needs to go to work in this internet age? Extremely hot day
·
The LDC Research
NBER Researchers are creating a new field of study that will become increasingly important; cities in the developing world; development economists have focused too much on farmers.
·Farming — important to study which farmers in which nations are able to adapt to changing climate conditions. To make sure that urbanites have access to affordable food we need; futures markets and free trade across nations in agricultural goods. This allows for risk diversification. We also need crops that we can hold in inventory to smooth risk. ;
·Orderly rural to urban migration in the face of climate shocks? Adaptability of farmers; system of cities; many cities to choose from; Borjas, Freeman and Katz and the ripple effects of immigration to cities as natives move from the immigrant port.
·Ted Miguel’s work on country side violence in Southern Africa exacerbated by climate change; urbanization will help to diffuse this threat.
conclude
·The Future of Bangladesh — Acemoglu and Linn — induced innovation; anticipated challenge creates profit opportunity
·Not chanting that the free market will “solve all”, Instead — the role that urban economic growth plays in protecting us from an emerging threat. Self interested “victims”? investment under uncertainty — reconsidered.
