Climatopolis

The rise of this mega-city foreshadows China's trajectory in the twenty-first century—and that of the rest of the world. Hundreds of millions will be moving to cities like Shanghai to strike it rich and escape the rural life as more and more of the world's population continues the shift that's been going on, in fits and starts, since the Industrial Revolution: moving from the rural to the urban. By 1950, 30 percent of the world's population lived in cities. In 2000 this portion grew to 47 percent, and the United Nations predicts it will rise to 60 percent by 2030.¹ These would-be city dwellers want economic opportunities and material comforts that we take for granted: cell phones (and decent service), personal computers, access to private transportation, and household air conditioning.

Given this search for the good life and the amenities that go with it, the move toward urban life makes sense. Cities are capitalism's growth engine, offering opportunity along every dimension from finding a job to support oneself, to finding a mate to spend money on, to great cultural events to attend, to fantastic restaurants of all kinds. And, maybe, a bit later, parks to take the kids to. City growth has lifted billions of people out of poverty.

That's a good thing, although many lament the loss of agricultural and pastoral life. But how many of the those who bemoan the loss of farm living have gotten up before sunrise to milk cows by hand or slop pigs or pitch hay? I haven't, but I'm pretty sure it wouldn't be much fun, day after day. If you don't believe me, contrast Seinfeld's life in New York City with the cheery world of the Swiss Family Robinson.

Prominent writers such as Jared Diamond, author of the best sellers Guns, Germs, and Steel and the more foreboding Collapse, are deeply worried about the environmental consequences of the growth of the middle class in the developing world. Diamond, and most environmentalists, charge capitalism with causing climate change because urban growth provides us with the income to afford a Hummer and a big house. Capitalist growth, they say, perpetuates itself with an advertising- and consumer-oriented culture ("The American Dream") that manipulates our desires to consume more and more carbon-intensive stuff: lawnmowers, air conditioners, cars, car seats, disposable diapers, See 'n' Says (kids' products produce a lot of carbon), and so on. Recent macroeconomic trends support some of these claims. The world's population, per capita income, and greenhouse gas emissions are all rising. The world's population will have grown from 2.6 billion in 1950 to 6.9 billion by 2010.² Real-world per capita income is now at $7,400, a figure that has grown sharply over the last forty years. In 2005 the world produced 28.1 billion metric tons of carbon dioxide; that number is predicted to rise to 42.3 billion metric tons per year by 2030.³

That's a lot of CO₂. Leading climate change researchers have concluded that to protect the planet from potentially catastrophic climate change risk, we must stabilize atmospheric carbon dioxide concentration at 500 parts per million (ppm) or even as low as 350 ppm. But this would require reducing our total global carbon dioxide emissions to no more than 19.1 billion tons per year—a little less than half of what's predicted for 2030. In a world with 7 billion people—the world's current population—we would have to shrink carbon emissions to an average of about two and one-half tons per person per year. To put this in perspective, a car that gets about 25 miles to the gallon—a Toyota Corolla, which happens to be the most popular car in the United States—would exceed the 2.5-ton target at 7,500 miles per year (the average driver travels something like 12,000 miles a year). But driving is not our sole source of greenhouse gas emissions. When we turn on the lights, eat a steak, order a coffee, take a shower, send an e-mail, and do countless other little things during the day, they all result in extra greenhouse gas emissions.

Are you ready to cut back? If so, are you willing to cut back that much? If you answered "yes," you're probably kidding yourself. Evidence shows that very few individuals have cut back on their carbon-producing activities at all. Most of us are "free riders," hoping someone else will do the heavy lifting so we don't have to. The fundamental free rider problem is that each of us hopes that everyone else will cut back and allow us to keep "Hummering" (or Corolla-ing) along. Which is to say that attempts to reduce or reverse our carbon output—to mitigate the damage that we've already done—aren't going so well.

We're a bit like the Titanic on the night of April 14, 1912. We know how the Titanic's story ends, but suppose the ship's watchman had seen the iceberg out in the distance. Anticipating that bad things happen when a ship hits such a big piece of ice, he would have issued a warning to the navigator to change course, and the disaster would have been averted.

Climate change and hitting an iceberg are different events, to be sure. In the case of the iceberg, the consequences of the ship hitting the ice are obvious and immediate. No Rush Limbaugh could step in and say that angry liberals are the real source of the problem. All aboard the Titanic would agree that they have a huge problem if they hit the iceberg. Nobody on board would say, "Well, that will only hurt the people in third class, and I never liked them anyway." The Titanic did not have enough lifeboats for everyone. Even the rich could not be sure that they would escape alive if a collision took place. Once those on board the Titanic spotted the iceberg, everyone would agree that switching direction to avoid it would be a wise move. The crew and passengers would know they would immediately be victims and all go down together. In contrast, as climate scientists demand that we take costly action to reduce global carbon concentrations to as low as 350 ppm, many people do not see why we should do so, even though we can see the iceberg.

We know what the future, our iceberg, looks like, almost guaranteed: more people, more money per person, and more overall pollution. And that's our starting point in this book: we have already released too much greenhouse gas, and I see no credible signs that global emissions will decline in the near or medium future. Although the carbon mitigation agenda—the plan to reduce our emissions—is a worthy goal, we are unlikely to invent a magical new clean technology that allows us to live well without producing greenhouse gases. We are equally unlikely to devise a geo-engineering technological fix that vacuums up the world's existing carbon emissions. That is, unlike a ship, we can't turn away.

So if the world is going to get hotter, and more of the world's population is going to be living in cities, then the fundamental question is what the future of our cities will be in our hotter world. Some claim that our future is bleak. The 2008 Nobel laureate in economics, Paul Krugman, for instance, has argued that we are like a frog in a pot of slowly heating water, patiently waiting to be cooked when it comes to a boil.⁴ He laments that although he knows the climate pot is getting hot, we frogs are blissfully ignorant of the coming doom that climate change will cause. It's worth noting, though, that frogs do actually jump out of heating water. They don't sit around waiting to get cooked. And neither will we.

I'm optimistic about the quality of our lives in the cities of the future, despite the very different climate conditions that we'll face. Urban life will go on in our hotter world. At the heart of my belief that we frogs won't cook is our individual freedom of choice, not to mitigate but to adapt. Unlike birds and butterflies, we have a much wider variety of choices and options that allow us to protect ourselves from climate change. This personal freedom opens up pathways that will greatly help urbanites cope with it. As climate change unfolds, billions of households will seek out strategies for protecting their families from harm. Some will move to higher ground to areas that are unlikely to flood; others will seek out products ranging from more energy-efficient air conditioning to higher quality building materials to protect themselves from climate change's blows.

My vision—that we will save ourselves by adapting to our ever-changing circumstances—stands in sharp contrast to the usual Hollywood theme of a singular hero such as Arnold or Harrison or even Sly saving us from Armageddon. Of course a bunch of people acting rationally in response to a slowly changing world wouldn't make for a really action-packed thriller. We're not all on board one big ship that we can save through one collective decision. Instead, we'll be "saved" by a multitude of self-interested people armed only with their wits and access to capitalist markets. In that way, my core theme is ironic: Capitalist growth created the problem of mass greenhouse gases, but now capitalism's dynamism and its ability to reinvent itself will help us to adapt to the climate changes we have created.

So how will this work? Over the last twenty years, I have lived in Chicago, New York City, Boston, and Los Angeles. While I sought out good job opportunities and the possibility of living in the same city as my wife, I also always sought cities that I thought offered a high quality of life. Put bluntly, I won't move to a city that doesn't have "it"—and I'm not alone. Cities compete with one another, although we don't normally think of them as doing so unless they're vying to host the Olympic Games. But they do. Climate change will affect the competitive landscape for cities, and people will be able to choose the winner by "voting with their feet." Around the world, cities are starting from different points in the race to adapt to climate change. Salt Lake City cannot flood. New York City can. Moscow is unlikely to suffer from extreme heat waves. Phoenix will. The geographical location of cities helps to define the diverse challenges they will face. Part of the challenge in predicting how cities will adapt to change is recognizing the diversity of the cities that exist. Some are coastal, some are tropical, some are rich, and some are poor. Some are located in democracies, whereas others are in dictatorships. In this book I seek to explain how all of these factors will affect the quality of urban life in a hotter world.

As climate change heats up our cities, it will create enormous demand for new products to protect people. Households that continue to live in a hotter Phoenix will seek out new architectural designs for homes, windows, and more energy-efficient air conditioning to protect them from summer heat. This is just the tip of the iceberg. Such anticipated demand creates opportunities for green entrepreneurs to step in and innovate, as well as serious competition as they fight with one another for market share. In this competition to seize the adaptation market, many of these ideas will fall flat, but the next "Green Google" is sure to emerge. Such efforts strengthen our cumulative ability to withstand climate change. Some worry that the resource scarcity caused by climate change will lead to war, but it's equally likely—and I believe more so—that the common risks we face will foster innovation that will protect us all. Once these new products are developed, they'll be relatively easy to mass produce and sell around the world. The technologies that emerge can be diffused worldwide. Whether it's Twitter, or solar panels, or the Tesla electric vehicle, the innovative capitalist culture will allow us to make a Houdini-style escape from climate change's most devastating impacts.

Describing our environmental future is risky business. In 1968 Paul Ehrlich famously predicted in his best seller Population Bomb that mass starvation would occur in the 1980s. He was wrong. At a lecture he gave at Stanford University, I heard him explain that his predictions did not come true because people read his book and adapted, and thus were able to avert disaster.⁵

I don't harbor the illusion that so many people will read this book that it will shift the course of history. But then, they don't need to. My economics training has taught me the role that expectations and incentives play in changing people's behavior. If we can get those right, we don't have to worry about doomsday scenarios, because we will adapt.

I recognize that my optimism may be viewed as audacious given our collective sleepy efforts to tackle (and in some cases even to acknowledge) climate change up to this point. During this time of war and economic uncertainty, climate change adaptation is a back burner issue. Despite Al Gore's efforts and futuristic Hollywood movies sketching our scary future (e.g., The Day After Tomorrow, which showed the entire world simultaneously flooding and freezing—but don't worry, Dennis Quaid saved the remnants of humanity), we are off to a slow start in preparing for the coming climate change. There are several possible explanations for this. First, we may be skeptics who like to laugh at Chicken Littles who announce that the sky is falling. We need to see climate change to believe it. Al Gore's PowerPoint show may not be sufficient truth; a few hot summers may not be sufficient proof. Second, we may anticipate the threat but be technological optimists who trust our nerdy engineers to dream up some technological geo-engineering fix if and when the time comes. Third, we may be impatient and lacking in imagination. Although we love our grandchildren, we think back to our grandparents and realize how much better our standard of living has been relative to theirs. We can foresee a similar generational progress for our grandkids (perhaps they will hop a space shuttle to Mars?).

In the case of climate change, there are huge uncertainties about what the climate consequences of filling the atmosphere with greater carbon levels are. Such atmospheric carbon concentrations could cause horrific temperature changes. The probability of these events is not small. Put bluntly, if the world's greenhouse gas emissions continue to rise to a level of 600 ppm, there is a non-negligible chance that the world's average temperature would increase 10 degrees Fahrenheit! There could be an abrupt melting of Greenland's ice sheet and a collapse of the West Antarctic ice sheet. These events would have a dramatic impact on sea level.

But we do know that we don't know for sure what these consequences will be. How do we respond to such known "unknowns"? There are two schools of thought in modern economics. The rising school of behavioral economists view us as a group of belly-scratching Homer Simpsons who, like the frog in the hot pot, simply say "D'oh!" Behavioral economists have a fundamentally pessimistic view of humans as lazy and myopic and unwilling to sacrifice for their long-term good. Whereas traditional economic man was a cold, calculating, self-interested individual (think of Mr. Spock from Star Trek), the new economic man is emotional, distracted, and sometimes illogical (think of Dr. McCoy). In a recent review in The New Yorker of two books written by behavioral scholars, Elizabeth Kolbert celebrated this "refreshing" change in the zeitgeist of modern economic research: "Who wants a friend or a lover who is too precise a calculator?"⁶ (This quote may explain why so many economists, like me, marry other economists.)

In contrast, neoclassical economists view people as forward looking and willing to make choices today in response to anticipated threats. Such "rational expectations" in the face of known unknowns push the population to take proactive steps. The awareness of scary future scenarios provides the "rational man" with a head start in coping with climate change. For generations University of Chicago economists, from Nobel Laureate Milton Friedman to his student, Nobel Laureate Gary Becker, to his non-Nobel laureate student (me), have believed that people respond to incentives as they pursue their life goals. Individuals have every incentive to recognize when they are in an unfamiliar situation. In this case, we will invest in better information that helps to reduce the uncertainty. As our climate scientists learn more and more about the challenges we face, this information provides us with an early warning system, signaling us about what lies ahead. This information helps us to cope with change.

Returning to the frog in the hot pot analogy, suppose that Al Gore and Homer Simpson are both offered the opportunity to buy a home at a low price in an area that climate change scientists believe is at high risk for serious flooding. The Al Gores would either say no thanks, or if they accepted this offer, would take steps such as elevating the home and other costly flood-proofing actions to protect it. Homer would be blissfully unaware and would seize the purchase opportunity. Such complacent households may actually migrate away from "safe cities" such as Salt Lake City to risky beautiful cities such as New York City, if they trust government and engineers to invent a credible protection strategy. As more of these households move to such cities, their political clout increases, and they attract even more federal government funds for protection. Once such households have made their locational decisions and chosen what types of homes to live in, Mother Nature will either create a nasty flood or not. There is a high probability that no storm will take place (even in the face of climate change). In this case, Homer Simpson will live on as a happy man. If a terrible flood does take place, Homer will suffer, and Al Gore will not. A Darwinist would say that the Al Gores will have to repopulate the planet after the days of reckoning begin.

But don't count out Homer. Forward-looking entrepreneurs, who smell the profits they can earn off the desperate Homers, will be ready with a variety of products to help the Homers cope with their new reality. At the end of the day, the story will have a happy ending. Some urban places suffer, but urbanites continue. In a very different context, Winston Churchill said, "Never in the field of human conflict was so much owed by so many to so few."⁷ That quote also applies in the case of climate adaptation. A small cadre of forward-looking entrepreneurs will be ready to get rich selling the next generation of products that will help us all to adapt.

It has happened before. Whenever we humans have been confronted by disasters, we have recovered—even from some really big ones. Chapter 2 discusses some of these events and the lessons we can learn from them, which we can apply to living in our hotter future.

Since we started settling in cities about 12,000 years ago (according to the archaeological evidence, the oldest site of permanent human settlement is probably Damascus, Syria), we have been subject to lots of shocks, both locally and globally. Our cities have been bombed, burned, infected, quaked, razed, and flooded. For our purposes—figuring out how we're going to respond to the slow disaster that we're participating in right now—that's good news. This litany of doom and gloom offers a type of laboratory for studying how cities recover from disaster, and how we might respond as the earth gets hotter, and, equally important, what we probably shouldn't do.

In the aftermath of horrible shocks, many (but not all) cities have recovered quickly. In some cases, such as New York City after the 9/11 terrorist attacks, the city's productive and lifestyle advantages outweighed the short-term pain caused by the recovery process. In other cases, such as post-Katrina New Orleans, the government has stepped in with massive assistance reminiscent of the Marshall Plan that helped rebuild Europe after World War II. Of course, climate change doesn't have an exact correspondence with any past disaster. Many of the disasters discussed in this chapter were quite literally shocks, events that struck a particular city out of the blue and then dissipated (even in the case of long-term effects, like those of the flooding of New Orleans). But, that said, we can still learn valuable lessons that are relevant for thinking ahead to how our cities will cope with climate change's future shocks.

There are two ways to interpret these facts. First, it could be a case study of what economist Joseph Schumpeter called "creative destruction." The destruction of the old, low-quality building stock created a demand to rethink and rebuild the city. An alternative explanation is that Chicago was booming despite the nasty fire. The only way we could figure out whether the shock caused the boom is to find another Chicago (circa 1871) and watch its growth trajectory if the fire had not taken place.

As you might suppose, either finding an exact replica of 1871 Chicago and then watching it grow, or going back in time to 1871 and preventing the fire, though fodder for a passable science fiction novel, is beyond the power of mere economists. Not only can economists not travel back through time, we're also not allowed to run experiments in which a random subset of cities is burned or bombed (the treatment) while another set of randomly chosen but similar cities is not, so we can observe under what conditions cities recover.

Without the ability to run such an experiment, economists are forced to rely on studies in which we sit and wait for a volcano to explode (to test how air pollution affects health) or for a sex offender to move into a town (to measure how fear of crime affects local home prices) and then conduct a before and after comparison. Some economists have used this approach to study "fun" shocks like how people change their lives after winning the lottery (they are more likely to quit their jobs and divorce their spouses than are similar people who have not won the lottery).⁵ Other economists have used the same methods to study the consequences of "serious" shocks such as assassinations. By comparing the aftermath of political outcomes across the world for nations in which assassinations succeeded and failed for all world leaders from 1875 to 2004, one set of economists documented that successful assassinations of autocrats produced sustained moves toward democracy.⁶ This approach can also be applied to studying how major cities have coped with significant tragedy.

History provides the perspicacious researcher with opportunities to figure out just how similar cities respond to being bombed. The relevant question here is how quickly the bombed cities caught up to the cities that were spared—if they did at all. Bombings cause large amounts of damage in physically well-defined areas, so economists can look at the cities that were bombed, and then compare the growth rates of the bombed cities with one another as well as with nearby, similar cities that weren't bombed at all.

This is exactly what Donald Davis and David Weinstein, two Columbia University economists, did in a prominent study in 2002. Davis and Weinstein recognized that the Allies' wartime bombings of Japanese cities offer exactly the laboratory necessary for testing how cities recover. They studied population growth trends for Japanese cities that each had populations of more than 30,000 in 1925. Of this set of 303 cities, 66 were bombed during World War II. The bombing destroyed almost half of all structures in these cities—a total of 2.2 million buildings. Two-thirds of the cities' productive capacity vanished. Some 300,000 Japanese were killed. Forty percent of the population was rendered homeless. Counting all of the dead, missing, and displaced, some cities lost as much as half of their population.⁷ In the nuclear bombings of Hiroshima, over two-thirds of the built-up area of the city was destroyed—covering more than 20 percent of the city's population. The second atomic weapon, dropped on Nagasaki, destroyed over 40 percent of the city's buildings.

These cities enjoyed an amazing postwar comeback. Davis and Weinstein measured "recovery" based on a city's population growth recorded at five-year intervals between 1925 and 1965. Population growth data indicate that people moved to the bombed cities, and survivors in these cities chose not to leave. This "voting with your feet" reveals that a city's economic opportunities and quality of life must be good (otherwise people would leave). Davis and Weinstein document that the average bombed Japanese city's population grew sharply within fifteen years following the end of World War II. Even the two cities (Hiroshima and Nagasaki) hit with nuclear bombs had been repopulated. By 1960 their population levels had recovered to what one might have guessed they would be had one only observed their population growth up until World War II, before they were bombed. Between 1945 and 1965 these cities made quite a comeback.