Matthew E. Kahn


On his book Climatopolis: How Our Cities Will Thrive in the Hotter Future

Cover Interview of May 24, 2011


I do not have a crystal ball that tells me what Moscow, Cairo or Los Angeles will look like in the year 2050.  But I do know that free market capitalism is centered in cities and their greater metropolitan areas.

I anticipate that over time we will learn about the specific new threats that specific cities face.

Cities that face increased flooding risk will create new profit opportunities for firms that produce products that help to reduce flood risk.  If such cities’ political leaders choose to address these emerging threat issues, then local land prices will not decline, and the skilled will continue to live there.  If politicians are unwilling or unable to protect the cities, then the skilled will “vote with their feet,” and the firms that hire them will also leave.  In this sense, competition between cities protects urbanites.

Over time, we must rebuild our cities.  As the world’s cities grow with billions of people moving there, there will be new construction of plenty of infrastructure.  Given that cities are long lasting investments, decision makers have the right incentives to invest and to build infrastructure that can withstand the shocks that we believe we will face due to climate change.

A maintained assumption in Climatopolis is that our climate scientists will continue to make objective progress in judging the probability and severity of the impacts of climate change for different regions around the world.

If I am wrong and our climate scientists make no progress in predicting threats—while Mother Nature poses a higher probability threat of extreme events such as flooding or extreme heat waves—then we will suffer greatly when the shocks occur.

But if climate scientists do earn their pay and we are able to develop coarse “leading indicators” about the threats we face—the equivalent of a Tsunami Warning—then I trust that individuals and firms have the right incentives to respond to this information.

After the deep Recession of 2008, it is not “cool” to celebrate free market capitalism.  My book intentionally challenges this social norm.

You do not have to be a billionaire to appreciate how free market growth has improved the quality of life for billions of people around the world.  Climate change will be a major threat to our quality of life in the next century.  And capitalism will again step up to help us to cope with the anticipated and unanticipated challenges we will face.

© 2011 Matthew Kahn