Matthew E. Kahn

My critics have “granted me” the point that developed free market cities have the ability and the capacity to cope with many aspects of climate change. But they have countered that poor nations such as Bangladesh could suffer greatly from climate change.

Of course this is true. As a free market optimist, however, I want to make several points.

First, do not forget the “Law of 72.” In a world with compounding, a nation whose income grows by 3% per year enjoys a doubling of per-capita income in 24 years (3*24=72). If a nation’s economy could grow by 8% per year, then it will enjoy a doubling in just 9 years.

Japan and South Korea have grown by these rates in the past; India and China are growing by these rates today. Each of these nations grew when embracing free market reforms and joining international free trade agreements.

As a nation’s per-capita income increases, poverty rates decline and individuals have more resources to purchase better food, housing, and access to electricity. Each of these necessities will help individuals in the developing world to adapt to climate change.

From the perspective of this year, 2011, if climate change’s major impacts will start to unfold in the middle of this century, then today’s poor nations will still have time to “catch up.”

I can certainly imagine that parts of Bangladesh will flood and sea level rise may submerge parts of the nation. But I would be surprised if such dramatic changes could occur overnight.

Instead, there will be a predictable pattern of which land will be lost. The owners of this land will suffer an income shock. Where will the people go? In a world that allows for international migration, people from a Bangladesh could migrate to Western China or Eastern India.

In 30 years, India and China may have developed to the point where they may be seeking younger, low skill immigrants to take on service jobs similar to those immigrants take up in the U.S. today—a crucial role in the service industry.

Today there is great concern about the possibility of “environmental refugees” moving across borders. I think that the right way to think about this issue is gains to trade in the international labor market. Self-interested households will migrate to the areas that offer them jobs and decent wages, and where they will be welcome.

As long as there is sufficient adjustment time to trends induced by climate change (such as sea level rise), there is no reason to think that wars will break out as desperate refugees seek higher ground.