Why Capitalism Could Save Us from Climate Change

Matthew Kahn kicked off his talk at The Actors’ Gang with a big question.

“What is the future of our great city?” said the UCLA Luskin scholar and professor. “Are we going to take it on the jaw and be knocked out like Muhammad Ali in the 60s, or is there any room for optimism?”

In an event co-presented with the UCLA School of Public Affairs’ Luskin Center for Innovation, Kahn, author of Climatopolis: How Our Cities Will Thrive in the Hotter Future, outlined the threats Los Angeles and other cities face from hotter temperatures, and why the consumer culture that so contributed to climate change could actually help save us from it.

Not Ronald Reagan

Audience for Matt KahnAs an environmental economist who talks about climate change, Kahn has faced his share of criticism – from the right that denies the impact of global warming, and the left that criticizes him for emphasizing adapting to climate change. “They’ve said this guy is trouble,” he said. “I’m a mild-mannered professor losing my hair and gaining weight. I’m not trouble.”

But Kahn continued forcefully, noting that leaders around the world failed to pass a global carbon deal, the Senate failed to pass climate change in the U.S., Barack Obama hasn’t pushed through controls on emissions, California’s emission reduction plan is under attack by a ballot proposition, and China and India are emitting ever more greenhouse gases. Given the lack of forward-thinking steps to mitigate climate change, Kahn suggested, a realistic approach may be to adapt.

“I’m not Ronald Reagan. I don’t believe in wishful thinking,” he said. But he’s optimistic, he said, that people are risk-averse and self-interested enough to adapt to climate change – at least if they had good information. Just as Los Angeles County’s restaurant ranking system made for a healthier city, Kahn suggests we need to know how different areas of Los Angeles will be hit by climate change. “How many of you eat at a grade-C restaurant? Armed with this new information, you made different choices,” he said. “And if I’m running a C-grade restaurant, I might call in the exterminators.”

Kahn noted that his colleague at UCLA Alex Hall (a past Zócalo guest), is creating such a bank of information by observing how different parts of the region will be hit by higher temperatures, lower rainfall, and other measures of climate change. Kahn added in Q&A that we should observe whether the same person, living in two different places, would consume more or less energy – which would suggest something about the place is the problem.

A hundred Detroit homes

Matt Kahn chats with guests at the receptionAs we start acting on climate change information, Kahn said, the 300 American cities – not to mention those around the world – could enter a competitive phase. Kahn noted that today, one home in Westwood is worth the same as 100 homes in Detroit, but with climate change, the calculation could flip. “If Los Angeles or New York became unlivable because of climate change, we could move to Fargo. We could rebuild our cities at other latitudes,” Kahn said.

“If a city is foolish enough not to address climate change, mobile, foot-loose, skilled people will leave. That city will become the Detroit of today,” Kahn said. “It’s not about having the port or having the steel industry.” This trend would create strong incentives for local politicians, Kahn said, even if they don’t believe in climate change.

Let prices rise, give peace a chance

Short of migration, we could change how we build and run our cities, and how we consume, Kahn said. Although L.A. has yet to commission a “crystal ball study” on the matter, we know that the city will face particular challenges that it can answer with some innovation. With rising temperatures, Kahn suggested, demand will increase for housing in temperate parts of the city. “If we ripped out every golf course in West L.A., how many people could live there?” Kahn asked. “And I’m a fan of golf. I still like Tiger Woods.” If builders faced NIMBYism, he said, the city would have to step in to regulate land use.

Guests at the reception for Matt KahnTo address water scarcity, Kahn suggested we follow the economists’ solution: “Let prices rise. Give peace a chance.” Currently, he said, the price of a gallon of water in Los Angeles is half a cent. If prices rose, households would economize, and demand water-efficient durables and appliances, creating a strong new market. As he explained in Q&A, such a system would have to ask how much water we need daily “to have a good day,” and provide for those earning lower incomes to afford this amount of water at the new market prices.

For rising sea levels and fire risk, Kahn pointed to smarter insurance policies, which would charge higher prices than they have. This would either encourage people to live elsewhere, Kahn suggested, or build more smartly, citing Thom Mayne and Brad Pitt’s effort to create $180,000 floating homes. He noted that even natural disasters – like the heat wave in Moscow this year – could make us keener to innovate and adapt to climate change more quickly.

Kahn emphasized that whether consumers are Mr. Spocks – rational planners – or feckless Homer Simpsons, whether they believe in climate change or not, they’re likely to catch on to such innovations and act in their best interest as a market arises. “It’s like selling lemonade on a hot day,” Kahn said. He did note in Q&A, however, that each advance would likely need to be evaluated case-by-case – for example, some argue that Prius batteries create environmental problems even as the cars emit less. And immediate action for poorer people may be required in the interim, using simpler coping mechanisms for heat, like cooling centers.

Green guinea pig

Politics could stand in the way of innovation, Kahn noted. “If we don’t allow insurance prices to rise or water prices to rise, there are winners from the status quo.” As he added in Q&A, Al Gore may even have made it harder to break the status quo on climate change. “I could imagine an alternate world, in ‘The Twilight Zone’, where climate change was a national security issue,” Kahn said. “But when Al Gore wrapped this issue around himself, Republicans, like the Sarah Palins, defined themselves by what they don’t believe in.”

Guests at the reception for Matt KahnBut Californians at least could be getting it right with AB32, the state’s plan to reduce emissions. Creating a market for green goods requires, Kahn aid, a “green guinea pig” – someone to make room for these products and create an incentive for entrepreneurs. With the legislation, California, “with our liberalism and our high incomes despite the recession and our high education – we are volunteering to be that guinea pig for the world,” Kahn said. “Are we a hero or a sucker? Why aren’t we free-riding like everybody else? I think we’re heroes.” He added that once California creates good green ideas, they could easily travel around the world, including to India and China, and accomplish what Kahn strongly advocates: decoupling economic growth from greenhouse gas emissions. Until now, as Kahn admitted during Q&A, capitalism has mostly been the cause of greenhouse gas emissions.

And in fact, Kahn said, that stream of green ideas may go the opposite direction. China, he noted, is offering low-interest loans and free land to green entrepreneurs. “For years China stole our intellectual property – Microsoft Windows, Hollywood movies,” Kahn said. “If China makes a breakthrough in green tech, we’ll steal it from them.”

Watch the video here.
See more photos here.
Buy the book here.
Read Matthew Kahn’s In The Green Room Q&A here.

*Photos by Sarah Rivera.


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