What Will Life Be Like in the Year 2100?

UC Berkeley’s Dan Farber has written a very nice piece about the challenge that climate change will pose for today’s 20 year olds in the year 2100.  As both a concerned citizen and as the father of a 17 year old, I take such informed predictions quite seriously.

The year 2100 is 81 years from now.  Think back 81 years ago to 1938.   FDR is our President and World War II is underway in Europe.   Only 2 million (of the 132 million Americans) lived in Florida at that time.  Could FDR and the British Ambassador Joseph Kennedy have anticipated any of our current technological and social trends?  The same laws of physics hold back then and now but much has changed.  Would they be surprised by the industries that are booming and the jobs in the modern economy?   Would they be surprised by the quality of medical care and food available in the stores?   Would they be surprised by modern communication and transport technology? You might say; “technological innovation is slowing down”.   Yes, I know about Robert Gordon’s thesis but in a world that has more educated people, larger aggregate world demand for great new products, and ample access to capital financing ;  I don’t believe this.

In 1938, if we could meet a person in the 90th percentile of the New York City income distribution (so only 10% of the adults are richer than him) and if we wrote down her consumption of various goods and exposure to outdoor air pollution, how does her consumption compare to a person in the 8th percentile of the New York City income distribution today (so 92% of adults are richer than him)?   While the modern poor person might be poorer than the past rich person, the quality adjusted prices we face for goods have fallen so sharply that the purchasing power of today’s poor person would surpass the purchasing power of the person in the past 90th percentile.

Returning to Professor Farber’s piece, all of the possible climate scenarios he outlines that our children may face out to the year 2100 are possible.  The economic question here focuses on the “production function” of safety and quality of life.  If it will be warmer in the future, if the seas will rise; given our technological frontier, given our ability to innovate and migrate, how much will these anticipated risks lower our standard of living?   A simple example is that air conditioning offsets outdoor heat.  This idea generalizes.

The technological frontier is always shifting out and the main idea of directed technological change is that we focus our efforts (human capital and capital) on problems that are profitable to solve.  Why will the free market let us down this time?  Why is Paul Ehrlich correct and Julian Simon is wrong?   Pessimists must base their case on the absence of substitution possibilities.  What can’t we substitute from?  An example, if the sea is rising then we retreat.  You might say “there is finite land”;  I reply “then developers will use capital to build tall buildings that require less land per person”.    This is substitution.  There are gains to trade and the trades will occur and we will be safer.