“Real output per person in the New York area is some 70% higher than in Buffalo, for instance; a New Yorker fleeing upstate may suffer a large income loss. Matthew Kahn of the University of California, Los Angeles, reckons that this, too, is manageable. In his book “Climatopolis”, Mr Kahn points out that the productivity of rich places often has little to do with unique geographical advantages. Instead, cities profit as magnets for skilled workers attracted by other skilled workers. New York’s financial wealth stems not from its port but from its brimming community of firms and workers.

Mr. Kahn argues that as the climate warms, vulnerable areas like lower Manhattan will become less desirable relative to rival centres: midtown Manhattan, New York’s suburbs, or Chicago. Rational workers and firms should assess the risk of floods or the like and migrate, raising the productivity of the destination locations as they arrive. The move wouldn’t be costless. Investors in lower Manhattan property would suffer large losses, for example. Yet Mr Kahn says there could also be gains, as activity shifts from cities with an out-of-date capital stock (like New York’s ageing infrastructure) to more modern areas. The speed of climate change may also help, reckons Paul Romer of New York University, if broader shifts in habitability occur slowly enough to allow a relatively smooth geographic adjustment. But change may be too quick and unpredictable to allow for easy adaptation.”

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Published: Monday, December 10, 2012

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