Climate shocks and economic growth

the excess of heat enervates the body, and renders men so slothful and dispirited that nothing but the fear of chastisement can oblige them to perform any laborious duty: slavery is there more reconcilable to reason.

That is the Baron of Montesquieu writing nearly three centuries ago. Sentiments like these helped to discredit simple theories of heat and the poverty of nations.

We’d be wrong, however, to dismiss climate as a cause of underdevelopment because of petty prejudices. David Landes gives a good account why climate might have a more legitimate effect on economic growth.

Now Ben Olken presents some hard evidence. He’s presenting at the IGC Growth Week alongside a number of climate change luminaries.

Olken, Ben Jones, and Melissa Dell have a recent paper showing that temperature shocks hurt growth; year by year, a 1 degree change in temperatures leads to a 1 percent fall in income growth–albeit only in poor countries.

The growth effect isn’t felt just in agriculture, but in innovation and other sectors as well. Something bigger and more complex than crop failure is going on here.

Most interesting to me is that the long term effect of climate shocks is less than the short term damage, suggesting that economies adapt to temperature shifts. Before the global warming doubters gloat, however, it’s worth noting a few things.

One is that, for lack of data, the adaptation figure seems to be pretty imprecise. So adaptation could actually be pretty low. I’d like to see the confidence interval.

Another point is that the evidence shows that climate change is especially harmful to growth not because of trend change, but because of volatility. If carbon emissions make weather more unpredictable, then nations might expect permanent growth harm as they are constantly thrown off track and forced to adapt.

If anything, say the authors, the implications for poor country growth might actually be worse once we account for these findings.