Will Climate Change Alter Our Net Worth?

Here’s my issue of the moment: Will climate change, in turn, change our net worth? In the most rigorous economic sense, it’s pretty obvious that it already is. At the very least it is slowly causing a redistribution of net worth between people, among social classes, and around the globe. The prices of various commodities are shifting due to real, imagined, or politically-controlled availability. New technologies are entering the markets every day. The things we value are far from static.

But that isn’t the interesting part. What about our statistical net worth? And by ‘our’ I mean yours and mine as human beings. The EPA currently places the highest value of any U.S. governmental agency on a human (or at least American) life at 6.9 million dollars. That certainly throws a wrench into the idea that a life is priceless. Of course, the EPA needs some way of looking at the dollars and cents aspect of its proposed environmental programs, and actually the 6.9 million is calculated based on two very reasonable factors: 1. How much people who work in risky jobs get paid; and, 2. How much people are willing to pay to cut their own personal risk.

So what will climate change do to this number? Well, I think that there are two important factors to consider: First, personal risk will become more costly, both because climate warming will presumably foster more risky situations (i.e., droughts, landslides) and because the reduction and redistribution of goods will make people more likely to want stability. Secondly, however, the government’s ability to pay up to 6.9 million per person will diminish as the population increases, need becomes greater, and as technologies to combat the effects of global warming emerge- at a significant cost. Which factor will win out? I suspect that the government’s inability to pay out will be more significant than changes in personal risk, but I guess we shall see what the future holds.

To further complicate matters, climate change will surely begin to be viewed as the national security issue that it is (forget oil, eat up those California avocados before the Central Valley goes dry!). And in case you were wondering, yes, homeland security also has a statistical value for a human being, and it’s less than the EPA’s. Now, if you’ll excuse me, I think I’ll start that Freedom Cabernet patch in my garden…