Encouraging Precautionary Investment in an Increasingly Risky World

The NY Times has published an Opinion Piece about reducing wildfire risk in the American West.    Due to climate change, actions such as machinery creating sparks that ignite brush are more likely to happen.  When we anticipate this chain of events, what ex-ante actions should we take?  Should there be more brush clearance in a vicinity of the train tracks?  If your answer is “yes”, then what sets of laws do we need to encourage more precautionary investment?  Of course, I’m talking about how should we change our laws to encourage climate change adaptation.  I don’t believe that environmental lawyers have devoted enough attention to this issue.   Economists are quite comfortable with imposing stringent and credible penalties for such malfeasance.   In my book Climatopolis, I argued at length that we need much more flexibility over electricity, water and insurance pricing to send signals to households and firms about resource scarcity and new risks caused by climate change.  Effective zoning will help to create a physical separation between activities that have increasingly bad possible social consequences due to climate change.

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About Matthew

Matthew E. Kahn is a Professor at the UCLA Institute of the Environment, the Department of Economics, and the Department of Public Policy. He is a research associate at t…

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About Matthew

Matthew E. Kahn is a Professor at the UCLA Institute of the Environment, the Department of Economics, and the Department of Public Policy. He is a research associate at t…

READ more