Climate determinism reborn

TL;DR

Problem: whether climate and geography deterministically shape long-run economic development and future macroeconomic outcomes. Approach: survey historical thought, current econometric claims, and future policy scenarios, with a focus on identifying methodological weaknesses in climate-growth regressions. Findings: monocausal links are not robust; in-sample fit often masks underlying non-stationarity and fixed-effects issues, and policy-driven climate impacts are likely small in major economies but potentially larger for small, carbon-intensive exporters. Significance: cautions against overclaiming climate determinism in policy debates and highlights the need for rigorous econometric design when evaluating climate-economy relationships.

Abstract

Environmental determinism in the past followed from the belief that the gods bestowed political power and the best possible weather on the sponsors of early scholars. Although later discredited in academia because of the associations with racism and the lack of support for any monocausal explanation of history, environmental determinism in popular culture has morphed into the unfounded idea of catastrophic climate change. Although a handful of papers in the literature on the economic impact of climate change appear to support this concern, closer inspection reveals severe methodological and conceptual issues with the analyses. Climate policy will not dominate major economies, because politicians will pull back before it does, but small economies may be overwhelmed by the export of carbon credits.

Figures (4)

• Figure 1: The temperature of the largest cities over time.
• Figure 2: Range of per capita income by temperature.
• Figure 3: Observed and counterfactual growth rates.
• Figure 4: The Leviathan tax and current and projected carbon prices.