What is the optimal temperature finance gravitates towards? While we have empirical evidence for the optimal cardinal temperature for GDP production and international development links external climate conditions to levels of societal development, no literature exists on climate-induced-finance flows.
Research on temperature-dependent financial flows holds invaluable insights in light of climate change. The connection between climate change and finance will be drawn via price mechanisms. Given the extinction potential of crops, industry and service production, price mechanism will be prospected with a hyperbolic tilt towards the end of durability and the closeness to extinction.
In contrast to classical and standard approaches in economics to determine prices, the following research thereby takes into account that agents in their behavior can be constrained by shrinking timeframes for production in light of global warming.
The contemporary attention to global warming and climate shocks is thereby assumed to affect the price expectations and hence actual market prices of commodities. Paying attention to supply and demand side perspectives, inflated prices surrounding scarcity will be first modelled and then back-tested on data about prices in commodities of food and beverages.
Future wealth of nations will be introduced by the concept of climate flexibility defined as the range of temperature variation of a country. So far, a broad spectrum of climate zones has not been defined as asset but climate change will require territories being more flexible in terms of changing economic production. The more climate variation a nation state possesses, this paper argues, the more degrees of freedom a country has in terms of GDP production capabilities in a differing climate.
These preliminary insights aid in answering what financial patterns can we expect given predictions the earth will become hotter. Already now this paper presents human capital flows and financial market inflows into areas that are winning economically from a warming globe. The degree of climate flexibility is found to be related to human migration inflow.
Climate change was recently found to affect countries differently. Given different mean temperatures and GDP compositions, countries around the globe will be affected differently by a warming climate. In the determination into climate change gain and loss prospects, climate flexibility needs to be integrated. Climate flexibility is defined as leeway countries have in coping with a changing climate due to a range of climate zones prevalent in their territory. Climate flexibility can be grounded on the relative latitude and altitude of countries around the globe. The wider the range of latitude and altitude within a nation state, the more climate flexibility and favorable economic leeway of degrees of freedom for multiple production peaks is assumed. When dividing the world given temperature ranges prevalent calculated based on the List of Countries by Extreme Temperatures, the following temperature range-weighted climate change winners (dark green) and losers (light green) are found as exhibited below.
Temperature range in Celsius degree by Country determining climate flexibility
Cardinal temperature for agriculture production
Temperature range for agriculture production
Extinction-based market price predictions as deviations from normal price
‘Future Climate Wealth of Nations’ presentation
at Harvard University
Puaschunder, J.M. (forthcoming). ‘Climate Wealth of Nations,’ Proceedings of the 11th International Research Association for Interdisciplinary Studies (RAIS) Conference on Social Sciences, Johns Hopkins University, Montgomery County Campus, Rockville, MD, November 19.
Invited guest lectures
Puaschunder, J. M. (2019). ‘Future generations and climate change,’ Climate Change, Coasts, and Communities Symposium, Monmouth University, New Jersey, United States, April 17-18.
Puaschunder, J. M. (2019). Climate Change, Coasts, and Communities Symposium Panelist, Monmouth University, New Jersey, United States, April 17-18.
Puaschunder, J.M. (2019). ‘Intergenerational Equity,’ Generation Citizen Guest Speaker, Frank Sinatra School of the Arts High School, Astoria, Queens, New York, April 9.
Puaschunder, J.M. (2019). Future Climate Wealth of Nations. Columbia University, Department of Economics, International Affairs Building, New York, New York, USA, February 20.
Puaschunder, J.M. (2019). Future Climate Wealth of Nations. Harvard University, Department of Chemistry, 12 Oxford Street, Cabot Division Room, Cambridge, MA, USA, February 11.
Puaschunder, J.M. (2019). ‘Lessons from divesting South Africa during Apartheid for a green economy.’ 35th Business & Economics Society International Conference, Vienna, Austria, European Union, July 6-9.
Puaschunder, J.M. (2019). ‘Future Climate Wealth of Nations’ Winners and Losers.’ 35th Business & Economics Society International Conference, Vienna, Austria, European Union, July 6-9.
Beerbaum, D. & Puaschunder, J.M. (2019). ‘A behavioral economics approach to sustainability: Digital nudging,‘ World Academy of Science, Engineering and Technology, Singapore, Asia, July 4-5.
Puaschunder, J.M. (2019). ‘When investors care about causes: Learning from political divestiture during Apartheid and the Sudan crises for the transition to renewable energy via green bonds,’ 26th Annual Conference of the Multinational Finance Society, Jerusalem School of Business Administration, Jerusalem, Israel, June 30 – July 3, 2019.
Invitation to Inauguration of Yale University Environmental Program in Honor of Natasha Chichilnisky-Heal, Kroon Hall, Yale University, New Haven, Connecticut, USA, March 26, 2019.
Puaschunder, J.M. (2018). ‘Climate Wealth of Nations,’ Proceedings of the 11th International Research Association for Interdisciplinary Studies (RAIS) Conference on Social Sciences, Johns Hopkins University, Montgomery County Campus, Rockville, MD, November 19.
Puaschunder, J.M. (2018). ‘Climate Wealth of Nations,’ Macroeconomics of Uncertain Times: Financial Crashes, Climate Disasters, and More, The New School, New York, United States, October 20.
Puaschunder, J.M. (2019). Lessons from Divesting South Africa during Apartheid for a Green Economy. Progress in Economics Research. Hauppauge, NY: Nova.
Expert conference calls:
Puaschunder, J.M. (2011). On Environmental Justice. U.S. White House.