Adaptation and Its Measurement

1 Introduction I strongly endorse the central theme of Mendelsohn's (2000) paper that 'adaptation (including its costs) must... be taken into account in order to design efficient climate change policies'. Mendelsohn makes several valuable observations that amplify this point. He stresses that there is an efficient amount of adaptation, and that one can have too much or too little adaptation. Using the distinction of Fankhauser et al. (1997) between reactive and anticipatory adaptation, he argues that most adaptation is likely to be reactive. He also makes an important distinction between private adaptation, where benefits accrue solely to the actor making the decision, and joint adaptation, where benefits accrue to multiple individuals. He argues that the public good aspects of joint adaptation may lead to underprovi-sion unless there in some public intervention. He cautions, however, that public intervention is not necessarily guaranteed to attain the efficient level of adaptation. These are interesting contributions to a debate within the climate change community on adaptation and its measurement which Mendelsohn himself has done much to foster. Adaptation is something that I and my colleague Tony Fisher felt had been overlooked when we were invited in 1992 to review the existing literature on the economic impacts of climate change. We concluded that there was a need for what we called a more 'capital-oriented' view of the impacts of climate change, and we urged that 'more of the economic research be focused on the potentially very large costs of adjustment affecting stocks of physical, human and natural capital. ...[V]irtually all of the economic research that has been performed so far on the subject of climate change is conducted in terms of comparative statics. ...By contrast, the issues lying at the heart of climate change concern dynamics and disequilibrium-how long will it take for people to perceive changes in climate and respond to them? Will they refuse to acknowledge such changes when they occur, or will they quickly anticipate them? Will they adapt readily or with difficulty?' (Fisher and Hanemann, 1993). It is certainly gratifying that these questions are now receiving sustained attention in the climate change literature.