Terry L. Anderson

This paper summarizes and synthesizes the role of markets in facilitating climate change adaptation. It explains how market signals encourage adaptation through land markets. It also identifies impediments to critical market signals, provides related policy recommendations, and points to promising new technologies. Urban, coastal, and agricultural land markets provide effective signals of the emerging costs of climate change. These signals encourage adjustments by both private owners and by policy officials in taking preemptive action to reduce costs. In agriculture, they promote consideration of new cropping and tillage practices, seed types, timing, and location of production. They also stimulate use of new irrigation technologies. In urban areas, they motivate new housing constructi...

Published: SARAH E. ANDERSON & TERRY L. ANDERSON & ALICE C. HILL & MATTHEW E. KAHN & HOWARD KUNREUTHER & GARY D. LIBECAP & HARI MANTRIPRAGADA & PIERRE MÉREL & ANDREW J. PLANTINGA & V. KERRY SMITH, 2019. "THE CRITICAL ROLE OF MARKETS IN CLIMATE CHANGE ADAPTATION," Climate Change Economics, vol 10(01).

We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ, but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action.

Published: “Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management,” Terry Anderson, Ragnar Arnason, and Gary D. Libecap, Annual Review of Resource Economics, 2011.