Does hot weather actually make us hot-headed? Does a warming planet induce us to take more risks? According to new research, there is indeed a correlation: When it comes to rational decision-making, changes in climate shape how individuals think about loss and risk—even if it takes centuries for that evolution to occur.
The idea that climate and human behavior are inexorable linked has been a fixture of Western thinking since the Enlightenment era, when Scottish thinker Adam Ferguson posited temperature as a core determinant of “rude” (barbarous) and “polished” (civilized) societies (though the specific empirical relationship between high temperatures and bad tempers has been hotly contested). This latest working paper, by researchers with the National Bureau of Economic Research, proposes a wide-reaching theory of climate and human behavior: In the realm of loss-aversion—the propensity for economic actors to prefer an avoidable loss over a sudden windfall and therefore avoid risky but profitable ventures—people living in climatically turbulent regions tend to make riskier decisions than those in relatively more stable environments.
In pre-industrial societies, “individuals who were characterized by loss-aversion had chosen to engage in safe agricultural practices that secured their subsistence consumption and minimized the risk of catastrophic realizations that would inevitably bring their dynasties to extinction,” write the NBER authors, Brown University economists Oded Galor and Viacheslav Savitskiy. “In contrast, individuals with greater propensity towards loss-neutrality may have favored riskier agricultural practices that were associated with higher expected return as well as higher expected extinction.”
In short: the logic of “nothing ventured, nothing gained” is more prevalent among those facing major climatic turbulence, while those who enjoy relative ecological stability have no incentive to adapt. If this sounds familiar, it should: It appears to reflect the so-called “high-level equilibrium trap” formulated by environmental historian Mark Elvin, which explains why the Industrial Revolution took hold in Britain rather than China. As Pacific Standard reported in October:
China, the theory goes, was just too self-sufficient to innovate, stuck in an equilibrium of supply and demand and flush with enough cheap labor to make capital investment necessary and unattractive. By contrast, Britain’s relatively small size and lack of resources forced landowners to explore more efficient methods. Scarcity was the incentive for innovation; but for China, why adapt when the current model is doing just fine?
British society, stuck in a world of economic scarcity, was driven toward riskier production methods and unpredictable innovation—the very loss-neutral behavior described in the new NBER paper.
This relationship between loss-aversion and climate volatility leads to an important assertion: While humanity has long left the limits of agricultural society behind, its decision-making logic hasn’t gone away. Indeed, individuals and ethnic groups that originated in regions with relatively stable environmental conditions are still “characterized by greater intensity of loss aversion, while descendants of regions characterized by greater climactic volatility have a higher propensity towards loss-neutrality,” according to Galor and Savitskiy. That “nothing ventured, nothing gained” attitude is, apparently, an evolutionary trait.
The NBER’s analysis of recent cultural and ethnic data—which relies on sources such as the General Social Survey, World Values Survey, and the European Social Survey—confirms that geography and climate have a long-term impact on decision-making, even after technology makes those constraints relatively obsolete. Consider WVS data showing that the United States and Canada express low levels of loss-aversion despite relatively high temperature volatility—and vice versa for Spanish- and French-language regions of South America:
Even accounting for the Columbian Exchange—the sudden emigration of second- and third-generation migrants between the Americas, West Africa, and the Old World in the 15th and 16th centuries—loss-aversion preferences remained consistent rather than adapting to new climates, according to Galor and Savitskiy. Those European immigrants to North and South America during the post-Columbian Exchange era brought their loss-neutral or loss-averse values with them, and their decision-making logic remains relatively consistent despite the actual change in their circumstances over time.
As a result, the Global South expresses consistently high-levels of of loss-aversion, making it unlikely to take risks despite the disproportionate impact of climate turbulence there:
Sure, the media in the Global North may trumpet the coming threats of climate chaos more than its affected counterparts south of the Equator, but this means that national risk-taking and innovation to address climate risks is also centered in locations that aren’t necessarily suited for it. Climate change is here, but the logic and decision-making necessary to take action is not evenly distributed—and perhaps never will be.
