Climate Change and Economic Development: A Pragmatic Approach (Invited Lecture)

Two major problems promise to dominate economic and socialpolicy during the twentyfirst century. These are global climate changeand the growing gap between the rich and the poor. Economists are facingthese issues at a time when many of the standard tools of economicanalysis—for example, competitive general equilibrium and thetheoretical system that supports it—have fallen into disfavour inanalysing global issues involving uncertainty and irreversibility. Thisis both a challenge and an opportunity for development economics. Thispaper first examines economic models of human development and climatechange, drawing, where possible, on the situation in Pakistan. We thenoutline an approach to coping with climate change based on newperspectives in behavioural and development economics, and on the likelyconsequences of global warming for Pakistan. We focus on adaptation toclimate change rather than on mitigation strategies.