I have long been interested in the possible relationships between climate and economy. Because my unproven hypothesis is that, given the choice, most city dwellers would probably prefer to hang out on Ipanema beach and drink caipirinhas in the sun than sit in a windowless cube farm toiling away on cover pages for TPS reports.
Well it turns out that there is some science to support this theory. A 2012 study by professors at Harvard and the University of North Carolina did in fact discover that people tend to work a little harder and focus a bit more when the weather is crappy outside and they're not distracted by the promise of glorious sunshine.
This Scientific American article from 2013 also argued that there are physiological reasons for why we're maybe not as sharp in extremely warm weather. The possible science is that excessive heat is more taxing on our body (compared to the cold) and so more energy is required to maintain homeostasis. That leaves less mental capacity for TPS cover pages.
Of course, these sorts of ideas aren't all that novel. For centuries, economists as well as many others have posited that climate could be one of the reasons why geographies like northern Europe have historically had a higher standard of living than the south. It instilled work ethic and an awareness of deadlines. If you didn't plan accordingly, you would starve to death in the winter.
But we also know that climate alone won't do it. There are many examples of tropical cities with advanced economies and high-functioning societies. (The invention of air conditioning surely played a meaningful role.) And on the flipside, there are many examples of cold shitholes. So it's complicated. But all this being said, doesn't a caipirinha on the beach sound nice right about now?
Photo by TAIS HELENA DE CARVALHO on Unsplash
At the beginning of this year, I predicted that we would see the price of carbon continue to rise, and in particular the price of EU carbon permits. Well the year is still young but so far the opposite has been happening. Back in January, the price of EU carbon permits were hovering around €80 per tonne. Since Russia bullied its way into Ukraine at the end of February, this market has corrected and now hovers around €66 per tonne. Generally carbon prices tend to increase alongside energy prices, but the opposite dynamic is happening right now because of all of this geopolitical uncertainty. But over the long-term, I don't believe that this will remain true. So this feels like possible mispricing to me. Climate change may be a relatively less important issue in Europe right now, but it's not going away.
Chart: Trading Economics
I spent much of this morning reading about and listening to discussions about what's happening in Ukraine and so, instead of a typical post this morning, I'm just going to share a mélange of links.
Monocle 24 Foreign Desk episode talking about Russia's invasion of Ukraine. Speakers are Ukrainian MP Lesia Vasylenko, former NATO chief Richard Shirreff, Russian journalist Ekaterina Kotrikadze, and Russia expert Mark Galeotti. I found this helpful in better understanding some of the dynamics at play here and what might happen going forward -- though, of course, who knows. All of this is both deeply sad and frustrating. [Link]
Discussion in Bloomberg Green about the feasibility of the EU shutting off Russian gas right now, as opposed to through a protracted transition. Currently, the EU satisfies about 20% of its total energy needs through gas and about 40% of it comes from Russia. [Link] Also, a chart showing Russian natural gas exports, by destination. [Link]
Warren Buffet published his widely read annual letter to Berkshire Hathaway shareholders this weekend. He likes to deliver news like this on a Saturday so that people have time to digest it before the markets reopen on Monday. The overall message was one that we have heard before: BH has a lot of cash (~$144 billion to be exact) and they're not finding very many compelling opportunities in which to deploy it. [Link]
To add to the above, here is a longish Q&A session with Buffet's partner, Charlie Munger. He continues to be worried about excess money in the system and high inflation. [Link]
Construction has been recently completed on a Mies van der Rohe design from 1952 that had been forgotten and buried in some archives. Originally commissioned to be a fraternity house at Indiana University, the building is now the Eskenazi School of Art, Architecture + Design. This is a supremely cool story, particularly for an architecture school. [Link]
Yet another simple example by Bobby Fijan on how highly restrictive zoning codes and design guidelines don't always produce the end results that we might want. Different times and different contexts in this example. But it's interesting to think about how best to promote design excellence in our cites. Is more creative market freedom the answer? [Link]
My friend Randy Gladman, who is senior vice-president of development advisory at Colliers here in Toronto, published an opinion piece in the Financial Post last week about the hidden costs of inclusionary zoning. It is consistent with the ad nauseam discussions that we have been having on this blog for the past few years, but it of course remains an important read. [Link]
Steve Pomeroy of Focus Consulting makes an argument in the Globe and Mail that elevated home prices in Canada isn't primarily the result of a supply deficit. Using recent census data that allegedly shows that housing supply in Vancouver actually kept pace with demand (over how long of a period?), Pomeroy instead points to the other typical culprits: strong demand, low interest rates, unused homes owned by non-residents, and so on. This one likely deserves a dedicated post at some point. [Link]
Ironically, the post turned out to be wordier than my usual ones.
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