Make More Money by Moving to a Cold Weather Climate

Ok, so the headline of this post is a bit over the top (what's new, huh?). But the concept discussed here is interesting and related to personal finance, so I'm going with it. :-)

Here's the summary:

New research suggests that higher temperatures can have a damaging effect on the economies of poor countries. The study, by economists at the Massachusetts Institute of Technology, found that in years with higher temperatures, poor countries experienced significantly slower economic growth.

The research adds to an economic puzzle that dates back hundreds of years: Why do the poorer economies of the world tend to be in hot places, while the more successful economies are found in cooler climates?

There's much, much more to the idea than this, including lots of debate on whether or not it's true, so click through and read the details if you like.

For now, here are my thoughts on this piece:

1. I may have to revise my "move to a lower cost-of-living city" advice to "move to a lower cost-of-living city in a cold climate." :-)

2. If this is true, shouldn't my state of Michigan be a boom-state? After all, the temps here are as cold as anywhere in the US. Oh yeah, I forgot, we are thriving! We have 85% employment!!!! ;-)

3. Shouldn't Canada be dusting the US if this was true?

Ok, enough fun about this topic. Seriously, I don't know whether or not it's true, and I'm unsure about its application if it turns out to be factual. But it's an interesting hypothesis if nothing else and I thought I'd bring it to your attention.

Comments

[Aron]

I've heard that the Dow Jones Industrial Average and average skirt length since 1950 are correlated, but it doesn't necessarily mean that they are related.

I have to agree with researchers mentioned in the article that it is more historical accident than a trend. Most of the high-GDP countries are in the upper latitudes of the Northern Hemisphere (US, Canada, Europe, Russia, etc.) whereas the lower-GDP countries in Africa and Asia are concentrated around the tropics, which obviously skews the results.

I would be interested to see the data for particular states/cities within the U.S. to see if it holds true there as well. It would need to incorporate cost-of-living to be a true measure, though.

[Jim]

I think that too hot or too cold is going to slow things down. Its hard to get much done when temperatures are extreme. Moderate climate is easiest to live in and easiest to get work done.

Modernization would impact the trend long term. With modern heating & AC its easier to get work done. Back in the olden days though 100 degrees or -5 degrees made economic growth much more difficult. And the poorer a country is now the less they have modern conveniences or white collar indoor style work.

[Foobarista]

This is obvious if you've read "Guns, Germs, and Steel". Electricity and air conditioning caused a massive revolution in world productivity, especially in hot, humid areas. Phoenix and Houston wouldn't exist in their modern forms without it (or Shanghai or Guangzhou for that matter).

But I doubt whether this "economic effect" matters once temperatures are in the human comfort zone or lower.

I doubt this would be terribly "actionable" to individuals in the modern world.

[Bad_Brad]

Think about primitve society. In very hot places, food is scarce. Therefore, those places make it very hard to be self-sufficient, and those who have access to food (the powerful and wealthy) can easily bully and oppress those who do not. In more moderate climates, it is much easier to persist on your own. This is why society developed more quickly in places with a moderate climate.

I also agree with the poster who said that the advent of widespread air conditioning had massive impacts in terms of population and economic growth of various regions. Phoenix is in the middle of a desert, for crying out loud. The desert is not a natural place where man would inhabit. But with air conditioning, it is suddenly viable. Ditto Las Vegas. Ditto Dubai.

[The Baglady]

Did they get the GDP of the North Pole and Antarctica? That would be the coldest right?

[MC]

Another shout-out to "Guns, Germs, and Steel"--a fascinating read about why civilizations developed and thrived (or not) where they did.

Regarding today, should one move to the American Siberia (the Upper Midwest) in an effort to save money? As someone who transplanted to Minnesota almost 20 yrs ago from the west coast, my opinion is "definitely not!" Unless you have a very solid, long-term job lined up.

Sure, the cost of living here is dirt cheap (even considering the added expenses for heat in the winter, air conditioning in the summer, and a new car every 10 yrs after it gets destroyed by salt). But jobs are scarce and the lack of population means that there aren't even that many industries to keep the local economies going.

This means local taxes are high on anyone making money, while tax dollars available for public improvements are scarce. What money there is seems to be sucked up by building highways to connect the far-flung, economically failed rural farm towns and constantly repairing them after they (& their bridges) are destroyed by winter cold or spring floods. There is often no money left over for storm drains, sidewalks, street signs, stoplights.

A bridge on a major street in my (100,000 population) town collapsed 3 years ago and the street has been closed since then--there's no money to repair the bridge now or in the foreseeable future. I live well within the city limits in an established residential area 5 min from downtown, but the city couldn't afford to repave my street last year (it had huuuge potholes in it). So my whole neighborhood got their streets "repaired" with gravel with oil sprayed on it (!???) instead. My children's elementary school is heated only to 58oF in the winter (they sent home a note to be sure to 'dress your children warmly') and class sizes are 31+ children/teacher. I have a good job, but if I lose it there would be literally no other employment here for me.

So, while it looks cheap to live here, but there are a lot of trade-offs!

[Old Limey]

About fifty years ago I decided to move from a good job in Denver, Colorado to the West coast. My motivation was to move from a very small aeronautical company to one of the aerospace giants where they would make it easy and inexpensive for me to pursue a post graduate degree. I mailed out three resumes, they were to Boeing in Seattle, WA, Lockheed in Burbank, CA, and Lockheed in Sunnyvale, CA.

All three letters came back with comparable offers of employment - a far cry from today's world. I knew very little about either of the cities and in the days before the Internet it wasn't as easy to research them. Anyway, I ruled out Boeing because I had heard that it rains a lot in Seattle. I then ruled out Burbank because I had heard a lot of jokes about "Beautiful downtown Burbank" and I knew it was in the L.A region which didn't really appeal to me. That left Sunnyvale, CA. I liked the name and immediately had visions of groves of orange trees interspersed with beautiful white houses - that vision turned out to be wrong. Anyway, they had included a really nice booklet on the virtues of the Santa Clara Valley. The booklet pointed out that the valley was then known as "The Valley of Heart's Delight" and was the center of a large fruit growing industry, principally prunes, apricots, and cherries. The pictures of the orchards in full bloom in the Springtime did it for me and that's where I ended up.

At that time Lockheed was the largest employer in the area and hiring like crazy because of contracts related to the Cold War weapons buildup. There were also three good universities nearby and I signed up to get my MS degree at the nearest one, with Lockheed allowing me to take classes, make up the time, and have minimal tuition costs. The climate was the first thing we started noticing. Spring was gorgeous with flowers and a change of seasons just like my native England, the summers were pleasantly warm, with no rain, almost no humidity, no thunderstorms, and no bugs. Best of all, as soon as the sun went down, cool breezes arrived from San Francisco Bay, on one side, and the Pacific ocean on the other. This made air conditioning unnecessary, turning on whole house fan in the evening is useful on the very hottest days. The winters were also a pleasant surprise, no snow, just a few mild frosts and periodic rainstorms blowing in from the ocean. Heating bills are very low, especially now that most people have gone to double pane windows, and extra thick roof insulation. All in all the most pleasant climate we had ever lived in and the best we have encountered in our travels around the world. A great climate definitely stimulates intellectual growth, invention, and discovery. It's no accident that many of the poorest regions of the world have very undesirable climates. The most desirable regions come with proximity to good food and water sources, good soils, good climates (especially low humidity), and good air quality.

The real estate developers soon started chopping down the orchards and turning them into housing developments. Fortunately they only did this on the valley floor where it was easy, thereby preserving the beauty of the surrounding hills, which today contain many state and county parks that are great for hiking and other recreation. Being in a valley and on a peninsula also greatly lessens the chance of a region turning into a large urban sprawl, though it does create very high real estate prices that now make it almost imossible for new arrivals to buy homes.

The final outcome was the transformation of the valley into "Silicon Valley" as it is known today, and the proliferation of Hi-Tech companies of all kinds, many such as Intel, Hewlett Packard, Apple, Genentech, Google, Yahoo, AMD, Varian, Adobe, Roxio, etc. etc. were started by very smart students from nearby Stanford University. The Venture Capital companies also sprang up in an area near the university and provided the seed money for these ventures.

Bottom line - the valley has totally changed but it's really a change for the better. Silicon chips are a lot more profitable than Prunes, and the growth has been well controlled, preserving the quality of life.
One other topic worth mentioning is a charitable foundation close to my heart. Many of the billionaire entrepreneurs in the valley feel the same way I do about preserving the natural beauty and with their generosity to this foundation thousands of acres of valuable agricultural land have been purchased and set aside as wildlife preserves for hiking, mountain biking and other recreational uses. We are also in the final stages of finishing the Bay Area Rim Trail, a hiking trail that traverses the whole region.

[texashaze]

Great post Old Limey! Wish I lived there back in the day.

Hey I need to hire someone for a 1 day a week freelance job there that pays $30-40/hr which lasts about 3 to 6 months. Can you help me find someone? My email is [email protected]

Thanks!