Economics of Spatial‐Dynamic Processes

I am honored to have the opportunity to give the AAEA Fellows Address this year. I would like to talk about a class of problems that are becoming more prevalent and yet have not re-ceived much attention by economists. These problems are a frontier area for economists— good topics for students looking for thesis top-ics and for the rest of us looking for new research questions. This class of problems po-ses challenges at the conceptual level, for em-pirical analysis, and at the policy design level. Spatial-Dynamic Processes The problems I would like to talk about I call “spatial-dynamic ” problems, situations for which there is some (generally biophysical) process that generates potentially predictable patterns that evolve over space and time. The system generating such patterns may be largely exogenous. For example, the pattern of coastal area inundation around the world that we are about to witness as sea surface rises due to global warming is essentially exogenous. The biophysical forces generating the pattern are already in play, and the process is unfolding and inexorable. Alternatively, many spatial-dynamic processes are endogenous in the sense that they are influenced by individual decisions at points in space/time. A good example is a forest fire. A forest fire spreads over space in a manner influenced by some biophysical pro-cesses (e.g., wind direction and speed), but the pattern is clearly also influenced by decisions made by individuals in the landscape. Firefight-