Monday, September 01, 2014

Repairing LA's Aging Infrastructure is Inhibited by the Generous Public Sector Wage Premium

LA boomed in the 1950s and 1960s and much of this infrastructure is now old and depreciating. Durable capital depreciates over time.  Walk around my Little Holmby neighborhood in Westwood and you will see some ugly 1950s homes whose current owners are investing in upgrading.  These are private homes and the owner has the right incentives to invest efficiently. In the case of the public capital stock, will it be upgraded efficiently?  The NY Times reports a long piece about the challenges of upgrading this city's infrastructure.  As I read the piece, I could find no mention of high LA public sector wages.  While this is good news for those who have these jobs, these wages paid by LADWP means that for every $1000 it spends on repairing infrastructure that the physical quantity of new and improved infrastructure is low because the wages and benefits it pays are so high.  I would guess that if these jobs could be filled through competitive markets that the cost would fall by 60% to 75%.  Demand curves slow down. Labor is the major cost in improving infrastructure. If labor could be purchased at a 75% lower price, there would be much greater demand for improving LA's infrastructure.  The NY Times again drops the ball as it refuses to engage in discussing the real econ 101 issues at the heart of many issues it investigates.

I'm now co-writing a new paper on the causes and consequences of urban public sector wages and will blog about this issue in the future.  

Heterogeneous Treatment Effects? The Case of Deprogramming British Radicals

If I'm reading this correctly,  the British Prime Minister will require that British citizens who have spent considerable time in Iraq and Afghanistan will have to attend "deprogramming" classes if they return to England.  The enormous economics literature on "treatment effects" has some insights to offer.

I have several questions;

1.  Do the treated subjects have any incentive to take the treatment seriously? Will they just sit there and meditate and ignore the talk and videos?

2.  What is the treatment's substance?  How do you deprogram a person?  How many hours of training are completed?  How will the subjects be evaluated to judge whether in the short run that they have been deprogrammed? Will it be a signalling equilibrium such as shaving a beard and wearing Western clothes?    Will MRI brain scans be used to monitor how the lobes of their brains light up to different stimulus such as a photo of ISIS vs. Hilary Clinton?  Such brain scans would be more expensive than simply surveying these individuals and would be less likely to yield "cheap talk".

3.  Given that people differ, what % of those assigned to treatment are at risk to be "deprogrammed"?  Who is at the margin?

4. Is there a risk of backlash so that by taking the treatment, a subset of those treated become more radical because they hate the idea of "Big Brother" mind control?

5.  Once these individuals are released back into their British communities, will their family report to the government how their day to day progress is going?  Will there be the equivalent of a parole officer?  How will he/she judge progress and worrying signs?

UPDATE:  My wife thinks that the British government may intend to use this program to profile this group to find out who are the risky ones among the bunch. It would interest me if the British government is shrewd enough to be able to achieve this partition of the entire sent into "risky guys" and "low risk" guys.

Sunday, August 31, 2014

International Port Competition and Urban Growth

I spent a lot of time in Singapore in the Summer of 2012 and 2013.  I was amazed at the amount of land that Singapore (a small city/state) devotes to its port.  Such land could be used for other purposes that might yield more long term economic growth?  Few wanted to have this discussion with me. The port was viewed as vital to Singapore's long term growth.  But, Singapore faces competition from several local ports.  I don't believe that a good urban economics paper has been written on ports and international trade and its impact on city growth.

With this in mind (and as a LA home owner), I read that the widening of the Panama Canal may impact U.S Western Port cities (think of Oakland and Long Beach and Los Angeles).  If you want to ship stuff from Asia to the U.S Northeast, is it cheaper to go through Panama or to load up trains and trucks in Los Angeles? If the answer is the former,then how big of a problem does my metro area of LA have? Who will lose? What is the multiplier effect? In 2014, how important is the LA port to LA's growth? Has it produced union jobs or a large number of middle class jobs?

To solve for the cheapest shipping option for a given tonnage of goods from Asia to the New York area must be a standard operations research problem?   You face a choice of renting a cargo ship to go all the way from Asia through the Panama Canal or renting a cargo ship to go to LA and unload onto trucks and trains there to ship to the final destination.  Are there economies of scale here?

Here is an example of an OR article discussing this but it is gated.

Saturday, August 30, 2014

Why Are There Few LA to Boston Flights? Airplane Routes Signal City Co-Agglomeration

The annual economics meetings will take place in January 2015 in Boston.  Today I booked tickets for my wife and myself from LA to Boston.  There are very few direct flights (especially non red-eye) flights connecting these cities.   In contrast, United has plenty of direct flights from San Francisco to Boston (I see seven on January 2nd).  Doesn't this suggest that there is more trade between San Fran and Boston than between LA and Boston?  Why would that be?

A city is a bundle of industries and tourist attractions.  San Fran is the high tech mecca and so is Boston.  Los Angeles is trying to do high tech but is off to a slow start and LA's high tech seeks to complement the entertainment industry.  The programming and science skills of the nerds at MIT and Harvard may not be a good match with the sleek beauty of the LA set.  So, I'm not surprised that there are so few flights between LA and Boston.  Expected demand may affect the willingness to supply flights!

I have tried to use Google Scholar and I can't find serious papers using city to city airplane visits as a measure of "closeness" of industries.     Almost 20 years ago, Ed Glaeser's Harvard student
Takuo Imagawa studied a slightly related issue.  Google Scholar is not helping me to track down his thesis.


The John Quigley Special Issue of RSUE

Back in October 2012, the Lincoln Institute hosted a great conference celebrating the work of UC Berkeley's John Quigley.    After a long and thorough review process,  RSUE (one of the leading urban and regional economics journals) has published a special issue based on revisions of the conference papers.  All of the papers are available here.   Ed Glaeser wrote a powerful history of John Quigley's Economic thought.   For any student interested in urban, I highly recommend that they read Ed's paper.

I published two papers in this special issue.

1. Nils Kok and I investigate the "green building" price premium using a large California data set.   Controlling for zip code/street/time fixed effects, we find that Energy Star certified homes sell for about 5% more than observationally identical homes that do not have this certification.

2.  Siqi Zheng, Weizeng Sun, Danglun Luo and I have created a panel data set by city/year in China to investigate the correlates of what raises the probability that a mayor is promoted.  We document that local economic growth raises promotion chances. Controlling for several factors, we document that mayors are more likely to be promoted if their city is experiencing reductions in air pollution.  This result suggests that Chinese mayors now have a greater incentive to address local environmental challenges. We expect that this paper will be well cited in an emerging literature on the political economy of local mayor's incentives to invest in "green cities".

Elite Slots

When is supply elastic?  What technologies feature roughly constant returns to scale?  At a top restaurant in NYC, the lead  Chef faces a scope and control issue. If the restaurant tried to sharply scale up its number of seats, the Chef wouldn't be able to maintain the quality of the meals.  Contrast this case with housing near a beautiful coast.  In most such areas, the area is zoned for single family homes.  If the area was upzoned and thus allowed multi-family housing, single family homes (even those worth $20 million) would be bought and knocked down and a 50 unit building would be built with each condo selling for $1.5 million.  This change in the rules would increase access and the total value of the land.    The supply of housing near the coast would become more elastic. Yes, I understand that I'm equating a single family home with a condo as a "house" but if a $20 million dollar home can be "turned" into $75 million dollars worth of new condos then value has been created in allowing such transactions to occur.   The real estate law in this case is causing the paucity of elite slots.

Scholars such as Robert Frank routinely talk about the zero sum game for status goods but this pessimism hinges on non-tested assumptions about an inelastic supply curve.   Elite "product" producers such as Yale are  trying to increase their number of students through building new colleges. China is trying to create its own great universities.  I recognize that in a market where reputation matters it can take a long time to convince the public that the new "Kahn University" is a great school and merits comparison with old type great Ivy league schools.  

As I have blogged before the rise of the MOOCS can be thought of as creating a more elastic supply of elite slots.  If society has a shortage of a valued resource then somebody will figure out how to increase its supply.

This is a long winded intro for talking about my teacher Lester Telser's 2013 short paper available here.   He investigates why the cost of running elite non-profit universities is rising over time and links this back to Ricardian rents and rising demand.

For our existing great private universities, they would have trouble scaling up in size.  Most are in urban areas.  NYU has faced stiff internal resistance in its attempts to build up vertical to increase its physical space.   Columbia has had to pay a lot of money for marginal land in its attempt to build a new campus.  Land is expensive near these universities because these universities are there!

For rural campuses (and I can't think of that many major private research universities not in big cities --- in part because of their hospital service and biomedical research), land is cheaper but in this age of power couples could they attract the same quality faculty?

So, from basic supply and demand --- if the 1% want something will its price be high?  This hinges on the shape of the supply curve.    Even the NY Times appreciates this point.  Read today's main editorial.  

Friday, August 29, 2014

Casey Mulligan's New Book "Side Effects" is Published

The University of Chicago's Professor Casey Mulligan has published a new $3 e-book titled "Side Effects".  He provides an in depth examination of the future of health care in the United States.    Building on some of the ideas discussed in his WSJ profile,  the book provides a nitty gritty analysis of the unintended consequences of the new health care law.  It offers a number of predictions about the medium term future that can be compared to data to see if his theory is correct.   At its core, this book focuses on incentives both of workers in terms of hours worked and on the demand side focusing on the incentives of firms to bundle how many hours into how many jobs. Intuitively, under the new law,  will firms seek to hire many part time workers or fewer full time workers?

I am not a health care expert but as I read Mulligan's book, I was reminded that there are many behavioral elasticities that health economists designing the law are assuming equal zero.  Mulligan questions this optimistic (and lazy) assumption.  Put simply, if the NFL adopted Canadian Football rules, more teams would punt on 3rd down!    As I understand Casey's argument, many Obama health economists are implicitly ignoring the Lucas Critique.

A critic might say that this is a "fancy" way to defend denying health care to poor people.  That would be a "low blow".   Instead,  Professor Mulligan is demonstrating how a "public intellectual" who is a Ph.D. economist goes about using his skills to hone the public dialogue.  We economists believe that incentives matter.  Mulligan is investigating what are the incentive effects embedded in President Obama's new health care law.  From an intermediate micro economics perspective, he is studying how the new law leads to kinked budget constraints and induces optimizing households and firms to move to corners and kinks.  Such individually rational choices have social consequences.  At a time when our economy features "secular stagnation", we need to be smarter about what tradeoffs we are making in the name of achieving a worthy goal such as an expansion of health care for the poor.

Today, economists are really interested in salient effects.  Raj Chetty has written several papers on tax salience.   To understand what is "salient", let me define the converse.  If you pay for your electricity bill using automatic credit card billing then this isn't salient. You never see the bill and "out of sight is out of mind".  Without being confronted with such price information , you are less likely to invest in energy efficiency.  Mulligan is arguing that there are several new taxes embedded in the new Obama Health care law that are not salient. This may be intentional by the White House to reduce political opposition but to economists it is crucial that we foresee the full price tag and potentially distorting effects of a major piece of new legislation.  At a time when our economy isn't creating many "good jobs", could this law further slow this process?  Shouldn't economists be studying this?

One feature that I really like in Mulligan's book is taking the theory of compensating differentials seriously.  Adam Smith would respect this and my mentor Sherwin Rosen would also salute this.   If jobs offer greater benefits then workers will accept a lower wage.  If firms must pay out greater benefits then they will only hire workers at a lower wage.

The Future of the Coast

Anthony Flint appreciates the beauty of the Rhode Island coast but worries about its future.  With sea level rise, there certainly will be specific parcels of land and structures there that will vanish.  The owners of such parcels will lose.  Anticipating this, the structures will be allowed to depreciate and they won't have any valuable possessions (or people) in them when they submerge. This is an example of how expectations reduce the cost of climate change.  

As land is lost, other land becomes more valuable.  Other "higher ground" pieces of coastal real estate will go up in value.  Changes in zoning laws would allow more people to live there.  So, instead of having a single family house on a bluff with a view of the ocean there could be a 20 story building (see Ocean Avenue in Santa Monica).   Look at this building. Do you see its stilts. It overlooks the Pacific Ocean.  

This simple example highlights how adaptation takes place. Note that the free market guides this process.  No President or Governor guides this set of events.  

Thursday, August 28, 2014

What Can Humanities Professors Teach Us About Drought and Climate Change Adaptation?

The NY Times doesn't offer much of its space to economists not named Krugman.  Yes, I read the Business Section on Sunday but those pieces are short and often lack punch.  Today, the NY Times allocates some web space to humanities professors to see what they have to say about drought and adapting to climate change.  Comparative advantage?   While I couldn't understand 90% of the piece, I did like how it ends.  

Here is a direct quote that refers to Steve Slovic who is an English Professor at the University of Idaho (I don't know him):
"Mr. Slovic sees, if not action, then at least rising concern. “Climate cycles are not absolutely fixed and predictable,” he said, “and that may be the great lesson of the era that we’re living through right now. Whether we believe in human-caused planet-wide changes or whether we believe that these are natural cycles, I think all of us in the early 21st century have this sense of a kind of basic uncertainty about how conditions are changing.” 
He’s noticed a growing desire to find ways to adapt to these changes: “The more nimble we can be, the more lightly we can live on the planet, I think the more able we will be to adjust to various shifts that we see occurring every day right now and that are likely to continue to occur in the future, and I see this reflected in the literature.” 
We don’t yet know how to make it rain. But increasingly, we may be talking about what to do when the rain doesn’t come."

In the face of drought, water price will rise and the basic laws of economics will be tested and confirmed as significant supply and demand side responses take place. In the medium term, induced innovation will take place as R&D is directed to augment our water supply. Engineers will quickly make breakthroughs in a range of technologies from desalinization to others that I can't even imagine. Don't bet against human ingenuity.  But to trigger this directed search for solutions requires a price incentives --- so politicians need to allow water prices to rise to reflect the fundamental scarcity.


Will Cheaper Drones "Solve" the Principal/Agent Problem?

While Eric Snowden and friends worry about the costs of spying, new monitoring technologies also offer benefits.   This piece  discusses how drones are being introduced to patrol over nature parks to see if poachers are actively invading parts of a park.   Such information should help environmentalists to focus their enforcement efforts.  The big point here is that cheaper monitoring technology reduces the private information that agents have.  Such agents become aware that their actions are being monitored and this should reduce shirking and other forms of bad behavior.  This new information access should also affect contract design.

Years ago, Tom Hubbard wrote a QJE paper focused on how the trucking industry's contract design was affected by onboard truck GPS systems that relay to headquarters where the truck is at each point in time. Before such technology, these truckers had private information about their activity (had they gone to Vegas to gamble and go dancing) or were they actually driving their assigned route?  In such a case, the headquarters had to provide some incentive compatible bonus for actually delivering the goods on time.  With the new GPS system on board, the headquarters could just pay an hourly wage because the asymmetric information problem had vanished.

Other examples?  On midterms, teachers worry about cheating and must keep our eyes on the crowded classroom. If we could fly a drone, there would be even less cheating taking place.

For activities that take place out in the open with a spatial component, drones appear to have an edge in monitoring. I agree that if a bunch of guys are colluding by email that a drone won't spot this but if a group of workers in a field are goofing off then the drone will record this and when output is found to be low for that sector; the workers can't claim that there was "bad luck" as the cause for the low output because their lack of effort has been documented.

Will economists start to write papers about the benefits of "Big Brother"?   What are workers' rights to privacy?

Wednesday, August 27, 2014

Carpinteria, California

From time to time, I live in Carpinteria, California.  Located close to Santa Barbara and UCSB, this beach town is a special place offering a combination of ocean access, hiking, scenic views, temperate weather and a small town sensibility (and two Starbucks).   An 80 minute drive from Westwood, this town is great for relaxing and exercising.   When in LA,  I rarely travel to the Venice Beach or the Santa Monica Beach.  While in Carpinteria, I go to the beach every day.  I have even gone jogging for three straight days.  In LA that's unlike to be the case.   When I was a kid, we would vacation on Fire Island along the Atlantic Ocean.  With the bright sunshine and blue skies, the Pacific Ocean just looks better than the Atlantic.

USC Invests in the Social Sciences

UCLA is heavily investing in building a hotel/conference center, dorms, a music building, an engineering building, and many new medical campus buildings.   At the same time, the faculty's size is shrinking and the faculty are aging (see pages 15 and 16).   Over at USC,  I read that this school has just finished building an interdisciplinary social science building that will be home to many of its rising research centers.    How do universities prioritize capital projects?  Which projects improve research on campus versus which improve student quality of life? What is the right balance between the two?  Can economists be useful in helping to decide this?

At a time when UCLA is ranked higher than USC in football, is USC closing the nerd gap?  Which matters more in the formula for being a great university?

Tuesday, August 26, 2014

The Coase Theorem Fails on a United Flight to Denver

My fellow University of Chicago economists, stop reading Krugman's latest and explain this puzzle to me.  A United Flight to Denver was diverted to Chicago because of a fight between two 48 year olds over whether the person sitting in front in Economy Plus has the right to recline her chair.   For details read this.

As we get ready to start the new academic year, here is an excellent example of the Coase Theorem not working! Who has property rights on an airplane when the person in front of you wants to recline while you care about your knees? Why was this United flight diverted to Chicago? Wasn't that a destruction of resources for everyone involved? My fellow Becker students, what is the answer? You have 10 minutes to answer this 6 point question. The Coase Theorem predicts that the recliner should have paid the person behind her? True, false, uncertain. Explain.

An environmental economist might ask a valuation question here.  In aggregate, on a plane carrying perhaps 150 passengers, what was the total loss to everyone on board (including all of the passenger time lost landing in Chicago and taking off again) and the value of the anxiety caused by this fight between these two people?   Did the two duelers internalize these social costs when their fight began?  Why didn't the victims on the plane pay the duelers to stop dueling?  Or would this create bad incentives encouraging even more fights over common space? The tragedy of the commons is an interesting problem!

Here is some analysis from Time Magazine as it discusses the merits of a product called the knee defender that implicitly grabs the property rights for its backseat owner.

UPDATE:  Yes, I am well aware that the Coase Theorem assumes that property rights are well defined and agreed upon (so some have said that the Coase theorem does not apply here) but what is interesting about this case is that the airline has not established these rules.  It is also interesting that transaction costs precluded the ability of others on the plane to offer their seat to the woman who wanted to recline because this simple solution would have resolved this "crisis".  Nobody gained by landing the plane in Chicago. People lost time, they had to land and takeoff one more time.  The Coase theorem assumes a smooth redistribution of resources but instead resources were destroyed in this multi-player interaction.  This should interest economists.  

The NY Times Reports on the New IPCC Report

The IPCC appears to have served up its same points again in a new set of reports related to the challenge of climate change.  Here is the report from Justin Gillis from the NY Times.  Here is the IPCC webpage so you can read up on what's new here.

A direct quote from the Gillis article;

"Warming that substantial would almost certainly have catastrophic effects, including a mass extinction of plants and animals, huge shortfalls in food production, extreme coastal flooding and many other problems, the report found.

The report noted that severe weather events, some of them linked to human emissions, had disrupted the food supply in recent years, leading to several spikes in the prices of staple grains and destabilizing some governments in poorer countries.

Continued warming, the report found, is likely to “slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing poverty traps and create new ones, the latter particularly in urban areas and emerging hot spots of hunger.”

Note the pessimism about our ability to adapt.  But, why?  What is the causal chain of events such that climate change slows down economic growth?  What is the micro economics here?   How does climate change make urban areas poorer?  In a system of cities, do all of the cities become poorer or does economic activity simply migrate from the most affected cities to less affected cities?

I love how the NY Times and non-economists make declarative sentences about the future without being honest about the uncertainty associated with their statements. I wish I was this confident about my ability to predict the future.

We do know that self interested individuals, firms and governments have strong incentives to come up with new strategies for coping with these real challenges. Ideas are public goods. If somebody on the planet (and they have strong survival and economic incentives to do so) figures out a good adaptation strategy then we all benefit from it.  The ideas of Julian Simon are ignored by the behavioral economics community and climate scientists who assume that everyone is unable to plan for the future.  I find this to be fascinating and to be a bit scary that the Rational Expectations revolution of the 1970s in modern macro has had no impact on how "intellectuals" think about major social problems.

Sunday, August 24, 2014

A Whale Visits NYC or "Why Do Whales Now Swim Near Big Cities"?

You have to admit that this is an inspiring photo. I grabbed it from this news article discussing the 35 foot humpback whale who has been swimming very close to NYC.

There's a new tourist attraction in NYC: Whales

If Ed Glaeser was writing a paper on this, he might title it;  "Why Do Whales Now Swim Near Big Cities?"   Randy Walsh and I are finishing a paper on this broad subject (we don't explicitly discuss whales) but our paper instead focuses on the rise of environmental quality in major U.S cities over the last 30 years with a focus on the causes and consequences of this dynamic.  As this article suggests, one beneficial consequence of the reduction in water pollution is an improvement in the quality of life for creatures in the nearby water. My father now goes out fishing again in NYC rivers that just a few decades ago were highly polluted.  It is no accident that this whale is hanging out. There must be food and fun in NYC.   The "consumer city" takes place under-water as well as on land!

Saturday, August 23, 2014

Field Experiments Recover the Revealed Preference of Bureaucracy

Social scientists continue to launch randomized field experiments to learn about human behavior.  In one well known field experiment, Bertrand and Mullainathan mailed out randomized resumes to potential employers where the resume sender hoped for a job interview. Unknown to the firms who received these, the resumes were for identical individuals with the only difference between the two being that some had "black names" while others had majority names.  They documented statistically significant evidence that EMILY AND GREG are more likely to be interviewed than  LAKISHA AND JAMAL (even though they are all identical!).  This paper has over 1600 Google Cites.  This is an example of how social scientists can learn about firms by seeing how they respond to a randomized treatment.

In a new Example,  Gary King and co-authors have published a paper in Science in which they randomly posted statements on China's social media and then observed whether the Chinese State censors allowed the statements to be posted or whether they were erased. The authors document that the censors do not like mentions of "collective action".

While I applaud the authors for their work, to an economist this piece poses more questions than it answers.

Economists say that the privately optimal amount of any action is such that at the margin the marginal benefits of the activity equals the marginal cost. What is the marginal cost to a Chinese censor saying "no" and refusing to post the  post?  The censor must read the post but when in doubt the censor is highly likely to just choose to say "no".  What criteria are censors promoted on?  Bad choices must get them fired and thus they must have strong incentives to block everything.

The problem in this "market" is that there is no price mechanism.  The creator of the social media content cannot convey the intensity of his preference to have his post posted.  He could post it repeatedly.  The censor cannot signal his intensity of dislike of the post.   This is a market with quantities but with no prices.  

An additional study would collect information on who becomes a Chinese censor? How long do they spend on each post? Are humans even reading them or is a machine screening them?  From the CCP's perspective are machines better than humans in "filtering" the posts?

Did Gary King and co-authors really believe that a random set of blog posts would be censored? Of course, there will be a selection effect.   What discussions and co-ordination are precluded in modern China if "collective action" is rarely said on the Internet?   What is the counter-factual here about how this censorship slows down learning and the potential rise of Democracy in modern China?

Thursday, August 21, 2014

An Unconventional Economics Textbook

While some leading economists are selling their textbook for $103 and other stars are selling theirs for $209, you can purchase my "Fundamental of Environmental and Urban Economics" book for $1.  I use
this book in my environmental economics course at UCLA as my main text but I think that anyone who is teaching environmental economics or urban economics can use this as a supplement for their course.  While this book's layout will not win any style prizes, its substance is pretty good.   For those who have wanted to see how a University of Chicago trained economist thinks about mainstream issues at the intersection of environmental and urban economics, you won't be disappointed.   I've set the price low because I want folks to read it.   A few people are buying it.  Maybe I need to offer a deeper subsidy to encourage more readership?

I'm posting this now because a new academic school year is about to start and I'm looking for brave young professors who are willing to experiment with a different type of textbook.  All of my lecture materials can be accessed here.  

Wednesday, August 20, 2014

Coastal Real Estate and Emerging Flood Risk: The Case of "Old Greenwich" CT

The NY Times offers some suburban sociology as it profiles the NYC suburban town of "Old Greenwich".  Has this coastal town learned any lessons from Hurricane Sandy? Has its residents in low lying areas now taken precautions so that the next storm causes less damage?

Here is a direct quote:

"The housing market is just now emerging from a nearly two-year slump induced by Hurricane Sandy. Flooding in low-lying areas and a wind-driven fire that destroyed three waterfront mansions “left a bit of a scar,” said Gary Cunningham, a former stockbroker who now develops single-family homes in Old Greenwich and is the managing partner of Core Properties.

Uncertainty around the Federal Emergency Management Agency’s flood zone remapping and new insurance rates also caused buyers to temporarily back off. These fears appear to be easing, however, Mr. Cunningham said. And he is further encouraged by recent revisions to the town’s building regulations for flood zones.

If the last three months are any indication, buyer confidence is back in a big way. Since June, at least four waterfront properties have traded above $6 million; the most expensive, a 7,700-square-foot colonial on Greenwich Cove, closed at $13.05 million."

So, there are two different issues here. The greater metro NYC housing market is hot.  Have real estate buyers "forgotten" about storm risk?  Or have home owners taken costly precautions to protect themselves?  A sociologist might go door to door asking survey questions to answer this question.  How might an economist answer this?  

Suppose that the flood maps are sharply delineated so that homes that are in very close proximity (such as 1/2 mile) differ with respect to their flood risk.  This would allow for a regression discontinuity design so that the researcher would test whether similar homes (in terms of square footage, year built) in the same geographic vicinity sell for a much lower price if they are in the FEMA flood zone relative to similar homes located just outside of it.   If there is no statistically significant difference in average prices between these homes, then either there is no perception of differential risk among recent buyers or the home buyers are convinced that they have access to private self protection strategies to offset the risk that mother nature is posing.

An even cleaner test of risk perception would be if FEMA announced that it would not offer any disaster relief $ to this area.  In this case, if there continues to be no price premium between the two sets of homes I listed above then this would be even stronger evidence that coastal households believe they can self protect.

Why do I reject the hypothesis that the home buyers are unaware of the true risks?  When you make an expensive multimillion dollar investment, you have the right incentives to engage in the due diligence of discovering what risks you are exposing your loved ones and your stuff to.  We are adults.  Caveat Emptor!

Sunday, August 17, 2014

Olive Oil Production as a Test of Our Ability to Adapt to Climate Change

Joe Romm's blog reports some doom and gloom about olive oil production.  This tasty (and healthy) oil is mainly grown in Spain, Italy and Greece with these three nations producing 97% of the European Union's total production and the EU produces 73% of the world's olive oil output. (Source).  Spain produces 62% of the EU's total and it is suffering from mega-drought.  What will be the short term and medium term consequences of this drought?  Given that this production is highly spatially localized, what adaptation could occur?    The Internet says that olive oil can be preserved for two years so storage will be one adaptation strategy as future "Hotelling inventory" papers will be written.   As of now, I will merely leave this as a challenge that we face. Will for profit farmers figure out a way to adapt? Will households who use olive oil figure out strategies to adapt?  This would appear to be a case where the pessimists are right that climate change will cause large impacts on our well being (as measured by lost consumer surplus).  Are they right? I will report back on this.

Saturday, August 16, 2014

Who Plans for the Future?

A fundamental question in social science focuses on whether individuals are consistent in how they make choices over time and in different settings.   If we are consistent in how we prioritize then we are less likely to regret our choices.  Psychologists tell complex stories that we are every changing shape shifters while economists tell a much simpler story that we know our utility function U(c) and we enter the market to purchase goods to maximize that well defined function.  In recent years, economists such as David Laibson have explored the middle ground of how to formally model such time inconsistencies.  Here is Laibson's most famous paper on hyperbolic discounting.  

This is a long winded way of introducing a new paper by Lamar Pierce that was profiled in the NY Times.  He has been able to access data that reports a person's investments in their 401k retirement plan and indicators of their personal health.  He finds a positive correlation. Those who save for the future are also healthier.   Here is a direct quote:

"The results echo previous research showing that some people are more predisposed than others to invest in the future. But much of that work, Dr. Chapman said, has been in the area of addiction — why heroin addicts, say, think differently about future consequences than nonaddicts. And this paper adds another interesting twist: The results come not from a laboratory experiment but from real-world data.

The researchers gleaned the findings from a trove of financial and health information that a midsize industrial laundry company in the Midwest collected from its employees, with their consent. The data was gathered anonymously by a third party and in turn provided to researchers at the Olin Business School at Washington University in St. Louis.

Broadly, the researchers looked at employees’ contributions to their 401(k) plans and compared them against various measures of their health, including blood test results; cholesterol, kidney and iron levels; exercise frequency; and whether they smoked."

To an economist, these findings suggest that there is a person specific trait such as self control and patience such that people who have a high amount of this unobserved attribute save more for the future and invest more in staying healthy.

The key public policy question is whether this unobservable is a fixed trait or whether it can be built up like a muscle?  The Nobel Laureate Gary Becker and my friend Casey Mulligan wrote an important paper on this subject back in 1998.  They argue that education has a causal role in increasing patience.  If this is true, then this is good news for both mitigating and adapting to climate change because it will be easier to adapt and to enact low carbon policies in a world with more future oriented individuals.

Thursday, August 14, 2014

Summing Up the Entire Climate Change Adaptation Debate in Two Anonymous Comments

Read this ABC News story about heavy rain and then read the comments. You will see a large number of "climate change deniers" saying that rainfall is cyclical and cracking some funny jokes but then read these two separate comments.

KittyTroll 2 hours ago 0 1
Problem is too many CONCRETE buildings and poor drainage systems! Over Development IS The Problem ! Not the Rain! Heck in most cities they should have patrols to clean drains ( but they don't ) and rebuild the drainage systems should be Mandatory -no it's not even considered or they say too late now! Hogwash!

HBa 1 hour ago 0 0
So you are saying the drainage system caused the record 13.75" of rain.

The 2nd comment is a standard "climate change has caused the surplus rain".  The 1st comment is the smart one. Note the focus on unintended consequences and simple strategies for urbanites to adapt to the "new normal". That's the Climatopolis logic and this is how we urbanites will adapt.

Wednesday, August 13, 2014

The Consequences of Ideology

Chilton and Posner have released a new working paper  analyzing documenting that among law professors at elite law schools that the faculty's scholarship is shaped by their personal ideology.  Scholars who donate $ to Democrats are more likely to write liberal scholarship.  It is unlikely that the causality runs in the reverse direction such that one's flavor of scholarship shapes who one gives $ to.  The Law is a distinctive research field that so many papers do not use quantitative methods. By not locking one's self into the formal hypothesis testing framework (featuring data collection, data cleaning and the possibility of ex-post replication and robustness tests), the scholar has more freedom to expound on her personal world views.

The bigger point of this new research is the causal role in how personal ideology infuses through our life.   As usual, this raises the issue of where ideology comes from. Social scientists have had much more success studying the consequences of ideology than in studying its causes. Parsing out how much of your world view is due to your parents, friends, society, the time when you lived (i.e Woodstock and Vietnam for boomers), is a tough question.

As I have said many times, my recent focus has been the causes and consequences of environmental ideology.

Here are some of my recent consequences of environmental ideology papers;

  1. Matthew J. Holian & Matthew E. Kahn, 2014. "Household Demand for Low Carbon Public Policies: Evidence from California," NBER Working Papers 19965, National Bureau of Economic Research, Inc.
  1. Costa, Dora L. & Kahn, Matthew E., 2013. "Do liberal home owners consume less electricity? A test of the voluntary restraint hypothesis,"Economics Letters, Elsevier, vol. 119(2), pages 210-212.
  2. Dora L. Costa & Matthew E. Kahn, 2013. "Energy Conservation “Nudges” And Environmentalist Ideology: Evidence From A Randomized Residential Electricity Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 680-702, 06
  3. Siqi Zheng & Matthew E. Kahn, 2013. "Understanding China's Urban Pollution Dynamics," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 731-72, September.
  4. Michael I. Cragg & Yuyu Zhou & Kevin Gurney & Matthew E. Kahn, 2013. "Carbon Geography: The Political Economy Of Congressional Support For Legislation Intended To Mitigate Greenhouse Gas Production," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1640-1650, 04
  5. Siqi Zheng & Matthew E. Kahn, 2013. "Does Government Investment in Local Public Goods Spur Gentrification? Evidence from Beijing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(1), pages 1-28, 03.

  6. Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.

    • Inc.
  7. Zheng, Siqi & Wu, Jing & Kahn, Matthew E. & Deng, Yongheng, 2012. "The nascent market for “green” real estate in Beijing," European Economic Review, Elsevier, vol. 56(5), pages 974-984.

  8. Kahn, Matthew E., 2011. "Do liberal cities limit new housing development? Evidence from California," Journal of Urban Economics, Elsevier, vol. 69(2), pages 223-228, March.
  9. Matthew E. Kahn & Matthew J. Kotchen, 2011. "Business Cycle Effects On Concern About Climate Change: The Chilling Effect Of Recession,"Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 2(03), pages 257-273.
    • Inc.
  10. Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.

  11. Kahn, Matthew E. & Vaughn, Ryan & Zasloff, Jonathan, 2010. "The housing market effects of discrete land use regulations: Evidence from the California coastal boundary zone," Journal of Housing Economics, Elsevier, vol. 19(4), pages 269-279, December.

  12. Kahn Matthew E & Vaughn Ryan K., 2009. "Green Market Geography: The Spatial Clustering of Hybrid Vehicles and LEED Registered Buildings," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(2), pages 1-24, March.
  13. Kahn, Matthew E., 2009. "Regional growth and exposure to nearby coal fired power plant emissions," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 15-22, January.

  14. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.

Tuesday, August 12, 2014

Human Ingenuity and Farmer Adaptation to Climate Change

Somewhere Julian Simon is smiling.  Even NPR is reporting how proactive farmers are making investments to reduce the output risk they face from climate change.   A direct quote:

"He (Gene Snetselaar) says farmers are buying new equipment to cope with the weather changes, including adding planters so they can get crops in faster during a wet spring, and new grain wagons with tracks like a military tank, instead of wheels."

Human capital is proving to be a useful input in devising new solutions for farmers. Here is another NPR Quote:

"In a test field east of Des Moines, Iowa, Watkins and Iowa State University agronomist Matt Liebman are looking for a way to help farmers adapt to soil erosion caused by torrential rain events that are becoming more common.

Liebman has helped develop a new technique for curbing erosion by planting strips of native prairie plants at strategic locations within cornfields. The deep-rooted, resilient prairie plants can help hold the soil in place as climate change produces more violent storms with heavy rains.

"We slow down the water, and allow more of it to seep into the ground, rather than run off," Liebman says. "We want to retain the nutrients that might be washed out into the stream and keep them on the crop fields.""

Julian Simon repeatedly reminded the "doom and gloomers" of the power of human ingenuity in the face of an anticipated challenge.  Climate change will offer the ultimate test of Simon's optimism.   Are we nimble problem solvers or are we ignorant victims who are blissfully unaware of what we have collectively unleashed?   I'm with Simon.

Now the $64,000 dollar question is how much of climate change's impact will be offset by human ingenuity? The reason this is such a hard question to answer is that we would need a good climate model of what climate change will do to us both individually and collectively and we would need an economic model of how successful will endogenous technological innovation will be.  What will be the price and quality of a highly energy efficient air conditioner in the year 2050?   While I don't know the answer to this question, I believe in a law of large numbers that if enough entrepreneurs recognize the potential profits they could earn devising such an adaptation friendly product then at least one of them will succeed and we will all benefit.  While Zuckerberg and Bezos focused on the Internet as their pet focus, future entrepreneurs will focus on climate change adaptation. Perhaps Elon Musk's many children have inherited their dad's good nose for hard problems that offer big economic and social returns.  

Sunday, August 10, 2014

Is a Hard Life Inherited? An Economist's Perspective

Nicholas Kristof has written a very good piece in the NY Times.  He sketches the life cycle of his friend Rick Goff who hasn't lived up to his full potential and he warns Ivy League graduates to be less smug and tells them that they were born on 3rd base and don't "deserve" the full credit for their lifetime of success.

On some level this is the usual crowd pleasing stuff that the NY Times writes.  It is read by a group of liberal intellectuals worried that the world is going to hell.   After documenting genuine serious issues, Mr. Kristof wimps out in offering his solutions to the challenges. To quote him:

"This crisis in working-class America doesn’t get the attention it deserves, perhaps because most of us in the chattering class aren’t a part of it. There are steps that could help, including a higher minimum wage, early childhood programs, and a focus on education as an escalator to opportunity. But the essential starting point is empathy."

Let me make a counter-offer;   Suppose that the next President of the United States commits to;

1. Universal pre-K provided by the private sector
2. a carbon tax of $30 a ton for CO2
3.  abolishing the minimum wage
4. Forcing every state in the nation to be a right to work state
5.  Using the revenue collected from #2 to reduce the marginal tax rate by 10 percentage points

This set of policies together would set our domestic economy on the right course for long run growth.

Note that this bundle of policies includes items that anger the left and the right.  Standard coastal liberals will be horrified by #3,#4 and #5.  Republicans will be offended by #2.   Note that this proposal is self financing and would be budget neutral.

More employers would take a chance on hiring workers because they would know that they could fire workers.  U.S manufacturing would become more competitive due to factor #2 and #3 and some manufacturing jobs would return to the U.S.

Both the right and the left are stubborn about experimenting with the status quo policies. If the world is "going to hell", why isn't each party willing to experiment?

Note Kristof's pessimism that new generations of kids never stood a chance.  If he believes his own thesis, what policies is he willing to support to change this?   The crowd pleasing "formula" is to tax the rich to pay for new publicly provided roads, airports and pre-K.  That's okay but I doubt that this alone will make a dent in the problem.  The standard NY Times solution smells of using the pain that the declining lower middle class are feeling to increase the size of government and that borders on "human shields" rather than being a sustainable solution to the challenge that we face.  

Friday, August 08, 2014

Does Inequality Lower Economic Growth?

Both Paul Krugman and John Cochrane have recently demonstrated that they continue to be among our top .1% economists.   As they raise their game, this increases inequality among academic economists (as measured by idea generation) and it has slowed down my own economic growth because I'm not working on my five revise and resubmits at journals and instead I'm going to blog about their thoughts.

I do not know Paul Krugman but one of his life goals seems to be to nudge Greg Mankiw.   Greg has written a great textbook.  For reasons I can't explain, I keep a copy of his 5th edition of his Principles book in my living room.  On page 258 of this text,  Greg states that there is an efficiency/equity tradeoff.  Will he need to rewrite this section?  Have we been teaching Econ 101 students the wrong stuff for 9000 years?

In his NY Times piece today,  Dr. Krugman takes a step towards Jim Heckman's human capability work and suggests (without explicitly saying this) that poor kids do not choose their parents and that many of these kids have been under-invested in so that they do not achieve their full potential.  In a counter-factual world where we tax the rich and invest in the Heckman Equation agenda, these kids will accumulate more human capital and in aggregate we will be a richer nation.

John Cochrane is an excellent Chicago Economist and wants to "see a model" that links rising inequality to lower economic growth.   Here is  a great quote from his blog in which he is not directly commenting on Krugman but instead is offering his thoughts on a related strange report by some business economists;

"OK, so the idea in this report is that somehow, truck drivers in Las Vegas found out that hedge fund managers in Greenwich CT were upgrading from Gulfstreams to 737s. This made them feel bad, so they went out and took out huge mortgages that they had no chance of repaying. When house prices went up, they refinanced and bought TVs giving them even less chance of paying off their mortgages. Now they're broke and not spending a lot. And "spending," not productivity is the key to long-run growth.

At best this is a theory of boom and slow recovery. But growth and inequality is about the long run. Why were we growing too slowly in the 2000s?"

He writes well!    Note that the key point that Dr. Cochrane is pursuing is to use the tools of micro economics to analyze the broad Krugman conjecture that inequality is slowing down US economic growth.    What is it about inequality that chokes off growth?   In Dr. Krugman's piece he appears to have a Robert Frank rat race vision that elite institutions such as his Princeton have a finite number of slots and that as the rich get richer they purchase the key inputs that give each of these fat cat's kids a probability of 1 of getting admitted to the Ivy League.  With these fat cat's kids accepted, there are no slots for the Horatio Algers and they suffer defeat. This waste of talent adds up to our becoming a poorer nation because Horatio could have been the next Krugman or Zuckerberg if only he had gotten into the Big Leagues.

Note the strong belief implicit in Krugman's setup  that the supply curve of elite slots is highly inelastic.  We only have finite slots of Ivy League education. We only have a finite set of slots to live in San Francisco.   A key micro economic question is how can we reconfigure capitalism to make the supply curve for such goods more elastic!  Less regulation and more innovation would achieve this.  Dr. Krugman seems to be taking the "zero sum game" notion as a law of physics.    I hope that he is wrong here but he may not be.

Consider the rise of the MOOCs.  If there is some very talented poor person in India (think of the Mathematician Ramanujan), such a guy may not get into Princeton but he can now assemble a pretty close substitute using the Internet for free.  This is an empirical question.   Ignoring the beer, the football games and social life,  how close do MOOCs approximate the intellectual experience for a motivated person?

While I don't fully believe this example, my point is that MOOCS create a more elastic supply curve (for those of you who don't know economics this means that more slots at elite schools now exist at the same price).    This is an example of how induced innovation solves a social challenge.

If Paul Krugman is going to embrace the Heckman agenda, he must explain why the public sector should be trusted with the extra tax revenue collected from the rich to fund the universal pre-K that Heckman (and I) support.  Why won't public sector unions simply grab this $ in terms of higher than market wages?

Is Dr. Krugman willing to simultaneously endorse massive increases in pre-K investment and a Milton Friedman style private voucher program?    Together these policies might achieve his goal of creating a fairer and richer society.

Tuesday, August 05, 2014

Some Foreshadowing Regarding How We Will Adapt to "6 Hideous Realities We Must Face"

Larry Schwartz offers a teachable moment.   In his Salon piece, he lists six challenges that climate change will pose for us and he is pessimistic about our ability to continue to thrive in the face of these challenges.  Here is list of his big six;

1.  Summer heat
2. drought
3. coastal flooding
4. specie extinction
5. storm intensity
6.  famine

 1.  Go to Singapore and you will see a rich, well functioning city that demonstrates that people can be productive and happy in the heat and humidity once air conditioning is provided.  This city really comes to life at night after the sun has set.  In a safe city,  people go out at night and have  great time.  For those who find it too hot, there will be Northern latitudes to move to.  Perhaps Canada's population will grow to 2 billion by the year 2050?    Canada's land area is 3.9 million square miles. If 2 billion people live there, this would yield an average population density of 512 people per square mile.   Given that Hong Kong's density is 65,000 people per square mile, this suggests that space won't be a limiting factor.

2. Drought?  California is in drought right now and the way to solve this problem is to raise water prices. We are incredibly inefficient in our use of water and with the rise of smart meters and Big Data we have no excuse to not introduce 21st century technology and real time pricing.   Gary Becker argued that as the inefficiency of public policies increase that this raises the likelihood of efficient reform.  Climate change and the drought challenge offers a nice test of this hypothesis.  

3. Coastal flooding --- if we anticipate this problem, are the people who live in these areas truly victims?   As I argue in Climatopolis if insurance companies can raise premiums in increasingly risky areas then this will direct economic activity to higher ground.  Place based policies that implicitly subsidize coastal living are the real problem that creates "humans shields" and places coastal people at risk. Coastal people want to have their cake and eat it to. They want to live a beautiful place at increased risk of disaster and if such disaster occurs they want to use "other people's money" to rebuild for them.  If we remove this spatial moral hazard effect then at risk coastal areas will depopulate.  No buildings live forever.  Rational investors will not invest in upkeep if they anticipate that these structures will be underwater in the near future. Read my paper with Devin Bunten where we talk about the future of Miami in the face of climate change.

4. Specie extinction --- ecologists are hard at work on this topic.  Why is Dr. Schwartz so pessimistic about creatures' ability to adapt?  He should read some of the work of Dov Sax.  The difference between people and creatures is our brain capacity and our ability to form expectations of the future and our access to markets.  These dimensions give us a huge advantage in adapting to the new threat of climate change.

5. Storm Intensity --- See #3 above.  In addition, if we anticipate more intense storms in the future then we build a real estate capital stock that can take a punch.  As I showed in my 2005 RESTAT paper, richer nations suffer fewer death from natural disasters.

6.  Famine?   Mr. Schwartz will continue to have plenty to eat because of world free markets in agriculture.   Trade occurs when there are mutual gains to buyers and sellers from trading with each other.  In a world of free trade, where food can be stored and futures contracts can be purchased, there will be many ways to hedge risk of bad crop output. GMO crops will be used.   Farming's spatial location will be diversified so that we grow wheat in many different locations.   He ignores that the world's population will soon stabilize because we are moving to cities and women have greater labor market opportunities in cities and thus work more rather than staying home with multiple kids (think of Hilary Clinton and Chelsea).

Salon magazine should not be confused with Slate.  I prefer the quality of the articles in Slate.

Monday, August 04, 2014

A Western Coastal Liberal State Blockade Limiting Exports of Coal to China?

This article suggests that a coalition of liberal Vancouver, Washington, Oregon and California may all limit the ability of Montana and Wyoming of shipping their coal to China.  In Econ 101, we teach that boycotts don't work because somebody will have an incentive to purchase the good at a low price and violate the boycott.  But, this Econ 101 logic abstracts away from geography and ideology. Permit me to explain.  Look at a map and you will see that the cheapest way to get coal from Wyoming to China is through some liberal states. If these states refuse to build a port to allow such shipments then the transportation costs of a mutually beneficial trade between Wyoming and China go way up.  Will the coal be shipped through Mexico?  Liberals clustering on coasts has been a favorite research topic of mine but now it appears to have implications for trade in natural resources and endogenous impediments to such trade.  Why would liberal areas engage in such a boycott? To reduce the threat of climate change, we need to burn less coal and keep it in the ground.  By erecting barriers to world trade in coal (i.e not building ports for shipping coal between nations), this may increase the likelihood that the coal stays in the ground.  

Sunday, August 03, 2014

How Will Climate Change Impact Transportation Logistics?

The global economy relies on shipping things from origin to destination.  Think of Amazon's core business.  Amazon doesn't produce anything.  Instead, it takes orders from urban households and ships them stuff that it buys from wholesalers and sells it to you for a retail price.  Supermarkets play the same role.  Each day commuters ship themselves to their office and then back home.  This piece suggests that climate change could disrupt such shipments.   If this claim is true, then the annual cost of climate change could be quite high. Here is a quote:

"In other words, climate change could mean “sun kinks” could warp train tracks in the heat, airplanes will be more expensive to fly, highway surfaces could soften in heat waves, roadways and bridges could be washed away in rising seas and storm surges, and storms in the open ocean could increase the cost and risks associated with shipping.

Those are the findings of a new report, “Climate Change: Implications for Transport,” released Monday by Cambridge University and sustainable business advocacy group Business for Social Responsibility (BSR) outlining what the conclusions of the Intergovernmental Panel on Climate Change’s Fifth Assessment Report mean foThese scenarios could certainly play out but the endogenous innovation literature teaches us that when we anticipate a problem that there is profit on the table for that firm and engineers who design a solution.  Note my optimism about the power of human ingenuity.  Note the fatalism and pessimism of the authors of this piece.

I do not mean to say that endogenous innovation is a "free lunch" but the key issue here is what is the marginal cost to society of figuring out new solutions to the new issues we will face caused by climate change.  The pessimists phrase the issue as one of "doom" rather than one of adjustment costs and learning and experimentation.

If train tracks warp in the heat then cooling substances will be needed to reduce this scenario.  Trucks and Waterways may be used instead of train tracks to move goods.  Having "redundant" backup plans is a form of insurance against such scenarios.

If highway surfaces soften in heat waves then new "green paving surface" can be used to cool the pavement.

If there are storm surges on the open ocean then we need bigger shipping vessels that can handle such big waves.

For each of the challenges that the article names, yes there will be losers but there will also be winners among those who can design new solutions.   How can we have put a man on the moon, decoded the double helix, created Facebook and Google but we aren't able to solve the engineering challenges posed above?  I reject this pessimism about our ability to cope with an anticipated threat.

Friday, August 01, 2014

Intellectual Growth

From 1993 to 2000, I served as a junior faculty member at Columbia University.   Today, I received an email from Columbia's Academic Commons informing me that there have been 6580 downloads of papers I posted there in the 1990s.    Re-reading some of the papers makes me cringe.  On the one hand, I see many good ideas that subsequently generated some citations and contributed to several active literatures.  On the other hand, I see raw papers that were not well written.   The referee process has a lot of value added.

Of this group of papers, the biggest hits based on Google Scholar are;

1.   Kahn and Matsusaka 1997       187  cites  ,   This paper collected county level voting data on more than a dozen California environmental voting initiatives to study the correlates of "pro-green" voting.  Robust evidence of the role that education plays in supporting green voting and affected industry counties voting against.

2.  Kahn 1999 on Rust Belt Decline,     53  cites  ,   First paper to measure the reduction in pollution in cities such as Pittsburgh brought about as an unintended consequence of Rust Belt industrial decline.  So, this is the reverse of the rise of "Satanic Cities".  Pollution drops as dirty industry collapses.

3. Cragg and Kahn 1997 on Climate Demand  ,    98 cites    (conditional logit study of state to state migration to measure the willingness to give up consumption = (income -rent) for better climate amenities and how this varies by age and education of the migrant.

4.  Kahn 1997 on the Clean Air Act  ,    90 cites  ,   first paper in the literature examining the unintended consequences of the differential enforcement of the Clean Air Act on the spatial agglomeration of manufacturing jobs.  The first draft was written in 1994 before other papers that appeared in the AER and the JPE on the same subject.

5.  Kahn 1995 on Revealed Preference  ,    75 cites    (those cities offering high wages and low rents must have low quality of life),  no arbitrage argument about bounding the total quality of life differentials between cities based on the private consumption one sacrifices by locating there.

The funny thing is that most scholars do their big work early.  As you can see (especially if you sit down and read the early drafts of my Columbia Papers),  I did not follow that path.

Thursday, July 31, 2014

Kayaking in the Pacific Ocean

While I'm well aware that I'm an "urban environmentalist", yesterday I engaged in some Robert Redford style environmentalism.  First, I took a kayak out for an hour and paddled around the best I could off of Carpinteria Beach.   Now I have a sunburn and blisters but at the time it was great.    Last night I attended a showing of the documentary DamNation. It is an outstanding film.   Before attending, I worried that it would be preachy and ignore the benefits that dams and hydro power have offered the nation.  Instead, this is a very witty film that even a two handed economist can appreciate.  The film makes a credible case that we have built too many dams in the U.S with our collection of over 65,000 dams and that diminishing returns have kicked in.  While there is a little bit too much focus on wild Salmon and the crazy guys who love them, the film opened my imagination to the benefits of allowing more rivers to "run wild".