Wednesday, November 30, 2005

How Do You Catch Terrorists?

Suppose that terrorists choose targets by maximizing their expected utility. Suppose these guys have rational expectations. In choosing where to strike, they must tradeoff the probabiity of a successful attack, the amount of damage they will cause if successful, their disutility from being killed or captured in the attack, and the financial cost of launching their mission.

If Homeland Security had a good model of how terrorists make choices, would we suffer fewer terrorist attacks? Or would the terrorists anticipate that their moves were predictable and switch over to randomization in choosing their strategies?

The article below suggests that the U.S counter-terrorism does not want to be predictable.

It would interest me whether Homeland Security is "over-investing" in protecting airports over other vulnerable targets. Its intuitive that another airplane hijacking would be unlikely to kill 3,000 people again. If such a plane were taken, this information would spread and people would evacuate. I can't even think of a major other target besides for the Sears Tower in Chicago. If the maximum loss of life from another plane takeover is bounded by 3,000, and if the potential loss of life from other types of attacks is much higher; what does this suggest?

In this horrible setting, I wonder how social scientists can make progress here in investigating how terrorists play "offense" and how Homeland Security plays "defense". Could a good game theorist be useful here advising Homeland Security? Are they doing such advising?



December 1, 2005
Significant Changes in Air Passenger Screening Lie Ahead
By ERIC LIPTON

WASHINGTON, Nov. 30 - The Transportation Security Administration is making some of the most significant changes in the screening of airline passengers since procedures were revamped after the Sept. 11 terrorist attacks.

The changes include a new type of random search, a revision of the pat-down process and the end of a ban on small scissors and certain other sharp tools in carry-on luggage.

The goal of the changes, which will be announced Friday and go into effect on Dec. 20, is to try to disrupt the now-familiar routine associated with security screening, a routine that federal officials fear would-be terrorists may have studied to figure out ways to circumvent it.

"We don't want the predictability of the system to be used against us," said Yolanda L. Clark, a security agency spokeswoman. "So we are introducing an element of randomness that makes it more difficult to manipulate."

Ms. Clark and other officials from the Department of Homeland Security declined to discuss the changes, saying they would be unveiled in a speech by Kip Hawley, the assistant secretary for homeland security who oversees the security agency. A five-page summary of the new policies was obtained Wednesday by The New York Times.

The summary document says the elimination of the ban on metal scissors with a blade of four inches or less and tools of seven inches or less - including screwdrivers, wrenches and pliers - is intended to give airport screeners more time to do new types of random searches.

Passengers are now typically subject to a more intensive, so-called secondary search only if their names match a listing of suspected terrorists or because of anomalies like a last-minute ticket purchase or a one-way trip with no baggage.

The new strategy, which has been tested in Pittsburgh, Indianapolis and Orange County, Calif., will mean that a certain number of passengers, even if they are not identified by these computerized checks, will be pulled aside and subject to an added search lasting about two minutes. Officials said passengers would be selected randomly, without regard to ethnicity or nationality.

What happens next will vary. One day at a certain airport, carry-on bags might be physically searched. On the same day at a different airport, those subject to the random search might have their shoes screened for explosives or be checked with a hand-held metal detector. "By design, a traveler will not experience the same search every time he or she flies," the summary said. "The searches will add an element of unpredictability to the screening process that will be easy for passengers to navigate but difficult for terrorists to manipulate."

The new policy will also change the way pat-down searches are done to check for explosive devices. Screeners will now search the upper and lower torso, the entire arm and legs from the mid-thigh down to the ankle and the back and abdomen, significantly expanding the area checked.

Currently, only the upper torso is checked. Under the revised policy, screeners will still have the option of skipping pat-downs in certain areas "if it is clear there is no threat," like when a person is wearing tight clothing making it obvious that there is nothing hidden. But the default position will be to do the more comprehensive search, in part because of fear that a passenger could be carrying plastic explosives that might not set off a handheld metal detector.

These new procedures will go into effect at the same time as the security agency continues to expand other measures, like using more bomb sniffing dog teams and installing high-tech devices that blow a short burst of air on passengers to detect traces of explosives. Forty-three of these devices, known as explosive trace portals, have been installed at 22 of the nation's largest airports.

This new category of random checks and the more comprehensive pat-downs can be done without causing significant delays, officials said, because of the enormous amount of time that will be saved because screeners no longer have to confiscate small scissors or tools, a policy change first reported in The Washington Post. These kinds of sharp instruments are now found in about one in four carry-on bags.

All knives will still be prohibited, as well as drills, hammers, saws and crowbars, according to the summary document.

The ban on scissors and other small tools, first imposed after the 2001 hijackers used box cutters to seize four planes, can be lifted, these officials said, because airplane cockpit doors are now more secure, thousands of pilots are now authorized to carry handguns and more federal air marshals now fly on planes.

The changes drew a mixed reaction Wednesday, with some security experts and members of Congress praising them, while others said they were counterproductive.

Representative John L. Mica, a Florida Republican who is chairman of the House subcommittee that oversees aviation security, said the changes were long overdue.

"The threat today is not someone taking over an aircraft with scissors or a knife," Mr. Mica said.

David Castelveter, a spokesman for the Air Transport Association, said the airline industry also supported the changes.

But Jon Adler, executive vice president of the Federal Law Enforcement Officers Association, which represents federal air marshals, said that allowing scissors and small tools on planes was a mistake.

"These items in the wrong hands can become dangerous instruments that can ultimately threaten both air marshals' and travelers' safety," Mr. Adler said.

Tuesday, November 29, 2005

Did Europe Over-React to the Chernobyl Disaster? Reducing Greenhouse Gases by Increasing Nucler Power Plant Production

What have been the long run consequences of the 3 Mile Island and Chernobyl events? Did these events make it much harder for the U.S and Europe to reduce greenhouse gas production? If these events had not taken place, how much lower would U.S and Europe's greenhouse gas production be today as "clean" nuclear power would have had a larger market share? We will never know how much nuclear energy research was retarded by the reduction in investment in these technologies after these salient shocks.

As I've blogged about in the past, the New York Times has discussed at length that the long run damage from Chernobyl was not nearly as bad as first thought.

Environmentalists face an interesting challenge. This group must prioritize. What are the greatest challenges we face? If it is climate change, then nuclear does become a more attractive choice. But, environmentalists are right to stress that nuclear is not a "free lunch". To quote from the NY Times article below,

"Opponents of nuclear power argue that it is costly, potentially dangerous, vulnerable to terrorist attack and dogged by the difficulties of nuclear waste disposal."

It sounds like an economist is needed here to measure the costs and benefits of each alternative! A critic would argue that it is very difficult to quantify some of the key unknowns (such as: If we build new nuclear plants,what is the probability that a terrorist group could achieve a big bombing and how much damage would this even cause).

So, how do we make choices under uncertainty? Which is the lesser of these two evils? As I ask my students each year, "Is Nuclear a green technology?"


November 29, 2005
Blair to Decide on Nuclear Plants by Next Summer
By ALAN COWELL

LONDON, Nov. 29 - Challenged by environmentalist protesters, Prime Minister Tony Blair announced today that Britain would decide next summer whether to reverse its current reluctance to build new nuclear power stations.

Mr. Blair's announcement reflected a nascent European debate that could presage a dramatic shift in energy policies. Finland in particular has already broken ranks with the opposition to nuclear power that has seized much of the Continent since the Chernobyl disaster in 1986. And while France derives around 80 per cent of its electricity from nuclear power, Germany, Britain and others may be poised re-evaluate their previous pledges to phase out nuclear power by the early 2020's.

As Mr. Blair spoke at an employers' meeting here, two men wearing fluorescent yellow jackets over dark business suits clambered into the steel rafters of the auditorium to launch a protest by the Greenpeace environmental group.

They carried banners saying, "Nuclear: wrong answer" and scattered similar messages on tickertape onto the crowd below. Greenpeace said the protest was intended to launch a "fightback against a new nuclear era" by preventing Mr. Blair from speaking.

The protesters refused to abandon their perches in the roof beams, insisting that they wished to make a 10-minute speech to participants in the annual meeting of the Confederation of British Industry, a leading employers' group.

"I'm not prepared to accept that," said Digby Jones, the head of the Confederation. "I don't give in to ultimatums."

Mr. Blair, regarded as an undeclared supporter of nuclear power, was forced to address business leaders in a cramped side room, surrounded by reporters and photographers. "This is going to be a surreal occasion," Mr. Blair said. "I'm going to give this speech if it's the last thing I do."

"Like most tough issues, what we actually need is an open and democratic debate, not one conducted by protests and demonstrations to stop people having the freedom to express their views," he said.

The two protesters, identified by Greenpeace as Huw Williams and Nyls Verhauelt, had apparently infiltrated the building with unauthorized identification passes, the organizers said.

Their action recalled other demonstrations by pro-hunting and fathers' rights protesters who breached security at the House of Commons and Buckingham Palace.

The Confederation of British Industry acknowledged that security around the prime minister had been compromised, only months after the July terrorist bombings. Another speaker at the annual gathering was Sir Ian Blair, the head of London's Metropolitan Police.

Prime Minister Blair's speech had been widely expected as the trigger for a new energy debate only two years after the British authorities resolved to increase the use of renewable sources like wind power to 10 per cent of the country's needs by 2010 and 20 per cent by 2020. At the same time, Britain's coal and nuclear power stations would be gradually phased out by 2023.

At the time, though, the government left open the possibility of building new nuclear power stations - a move that has divided environmental groups and is opposed by some members of Mr. Blair's Labor Party.

"The issue back on the agenda with a vengeance is energy policy," Mr. Blair said. "Round the world you can see feverish rethinking. Energy prices have risen. Energy supply is under threat. Climate change is producing a sense of urgency."

Britain's looming energy crisis is depicted here as potentially acute since the country, which long relied on its North Sea oil and gas reserves, has now become a net importer of both, provoking concerns that Britain will consume more energy than it can produce or afford to import. Government officials say they are also worried that Britain could finish up reliant on politically unstable countries for its supplies of natural gas.

Mr. Blair said Britain's latest policy review "will include specifically the issues of whether we facilitate the development of a new generation of nuclear power stations."

Opponents of nuclear power argue that it is costly, potentially dangerous, vulnerable to terrorist attack and dogged by the difficulties of nuclear waste disposal. Advocates maintain that nuclear power plants produce clean and cheap fuel, reducing emissions of so-called greenhouse gases.

In the United States, no new nuclear plants have been ordered since the Three Mile Island accident in Pennsylvania in 1979. Nuclear power contributes around one-fifth of the country's electricity needs.

But in Europe, the nuclear debate - propelled by concerns over future shortages of oil and gas, pollution and high costs - has begun to accelerate.

In Finland, four nuclear reactors provide 28 per cent of the country's electricity. In 2002, the government in Helsinki resolved to build a fifth reactor - the first ordered in Europe for over 10 years - that will bring that figure to 34 per cent.

Much of Europe's opposition to nuclear power dates to the Chernobyl disaster, which provoked such protest that no new reactors have been built since then. Indeed, Italy and some other countries call themselves nuclear-free zones, while Austria and Denmark have also rejected nuclear power.

In Germany, Chancellor Angela Merkel's Christian Democrats have traditionally been favorable to extending the deadline for closing nuclear plants supplying almost 28 per cent of the country's power. But the Social Democrat coalition partners, who are in charge of the environment ministry, insist that the plants will close on schedule.

Climate Change Mitigation: Blue States Act and Red States Free Ride

As discussed below, 9 northeastern states are getting ready to sign a pact to cap and trade electric utility greenhouse gas emissions. Under what conditions would this pact accelerate the timing and increase the probability that the nation's electric utilities adopts a credible cap and trade CO2 policy?

1. Is this a demonstration project to show that the extra costs of meeting this new regulation (measured in higher electricity prices and lower electric utility profits) are not that high?

2. Will this accelerate the development and diffusion of new "green" technologies?

3. In aggregate,how much will this regional trading reduce national greenhouse gas production by?

4. What are the unintended consequences of having only one region engage in this policy? Could there be border effects where new electric utilities will locate on the border of Red states outside of the 9 state pact and use "shipping" technology to send the electricity back to the blue states? This could create Domestic Pollution Havens. Could this pact make the Northeast even less competitive in attracting jobs that are energy intensive? (this hinges on the expected future relative price dynamics of electricity in these blue states relative to red states).



November 29, 2005
Fears of Energy Price Increase Delay 9-State Pollution Pact
By ANTHONY DePALMA

With delegates from all over the world meeting in Montreal on an international treaty to cut greenhouse gases, negotiations for a separate pact among nine Northeastern states have been prolonged by worries that controls on emissions could drive up the price of energy.

The nine states had planned to announce a final agreement on the plan this week, coinciding with the meeting in Montreal.

But Gov. Mitt Romney of Massachusetts, one of the nine states, has pushed the discussions past that deadline. He said he was concerned that the plan to cap carbon dioxide emissions from power plants in the region, and then reduce them by 10 percent, would raise the cost of electricity too much and hurt businesses and customers.

Governor Romney said that he supported some of the plan's provisions, and that he was committed to reducing the state's reliance on foreign oil. But he insisted that the plan have price controls on what power plant operators would pay to exceed their pollution allowances under the agreement, called the Regional Greenhouse Gas Initiative, to check rapidly rising energy costs.

"We're seeing huge rate increases now in the cost of energy," Governor Romney said in a telephone interview yesterday. "To add to that burden for the purposes of symbolism is something our business community is not about to undertake."

This would be the first such cooperative action by the states in the nation, but its impact on climate change would be limited. It would, however, represent a significant challenge to the Bush administration, which does not support the international treaty to control greenhouse gases, and it would increase pressure for a national emissions reduction program.

Rhode Island is prepared to follow the lead of Massachusetts in demanding price caps, said Jeff Neal, a spokesman for Gov. Donald L. Carcieri.

New York, which initiated the regional plan, and New Jersey oppose setting caps on prices for pollution allowances. They argue that caps are not needed to protect customers and can dampen incentives to develop cleaner alternatives. The other states in the pact - Connecticut, Delaware, New Hampshire, Maine and Vermont - have indicated that they are willing to go ahead without a price cap.

The delegates meeting in Montreal this week are assessing the progress of attempts to reduce greenhouse gases since the treaty took effect in February, and are considering further reductions.

"This would be a terrible moment for this agreement to fall apart," said Seth Kaplan, senior lawyer for the Conservation Law Foundation of Boston. He has been involved in the regional negotiations since Gov. George E. Pataki of New York began the initiative more than two and a half years ago.

Under the regional pact, a market-driven system would be created to control emissions of carbon dioxide, the main greenhouse gas, from more than 600 electric generators in the nine states.

Each state would have its own emissions cap, and power plant operators would each be permitted to emit carbon dioxide up to a certain level. The operators would be encouraged to use the cleanest plants in order to stay under the limits, and would be free to trade excess allowances. About 25 percent of the pollution allowances would be sold or auctioned to plant operators who exceed the caps.

The states have just completed a new study that found that if money raised by the sale of pollution allowances were used to pay for aggressive energy efficiency programs, the average annual household bill would actually fall by more than $100.

Governor Romney said he had not seen the new study.

Besides a cap on the price companies would have to pay for extra pollution allowances, the governor said he had other objections to the plan. He said Massachusetts' allotment of the regional emissions total was too small, and that 25 percent was too high a percentage of pollution allowances to be sold.

Sunday, November 27, 2005

Are Republican Academic Economists Interested in Going to Washington a Scarce Commodity?

Perhaps Paul Krugman's popular writings have had a strong treatment effect causing Republican economists to hide or change stripes. Perhaps economists are jockeying to join President Clinton's "Economic Dream Team" in early 2009. Today the New York Times points out an interesting fact. The Bush Administration is finding that the "academic bench" is short. It is having trouble recruiting excellent senior economists to join its team.

Why?

As a graduate of the University of Chicago's PHD program in economics, I had the opportunity to meet and work with some brilliant conservative thinkers. Unlike many of their cambridge counterparts, it never crossed their minds to join any Administration. I would guess that the typical "Republican" academic economist is a libertarian who may not agree with all of President George W. Bush's social policies or current fiscal policies. This sharply reduces the pool of possible candidates for the President to select from.

From reading the New York Times, I have the sense that the CEA is not currently that important a place in the current administration. This perception, even if it is not true, would also tend to dissuade people from signing up.

Stanford University has been a major pipeline sending strong economists to Republican Administrations. In recent years, the Stanford faculty has turned to more "pure theory" topics and its faculty has aged. I would guess that both of these facts also contribute to the "scarcity problem".

Finally, academic economists are well paid and I would guess that many leading Republican academics consult. These self-interested researchers would face a tradeoff. If they "serve their country now", will this be intellectually satisfying and could this raise one's ex-post consulting fee? I would like to know the answer to this question but I have no idea.


November 27, 2005
Economic View
Help Wanted: Academic Economists, Pro-Bush
By DANIEL ALTMAN

IT'S no secret that hurricanes and wars have swamped the economic agenda that George W. Bush planned for his second term. In the commotion, however, one fact has gone largely unnoticed: much of Washington's expert economic team has disappeared.

The chairmanship of the Council of Economic Advisers will soon be vacant, and two spots on the Federal Reserve Board that were recently filled by academic economists already are. There is no assistant secretary of the Treasury for tax policy, and the director's chair at the Congressional Budget Office, currently occupied by Douglas J. Holtz-Eakin, will soon be empty, too.

The White House and Congress need as many as five academic economists of high caliber, and it's not obvious where they will come from. The Republican Party may be facing something of a shallow bench.

"Bush's reputation in at least the academic community is about as low as you can imagine," said William A. Niskanen, who was a member of the council during President Ronald Reagan's first term and is now chairman of the Cato Institute, a libertarian research group. "A lot of people would not be willing to give up a good tenured position for a position in the White House."

Back in 2003, the choice of N. Gregory Mankiw, a Harvard professor, to head the council initially provoked some wonderment from economists. He had condemned supporters of some Reagan-era tax cuts as "charlatans and cranks" in the first edition of his basic economics textbook, and he had suggested replacing part of the income tax with higher taxes on gasoline - a nonstarter in this White House. But it's possible that the administration had few other options.

"It has been true, typically speaking, that Republican administrations have found it harder to find senior, more prominent academic economists for the C.E.A. members and chairman than have Democratic administrations," said Michael L. Mussa, a senior fellow at the Institute for International Economics, a nonpartisan research group in Washington, who was a member of the council during President Reagan's second term.

Mr. Mussa explained that the problem was partly one of specializations. "In the economics profession, on the microeconomic and regulatory side, there you find a substantial number of Republicans," he said, "but macroeconomists tend to lean a bit more to the Democratic side, on average."

And politics do matter for the appointments. "If you have written publicly in strong opposition to the current administration, they will be less likely to be interested in you," said Kristin J. Forbes, a veteran of the council who is now an associate professor at the Sloan School of Management at the Massachusetts Institute of Technology. "On the Council of Economic Advisers, the priority is a very good economist who supports most of the president's economic policies."

The same is likely to be true for the positions at the Treasury, the Fed and the Congressional Budget Office. Two of the three spots being vacated by academic economists - Ben S. Bernanke and Edward M. Gramlich at the Fed, and Mr. Holtz-Eakin at the budget office - could well be filled with more of the same, Mr. Mussa said. (Mr. Bernanke is expected to become the Fed chairman; Mr. Gramlich has returned to the academic world, and Mr. Holtz-Eakin will join the Council on Foreign Relations.) Mr. Mussa added, however, that the economist at the budget office should have experience in policy and management.

That's something that many academics lack. "Generally, economists are not very slick," said Alicia H. Munnell, a professor of management sciences at Boston College who served on the Council of Economic Advisers when Bill Clinton was president and spent years working in the Federal Reserve system.

Economists may not want to be political, either, she added. The reason has to do with incentives. "Everybody wants to go back into academia and be respected, so you don't want to say anything too foolish that people are going to laugh at you afterward," Professor Munnell explained.

Professor Forbes recounted that she and her colleagues on the council had pledged never to support policies that they didn't believe in themselves. Nevertheless, the role of the council's chair can take on a decidedly political tilt. That much was clear when Professor Mankiw, the last chairman to serve for more than a few months, appeared before the Joint Economic Committee of Congress in February of last year.

At times Professor Mankiw, who has returned to Harvard, sounded more like Scott McClellan, the White House press secretary, than an economic adviser. "The president is very focused on putting people back to work, at creating jobs," he said. "The president has said that he wants to make the tax cuts permanent. He believes that is important for economic growth."

Once he even caught himself, but the result ended up the same: "The president has - we've worked with Congress in the past to extend unemployment benefits. The president will continue with Congress on that issue."

Quite a few economists might have a hard time acting as the president's mouthpiece today. Plenty of academics, even some who have supported Republicans in the past, have condemned the White House's current policies. In particular, the enormous federal deficit has elicited ire from both left and right.

"There are a number of Republicans, both the right-wingers and the moderates, who are very uncomfortable about the deficits, and particularly about the spending that we saw in the first four years," Mr. Mussa said.

Dismay about the war in Iraq could also prompt many academics to turn down the White House on principle, Mr. Niskanen said.

One hint that the labor pool is drying up may be in the ages of some recent appointees. Professor Forbes was only 33 when she joined the council in 2003. Katherine Baicker and Matthew J. Slaughter, two academics confirmed as members this month by the Senate, are 34 and 36, respectively. Before taking up their new posts, both were associate professors, as Ms. Forbes is now - not full professors, like the vast majority of their predecessors.

Mr. Niskanen suggested that this change could stem from a perceived drop in the prestige of the council. "Bush has centralized policy decision-making much more than any president in years," he said. "The Council of Economic Advisers has been somewhat bypassed."

Mr. Niskanen said that there were now fewer meetings between members of the council and members of the president's cabinet than there were during his term. The council's offices have even been moved to a building farther from the White House.

ALL of these tensions may have resulted in a sort of Catch-22. The president's inability to move forward with much of his second-term economic agenda - dealing with Social Security, the tax system, immigration and tort rules - may have dulled economists' eagerness to work with him. Yet he may need them in order to start the wheels moving.

"John Snow has talked about turning the tax commission report into legislation," Mr. Niskanen said of the Treasury secretary, "but he does not have the skills on board to do that."

Professor Forbes, who also spent time at the Treasury, said that working in Washington demanded heavy sacrifices and large commitments of time. Her colleague there, Harvey S. Rosen of Princeton, added that spouses were often unwilling to move for short-term stints.

But Professor Munnell praised the experience as "extraordinary," adding that it also had a tendency to change the outlook of academic economists: "Once you taste the real world, it's really hard to ignore it."

Saturday, November 26, 2005

An Old Foe of Green Cities Returns to NYC: Beware the Bedbug!

Urban population density offers some advantages and some disadvantages. The usual laundry list of disadvantages includes congestion and pollution. When people think of pollution, they immediately think of air and water pollution. But, The New York Times today points out a new indicator of environmental trouble in the big city; bedbugs are back in New York City.


November 27, 2005
Just Try to Sleep Tight. The Bedbugs Are Back.
By ANDREW JACOBS

They're the scourge of hobo encampments and hot-sheet motels. To impressionable children everywhere, they're a snippet of nursery rhyme, an abstract foe lurking beneath the covers that emerges when mommy shuts the door at night.

But bedbugs on Park Avenue? Ask the horrified matron who recently found her duplex teeming with the blood-sucking beasts. Or the tenants of a co-op on Riverside Drive who spent $200,000 earlier this month to purge their building of the pesky little thugs. The Helmsley Park Lane was sued two years ago by a welt-covered guest who blamed the hotel for harboring the critters. The suit was quietly settled last year.

And bedbugs, stealthy and fast-moving nocturnal creatures that were all but eradicated by DDT after World War II, have recently been found in hospital maternity wards, private schools and even a plastic surgeon's waiting room.

Bedbugs are back and spreading through New York City like a swarm of locusts on a lush field of wheat.

Infestations have been reported sporadically across the United States over the past few years. But in New York, bedbugs have gained a foothold all across the city.

"It's becoming an epidemic," said Jeffrey Eisenberg, the owner of Pest Away Exterminating, an Upper West Side business that receives about 125 bedbug calls a week, compared with just a handful five years ago. "People are being tortured, and so am I. I spend half my day talking to hysterical people about bedbugs."

Last year the city logged 377 bedbug violations, up from just 2 in 2002 and 16 in 2003. Since July, there have been 449. "Its definitely a fast-emerging problem," said Carol Abrams, spokeswoman for the city housing agency.

In the bedbug resurgence, entomologists and exterminators blame increased immigration from the developing world, the advent of cheap international travel and the recent banning of powerful pesticides. Other culprits include the recycled mattress industry and those thrifty New Yorkers who revel in the discovery of a free sofa on the sidewalk.

And that new mattress delivered from a reputable department store, which kindly hauled away your old one? It may have spent all day in a truck wedged against an old mattress collected from a customer with a bedbug problem.

Once introduced into a home, bedbugs can crawl into adjoining apartments or hitch a ride to another part of town in the cuff of a pant leg.

"Anyone who stays in a hotel, rich or poor, can bring them home in a suitcase," said Richard Kourbage, whose company, Kingsway Exterminating in Brooklyn, does about a dozen bedbug jobs a day. "Some of the best hotels in New York have them."

Unlike mice and roaches, which are abetted by filthy surroundings, bedbugs do just fine in a well-scrubbed home, although bedroom clutter gives them more places to hide and breed. When engorged with blood, they grow slightly plumper than the O on this page, although the nymphs, which appear almost translucent before their first meal, are not much bigger than the period at the end of this sentence.

And contrary to popular perceptions, they don't dwell just in mattresses and box springs: any wall or floor crack the thickness of a playing card can accommodate a bedbug. Although some people try to treat the problem themselves, most people hire exterminators, at a cost of $300 per room.

The modern bedbug is immune to hardware store-variety insecticides, and setting off a cockroach bomb in the bedroom will only scatter them farther afield. And because they are active only at night, many people don't discover them until their population has grown into the hundreds, or even thousands.

Worst of all, bedbug sufferers say, is the stigma of living with an insect that feeds on blood - though it does not transmit disease - and leaves behind a trail of red bumps that many dermatologists mistakenly identify as hives or scabies.

"People come in here and cry on my shoulder," said Andy Linares, the owner of Bug Off Pest Control, in a Washington Heights storefront. "They feel ashamed, even traumatized, to have these invisible vampires living in their home. Rats, even V.D., is more socially acceptable than bedbugs."

In interviews with more than a dozen bedbug sufferers, only a handful would speak on the record, saying they feared the condemning glares of neighbors or the shunning of co-workers. A bedbug infestation, many say, puts an added strain on relationships, all but ruling out staying the night.

Like many "bedbug victims," as some call themselves, Josie Torielli has become consumed with the biology of bedbugs since she discovered them in her home last year. She blamed mosquitoes for the ruddy blotches on her body until she turned on the lights one night and found a few of the fiends crawling across her sheets.

She thought she had them conquered, but last week, after nine months of peace, Ms. Torielli discovered the telltale red spots on her sheets, the result of blood-engorged bugs crushed during the night.

"I've become obsessed," said Ms. Torielli, 33, a social work student who lives in Hell's Kitchen, in Manhattan. "I switched to white sheets so I can see them better, and I've set up a bedbug jail in a Tupperware container that I put on the windowsill to torture them with daylight. It's all-out war."

Though bedbugs prefer human hosts, they will feed on dogs or cats if necessary. They can live longer than a year, with the female laying up to 500 eggs in a lifetime. An adult bedbug can survive unfed for up to a year.

"They're kind of amazing," said Louis Sorkin, an entomologist at the American Museum of Natural History, explaining how a bedbug, a k a Cimex lectularius, emits one pheromone that allows it to find another bedbug and another that warns others of danger. In heavy infestations, the pheromones give a room a sweet, musty odor.

To show off the insect's special sucking stylus, Mr. Sorkin removed a bedbug nymph from a container and placed it on his finger. Even though it was under a bright light and being nudged by tweezers, the critter immediately began to feed and turned rust-colored as it filled with blood.

"They're insatiable," he said five minutes into the bug's feeding.

All this science is not much comfort to those in the throes of battle. Kellianne Scanlan, 30, a hairstylist who lives in Washington Heights, has been living like a nomad since last month, when she spotted a bedbug on her pillow, and then whole families happily ensconced in the frame of her platform bed. Despite the visit of an exterminator, the problem has not been vanquished, and every last item of clothing remains sealed in plastic bags and piled up on the living room floor.

"My life has become all about bedbugs," she said as an exterminator arrived last week.

She said that in order to calm her friends and ensure that she does not spread the problem, she takes an extra set of clothing with her and changes when she arrives at their homes for overnight visits. "The psychological damage is probably the worst thing about it. I mean, how long will it be before I can sleep soundly and not worry about some creature sucking my blood?"

Still, for Ms. Scanlan, there has been a silver lining. The night after she discovered the bugs, she went out drinking, intent on avoiding her own bed. That evening she met a man at a bar, and, contrary to her usual instincts, accompanied him to his apartment. An encounter partly born of desperation soon blossomed into something more, she said.

"We've been together ever since," Ms. Scanlan said with a smile. "Thanks to the bedbugs, I've fallen in love."

Friday, November 25, 2005

Has Superfund Been Effective Public Policy?

Two leading environmental economists have conducted a thorough study of the costly Superfund program. They conclude that the $30 billion dollars spent on hazardous waste site cleanups does not pass a cost/benefit test. Their primary measure of the benefits of hazardous waste cleanup is average home price appreciation in a vacinity around the cleanup.

It will interest me whether this paper's findings "trickle down" into the popular media? Will the New York Times pick it up for its Science Times on Tuesdays? I find that the Science Times devotes too much attention to Personalities of Nobel Laureatues and "cute" discussions of small scale studies attempting to measure treatment effects.

As discussed below the Greenstone/Gallagher study attempts to construct an ambitious nation wide "counter factual" concerning what would have been home price appreciation in areas where hazardous waste has been cleaned up if the waste hadn't been cleaned up? They can estimate this because they can identify areas that have hazardous waste but that "just missed" getting the Superfund cleanup treatment. These areas represent a real nice control group.

Critics will argue that full "land price capitalization" requires many assumptions such as full information, low migration costs, and inelastic land supply. If housing supply is elastic, then improvements in local public goods may simply lead to population growth rather than than price responses.

Friends of mine in Houston have pointed out that over the last 25 years there, more people are living in this metropolitan area but real home prices actually fallen.
Based on a migration "voting with your feet" metric, this area's quality of life has improved but based on a home price criteria you would say that the area's quality of life has declined.

But my bottom line is that Greenstone and Gallagher deserve a lot of credit for conducting a rigorous evaluation of an important and costly public policy question Their work builds on Hilary Sigman's earlier work (published in the Journal of Law and Economics) that looked at the question of which hazardous waste sites are targeted for cleanup. She showed that it isn't the sites in densely populated areas or in areas where minorities are over-represented. Thus, environmental justice is not furthered by superfund site cleanup. Instead, she showed that sites located in powerful Congressmen's districts were more likely to be cleaned up. Surprise, surprise! Still the truth must be uncovered and economists have the tools that journalists do not have to uncover these truths.

Everyone, go take a statistics class!



Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program

Michael Greenstone, Justin Gallagher

NBER Working Paper No. 11790
Issued in November 2005

---- Abstract -----

Approximately $30 billion (2000$) has been spent on Superfund clean-ups of hazardous waste sites, and remediation efforts are incomplete at roughly half of the 1,500 Superfund sites. This study estimates the effect of Superfund clean-ups on local housing price appreciation. We compare housing price growth in the areas surrounding the first 400 hazardous waste sites to be cleaned up through the Superfund program to the areas surrounding the 290 sites that narrowly missed qualifying for these clean-ups. We cannot reject that the clean-ups had no effect on local housing price growth, nearly two decades after these sites became eligible for them. This finding is robust to a series of specification checks, including the application of a quasi-experimental regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the benefits of Superfund clean-ups as measured through the housing market are substantially lower than the $43 million mean cost of Superfund clean-ups.

http://www.nber.org/papers/w11790

Does China Have the Right Incentives to Curb Regional Environmental Externalities?

Recently there has been extensive media coverage of this benzene spill near China's Harbin City. Part of the costs of this disaster will be borne in nearby Russia. What is the dollar damage that the Chinese spill has imposed on Russia? This would require a lot more information concerning how many people live in this part of Russia, how much would they be willing to pay to avoid this pollution exposure, and how is industrial profitability in Russia affected by the spill.

This salient event highlights an important trend. China's economic development is affecting the environmental quality of its neighbors. When China dams a river such as the Mekong this has implications for environmental quality in downstream nations such as Vietnam.

Another example is the growth in manufacturing in the Chinese Guangdong Province leading to a sharp rise in Hong Kong’s particulate levels (September 10, 2002 New York Times). This benzene spill represents a 3rd example. In all of these examples, China's growth exacerbates regional pollution problems.

Given China's size measured in population, military might, and economic market size, is there any economic incentive that "victim" nearby nations can harness to get China to "play nice"? If China is able to "externalize" enough of the pollution costs of economic development, then it is less likely to enact costly regulation to mitigate such pollution problems.

Recently environmental economists have been trying to measure the size of cross-boundary environmental spillovers. I'm thinking of papers by Linda Bui and Hillary Sigman. The next step in this literature should examine Coase Theorem like bargaining to establish the conditions such that externalities are internalized versus when they grow worse over time. I'm concerned that at least in the medium term that China falls into the latter case.


November 25, 2005
China Blames Oil Company for Benzene Spill in River
By DAVID LAGUE
International Herald Tribune

HARBIN, China, Nov. 24 - The Chinese government on Thursday blamed the country's biggest oil company for a pollution spill that allowed a 50-mile slick of toxic benzene to reach this northern city of almost four million people on the river that normally supplies it with running water.

Residents continued to stockpile bottled drinking water on Thursday, the second day after the authorities shut down the municipal water system and stopped pumping from the Songhua River to minimize the risk of poisoning.

Schools and many businesses remained closed, and restaurants in the city center were mostly empty late Thursday as the environmental disaster led the authorities to mount an investigation that could prompt a criminal charges.

Authorities in Harbin, the capital of Heilongjiang Province, assured residents that adequate supplies of drinking water would be trucked in and warned them to watch for the symptoms of benzene poisoning.

They said that the slick was expected to have passed the city by Saturday and that normal water service could resume by Sunday.

China has also warned Russia about the toxic spill, which is being carried toward Khabarovsk, on Russia's border.

An explosion on Nov. 13 at a China National Petroleum Corporation plant in Jilin Province, 236 miles upriver from Harbin, spewed an estimated 100 tons of benzene compounds into the Songhua River, Chinese authorities said.

Thursday, November 24, 2005

Building Social Capital Through Firing Guns

Dora Costa and I are starting to write a book on social capital during war time. Our setting is the U.S Civil War. In particular, we have unique soldier level data for over 36,000 Union Army Soldiers (30,000 whites and 6,000 blacks). For these soldiers, we examine key outcome indicators such as desertion, survival in tough confederate POW camps, after war migration to test for evidence of the importance of social networks. For example, we find that men from small towns who are in the Andersonville POW camp are more likely to survive if they are there with more men from their home town. Our story is that these men "re-connected" in the POW camp and worked together to increase their survival odds. If you would like to see the 4 papers that the book will be based on go to:
http://web.mit.edu/costa/www/papers.html

Today the New York Times indirectly addresses this issue. In the past, corporations took workers for company picnics to build morale and a sense of team unity. This article suggests that firing guns is the "modern" way of achieving this goal. Civil War soldiers had the opportunity to fire a lot of guns but I bet they would have preferred to have attended a picnic!

The broader issue that this article does not address is: what types of organizations need social capital and bonding to function better? In different types of organizations how are these bonds built? Why can't incentive pay be sufficient motivation to get workers to do what the boss wants them to do?

November 24, 2005
Now, Accounting Can Get Its Gun
By VINCENT M. MALLOZZI

HIGHLAND LAKES, N.J. - This past summer, members of a Manhattan law firm went on a field trip to Danbury, Conn., where they spent an entire day at a range without swinging bats or golf clubs. The members of Kobre & Kim LLP were there not to hit and hack, but to lock and load, and to experience the thrill of firing pistols, rifles and even submachine guns.

"We do very aggressive litigation and trial work," said Michael Kim, a partner in the firm. "So we prefer an activity that dovetails nicely with that aggressive culture, and hitting a little white ball on the greens doesn't do much for us."

In the last few years, a growing number of professionals like Mr. Kim are abandoning traditional company outings like softball, golf or fishing, choosing instead to escape the pressures of their busy workdays by blowing off steam - and rounds of ammunition - at shooting ranges that give corporate retreats some of the atmosphere of military attacks.

"We offer a thrilling experience denied a lot of New Yorkers who have never fired a gun," said Andrew Massimilian, 42. He owns Manhattan Shooting Excursions, which takes individuals and corporate groups on shooting parties at seven ranges scattered around New York State, Pennsylvania, Connecticut and New Jersey. The excursions are held outside New York City because almost all of the firearms in Mr. Massimilian's vast arsenal are illegal to possess in the five boroughs.

Chip Brian, president of Comtex News Network Inc., a distributor of financial news in Manhattan, has found that firing a few friendly rounds is an effective approach to bonding and networking. "At the end of the day, it's all about getting to know your clients better," he said, "and a shooting trip is one of the most unique ways to do that."

"There's a huge difference in taking clients out to dinner, with nice music playing in the background, as opposed to taking them to a sporting event, which is much more exciting," Mr. Brian said. "A shooting trip takes that to the next level - it really makes a lasting impression."

Russ Savage, a Manhattan lawyer who took a shooting holiday earlier this year, said that some of the men and women who have pulled the trigger on the increasingly popular excursion, especially those in the world of high finance, may have done so to gain "a feeling of empowerment."

"For major corporate executives whose job it is to lead, this is a much more powerful way for them to maintain a sense of aura than by simply taking their people on a company picnic," Mr. Savage said. "It's an exhibition of strength and power."

On a recent Saturday afternoon, Mr. Massimilian staged one of those exhibitions in a thickly wooded area at Highland Lakes in Sussex County, N.J., where a small army that included doctors, lawyers and Wall Street types, all wearing padded earmuffs and protective glasses, waited on his command to fire their guns into paper targets set 50 yards away in front of a mountainside.

When the signal was given, 17 men and women began blasting away at the targets, filling the cool air with the scent of gunpowder and the kind of echoing booms that can keep a deer up all night.

"Everyone goes golfing or to a Yankees game, but this is a much more exciting way to bring people together," said Anthony Belluzzi, a 31-year-old institutional sales trader for Knight Capital Markets in Jersey City. "It's great for people like me who sit in offices all day, under fluorescent lights, staring at computer screens."

Are field trips that involve packing heat instead of sandwiches detrimental to society?

"They might not be the best thing for a society that is already way too aggressive," Dr. Kenneth Porter, a Manhattan psychiatrist, said. "When you look at what is in the media, and what kids growing up are exposed to, something like this could have a negative effect on the overall mental health of the population.

"However," Dr. Porter continued, "shooting can be viewed as a legitimate sport and can be seen as a constructive outlet to express aggression, so it cuts both ways."

Seconds later, Dr. Porter, sitting at a picnic table at the Highland Lakes site with his fiancée and her son, picked up a long-range rifle and began firing at a wooden bull's-eye, shell casings flying behind him as he squeezed off round after round, his body recoiling slightly after every blast.

"Before today, I thought something like this was unequivocally harmful," he said. "But now I've learned otherwise."

Mr. Massimilian, whose grandfather once owned a firearms manufacturing company in Germany, holds an M.B.A. from Columbia. He worked for 20 years in the corporate world, with PricewaterhouseCoopers and Vornado Realty Trust, before establishing his shooting excursion business two years ago.

He said the fees for his excursions range from $150 to $600 a participant, depending on the firearms used and the level of personal instruction offered. His most expensive guns include the Springfield Armory M1-A Super Match long-range rifle; the Armalite AR50, a bolt-action, 50-caliber, long-range target rifle; the Benelli M4 Tactical Shotgun; and the Heckler & Koch Elite, a .45-caliber semi-automatic pistol.

Some customers, like Mr. Belluzzi, the trader, chose guns with special nostalgic or sentimental value, such as the M1 Garand, a G.I. infantry rifle used during World War II, which he had fired most of the afternoon.

"Both of my grandfathers served in the war and used the exact same weapon," he said. "I thought it would be cool to see what it felt like."

Mr. Massimilian blames Hollywood for the negative images attached to shooting.

"Hollywood marginalizes us by showing three types of shooters: criminals, policemen and soldiers," he said. "They never show the doctor, the banker or the father-and-son teams who just want to go out for a friendly shoot."

Or the aggressive lawyer, like Mr. Kim, who is targeting a return date.

"We're going back to shoot again," he said. "And we'll probably make it an annual event."

Wednesday, November 23, 2005

A "Non-Green" City in China: A Test of the Catalyst Hypothesis

Can there be a large "silver lining" from environmental disasters? A Chinese city called Harbin offers another natural experiment today for thesting this hypothesis. A chemical plant exploded in Harbin and this has increased the local river's toxic benzene content. Clearly this city will need a new drinking water source.

Will this shock lead to new industrial regulation? Will the Chinese government now demand that industries engage in greater precautionary investment to reduce the probability of future negative shocks?

Since China is not a democracy, it does not have a free press. People in Harbin may have trouble organizing to voice their concerns with the status quo. In this case, industrial polluters face fewer incentives to take costly actions to reduce their possible environmental impacts. In the United States, only in the early 1980s was the Toxic Release Inventory created. Does China have a similar data base that it freely distributes to people? Somehow, I doubt it.

Is Harbin a "green city"? Clearly a city's industrial composition matters in determining its environmental quality. A city that specializes in chemical plants is at greater risk to experience these types of negative shocks.

This interesting article also highlights the cross-boundary issues that arise with water pollution. Russia is worried that its water quality may be affected by the pollution from Harbin. If Russia could credibly punish China for the externality it imposes on Russia's water quality, then China would be more likely to take ex-ante steps to minimize the likelihood of future industrial accidents that pollute the water.

http://news.yahoo.com/s/ap/20051123/ap_on_re_as/china_water_panic

Toxic Leak Shuts Down Chinese City

By JOE McDONALD, Associated Press Writer 1 hour, 7 minutes ago

BEIJING - A Chinese city of 3.8 million people closed schools and was trucking in drinking water Wednesday after shutting down its water system following a chemical plant explosion that officials said polluted a nearby river with toxic benzene.

The announcement of the shutdown in Harbin in China's frigid northeast set off panicked buying this week of bottled water, milk and soft drinks that left supermarket shelves bare.

The water system was shut down at midnight Tuesday and probably will stay out of service for four days, said an official of its Municipal Water Supply Group. He would give only his surname, Chen.

An explosion Nov. 13 at a chemical plant in the nearby city of Jilin left the Songhua River, Harbin's main water source, polluted with benzene, a toxic, flammable liquid, the government said.

Though local officials denied it, water supplies were also cut in at least one district of Songyuan city in neighboring Jilin province, about 90 miles southwest of Harbin, residents said.

A doctor from the Ningjiang District Central Hospital and a teacher from Ningjiang No. 1 Middle School said the water had been cut off for between five to seven days already. Both refused to give their names when reached by telephone.

Another Songyuan resident from a separate district said his neighborhood's water supply had been uninterrupted because it came from a well, not the river.

Russian television reports said Wednesday that concern was growing over the pollution threat in the Russian border city of Khabarovsk, about 435 miles down river from Harbin on the Songhua.

In Harbin, officials tried to downplay the crisis.

"The provincial government is sending in bottled drinking water from other cities," Chen said. "It must be very inconvenient for the public — taking showers or flushing toilets. But this is an emergency and it will only last a few days."

Schools canceled classes through Nov. 30 "for fear that catering and sanitation cannot be secured," the official Xinhua News Agency said.

There is no sign that benzene got into the city water system, said an employee of the Harbin Environmental Bureau who would give only his surname, Wang.

Water service was reinstated for about 12 hours on Wednesday after experts concluded the benzene wouldn't reach the city until Thursday afternoon, the city government said on its Web site.

There were no reports of anyone injured by drinking the polluted water but 15 hospitals were ordered to be ready to treat possible poisoning cases.

Harbin is one of the coldest places in China, with overnight temperatures this week of 10 degrees. It is best known abroad for its winter "ice lantern" festival, when giant slabs of ice cut from the Songhua are used to construct copies of famous buildings and artworks in public parks.

Companies that supply steam heat to buildings have been ordered to ensure they have adequate water supplies from wells in order to ensure that heat is not interrupted, Xinhua reported.

The explosion in Jilin killed five people and forced the evacuation of 10,000 others. It was blamed on human error in a tower that processed benzene.

The disaster highlighted the precarious state of China's water supplies.

The country's 1.3 billion people and the factories and farms of its booming economy compete for scarce supplies. The government says all of China's major rivers are dangerously polluted.

Due to its vast population, China ranks among countries with the smallest water supplies per person.

In Harbin, the government is using wells to supply hospitals and some residential areas, according to local news reports. Retailers were warned not to overcharge for drinking water.

The shutdown affects the city of Harbin but not its suburbs, Chen said. The city has 3.8 million people, while the surrounding area has about 5 million more.

Photos in newspapers and on news Web sites showed people in packed supermarkets pushing carts overflowing with cases of bottled water and soft drinks.

Families prepared by filling buckets and bathtubs with water while the government said supplies were still safe, according to state media.

Monday, November 21, 2005

King Coal and Peak Oil

Is Montana coal our nation's solution to achieving energy independence? The New York Times today sounds convinced. This article is quite interesting but I think it is a good example of why journalists needs to specialize and know the technical details of the subject they are studying.

While I hope that the boosters are right that with enough investment that in 10 years Montana's natural resources could be converted into an oil substitute, I had the sneaking suspicion that there must be a catch. How much pollution is produced in this process? What engineering problems still remain?

Still the optimism expressed in this article is striking. What do you peak oilers have to say to the great people of Montana? Will Montana "save us" from facing a day of peak oil doom?

My wife and I spent 3 days in Whitefish Montana a couple of years ago and had a great time.

November 21, 2005
Seeking Clean Fuel for a Nation, and a Rebirth for Small-Town Montana
By TIMOTHY EGAN

HELENA, Mont., Nov. 15 - If the vast, empty plain of eastern Montana is the Saudi Arabia of coal, then Gov. Brian Schweitzer, a prairie populist with a bolo tie and an advanced degree in soil science, may be its Lawrence.

Rarely a day goes by that he does not lash out against the "sheiks, dictators, rats and crooks" who control the world oil supply or the people he calls their political handmaidens, "the best Congress that Big Oil can buy."

Governor Schweitzer, a Democrat, has a two-fisted idea for energy independence that he carries around with him. In one fist is a shank of Montana coal, black and hard. In the other fist is a vial of nearly odorless clear liquid - a synthetic fuel that came from the coal and could run cars, jets and trucks or heat homes without contributing to global warming or setting off a major fight with environmental groups, he said.

"Smell that," Mr. Schweitzer said, thrusting his vial of fuel under the noses of interested observers here in the capital, where he works in jeans with a border collie underfoot. "You hardly smell anything. This is a clean fuel, converted from coal by a chemical process. We can produce enough of this in Montana to power every American car for decades."

Coal-to-fuel conversion, which was practiced out of necessity by pariah nations like Nazi Germany and South Africa under apartheid, has been around for more than 80 years. It is called the Fischer-Tropsch process. What is new is the technology that removes and stores the pollutants during and after the making of synthetic fuel; add to that high oil prices, which have suddenly made this form of energy alchemy feasible. The coal could be converted into gasoline or diesel, which would run cars, or into other types of fuel.

With coal reserves of about 120 billion tons, Montana has one-third of the nation's total and a tenth of the global amount. Most of it is just under the prairie grass in the depopulated ranch country of eastern Montana. Mr. Schweitzer wants to plant coal-to-fuel factories in towns that have one foot in the grave. It may not provide enough fuel to wean the West off imported oil, but it may be enough to show the rest of the country that there is another way, he said.

"This country has no energy plan, no vision for the future," said Mr. Schweitzer, who spent seven years in Saudi Arabia on irrigation projects. "We give more tax breaks and money for oil, and what do we get? Three-dollar gas and wars in the Middle East. If you want to control the destiny of this country, it's going to be with synthetic fuels."

For now, the governor's ideas are just speculative. Although several energy companies have expressed interest in building coal-to-fuel plants, no sites have been chosen or projects announced. Because it would be such a novel, financially risky undertaking, companies have been hesitant to go the next step. But Mr. Schweitzer hopes for a breakthrough, with several plants up and running within 10 years, and he says he does not need legislative approval to give the go-ahead if companies commit.

The governor has met with the president of Shell Oil, the chairman of General Electric and other captains of big energy, as well as with smaller companies that develop synthetic fuels.

"This is not a pipe dream," said Jack Holmes, the president and chief executive of Syntroleum, an Oklahoma company that has a small synthetic fuels plant and wants to build something bigger. "What's exciting about this process is you don't have to drill any wells and you don't have to build any infrastructure, and you'd be putting these plants in the heartland of America, where you really need the jobs."

Certainly jobs are a big motivating factor. Montana is a poor state and ranks last in average wages. Mr. Schweitzer, whose approval rating is near 70 percent, says thousands of good-wage jobs can be gained in towns that are dying.

He is also promoting wind energy and the use of biofuels, using oil from crops like soybeans as a blend. The governor signed a measure this year that requires Montana to get 10 percent of its energy from wind power by 2010, a goal he said would be reached within a few years. Still, the Big Sky State, with a population under a million, has fewer people than the average metro area of a midsize American city, and its influence is limited. The governor acknowledged as much.

"I'm just a soil scientist trying to get people in Washington, D.C., to take the cotton out of their ears," Mr. Schweitzer said with somewhat practiced modesty. "But if we can change the world in Montana, why not try it?"

By some estimates, the United States has enough coal to take care of its energy needs for 800 years. The new, cleaner technology stores the pollutants in the ground or processes them for other uses.

The United States imports about 13 million barrels of oil a day. To replace that oil would be a monumental undertaking, with hundreds of coal-to-fuel plants. But Mr. Schweitzer points to South Africa, where a single 50-year-old plant provides 28 percent of the nation's supplies of diesel, petrol and kerosene. But the South African plant uses old technology that does not remove the pollutants.

In this country there is a small factory in North Dakota that converts coal to natural gas. And Pennsylvania is moving forward on a plan to produce diesel from coal. Neither of these plants would come close to the scale of the plants Mr. Schweitzer is envisioning in Montana, where it would cost upward of $7 billion to build a plant that could turn out 150,000 barrels of synthetic fuel a day, for about $35 a barrel.

One surprising thing, thus far, is that many people in the environmental community have not rejected the coal-to-fuel idea out of hand. Environmentalists like the process for producing clean fuels from coal. They say the technology is there and it can be done in coal-rich empty quarters of eastern Montana, North Dakota or Wyoming.

Still, they worry about strip mining the ranch country and about whether there will be a global commitment to make synthetic fuels the clean way rather than in a dirtier way along the lines of a plan in China, where the government has joined with major global oil companies to build about a dozen coal-to-fuel plants.

"It's a very interesting moment in energy history," said Ralph Cavanagh, an energy policy expert at the Natural Resources Defense Council, one of the nation's most powerful environmental groups. "Certainly this process can be done. This is a promising direction. The question is, Are we going to do it clean?"

Because there is no federal mandate to process coal in a way that reduces the emissions that can cause global warming, Mr. Cavanagh says he fears that any new coal operations will simply add new pollutants to the atmosphere. Coal plants without the cleaning technology are the biggest source of man-made carbon dioxide, a gas that is considered a central contributor to the warming of the earth, according to many studies.

There is another problem as well. Some Montana ranchers and environmentalists who fought big coal-mining proposals in the 1970's are worried about what new mining will do to the grasslands.

"The governor's idea is a big one," said Helen Waller, a farmer who is active with the Northern Plains Resource Council, a Montana environmental group. "I'm not sure it's the best one. I don't think there's any such thing as clean coal. And even if there were, it would require a lot of productive ranchland to be ripped up."

Mr. Schweitzer said the mining could be done in a way that restored the land afterward. "I call it deep farming," he said. "You take away the top eight inches of soil, remove the seam of coal, and then put the topsoil back in."

But given Montana's history of abuse by mining companies - the giant open-pit mine in Butte is the most visible legacy of a bygone era - some Montanans remain skeptical.

"I just think there's a better way that doesn't involve tearing up productive ranchland," Ms. Waller said.

Is Geneva the World's Best City Based on Quality of Life?

Ther Mercer Rankings for the year 2005 rank San Francisco as the 25th best city in the world and New York City is ranked as #39. None of the major cities in the United States cracks the world top 25! If this survey is to be believed, what does this really mean?

As described at the bottom of this blog entry, the Mercer Consulting group does try to quantify differences in each city's objective quality based on a variety of criteria ranging from schools to natural disasters. Such researchers face many subjective decisions. Post 9/11/2001, how much did New York City's quality of life decline by? Given that there hasn't been a 2nd major terrorist attack there since 9/11, has New York City's ranking risen over time?

How does Mercer choose how much weight to give each of their criteria? Clearly people will rank the criteria differently. If I don't have children, I may care little about local school quality.

I'd also like to know how multinational corporations use this information. If a company sends a worker to a low quality of life city (based on this index), does the corporation pay extra "combat pay" as a compensating differential to offset the lost amenities of living in a nicer city?

Clearly, if we had freer migration across international borders and we had origin/destination data we could estimate some revealed preference migration models. Are people voting with their feet and migrating to Geneva? How much higher are home prices there and how much lower are wages there? In the absence of such market tests, we must rely on Mercer for such fun rankings.


http://www.citymayors.com/features/quality_survey.html

Swiss cities offer the best quality of life while
Luxembourg has been named the safest city
A report by Mercer Consulting

The Swiss cities of Geneva and Zurich offer the best quality of life according to research published by Mercer Consulting in March 2005. Vancouver (Canada) is placed third, followed by Vienna (Austria) and Frankfurt (Germany).

EIU names Vancouver, Melbourne and Vienna as 'best' cities in the world

Cities in Europe, New Zealand, and Australia continue to rank highly. Munich and Düsseldorf both move up the rankings, from 10th and 12th place respectively, to share joint 5th place with Frankfurt. Munich’s rise is due to more efficient waste removal systems and better housing for expatriates, while Düsseldorf’s transport and standards of international schooling have improved. Bern, Copenhagen, and Sydney are pushed down slightly to rank 8 with scores of 105.

In the US, Honolulu and San Francisco rank highest in joint 25th position (score 102), mainly because they have lower crime levels than other US cities. Boston, New York, Portland, and Washington follow in positions 36, 39, 42, and 42 respectively (score 100.5, 100, 99, 99), while Houston ranks lowest at position 68 (score 94).

The analysis was based on an evaluation of 39 quality of life criteria for each city, including political, social, economic, and environmental factors, personal safety and health, education, transport, and other public services.

Baghdad remains the world’s least attractive city for expatriates. Its low score (14.5) is due to the recurrent threat of attacks against people, multinational organisations, and government institutions in the area. Other poor-scoring cities for overall quality of life include Bangui in the Central African Republic (score 29), Brazzaville in Congo, and Khartoum in Sudan (29.5 and 31 respectively).

The world's top 55 cities offering the best quality of life
(New York is the base city with a score of 100 points)

2005 Rank

1 Geneva Switzerland
106.5
2 Zurich Switzerland
106.5
3
Vancouver Canada
106.0
3
Vienna Austria
106.0
5
Frankfurt Germany
105.5
5
Munich Germany
105.5
5
Düsseldorf Germany
105.5
8
Auckland New Zealand
105.0
8
Bern Switzerland
105.0
8
Copenhagen Denmark
105.0
8
Sydney Australia
105.0
12
Amsterdam Netherlands
104.5



Safety and security
Luxembourg ranks as the world’s top city for personal safety and security, according to a quality of life survey by Mercer Human Resource Consulting. The city scores 122.5 followed by Helsinki, Bern, Geneva, and Zurich which take joint second place with scores of 120.

Scores for personal safety and security are based on relationships with other countries, internal stability, and crime, including terrorism. Law enforcement, censorship, and limitations on personal freedom are also taken into account. (See Notes below for details.)

Cities are ranked against New York as the base city, which has a rating of 100. The analysis is part of a worldwide quality of life survey, covering 215 cities, to help governments and major companies to place employees on international assignments.

The Japanese cities of Omuta, Kastuyama, Tsukuba, and Yokkaichi score highest in Asia (joint 14th place with scores of 112.5), while Calgary, Montreal, Ottawa, Toronto, and Vancouver rank top in North America, in joint 18th place (score 112).

“The top-ranking cities for personal safety and security are in politically stable countries with good international relations and sustainable economic growth,” said Slagin Parakatil, Senior Researcher at Mercer. “Most of the low-scoring cities are in countries with civil unrest, little law enforcement, and high levels of crime.”

The world’s least secure city is Baghdad (Iraq), with a score of 5 due to ongoing civil unrest and threats of attack in the city. Other low-ranking cities include Abidjan in the Ivory Coast, Bangui in Central African Republic, and Port Harcourt and Lagos in Nigeria , which score 24, 26.5, 32.5, and 32.5 respectively. These countries continue to experience political turmoil and low economic growth.

Western Europe
Many Western European cities appear at the top of the rankings. Luxembourg scores highest for personal safety and security, followed by Swiss and Scandinavian cities. Other high-scoring cities include Vienna, ranked 6th with a score of 116, followed by Düsseldorf, Munich, Nürnberg, Frankfurt, and Oslo, sharing 8th place with scores of 113.

In contrast, Athens, Rome, and London appear at the lower end of the rankings for this region, at positions 83, 74, and 69 respectively (score 93.5, 95.5, and 99), due to high levels of petty crime. Madrid also scores relatively low, sharing 69th position with London, due to terrorism.

Eastern Europe
Cities in Eastern European cities generally rank lower than those in Western Europe. Ljubljana in Slovenia scores highest for personal safety and security, at position 41 with a rating of 105, followed by Bratislava in Slovakia and Prague in the Czech Republic in joint 58th place scoring 100.

“Some Eastern European cities have gained higher scores in the rankings due to their accession to the European Union,” said Mr Parakatil. “There are noticeable differences in personal safety and security scores between many Eastern and Central European cities.”

Russian cities score poorly due to high crime rates, economic turmoil, and lack of internal stability. Moscow, Novosibirsk, Kazan, and St Petersburg take positions 198, 179, 179, and 175 respectively, with scores of 41.5, 52.5, 52.5, and 53.5.

North America
All of the Canadian cities covered by the survey appear in the top 20 rankings for personal safety and security. Calgary, Montreal, Ottawa, Toronto, and Vancouver rank jointly in position 18 with scores of 112.

In the US, Honolulu, Houston, Lexington, San Francisco, and Winston Salem rank highest in joint 45th position with scores of 104. Boston, Chicago, Cleveland, Minneapolis, Pittsburgh, Portland, and New York all follow in 58th place with scores of 100. The lowest scoring city in North America is Atlanta, ranked 90 with a score of 90.5, due to street crime and burglary.

In Mexico, Monterrey and Mexico City rank 87 and 126, scoring 92 and 72.5 respectively.

South America
Cities in South America tend to feature much lower in the rankings than those in North America. Growing unemployment and political instability in these regions have led to high crime levels.

Santiago in Chile ranks highest in 94th place with a score of 90. Buenos Aires in Argentina ranks 115 with a score of 77.5, while São Paulo and Rio de Janeiro in Brazil take 148th and 167th position respectively, with scores of 63.5 and 56. Bogotá and Medellin in Colombia and Caracas in Venezuela rank lowest in positions 210, 205, and 193 respectively (score 33, 37.5, and 48) due to crime including kidnappings.

Mr Parakatil concluded: “As globalisation increases, security and relationships with other countries become more critical to overall quality of life standards in cities across the world.”

Survey methodology
The data for the 2005 survey was largely collected between September and November 2004 and was regularly updated to take account of changing circumstances.

The overall quality of life ranking is based on an evaluation of 39 quality of life criteria. The covered topic in 2005, “personal safety and security,” is based on an evaluation of six criteria that have been drawn from the overall quality of life survey. New York has been used as the base score for quality of life with a score of 100 points.

Mercer’s study is based on detailed assessments and evaluations of 39 key quality of life determinants, grouped in the following categories:

• Political and social environment (political stability, crime, law enforcement, etc)
• Economic environment (currency exchange regulations, banking services, etc)
• Socio-cultural environment (censorship, limitations on personal freedom, etc)
• Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc)
• Schools and education (standard and availability of schools, etc)
• Public services and transportation (electricity, water, public transport, traffic congestion, etc)
• Recreation (restaurants, theatres, cinemas, sports and leisure, etc)
• Consumer goods (availability of food/daily consumption items, cars, etc)
• Housing (housing, household appliances, furniture, maintenance services, etc)
• Natural environment (climate, record of natural disasters)

Saturday, November 19, 2005

Will Chinese Innovation Protect Us From Peak Oilers' Gloomy Predictions?

Suppose there is sharp learning by doing in the renewable energy industry. As this article below discusses, China is getting ready to make a major investment in wind turbines. If the Chinese government creates the demand for renewables technology and rewards those who develop such technology, could this help the world make a "smooth" transition away from fossil fuels?

This article below suggests that government intervention is needed to give renewable energy a "fighting chance" to compete. I'm not sure if this is true or not.

What I find interesting about this article is the basic point that ideas are public goods. Once Chinese researchers figure out new technologies, these ideas will diffuse around the world. Perhaps the United States should be subsidizing such research in China?

The article has a slightly negative tone suggesting that the U.S is about to lose out in another new market but here the issue of comparative advantage arises. Is China relatively well endowed with the inputs needed to make wind power a low cost energy alternative?

Peak Oilers tend to stress that we will "run out of oil" because of India and China's growth. This article turns this logic around and suggests optimistically that China's growth may create the resources to allow a solution to be found. The article highlights the adaptation strategies that real world firms engage in when energy prices increase.

http://www.alumni.berkeley.edu/Alumni/Cal_Monthly/November_2005/China_charging_up.asp


China charging up

Beijing's rapidly expanding investment in renewables could transform energy markets—and give China a leg up on on the United States. By Lisa Margonelli

WHEN CHINA’S national oil company tried to buy California-based Unocal this summer, the United States reacted like an old dog startled out of a deep sleep: We barked loudly, and aggressively. A fearful Congress voted the sale a threat to U.S. security and the deal fell through.

Across the pond in China, a different sort of frenzy took shape: As power plant outages rolled on and fuel prices climbed over the sweaty summer, the papers reported all sorts of bold and varied schemes for alternative fuels. There was, first of all, something called “hydropower mania,” and then there were many large wind energy projects, and Beijing’s plan to make 18,000 city buses and taxicabs run on clean fuels—some on an exotic mixture of natural gas and hydrogen—by 2008. Provincial taxi drivers were spending $690 to convert their gasoline cabs to cheaper natural gas, while Chinese automaker Geely was announcing plans to build a hybrid car with all-Chinese technology. Beijing mulled an unconventional scheme to use geothermal heating and cooling to replace 800,000 tons of coal. As the summer drew to an end, a decree came down from above: government bureaucrats were to abandon suits and ties to save energy, and the air conditioning in the Great Hall of the People was to be no lower than 77 degrees.

New sources of energy are key as China gears up to attack its twin goals: reining in energy imports and tripling per capita GDP to $3,000 by 2020. Despite adding enough electrical power plants to supply all of California’s energy needs last year, blackouts in China have continued. Renewable energy doesn’t require oil imports (or produce greenhouse gases). But some decision-makers think renewable energy can also guarantee higher incomes in the future. By using its vast market to drive demand, China can nurture industries related to renewable and clean energy. And as fossil fuels are phased out, China will already be making the products the world wants. Message to Congress: Don’t worry about who’s buying your old fossil fuel. Worry about who’s going to sell you the fuels of the future.

Energy_windfarm

Last December, President Hu announced a dual plan for energy conservation and producing oil substitutes. In February, the National People’s Congress quickly passed the National Renewable Energy Development Law. The country’s goal is to import only 5 percent of the energy they consume. (Right now they import 12 percent, and the United States imports 33 percent.)

Watching Beijing’s announcements care-fully is Joanna Lewis, a senior international fellow at the Pew Center on Global Climate Change in Arlington, Virginia, who says that she’s less interested in the numbers than in “the political signals they’re sending.” Lewis’s research in Berkeley’s Energy and Resources Group suggests that the impact of China’s push for more wind power may dramatically change the feasibility of wind power around the globe.

In the short term, China’s goals are modest. By 2020, China plans to install enough wind turbines to supply roughly the equivalent of 20 coal-fired power plants (20 gigawatts). While this is a lot of turbines whirling across the landscape of Inner Mongolia, it pales when you consider that the country is currently installing the equivalent of one coal-fired power plant (1 gigawatt) every week.

Longer term, China hopes to develop a domestic wind turbine manufacturing industry. To this end, Lewis says, China has mandated that most large wind projects consist of 70 percent locally-produced parts rather than buying state-of-the-art turbines from Europe or the United States. This is difficult, and Chinese technology has a long way to go, she believes. At the moment only one company, GoldWind of Xinjiang, is successfully producing turbines that are half the size of those in Europe. (Bigger turbines are better turbines, goes the current thinking.) However, the rewards for local manufacturers are potentially large because China
estimates it could eventually generate 250 gigawatts of energy from wind—a staggering amount when you consider that the world’s total wind capacity is about 50 gigawatts.

Huge prizes, though, come with bigger scale. If Chinese manufacturers start producing more turbines, Lewis speculates that they may be able to reduce the price of wind equipment by 25 to 40 percent, making wind energy much cheaper than conventional power plants. “It could make wind even more viable for developing countries in Africa, as well as India and Pakistan,” Lewis says. “You can see parallels to other industries where they’ve reduced the price dramatically—like color TVs.” And if all goes well (and it may not), the new industry could be very rewarding: the global wind business is already projected to grow by 17 percent a year through 2009.

Last year, China also raised auto fuel efficiency standards, which are among the toughest in the world. The new regulations reward smaller cars while imposing strict fuel efficiency standards on larger ones. Initially, only one U.S. SUV passed the standards. “We learned our lessons from the United States,” says Wang Junwei, who helps set the Chinese government’s auto standards. “We are going to clamp down on them early!”

The big benefits are, again, long term. A U.S. consultant who worked with the government says the new standards were designed to pressure joint ventures like GM and Volkswagen to send their newest technology to China, so that China can sell cars to efficiency-conscious Europeans in a decade or so. Referring to Detroit’s reluctance to make small cars with better fuel economy, he laughs, “China doesn’t subscribe to the idea that what’s good for GM is good for the country.”

China seems to be starting a lot of little projects, seeing which ones thrive, and then nurturing them to a potentially big payoff down the line. With this attitude, even pie-in-the-sky technologies like hydrogen start to seem reasonable. Beijing’s Tsinghua University has developed a hydrogen fuel cell bus that runs on the cheap. Designed to cost less than half the price of the Mercedes fuel cell bus and using one-third the hydrogen per kilometer, the Tsinghua bus’s top speed is only 35 miles per hour. But what bus driver between Beijing and Bombay can go any faster? Ouyang Minggao, the coordinator of the 100-person bus development team, plans to have 15 buses on the streets of Beijing for the 2008 Olympics and have commercial production in place by 2010. He sees a niche market for hydrogen buses in developing countries. “China will be very competitive,” he says, “not the best quality, but reasonable.”

The road from a zillion ideas to several thriving industries is long, expensive, and treacherous. China would do well to study the experience of California (whose incentives and technology they’ve partially adopted). During the heyday of renewable power in the 1980s, California companies were doing much of the research and development on wind, solar, and solar thermal power—driven by government incentives and a growing market. In 1985, California had 95 percent of the world’s installed windpower. But with the deregulation of the electricity industry, and the arrival of seemingly cheap natural gas, California stopped nurturing its market and the state’s industry fell apart, just when the rest of the world started to take wind seriously.
Lisa Margonelli is a writer based in Berkeley. She’s working on a book about the culture of oil called Oil On the Brain: Travels in the World of Petroleum that will be published by Nan A. Talese/Doubleday next year.

Friday, November 18, 2005

Jeff Sachs Predicts That the U.S Will Blame China for Costs Imposed by Climate Change

Permit me to quote a 9/15/2005 Financial Times piece by Jeff Sachs: “The US has steadfastly resisted any new commitments on climate change, yet it won't feel quite the same way soon when Americans begin to understand that climate change is expected to lead to more Katrinas, and when they simultaneously realise that China and India are becoming major global emitters of carbon dioxide that are adversely changing the US climate.

The US has ignored the issue as long as it is the one doing the damage to others. Soon the perspective will change, and Americans will probably begin to complain bitterly about what other countries are doing to "their" climate.”

http://www.earthinstitute.columbia.edu/about/director/documents/FinancialTimesSep152005-ShiftingPositionsattheUNWorldSummit.pdf

This is an interesting quote. If Sachs believes in salience and catalytic events then he will recognize that an unintended consequence of China's and India's exports of carbon dioxide will be damage to the United States and this will jump start President Clinton's desire (in the year 2010) to sign a credible greenhouse gas treaty with other nations.

Sachs is making an implicit assumption that the United States in aggregate will be made worse off by climate change. My read of the agricultural research coming out of Yale University is that there will be distributional effects caused by climate change within the United States but that the dollar aggregate damage would not be large. Las Vegas might get hotter but Duluth would become nicer. If one knew that coastal storms would be much more severe due to climate change, and if many people live in these coastal areas, then one has a stronger case documenting the U.S costs of climate change.

Thursday, November 17, 2005

Adaptation and Climate Change

I read an interesting press release concerning who bears the brunt of climate change impacts see http://www.news.wisc.edu/11878.html. These researchers have the guts to forecast far into the future concerning likely impacts. Let me list them:

According to the UW-Madison and WHO team, other model-based forecasts of health risks from global climate change project that:

* Climate-related disease risks of the various health outcomes assessed by WHO will more than double by 2030.
* Flooding as a result of coastal storm surges will affect the lives of up to 200 million people by the 2080s.
* Heat related deaths in California could more than double by 2100.
* Hazardous ozone pollution days in the Eastern U.S. could increase 60 percent by 2050.

All of these outcomes are certainly possible but I don't understand what assumptions are being made concerning our ability to self protect and adapt to climate change. I would bet that these researchers are assuming a "worst case" scenario where we take no precautionary steps to mitigate climate change's worst effects.

Consider Flooding, I'm not an engineer but as we learned from Katrina in New Orleans and the levees infrastructure investments do make a difference in protecting a coastal population. If we have 75 years to get the technology in place and pay for it, how much would anti-flooding investments cost and how much could these devices protect us against the extra flooding caused by climate change?

Similarly with respect to heat, if weather forecasting improves and weathermen are able to predict next week's weather is it really true that in the face of a coming "Heat Wave", if people know the heat wave is coming will they really go jogging outside those days? There is a growing environmental economics literature documenting that people respond to information regulation. We see this with respect to Smog Alerts in Los Angeles. Similar "Heat Alerts" will reduce the death count from hot days. I do agree that the number of deaths in Chicago a few years ago from that Heat Wave was shocking. The urban poor may need resources to help them cope with such shocks.

Hazardous ozone days in the Northeast are likely to take place in July and August. The population, especially those who are susceptible to ozone pollution, may have to learn to take vacations during those months to avoid exposure and get away from affected areas. My general point here is to not under-estimate the ability of the population to adapt. It may be hard for social scientists to measure adaptation, the most educated might be the best at adapting but this force will help reduce the quality of life impacts of climate change.

Wednesday, November 16, 2005

Has Charity for Katrina Victims Dried Up?

Do we have limited attention spans? In the aftermath of a shock such as the Tsunami or Katrina, people feel generous and give. As the media moves on and devotes less attention to the issue, does this have a causal effect on reducing popular support for helping the people who bore the brunt of the shock?

The New York Times today reports that FEMA is going to stop paying hotel bills for the storm victims. I presume that billions of tax payer dollars will be spent fortifying the levees and other infrastructure to protect New Orleans from future shocks. It is an interesting question to ask what does the nation "owe" the New Orleans poor who didn't run from this shock to help them make a life transition? If the New York Times and other media leaders continued to devote space to this story would there be greater political support for continuing to redistribute income to the Katrina poor?

If the media does play such an important role in determining what issues we prioritize, then it would be important to understand how key media outlets such as the New York Times choose what will be on their Front Page each day. How do they prioritize? Does this represent the editor's tastes? What he thinks will interest his median reader? What he thinks is truly important? Does he worry about diminishing returns to focusing on any one topic or does he believe there are increasing returns to hammering on a specific topic such as running article after article on a specific topic.

I recognize that there are "chicken and egg" issues here. Does the New York Times stop covering an issue because it is bored or because it thinks its readers are no board with the topic?

If people have a finite capacity to "emote" for others, then there still remains the issue of chain reactions. If you want to help the Katrina affected poor, how do you set off a chain reaction to create a social movement such that middle class tax payers are willing to spend their money to help?


November 16, 2005
FEMA Is Set to Stop Paying Hotel Cost for Storm Victims
By ERIC LIPTON

JACKSON, Miss., Nov. 15 - The Federal Emergency Management Agency moved Tuesday to nudge victims of Hurricane Katrina toward self-sufficiency, announcing that it would cut off financing for most of the 60,000 families in government-paid hotel and motel rooms by the end of this month.

The deadline, three months after the hurricane struck, will bring the agency's assistance packages more into line with the customary array of federal disaster aid.

"There are still too many people living in hotel rooms, and we want to help them get into longer-term homes before the holidays," the agency's acting director, R. David Paulison, said in a statement. "Across the country, there are readily available, longer-term housing solutions for these victims that can give greater privacy and stability than hotel and motel rooms."

The cutoff will come in two phases. In the first, payments for hotel rooms occupied by about 50,000 of the families will end on Dec. 1. In the second, an apartment shortage in Louisiana and Mississippi has led the agency to give the 12,000 families living in hotels in those two states until Jan. 7 to move out, or assume the cost on their own.

Assuming that their permanent homes still cannot be occupied, FEMA will offer people in both of those groups temporary-housing rental assistance worth an average of $786 a month. That is less than half what hotels have been costing the government in a typical month.

Nicol Andrews, a FEMA spokeswoman, said the agency's caseworkers, as well as charities that it is helping to finance, would assist these families in the search for housing.

"We are just trying to help people move on," Ms. Andrews said.

But Representative Barney Frank of Massachusetts, the ranking Democrat on a House panel that oversees housing issues related to the hurricane, said FEMA was not giving the families enough warning.

"Two weeks' notice is outrageous," Mr. Frank said. "These are not people who can easily find alternative accommodations."

The agency has also notified state and local governments that it plans to end financing on March 1 for a program, set up in about two dozen cities, through which apartments have been rented on behalf of storm victims. Houston alone has issued 39,500 vouchers for evacuee families, costing the federal government more than $100 million.

The goal of this program was to speed the move from shelters or motels into more stable housing. But FEMA wants to get out of the business of directly financing the rental of apartments. The agency has told state and local governments that as of this week, they can no longer sign leases of more than three months. As of Dec. 1, they will no longer be able to sign any new leases. And finally, as of March 1 the government is to stop paying for all outstanding leases, although FEMA officials said Tuesday that state and municipal authorities would be permitted to apply for extensions.

It remains unclear what will happen in cities like Houston, where officials have signed many yearlong leases for evacuees from the storm.

None of this prevents victims from using direct aid from FEMA - the $786 a month on average - to rent apartments or assume control of leases that the state or local government has initially rented on their behalf. Housing aid for these families will last up to 18 months; a total of $1.2 billion in such aid has been given to more than 500,000 families so far.