Now this is a forward looking Mayor! A cynic might ask why a mayor who can't run for re-election again would care about the environmental health of New York City 24 years from now in the year 2030. A moral philospher might state that the mayor is altruistic and cares about future generations. An economist would point out that the Mayor owns some expensive land in the fancy part of New York City and this land will be more valuable if NYC remains a "Green City" into the future.
Regardless of his "true" motivations, this is a pretty impressive speech. I sent the Mayor a copy of my "Green Cities" book maybe he read it?
Office of the Mayor
New York, NY 10007
MAYOR BLOOMBERG DELIVERS SUSTAINABILITY CHALLENGES AND GOALS FOR NEW YORK CITY THROUGH 2030
Remarks as Delivered
Date: December 12, 2006
Location: Queens Museum of Art, Flushing Meadows Corona Park, QUEENS
Event: Delivers “New York City 2030: Accepting the Challenge” Address
Mayor Michael Bloomberg: Thank you. I might point out I also promised a subway series, an Olympics, a few other things, but nevertheless, for the things you listed, thank you very much. Marcia, thank you and thanks to the League of Conservation Voters for hosting us today as we look ahead to the year 2030 and to the immense challenges facing our City.
Some might think that whatever happens by then won’t be our problem.
But, speaking for myself, I’m going to be 88 years old that year and the kind of city we have certainly will matter to me. What’s more, my mother will be 121 and she just might come down from Boston for a visit some time so-
And that’s why we’ve come together today at the Queens Museum, which plays such a vital role in the cultural and civic life of Queens, and which I also want to thank for their hospitality.
Because it’s here in Flushing Meadows, in the heart of Helen Marshall’s district- borough, that more than once, New Yorkers have looked beyond the present, to see the promise of the future.
Whether it was at the 1939 World’s Fair, when men and women, still feeling the effects of the Great Depression, dared to imagine a dazzling “World of Tomorrow,” or at the 1964 World’s Fair, whose glorious panorama you just walked through and which featured the futuristic wonders of what people were starting to call “the global village.”
Only five years ago, looking 25 years into the future might have seemed a bit unimaginable. After 9/11, we weren’t sure what even the next day would hold. Instead of looking ahead, many people were looking back, fearful of seeing a return to the days when New York’s dangerous streets, graffitied subways, and abandoned housing were national symbols of urban decay.
We recalled seeing our city’s population plummet by nearly one million in just ten year’s time. Many of us remember that era all too well. And many of us have worked hard over the years to bring New York – and New Yorkers – back – and then some. The past five years have truly rewarded our efforts. Building on the successes of our predecessors, we’ve driven crime down to levels last seen when the ‘64 World’s Fair opened. Our welfare rolls are lower than they were in 1964, as well. Today, our streets are cleaner than they’ve been in 30 years. We’ve increased high school graduation rates to a 20-year high. Our bond rating is the best ever.
Unemployment is at an all-time record low. New Yorkers are living longer than the average American for the first time since World War II. And the most visible symbol – and source – of New York City’s comeback is that we’re growing again – our population is at an all-time high.
A generation of dedicated New Yorkers – including many in this room – have played a role in making this happen, and I want to especially acknowledge the strong leadership provided by my predecessors: Mayors Koch, Dinkins, and Giuliani. As a city, we stand on their shoulders – and because we do, we are standing taller and stronger than ever.
We should be proud of what we’ve achieved together, not just over the past five years, but over the past twenty-five years.
It would be easy to sit back now and enjoy what we’ve done; to let our successors worry about the future. But we must not become complacent. That’s not how New York became great. And it’s not how I plan to spend the last eleven hundred and fifteen days of my term as mayor! But who’s counting?
(Applause)
Over the first eighteen hundred days we've already begun making the investments that will ensure the city's long-term future: A $4 billion commitment to finishing the
Third Water Tunnel -- double what has been spent by the last five administrations combined and a $1.6 billion to build the vital Croton water filtration plant, and $13 billion for the largest school capital plan in the city's history.
We're turning Fresh Kills, once the world's largest landfill, into the biggest new city park in more than a century. And a few days ago, we sold bonds for the Number 7 line, the first major expansion of the subway system in decades, and the first in modern memory paid for by the city.
But we also know that much more work needs to be done. Last January, I asked
Deputy Mayor Dan Doctoroff to develop a long-term land use plan for the city. At the time, we both thought it was a project that would just take a few months.But as we worked, we discovered the sheer scale of what was ahead – the intricacy, urgency, and interdependency of the challenges we face.
We realized that unless we considered the full range of challenges to our City's fiscal environment- physical environment, the progress we’d worked so long and so hard for might be at risk. And it became clear that to secure a stronger, cleaner and healthier city for our children and grandchildren, we had to start acting now. In short, we realized that New York needed – not a long-term plan for land use, but a long-term plan for sustainability.
“Sustainability” is a word that’s used a lot these days. But at its heart, it simply means striving to make our city greater, not just for ourselves, but for those generations still to come. Today, we have a rare opportunity to achieve that goal. Because with the city’s immediate prospects as healthy as they are, and with our Administration not beholding to special interests or big campaign contributors, we now have the freedom to take on the obstacles looming in the city’s future and to begin clearing them away before they become rooted in place.
To help us meet that challenge, we created a new Office of Long Term Planning and Sustainability. They’re supported by a team of more than 15 City agencies. Joining them have been some of the best and the brightest: independent scientists, think tank scholars, respected academics and city planners, innovative green builders.
And because our focus has been on community-based strategic planning, not central planning, our team has also included neighborhood activists, public interest advocates,
labor leaders, and others from the private and non-profit sectors.
Some of our partners serve on our Sustainability Advisory Board, while others have played a more informal role. With help from all of them, we’ve studied every part of this city. We’ve looked at every playground – all 1,310 of them – and identified which neighborhoods will need more of them going forward. We’ve rated the age and efficiency of all 25 power plants serving the city through 2030. We’ve estimated which of our nearly 250 miles of subway routes will be congested on an average day in the year 2030.
We have, in short, tried to anticipate every physical barrier our communities will experience to maintaining – and building on – the quality of life we enjoy today.
And the process has given us a new, deeper, and sobering appreciation of the magnitude of the challenges New Yorkers face. Through our work, we’ve identified three major challenges our city will face over the next 25 years:
First, we will be getting bigger. By 2030, projections show that our city will add nearly one million more people, along with millions of additional tourists and three-quarters of a million new jobs.
Second, our infrastructure will be getting older, more than a century old in many places, and it will be under increasing pressure.
And third, as our population grows and our infrastructure ages, our environment – our air, water, and land – will be pushed to new and possibly precarious limits.
Today, we’ll share what we've learned over the past 11 months.We’ll also present 10 aggressive but achievable goals that we’ve developed – with the help of our extraordinary team of policymakers and advisors. They’re our goals for making New York a sustainable city by 2030. We’ll also launch the next stage of this process: Developing, with extensive public input, a detailed action plan to create a sustainable city- a sustainable future for our city, a process that we are calling “Plan-Y-C.” Informed by that process, three months from now we’ll present New Yorkers with specific proposals for reaching each of our goals; in three months we’ll be explaining in full the regulation, legislation, financing mechanisms, or other measures they will require. And then we’ll reach out to our partners in every branch and at every level of government to begin turning those goals into realities.
The engine driving New York’s future is growth, growth that’s evident all around us.
It seems wherever you walk in our city these days, whether it’s Kingsbridge Heights or
Lower Manhattan; Queens West or East New York; Fort Greene or here in Flushing, there’s new housing being built. Over the last two years, more permits for housing construction have been issued than at any time since the early 1970s, and we will need all of those new units, and more.
Because the Department of City Planning projects that by 2010, New York will grow by another 200,000 people. And by 2030, our population will reach more than 9 million – the equivalent of adding the populations of Boston and Miami to the five boroughs.
The result is a surge that is taking our population to new heights, and our city into uncharted waters. This growth could bring incredible benefits: Billions of dollars in new economic activity will be generated by new jobs, residents, and visitors. But growth also presents challenges: It can undermine neighborhood quality of life, which is why over the past five years we’ve rezoned more than 4,000 city blocks in dozens of neighborhoods, to allow for growth where there’s capacity, and preserve community character when appropriate.
Growth can also bid up housing prices. And with more than a third of New York City renters already paying more than half their income on rent, we can’t let that pressure on family budgets grow any worse. In response, we’ve undertaken the largest affordable housing plan of any city in the nation, one that will create and preserve affordable housing for 500,000 New Yorkers by 2013—that’s more people than live in Atlanta, Georgia.
But we know even it won’t be enough. Population growth also increases the need for more of the parks, playgrounds- and playgrounds that families depend on, even as the competition for land use becomes more intense. We have added 300 acres of parkland over the past five years, yet more than 100 neighborhoods still do not have enough playgrounds for the children who live there.
Our growing population also presents transportation challenges. Strong leadership and major investments over the past 25 years have made our subways cleaner and safer today than they’ve been in decades. But, as a result, ridership has soared – making some commutes more of an “up close and personal” experience than we’d really like.
In short, growth is a challenge that can produce great benefits, but only if we prepare for it and guide it – so that our city stays as open and welcoming as ever.
OPENYC VIDEO ROLLS
Because Joe is not alone in wanting to live here, our population is expected to reach undreamed-of levels. This poses an enormous new challenge, and to meet them, we’ve set these three goals: Creating enough housing for almost a million more people and finding even more creative ways to make housing more affordable for more New Yorkers; Ensuring that even as land becomes more scarce, every New Yorker lives within a 10-minute walk of a park so that every child has the chance to play and be active. And so congestion doesn’t bring our economy grinding to a halt, adding to the capacity of our regional mass transit system, so that travel times stay the same – or get better.
Our growing New York will always be the most diverse city on earth. It will remain a magnet for artists, entrepreneurs, and ambitious immigrants from every corner of the globe. But despite our dramatically varying backgrounds and ambitions, we’ll share so many common experiences as New Yorkers. For starters, we will all go about our days confident in, and, in most cases, taking for granted the systems that underpin this exceptional city.
For example, think about what you did to get here this morning.
Maybe your alarm went off, you turned on the lamp, you ran some water to brush your teeth.
(Laughter)
Picked up the paper, which had been delivered by truck.
(Laughter)
For breakfast, you made some toast…
(Laughter)
…took a phone call from a Deputy Mayor, telling you not to mess up the speech you were going to give in Queens this morning, made yourself some hot coffee…
(Laughter)
… then hopped on the subway to get here.
In other words, you relied on the City’s infrastructure – without ever giving it a single thought. In millions of components- Its millions of components just have to work seamlessly… … every second ... day after day... year after year... for all of us to survive.
And, for the most part, they do. And that’s a testament to the genius of visionaries like Thomas Edison; to the skill and muscle of sandhogs who blasted subway and water tunnels through 400 million-year-old bedrock, and to all those who engineered and built our brilliant city.
But even their amazing achievements can't outlast the ravages of time.We’re a city that runs on electricity, yet some of our power grid dates from the 1920s, and our power plants rely heavily on outmoded, heavily-polluting technology. Our subway system and highway networks are extensive, and heavily-used, yet nearly 3,000 miles of our roads, bridges, and tunnels, and the majority of our subway stations, are in need of repair.
And even though we’ve invested hundreds of millions of dollars to improve our sewer infrastructure over the past 15 years, at the current pace, a full upgrade will take another 500 years. And hopeful as I am for a long and happy life, even I don’t expect to see that day!
By 2030, virtually every major infrastructure system in our city will be more than a century old, and pushed to its limits.
It doesn’t have to come to that…if we act. Once, infrastructure solutions were pioneered in New York. Now it's time for us to rise to the challenge again, with a new commitment to upgrading and maintaining New York’s infrastructure.
MAINTAINYC VIDEO ROLLS
Achieving sustainability for our growing city means protecting its foundation, our infrastructure. And to do that, we’ve set these three goals:
Developing critical back-up systems for our water network so every New Yorker is assured of a dependable source of water even into the next century.
Reaching a full state of good repair for New York City’s roads, subways, and rails for the first time in history.
And providing cleaner, more reliable power for every New Yorker by upgrading our energy infrastructure.
In addition to a surging population and a straining infrastructure, we also face
the challenge of preserving and “greening” an increasingly embattled urban environment.
The good news is we’ve already taken major steps in the right direction. Exhibit A is our Solid Waste Management Plan, which, thanks to the active support of the League of Conservation Voters, Speaker Quinn and the City Council passed earlier this year.
It was the most dramatic environmental victory New Yorkers have achieved in decades, one that will increase recycling, and completely end our Sanitation Department’s use of heavily polluting, diesel-burning long-haul trucks.
Nor is that an isolated achievement. In the past five years, City agencies have cut their greenhouse gas emissions by more than 350,000 tons a year. We’ve made far-sighted investments that will protect the purity of the water we drink. And not far from here, we’re turning the site of the old Elmhurst gas tanks into a beautiful new park, just one example of how we’re reclaiming former industrial sites for open space and housing.
But the demands of our growing population require we do far more to protect our environment. Despite the gains we have made over the past two decades, our aging sewer network still discharges two billion gallons of sewage into our waterways every year.
Even though we have cleaned hundreds of acres of brownfields across the city, there is still much more contaminated land waiting for the reclaiming- waiting to be reclaimed for new jobs, housing, and parks.
Our air is cleaner now than it was for much of the 20th Century, yet we have one of the highest asthma hospitalization rates in the country and its effects are most severe for young children in neighborhoods with high poverty rates.
Meanwhile, we've all noticed that the weather seems to be getting more unpredictable and summers seem to be getting hotter. And longer. That’s not just a perception;
it’s a reality. It's called global warming, but the impact can be local. Not that I’m complaining about fifty-degree weather in December, but we’re a coastal city. And the increase of greenhouse gases in our air is not only lifting temperatures, but may also be contributing to our rising sea level. That means that when major storms hit in the future, the resulting flooding could be worse than anything we’ve ever seen.
We now know the cost of failing to prepare. It can devastate a great city in just hours, which is why we have created a comprehensive Coastal Storm Plan.
But to reduce the threat of dangerous storms, it’s also essential that we do our part to dramatically cut greenhouse gases. To ensure the health of future generations and to establish New York as a leader in meeting some of the greatest challenges of our time, we must do more to green our city.
GREENYC VIDEO ROLLS
As Carlton said, if anyone can innovate when it comes to the environment – or anything else – New York can. And in that spirit, we’ve set these four environmental goals:
--Reducing our city’s global warming emissions by more than 30% by 2030, a target we know is achievable even just using technology that exists today.
--Achieving the cleanest air quality of any big city in America…
--Cleaning up all of our contaminated land...
--And, finally, opening 90% of our rivers, harbors and bays for recreation by reducing water pollution and preserving our natural areas.
Clearly, we have a lot of hard work ahead of us. I’m not going to pretend that fulfilling these goals will be easy. We know that some of these solutions will be difficult, and some will cost money.
But in a very real sense, the predicament of our future is also our hope. The very same population growth that intensifies the challenges we face also offers us
the resources for meeting them and the means needed to help achieve sustainability.
I also agree strongly with Kenneth Jackson, that doing nothing has its costs, too – economic and environmental, costs that will only escalate with the passing years. Refusing to saddle our children with those high costs is what fiscal responsibility is all about. It's why the discipline we’ve shown and the investments we've made for the past five years have given us a strong foundation to face our future. To address the challenges before us, we’ll seek the cooperation of policymakers at every level of government, including the Governor-elect and our regional partners.
And the really creative solutions to our problems are especially likely to come from the private sector, or from non-profit organizations, or from community leaders who are determined to make a difference.
We want to hear all of those voices. And we need to.
That’s why we are going to conduct a major public outreach effort over the next few months to solicit ideas, get feedback, and build toward consensus.
Today we are launching that citywide conversation.
In fact, the first discussion will take place right here on this stage. We have assembled an impressive panel of experts representing a broad spectrum of disciplines and opinions.
And now it is my pleasure to introduce the moderator for this discussion – a long-time resident of our City who loves it as much as his native South Dakota and who believes in the power to innovate and inspire.
Ladies and gentlemen, please welcome a great New Yorker and a good friend – Tom Brokaw.
PANEL DISCUSSION TAKES PLACE
Wait, we’re not done yet. Sit down, sit down. I knew this was going to happen.
(Laughter)
You can’t leave until we sa- everything has been said but it hasn’t been said by everybody. So we’ve got to do that. Anyway, seriously, thank you, Tom and all of our distinguished panelists.
I think it’s clear from that spirited discussion that the question isn’t IF there are solutions, but which ones to pursue. And Ed and I will be talking about it over steak and potatoes.
As we go forward, seriously, it’s important to know that every good idea will be on the table and that every reasonable proposal will get a fair hearing.
To help us generate those ideas, we’re going to go to the real experts and that is you – New Yorkers in all five boroughs.
We’ll also encourage our neighbors in the region to participate as well. .
So go to our website, the address is here. Look for meetings we'll be holding in every borough, bring us your ideas. Next week, the city’s daily newspapers will include a brochure that summarizes the challenges we’ve considered today and I want to thank them for helping us start what I hope will be many conversations – on subway platforms, at neighborhood gatherings, and at dinner tables all over town.
We’re only at the beginning of this process, let me remind you. And if it looks today like we have a steep hill to climb, we really do. But the willingness to dream big and then act on those dreams is how New Yorkers created the greatest city in the world.
Whether it was designing a street grid for one million people at a time when our population was only 100,000. Or unveiling plans for a central park, even though the heart of the city was still a mile to the south; or building one of the world’s largest subway systems, when much of our city was still farmland and fields.
Previous generations imagined how New York would change, and they delivered.
And now it is our turn. It was exactly 44 years ago this week that President John F. Kennedy stood just a few steps from where we are today and helped launch construction of the U.S. Pavilion for the 1964 World’s Fair. That Pavilion was called "Challenge to Greatness” and asked Americans not to remain content with victories from the past, but to face the hazards and embrace the hopes of the future.
Today, our future presents us with new challenges. And meeting them requires greatness from all of us, too – a greatness of spirit, of purpose, and of vision.
Now it’s up to us to look ahead, as earlier generations did and begin to plan for a better, stronger, and more sustainable future for our children, and for theirs.
++
It is our city.
It is our future.
It is our choice.
And shame on us if we aren’t up to the task. We can’t just say fu- people in the future should do it. The future is now, and we’ve got to make sure that we get viewed beautifully by the perspective of history.
Thank you very much, have a good day.
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Dear Readers, In recent months, I have posted my public writing to my free Substack. I have such fond memories of Google Blogspot, thus it deeply surprises me that Google's search engine does a terrible job in helping those who search to find past blog posts. This deeply surprises me. As I age, I'm trying to post more dignified material to my Substack. I am sticking to what I know based on my ongoing research in microeconomics. Thanks very much for reading my posts. Best Regards, Matthew E. Kahn
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I have moved my blog over to Substack (and I've lost many readers). Please join me there. Here is a recent column. The Wall Street Journal has published an important piece about how the high heat is reducing economic activity in Houston. The piece has a pessimistic tone that the heat melts the city’s infrastructure and shaves off economic activity as people don’t want to go outside. When microeconomists study consumer expenditure dynamics as people buy cars, go out to dinner and buy groceries. During hot spells, people are less likely to go out for dinner or to play multiple rounds of golf. A microeconomist would say that this evidence indicates that people have “state dependent preferences”. In English, this means that how much we enjoy a steak dinner at an outdoor restaurant depends on whether it is 75 degrees outside or 95 degrees outside (this is the “state of the world”). I certainly believe that hot and humid Houston is in a type of “macroeconomic Siesta” right now and this reduces economic activity. But, permit me to make some counter-points. #1 The money people in Houston do not spend on the hot July 28th 2023 is still in their bank account and they can spend it on a cooler November 5th 2023 day. Note this intertemporal substitution. The media focuses on the direct effect of the heat (that high heat is reducing economic activity today) but my counter-hypothesis is that it displaces expenditure to the future when it will be cooler later this year in Houston. So, will the New York Times write a piece saying that high summer heat causes a fall boom in Houston? I don’t think so. This type of cross-elasticity is ignored by the “climate crisis” focused media. #2 The WSJ interviewed a few people who want to leave Houston. As always, they are free to choose. As more workers can engage in WFH, those who hate the high heat will leave the city in summer. If they own a home, they can AirBNB it. WFH is a climate adaptation strategy as it makes people more geographically footloose. I discuss this in my 2022 book. #3 We have to live somewhere. Is Houston becoming more miserable to live in summer than other cities? If the answer is “yes”, then its home prices will fall. Here are some data from Zillow.Even with higher interest rates, I don’t see a collapse here in the Zillow index. Are you going to sell short Houston homes as your strategy to get rich? Incumbent home owners form a strong interest group to invest in adaptation strategies to protect their asset’s value. WHAT are possible adaptation strategies? #1 Road construction materials can be re-evaluated to reduce the urban heat island effect. Read this report. The City has strong incentives to embrace the cost-effective strategies discussed here. #2 Golf courses can open up part of the area and charge people to enter on hot days to use them as private parks. #3 Here are personal cooling strategies. On a personal level, of course the city needs access to strong air conditioning. Firms that make them and repair them will enjoy a boom. The Electricity GRID must remain reliable. The Climatopolis logic is that Houston competes with other cities to attract successful people and firms. The system of cities and the fear of brain drain gives Houston’s leaders and land owners strong incentives to be pro-active in adapting to climate change. Such efforts will be messy as there will be fights over who pays for such local public goods but the end result will be a more resilient Houston where the high heat causes less economic damage in the short term and medium term. This is the climate change adaptation hypothesis.
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The New Economic Geography of WFH Matthew E. Kahn Over the last three years, companies from all over the world have learned valuable information about how their firm’s productivity and worker satisfaction is affected when workers can engage in Work from Home (WFH) on at least a part-time basis. Each firm faces fundamental tradeoffs in not requiring workers to return full time to the office. On the one hand, WFH accommodates worker lifestyles and responsibilities at home. WFH workers gain from commuting less often and some may choose to live further from their place of work because they commute in on fewer days. Firms with happier workers are less likely to face retention challenges and will pay less retraining workers. Given that WFH is a non-taxed perk, firms that offer this job amenity can be less generous in giving workers pay raises. Firms located in expensive areas can economize on expensive commercial real estate. If a firm requires that workers be in the office just half the week, then a firm can reduce its space requirements by 50%! On the other hand, firms benefit from face to face communication. Younger workers gain more from such mentoring. Building up the firm’s culture and monitoring worker effort is easier to do if workers are on site. Each company has a strong incentive to experiment with different workplace practices to learn what works best for their organization. The pursuit of profit actually accelerates this learning process. Economists are always looking for new ways to study firm dynamics. The rise of the WFH economy opens up many questions related to what types of firms will encourage their workers to engage in WFH. Famous executives such as Elon Musk at Tesla and Jamie Dimon at JP Morgan have been encouraging workers to return to the office. Why? Up until now, a lack of data has hindered the systematic analysis of what types of firms prioritize allowing workers to engage in WFH on at least a part-time basis. The newly released Flex Index provides a unique opportunity for researchers. As an urban economist, I am especially interested in the geographic determinants of why different firms engage in hybrid-WFH. The Flex Index provides data on each firm’s headquarters’ location. I focus on those that are based in the United States. I use data for 2528 of them. For this set of firms, I merged in three geographic variables. The first variable is the Zillow Median Home Price Index. Zillow uses a repeat home price index methodology to create a standardized “apples to apples” measure of home prices that can be compared across cities at a point in time or within a given city over time. In the analysis I present below I use Zillow data from December 2022. The second variable I merge in to the Flex Index is the percent of voters in the Headquarters State that voted for Joe Biden in the 2020 Presidential Election. The third variable I merge in from the Zillow data base is the city’s size. So, New York City is the first ranked city in the nation because it is the largest city. I use these data to test two hypotheses; Hypothesis #1: All else equal, firms are more likely to engage in WFH work if home prices are higher in the HQ City. Hypothesis #2: All else equal, firms are more likely to engage in WFH in more Progressive states. To test these hypotheses, I use a linear multivariate regression framework. To standardize the firms, I include industry fixed effects (this variable is in the Flex Index database). The dependent variable is a dummy variable that equals one if the firm’s workers all work on site. In the database, 39% of the firms report having the workers work fully on site. Table One reports four regressions with each column reporting a separate regression. I use the regression output to test the hypotheses presented above. Main Results All else equal, firms are more likely to engage WFH work if home prices are higher in the Headquarter (HQ) City. Based on the results in columns (1) and (3), I find that for the full set of industries and for the Healthcare and Biotechnology industry that workers are more likely to be engaging in WFH if home prices are higher in the HQ’s city. Based on the results in column (2), a doubling of home prices is associated with a log(2)*-.088 = -.06 or a six percentage point reduction in workers working solely on site. This effect is even larger for the Health Care industry. For this subset of firms, a doubling of local home prices is associated with a 12.7 percentage point increase in WFH. For the other two industries, I fail to reject the hypothesis that firms are not more likely to allow workers to engage in WFH as a function of local home prices. All else equal, firms are more likely to engage in WFH in more Progressive states. The test of this hypothesis is based on the coefficient on the 2020 Joe Biden vote share. Across all four specifications presented in Table One, I find consistent evidence that firms are more likely to allow their workers to engage in WFH when the HQ is located in a more liberal state. A ten percentage point increase in Joe Biden’s vote share is associated with a 3 percentage point increase in the probability that a firm allows its workers to engage in WFH on at least a part-time basis. Conclusion The Flex Index is a terrific new data source that allows empirical researchers to study how different firms are incorporating WFH into their work routines. In my 2022 Going Remote book, I hypothesized that the rise of WFH would benefit workers in high home price areas. The evidence presented here supports this hypothesis. Here, I also find a Red State/Blue State divide such that firms located in Blue States are more likely to allow their workers to engage in WFH. Future research should explain why we observe this fact. Are such firms in progressive states more concerned about work/life balance and gender equality issues? There are many open questions that improved data access will allow for us to provide credible answers.
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A majority of American adults live in owner occupied housing. As an economist, I celebrate the logic of revealed preference. While many poor people are renters, many non-poor people reveal that the benefits of ownership exceed the costs. In this entry, I would like to delve into the details here. Up front, let me say that I don’t want to discuss the tax code and the nitty gritty of mortgage interest deductions, the GSEs, etc. Instead, I want to talk about why people gain life satisfaction from ownership and what are some of the hidden costs of ownership under our current “rules of the game”. As an urban economist, I want to contrast the private benefits to an adult of owning a home and the local social benefits conveyed to a community when it consists of home owners. Portfolio Risk from Home Ownership Let’s start with a personal example. Back in 2000, We purchased a home in Belmont, MA (a Boston suburb), we paid 1/2 in cash and got a loan for the rest. The cash we invested in the home had a next best alternative. We could have invested in a diversified portfolio of assets rather than making a place based bet. By buying this home, we were raising our migration costs for moving away from Boston and thus were losing some option value if the local economy performed worse than the rest of the nation. A strange feature of the housing market is that owners hold an undiversified portfolio. Imagine an alternative world where I could own 36% of my Belmont home and own 2% of 32 other homes scattered around the United States. This would be a more diversified portfolio. Of course there would be contracting issues in designing this contract. My friend and co-author Joe Tracy co-authored a MIT Press book on implementing these contracts. The Past Rate of Return on Housing for African-Americans In 2021, I released an NBER Working Paper where I use several data sets to make a simple point. Here is my paper’ abstract: “The racial and ethnic composition of home buyers varies across geographic locations. For example, Asians and Hispanics are much more likely to buy homes in California than Blacks and Blacks are more likely to buy homes in Georgia than other demographic groups. Home prices grow at different rates across geographic units such as counties or zip codes. Hedonic bundling inhibits buyers from purchasing shares of different homes and forming a spatially diversified housing portfolio. Spatial variation in purchases suggests that the average rate of return to housing varies across racial and ethnic groups. To test this claim, I construct a geographic shift-share index by combining Zillow geographic specific home price index data with HMDA micro data. The shift share calculations yield the average rate of return to home ownership by purchase year, and sale year for different demographic groups. Over the years 2007 to 2020, Blacks earned a lower rate of return on home purchases than Asians and Hispanics and the sample average. Within geographic areas, average loan differences across racial and ethnic groups are very small.” Let’s unpack this. Over the last 25 years, cities such as San Francisco, Boston, Portland, Seattle, San Jose, Malibu, and Santa Monica have boomed. None of these cities is known to be an African-American city. African-Americans tend to buy in other cities such as Baltimore, Cleveland and Detroit. What is going on here? (and of course I am telling an Average story —- LeBron James lives close to me in Los Angeles’s Brentwood). African-Americans on average have lower wealth than Whites and are less likely to be able to afford the down payment to buy housing in Superstar Cities. African-Americans are less likely to work in Tech than Whites and Asians and this reduces the likelihood that they are living in the major tech hubs. In the areas where African-Americans have ties, house prices have not appreciated much and this means that the AVERAGE African-American homeowner has earned a lower rate of return on housing over the last 25 years. Going forward (from 2023 to 2040) will Baltimore’s housing market outperform San Jose’s? This is possible. In my recent WFH Going Remote book, I present microeconomic arguments for why this is possible if Baltimore improves its quality of life. In closing this section, I want my readers thinking about opportunity cost. If an African-American family owns housing in Baltimore then that money is not invested in the SP500 stock market index. Opportunity cost for asset investments always exist. What About the Consumption Value of Home Ownership? When we teach Econ 101, we introduce our students to the utility function. This is the economist’s “thermometer” measuring how much pleasure we gain from different consumption bundles such as consuming beer or pizza. The consumer knows herself and knows her budget constraint and makes the right (affordable) consumption choice. Assuming people are consistent over time, we learn about their priorities from the choices they make as market prices and their income changes. With this preamble, why does home ownership raise one’s utility? One hypothesis is “pride of ownership”. But what do these words mean? Economists have struggled with modeling the demand for “status”. Economists have taken Veblen seriously and have sought tests of which subgroups of people seek to own and display luxury goods to signal that they are special. Here is a paper about cars and jewelry ownership. Of course, I understand the desire for status. I continue to submit papers to Top 5 journals and to track my Twitter Follower count! But, the point of this 1/2 joke is that there is an ever increasing number of strategies for producing “status”. As I age, I gain pride by reaching my Google Fit target of 10,000 steps a day. During my life time, I have lived in fancy rental housing in Manhattan, Singapore, and Baltimore. Given the changing demographics of our population, real estate suppliers will offer rental properties if there is demand. Don’t Renters Face Displacement Risk and Gentrification Risk? Yes, but if this is a serious concern then renters can sign longer term contracts up front. Scottie Pippen signed a 10 year contract with the Chicago Bulls at the start of his career because of his fear of injury. In a renter economy, there would be less support for local NIMBYism and real estate developers would build more housing and this would reduce rent rise risk. The ongoing conversion of commercial urban real estate into residential housing also reduces the likelihood of medium term rent spikes. I claim that it is time to visit this important paper by Todd and Nick. Sinai, Todd, and Nicholas S. Souleles. "Owner-occupied housing as a hedge against rent risk." The Quarterly Journal of Economics 120, no. 2 (2005): 763-789. Neighborhood Social Capital Boosts Due to Home Ownership? Ed Glaeser and Denise DiPasquale have posited a positive spillover that when real estate is owner occupied that the owner has the right incentives to maintain the property (to maintain the resale value) and to not free-ride in terms of neighborhood attributes such as safety and neighborhood greenness. Their empirical strategy in their applied research was to use panel data at the individual level and observe how the same person behaves before and after she becomes a home owner. A field experiment researcher would want to go a step further and randomly assign similar people at the baseline to renting versus owning and then observe how their home is treated and how their neighborhood’s quality of life changes over time. I greatly admire their work here but I want to be provocative and argue that their work is out of date due to technological change. I want to return to a paper by Baker, George P., and Thomas N. Hubbard. "Contractibility and asset ownership: On-board computers and governance in US trucking." The Quarterly Journal of Economics 119, no. 4 (2004): 1443-1479. These authors tell the following story. Back in the 1970s, truck drivers bringing stuff from California to Baltimore markets had private information about their routes and effort. The food company gave the truck driver a share of the profits to incentivize them to not shirk with respect to effort. The advent of cheap GPS computers meant that the food company could easily monitor the trucker and could now pay him a fixed wage. The same idea holds in 2023 for rental housing. The big data monitor era allows the property manager to have a very good sense of how the tenant is using the property and what is going on in the local neighborhood. If crime rises, the property manager can hire private guards. If litter increases, a crew can be hired to pick up the trash. Markets substitute for social capital and volunteering! Conclusion The modern Economy’s Big Data revolution and climate change risk both create incentives for more of us to be renters. Going forward if more of us are renters in the year 2040; then we gain the following adaptation benefits; #1; Our assets are less exposed to place based shocks (i.e Hurricane Ian), #2 we hold a real option to move away from areas that turn out to be at greater risk from shocks, #3 There is less lobbying for place based subsidies using national subsidies because “victims” have fewer place based assets at risk (i.e we are each holding a more diversified portfolio). If government steps back from insurance markets, the private sector will step up its game and insurance innovation will further spur the pace of climate change adaptation. If these ideas interest you, read my 2021 Yale Press book Adapting to Climate Change.
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Climate change adaptation refers to our individual and collective ability to cope with Mother Nature’s more intense weather punches in terms of extreme heat, drought, fire, flood and many other place based risks. My microeconomics research, as sketched out in my 2010 Climatopolis book and my 2021 Adapting to Climate Change books, argues that capitalism accelerates our ability to adapt as market price signals encourage substitution and innovation. Whether government policy complements the private sector muffles the private sector’s efforts continues to be a major research topic. In my 2010 Climatopolis book, I asked; “If Milton Friedman ran the U.S FEMA (and thus committed to no generous ex-post bailouts to shocked places) how much faster would adaptation occur?” In my ongoing empirical work, I continue to study how extreme weather affects our economy. I see evidence of adaptation progress as the “climate damage function” flattens and this means that the same punches thrown by Mother Nature cause less damage over time. My students are studying this hypothesis in the developing world and investigating what frictions (such as government policy) inhibit adaptation from taking place. An example would be government price supports for agriculture that create a moral hazard effect. See this 2015 paper set in the United States. My Thoughts About the Work by Two Talented New York Times Journalists The New York Times continues to be the paper of record. Two of the leading authors for the Times are Christopher Flavelle and David Wallace-Wells. I link to their work so you can read it on your own. David recently published a huge New York Times Magazine piece that you can read here. I want to keep this entry short but I plan to expand upon the themes I present below. I must acknowledge upfront that I have not interviewed either of them about their climate change adaptation pessimism. My points I present here are based on my reading of their work. How Does a “Climate “Crisis” Emerge? Global greenhouse gas emissions will continue to rise. Read our 2022 NBER paper. We do not know how much global average temperatures will rise due to rising emissions and we do not know what “crazy” weather will emerge because of what we have collectively unleashed. In a series of case studies, Flavelle argues that we have built up billions of dollars of place based capital in increasingly risky areas such as Florida that face more severe disaster risk. He emphasizes the moral hazard effect that the expectation that there will be Federal Bailouts of struck areas encourages more rebuilding in these areas. So, he is telling a story that we do not learn from our mistakes. He does not explain who is the “adult in the room”? Why don’t city urban planners, the mortgage lending industry, the real estate development industry, the insurance industry adopt new “rules of the game” so that new real estate development is nudged to “higher ground” or if we build in risky places that private actors are incentivized to invest in pre-cautions that reduce the damage caused by the next storm. Starting with my Climatopolis book, I have argued that if people make place based bets (such as investing in Miami real estate), then they should flip two sided coins. They get to keep the upside appreciation if local prices rise but they also must “eat” the downside loss if local prices decline because of rising risk and better opportunities in other real estate markets such as Boston or Houston or Buffalo. I do respect his point that the public sector activism in insurance markets is causing an important free market distortion. As the social cost of this distortion rises, economic theory predicts that political reform will take place. Why should tax payers on “higher ground” bail out risk takers over and over again? Why reward “bad behavior”? As we saw with the economy’s reorganization during the COVID crisis of 2020, markets adapt and change when new news occurs if government does not distort price signals. The rise of the Zoom WFH experiment was an amazing example of adaptation. David Wallace-Wells argues that adaptation is costly and will exacerbate existing inequality. A quote “Talk enough about adaptation, and you drift into technical-seeming matters: Can new dikes be built, or the most vulnerable communities resettled? Can crop lands be moved, and new drought-resistant seeds developed? Can cooling infrastructure offset the risks of new heat extremes, and early warning systems protect human life from natural disaster? How much help can innovation be expected to provide in dealing with environmental challenges never seen before in human history? But perhaps the more profound questions are about distribution: Who gets those seeds? Who manages to build those dikes? Who is exposed when they fail or go unbuilt? And what is the fate of those most frontally assaulted by warming? The political discourse orbiting these issues is known loosely as “climate justice”: To what extent will climate change harden and deepen already unconscionable levels of global inequality, and to what degree can the countries of the global south engineer and exit from the already oppressive condition that the scholar Farhana Sultana has called “climate coloniality”?” These are great questions but note that these are economics questions. What is the quality adjusted price of the goods we need to continue to be safe, comfortable and healthy? David Wallace-Wells owns a computer and a cell phone. These products didn’t exist in 1940. Every day they grow cheaper and become of higher quality. This is what market competition does. More poor people in the developing world can afford these products as quality adjusted prices decline. Note that Wallace-Wells is rightly concerned with poverty and the challenges that poor people will face going forward. An economist would reply to his pessimism; “okay, you are not worried about Elon Musk’s ability to adapt to new risks. Let’s rank all of the world’s population with respect to their income. Who are the people who currently do not have the capacity to adapt to the serious challenges that wacky weather is posing? What income growth would give them the opportunity to adapt? Why isn’t this income growth occurring? “ Note that David Wallace-Wells is saying that economic growth in the developing world is the key to adapting to climate change. We need poverty alleviation to help everyone to be able to adapt. Here we agree. Economic growth is the key tool for adapting to climate change. Such economic growth reduces poverty. Here is a study of global poverty alleviation by a leading macro-economist. I recognize that I am positing that national economic growth reduces poverty. Is this a controversial claim?
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This has been a very hot summer. For every person on the planet, what is her willingness to pay to avoid this hot summer? So, on a day when it s 93 degrees on average --- how much is Sally in Seattle willing to pay for this day to have been 78 degrees instead?
In a "make versus buy" economy, one can either pay God to not face the 93 degree day in Seattle or one can use a suite of adaptation strategies to cope with the high heat. Basic economic logic teaches us that one's willingness to pay to avoid the heat is bounded by what it would cost you to adapt to the heat. This blog post focuses on the microeconomic determinants of adapting to the heat.
I will argue that at any point in time, this adaptation strategy set is almost infinite dimensional and that the dimensions of the adaptation strategy set grow over time so that it gets ever easier for us to adapt to the high heat. This means that our willingness to pay to avoid facing the extreme heat actually declines over time because it is getting cheaper for us to adapt on our own to the heat. In my 2021 Adapting to Climate Change book, I expand on this point that the Social Cost of Carbon can actually decline over time for many people as their adaptation choice set grows.
Let's start with the marginal cost curve that is familiar to anyone who has taken Econ 101.
Case #1: A firm produces pizza using a linear production function such that pizza=10*Labor and the price of Labor = 2 each.
Given the linear production function, the firm can always make one more pizza if it hires .1 workers. It costs $2 per worker so the marginal cost to the firm of producing an extra pizza =2*.1 = 20 cents and this is a constant function.
Case #2: A firm produces pizza using a concave production function such that pizza=10*square root of Labor and the price of labor is .4 each.
In this case the amount of labor needed to make a pizza can be expressed as = Pizza*Pizza/100 and the $ expenditure to purchase this labor equals Pizza*Pizza/25 . This mechanical marginal cost function is convex.
Given this definition of marginal cost, now let's turn to the marginal cost of avoiding heat. Consider a person in Spain today confronted with high heat where she currently lives and works. Here is her strategy set for adapting;
#1 Move to a cooler place (either outdoors or inside such as below ground). Such migration can be permanent or temporary in an economy featuring cross-city transportation services and AirBNB short term housing.
#2 seek out a shady place with a breeze
#3 turn on air conditioning or go to a public place with air conditioning, A theme in my 2010 Climatopolis book was that if an area is known to face rising summer heat then people will change their durables and their home and work place architecture to be better prepared for the heat. We are not passive victims!!
#4 wear lighter clothing
#5 use a damp towel
#6 drink water
#7 take a Siesta and stop working during the hottest hours
#8 Eat lightly
Each of these adaptation strategies has a financial cost and a time cost. As Gary Becker taught us the full price equals the financial cost + your wage*time cost. For example, migrating will require more time and for high value of time people, this will mean incurring a larger cost.
I will stop here but note the following. Taking permutations of these various options yields an almost infinite dimensional adaptation choice set. Modern climate economics assumes that this choice set is stationary. In truth, it expands on a daily basis as we make progress building higher quality durables such as housing and air conditioning units and as we retire older capital and install newer capital. Modern economics is weak on capital updating problem. John Rust wrote a famous bus engine replacement paper but climate economists haven't incorporated this logic into the updating of the spatial capital stock. My paper with Devin Bunten is one attempt to address this issue.
Once we acknowledge that we have an ever growing set of adaptation strategies that are becoming cheaper and cheaper to use then one becomes more optimistic about the ability of the rich and the poor to adapt to the new serious challenges we face.
One example of the rising permutations. More and more educated people now have the opportunity to engage in Work from Home. These individuals can now more easily take a Siesta on a hot day. This is an example of the permutations of the strategy set listed above.
My critique of modern climate economics is that so many researchers are content to estimate reduced form empirical regressions of the form;
Person i's suffering on day j in location q = constant + b*Extreme heat on day j in location q + U
and take "b" as a physics constant. Assume that "suffering" is measured by lost income and that this can be measured by the statistician.
"b" is an interesting reduced form parameter. It represents a slope that measures at a point in time how much suffering extreme heat has caused to the average person who lives at location q at day j.
My Point is that "b" is determined by all of the factors I discussed above. As society's innovation and urban planning continues; "b" converges to zero over time and this pace of "b" shrinking from a positive number towards zero over time is a measure of our adaptation progress.
I want to see more climate economists exploring the microeconomic determinants of when does "b" change over time and when does it remain constant. Government policies that distort adaptation decisions such as subsidies will likely turn out to be a major determinant of slowing down adaptation.
As the marginal costs of climate adaptation decline, simple economics predicts that more individuals and firms will engage in adaptation (as they compare the benefits to the costs of adaptation) and as they engage in such self protection, the empirical reduced form researcher will estimate climate damage functions showing an ever declining amount of damage caused by climate change.
The Climate Change adaptation literature needs to take basic microeconomic logic about rational choice more seriously and then we will make more progress understanding the pace of adaptation and the frictions that slow down adaptation.
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Is face to face interaction over-rated? I am not talking about participating in the service economy (i.e getting a haircut), romance, friends and family interaction. I am talking about workplace face to face interactions and the vaunted "Water Cooler" (WC).The cliche WC story has focused on serendipity and spontaneity that occurs when people casually chat about this and that. This is not "directed search".POINT #1; Pessimists claim that the rise of WFH-HYBRID work will tax the Water Cooler such that organizations will become less productive.Counter-Point: The pessimists forget what they learned about self-selection. Workers know themselves, they know when they want to be social and when they want to be left alone. Such workers also respond to incentives. If the boss says; "hey , let's get our creative juices flowing". Workers will respond and be charming and engage on those days.I claim that there is quantity and quality of F2F interactions. The lazy urban economics productivity literature implicitly assumed that F2F interactions are homogeneous and are just a question of their count. So, if you meet with me 1000 times; the probability we have a breakthrough is 10 times higher than if we only meet 100 times face to face. I reject this. Anyone who has met me knows that sharp diminishing returns kick in -- -in speaking with me!POINT #2; The Water Cooler is a pre-AI, pre-UBER entity. I am interested in directed search. UBER matches drivers and riders to achieve efficiency criteria. Why can't successful firms introduce a type of UBER AI matching to bring different workers together? Why can't a boss make some recommendations about such matching?Point #3 Given successful within firm AI matching of Water Cooler Workers, why do they have to meet at work? Is the firm afraid of romance? That would be a funny reason for the persistence of the office!Point #4; Pessimists claim that we will get into a bad Nash Equilibrium such that social workers will go to the office and discover nobody to chat with as everyone else will be engaging in WFH on that day. In this age of AI Matching, can this misallocation really persist?So, to summarize this blog post; The Quality versus Quantity tradeoff always exists. Organizations have strong incentives to experiment here to see how to maintain their productivity under different organizational rules. How firms adapt to the new opportunity created by WFH is fascinating.FINAL POINT: Note that I set up this blog post such that the spontaneous face to face interactions occur by workers who work at the same firm. In this case, there is a residual claimant who has an incentive to get the rules of engagement right.What happens when workers work at different firms but work in the same city? I doubt that spontaneous F2F is that important for these folks. There isn't that much time in the day. You might say that a Harvard economist and a MIT economist can have coffee and make research magic happen if they both go to work. I accept this example but this is a special example. Do Elon Musk's Tesla engineers hang out at the local bar looking to chat with engineers from other firms?Since urban and labor economists do not have a real understanding of the production function of knowledge firms , we don't understand how the time allocation equilibrium induced by WFH will evolve over time.Of course, I do think that small firms will want to agglomerate close to each other for Labor pooling reasons but this is distinct from the gains from F2F interaction.
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Millions of American workers engaged in Work from Home (WFH) during the pandemic. WFH helped us to adapt to the risk of disease contagion. Going forward, WFH will also helps us to adapt to the rising climate risks we now face. Given that global greenhouse gas emissions are likely to continue to rise as the world’s population and per-capita income grows faster than the decarbonization of the world economy (declining GHG emissions per dollar of GNP), the climate change challenge will grow more severe over time.New climate risk modelling firms such as First Street Foundation and Jupiter are mapping the risks of flooding and fire risk that every land parcel may face over the next decades. Of course, these science based models cannot offer certainty about emerging risks but they do play a “Paul Revere” role in educating both firms and workers about new place based climate risks. You can type in any residential address here and First Street Foundation reports the property's expected fire risk and flood risk for free! Going forward, more and more property buyers will "do their climate risk homework" before making a large $ investment in a property.Before 2020, only the super rich and senior citizens were “footloose” and able to move to an area solely based on its amenities (or on its absence of risk). The rise of WFH allows more and more American workers to live where they want to live as their daily commute to work is no longer looming over where they choose to live. In our recent past, the expectation that one would commute to work 5 days a week for 48 weeks a year pinned down a worker and her family to specific locations near the corporate headquarters.Perceptions and concerns about emerging climate risks will influence where workers choose to live. Those who are risk lovers will actually be attracted to risky areas because property prices will be lower there! For those WFH eligible workers who are risk averse, their menu of locational choices will expand as they can live further from where they work.While no two WFH workers are identical, climate change will influence their locational choices. For those WFH workers who are especially sensitive to air pollution, they will anticipate that elevated fire risk in the American West will create PM2.5 spikes during summer months. They will figure out how to avoid these areas at those times. For those WFH workers who are especially risk averse, they will be willing to pay more for housing in places where climate risk modelers predict that they face less risk. Those WFH workers with niche preferences for leisure and exercise will have increased opportunity to live where they can engage in their hobby and meet like minded people.As different workers choose their own best “climate niche”, this will improve their mental and physical health and raise their workplace productivity. Surveys of young people have documented extreme ecological anxiety. The ability to choose one’s own favorite location that will be likely to attract like minded people will help them to better cope in the face of the new risks we face.If WFH workers choose to cluster in relatively safer parts of the U.S that feature less extreme heat, less drought risk, less flood and fire risk then firms will have an incentive to locate their future HQ2s and HQ3s closer to these areas. Firms will benefit from lower turnover from less burnout and greater worker satisfaction. Firms that expect that workers will stay with the firm longer have a greater incentive to mentor and invest in such workers. Firms will use their corporate data on the location of their workforce and can use this information to decide where to open up HQ2s and HQ3s. An old idea in urban economics focuses on the “chicken and egg” issue of whether people go where the jobs are or whether jobs move to where the people are. In our emerging economy where more WFH are footloose, they will increasingly take into account the emerging climate risks and move to relatively higher quality of life areas. As firms see these spatial clusters, the leadership can open up HQ2s closer to these worker hubs to increase face to face interaction and to buildup the company’s corporate culture.Some worry that the rise of WFH is elitist. As new WFH clusters form in climate resilient places, there will be an increased local service sector demand. This creates a local multiplier effect. Well paid WFH workers will need local teachers living nearby, dentists, repair people, and there will be jobs in construction. This increased local labor demand in a relatively high quality of life area featuring lower rents than in the Superstar Cities offers new opportunities for non-WFH eligible workers.Today, more educated people are more likely to work in industries and occupations that are WFH “friendly”. If WFH facilitates adapting to climate change and facing less climate risk, then this creates an extra imperative for improving American education so that more young people can have the option to engage in WFH when they are older.Before 2020, America’s most productive places were located in areas that face emerging risks. There are worries about flooding in New York City and wildfire risk affecting the American West. WFH accommodates our diversity. Millions of workers will have the personal freedom to live where they want to live and this will reduce their stress during a time of rising risk.Matthew E. Kahn is the Provost Professor of Economics at USC and the author of the New Book Going Remote. This piece presents some ideas from his new book.A Postscript: Back in 2016, a prominent University of Chicago economist (who does not have a PHD from Chicago!) told me that snowstorms disrupt Chicago's productivity. I countered that I bet that he is even more productive on those days because he didn't go to work and nobody bugged him on such a day. He just looked at me. Flash forward to 2022 and I am even more confident about my 2016 comment. The WFH option is now available to more and more highly educated people and they can "reoptimize" when a day turns out to be nasty to still be able to "seize the day" and get work done. Of course a snowstorm can disrupt a dentist appointment but for more and more of the key tasks in the modern economy, these can be done "anywhere" and a footloose population will each make decentralized decisions for how to make the best of that day before the weather goes back to normal. The reduced form empirical researcher then observes that the same Chicago snowstorm causes less economic damage and this is the empirical benchmark test that adaptation is taking place! Mother Nature's punches cause less damage over time in an economy enjoying adaptation progress.
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I joined the USC Economics faculty in 2015 and Romain Ranciere also joined that year. Permit me to list the impressive scholars who have subsequently joined our faculty.
In July 2022, a star theorist will join our department as our newest hire.
USC fascinates many people. This list highlights that the hype about us is earned. Note that we continue to build up strength in micro theory, macro, econometrics and applied micro. A balanced, optimistic department.
The next piece of the jigsaw puzzle is to build up a PHD program that trains and places students to achieve their career goals.
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The Los Angeles Times rejected my piece that I present below. Of course, I'm trying to sell my new 2022 Going Remote book!!
The New New Geography of Jobs
LeBron James joined the Los Angeles Lakers in 2018. He wanted to live and work in Los Angeles. How many of us have compromised as we live in a place because our work is nearby?
Going forward, a silver lining of the pandemic is that more and more of us will have the option to live where we want to live as we engage in WFH on either a part-time or full time basis. How will this new freedom affect our quality of life?
More educated workers are more likely to be working in occupations and industries that are WFH “friendly”. While a surgeon cannot work from home, a book author can. More and more people have learned due to our experience we gained from the COVID lockdown that we can be quite productive while working at home.
WFH workers reduce their weekly commute time. The rise of WFH allows for staggered work hours removing many peak commuters off the roads. The typical WFH worker saves perhaps 5 hours a week in commute time. Will traffic speeds increase for everyone else? This depends on whether more drivers take non-work related trips when road speeds increase.
WFH workers will have increased freedom in their lives to exercise more, to spend more time with children, to participate in family chores and to co-ordinate their leisure time with their nearby neighbors and friends. This opens up the possibility of new civic engagement. On days when a child is sick or bad weather days, the WFH worker can be productive and caring while at home. This opportunity reduces one’s stress and improves one’s mental health.
In 2021 and 2022, economists have used U.S Postal Service change of address data to study migration patterns. We are already spreading out. People have been moving to the exurbs and bidding up home prices there. People will move to areas where they want to be now that they are “untethered” and can live where they want to live. People who love to ski will move to such areas. Those with an aging mother may move closer to her without facing the same labor market penalty as before the rise of WFH. The ability to seek out cheaper housing will allow families to achieve their goals. One economic study argued that when people live in larger housing that this causes them to have more children!
During this time of deep concern about inequality, will WFH be elitist such that those who are not WFH eligible will be left behind and housing will become unaffordable in areas far from the cities? While these are open questions, economic logic offers several insights. First, with the rise of new WFH communities, there will be a local demand for the service economy as construction workers, teachers and restaurants will be in demand. For those non-WFH workers with a taste for the area’s lifestyle, new opportunities will emerge. Second, home prices do not have to soar in the medium term if real estate developers are allowed to build new housing in these places that have plenty of land. American’s NIMBYism could be a key constraint on how the rise of WFH affects our nations’ geography.
Consider California. Our state is suffering from drought right now and features extremely high home prices. Farmers consume over 75% of the state’s water. If some farmland could be rezoned as suburban housing, then water consumption would decrease and the supply of affordable housing would increase as that land is converted into housing. The rise of WFH helps our state to adapt to climate change and to increase the supply of affordable housing!
Third, our cities feature many durable buildings. If many WFH workers “head for the hills”, this opens up new possibilities for those who want to live in a San Francisco or a Boston to find housing there. This possibility only grows if commercial real estate in these areas is converted into residential buildings.
In the medium term, the rise of WFH opens new opportunities for parents of young children. In the past, many women opted out of the workforce to raise children. WFH opens up the possibility of working part-time for one’s firm while the kids are young. A firm that anticipates this dynamic will continue to mentor such young female workers and this will close the gender earnings gap. In the past, women disproportionately entered fields such as being a pharmacist because of the job’s flexibility. WFH opens up the possibility of more flexibility and thus accommodates our diversity.
In the past, African Americans were under-represented in the Tech Sector. Relatively few African-Americans live in tech cities such as San Francisco and Seattle. Few tech companies have headquarters in Baltimore or Detroit. The rise of WFH raises the possibility of the “best of both worlds”. One can live in Baltimore and work and physically appear from time to time at Amazon HQ2 or a future HQ3. Such tech firms will be able to attract a more diverse workforce and depressed cities such as Baltimore will attract role models who boost the local tax base.
A “New” New Geography of Jobs is now emerging. Those firms that recognize this point will build a stronger, more diverse and more loyal workforce. Those places that compete to attract such workers will enjoy growth and an influx of new blood.’. A stronger America emerges as people can live where they want to live and change their schedules to meet their goals and responsibilities.
