Tuesday, August 29, 2006

As of Today, Green Cities: Urban Growth and the Environment is Published!

Permit me to announce that my new book has been published today! If you spend $45 on the hardcover or $19 on the paperback, you can now buy Green Cities: Urban Growth and the Environment from the Brookings Institution Press. While my current amazon book ranking is 1.5 million, I have a feeling that the distance between my book and Al Gore's new inconvenient classic will quickly shrink. I must warn you that my book does have fewer pictures than his.


I could tell you the polite answer or the true answer. The polite answer is that ever since I finished my 1993 PHD thesis at the University of Chicago I have worked on a diverse set of topics related to urban and environmental issues. I always saw the links between these papers. I saw my research agenda but you'd have to be quite a Matt Kahn groupie and carefully read these exciting papers to see the links between these papers and to see my "big picture". My Green Cities book has allowed me to present my "big picture" research agenda in one place rather than downloading 50 different JSToR , NBER and Elsevier papers in different formats and fonts.

More than simply summarizing my past research, I try hard in my green cities book to show the reader what are some of the most exciting studies conducted by other environmental and urban economists on related topics. I would hope that my book leads to some debate and helps young people formulate interesting research questions of their own that build on what I lay out in this book. I'd be delighted if economists in developing countries read my book and address how the issues I discuss may or may not matter for their home nation. While the book is only 160 pages long, it tries to tackle some international issues but it is true that the bulk of the evidence and discussion is based on U.S cities (with the exception of Chapter 6).

The true reason I wrote this book is that for the last 8 years I have suffered from book envy. Published in 1998, my wife wrote a great book called the "Evolution of Retirement". She won the TIAA-CREFF prize for this book. It is well cited and it raised our family's permanent income. While I've always been quite proud of her for her accomplishment, in the back of my mind I've always wondered whether I could write a good book. I started writing an early version of this book in 1999 when I was still a faculty member at Columbia University but I was too young and too befuddled to write a strong book that interest both a general audience , students, and even professional academics.

I made real progress writing this book when I was at Stanford in 2003-2004. Peace and quiet and sunshine are productive inputs for writing!


I would hope that there are professors of environmental economics, urban economics, urban planning and environmental law that are looking for course supplements to make their readings more interesting.

I would hope that there are generalist readers who have an open mind about environmental trends and after the success of Lomborg's Skeptical Environmentalist are willing to read through an empirical study by a Chicago economist who cares about environmental issues but also believes in the importance of tradeoffs and the power of incentives.

California Manufacturing Battles Back against new CO2 regulation

The San Francisco Chronicle today reports an opinion piece making some points about the full cost of adopting a California only cap on carbon emissions. This guy argues that facing higher energy prices due to the regulation will lead some manufacturers to seek out other states that are "pollution havens". Thus, he argues that while the California policy proposal is well meaning that an unintended consequence of this policy may be to raise greenhouse gas emissions.

He argues that california manufacturing is now much more energy efficient than it used to be. An economist would argue that expectations of higher energy prices would be the main incentive for having achieved this. At the end of his piece, he argues that cost/benefit analysis must be used to judge this policy. The challenge here would be the heroic assumptions needed to estimate the benefits of this policy. From the global point of view it would only have a small impact on reducing CO2 but from a "demonstration effect" point of view; the California guinea pigs may be valuable for overall learning.

You do know that Green Cities will be published tomorrow? Go to the brookings press webpage to learn more!

California needs to get it right on climate change policies
- Jack M. Stewart
Tuesday, August 29, 2006

California, already a leader in addressing global warming, may soon become the first state to impose mandatory limits on greenhouse gases. State lawmakers are poised to pass Assembly Bill 32 (authored by Assembly Speaker Fabian Núñez, D-Los Angeles), which calls for a California-only cap on carbon emissions. The stakes are high: Climate change mitigation won't come cheap, and the economic risks of California going it alone could impact the competitiveness of businesses for years to come.

Industries consuming large amounts of energy -- electric power, manufacturing, refining, steel and cement production, among others -- would bear the brunt of compliance costs, further disadvantaging California manufacturers whose electricity rates already are 80 percent higher than for manufacturers in other Western states. As such, it behooves us, and our elected representatives in Sacramento, to craft climate change policies that will be sustainable both near and long term, and at the least cost to the economy. That is, we better get it right.

A proper analysis of AB32 -- its merits and demerits -- should begin with an examination of California's policies. California already leads the nation when it comes to reducing greenhouse-gas emissions through energy efficiency. Our continuing investment in energy efficiency ($500 million per year on energy efficiency alone), research and development and renewable power help explain why carbon intensity (per capita energy usage) has remained steady in California while increasing by 50 percent nationwide.

Manufacturers across California have played an integral role in reducing greenhouse gases by voluntarily improving energy efficiency and by using combined heat-and-power systems. The cement industry, for example, has increased its energy efficiency by more than one-third since the 1970s. This has been a matter of necessity and economic survival. Energy is a large part of the cost of doing business for manufacturers in California. As a result, California manufacturers have had to become more efficient energy users. Climate-change policies for California should recognize that we already have lower greenhouse gas emissions than other industrialized states and nations, and that the incremental costs -- the additional costs of reducing carbon emissions -- will be substantial for manufacturers.

AB32 would establish a California-only cap on carbon emissions, significantly undermining the ability of California businesses to compete with businesses in other states and overseas, where there is no cap. It could also have the unintended consequence of reducing emissions here but increasing global emissions -- a lose-lose situation. Earlier this year, the governor's Climate Action Team conceded that if California implements a greenhouse-gas reduction program "without other states," as now appears likely, "there will be an incentive for production to shift to other states to avoid the cap," which could result in a situation in which "emissions may decline in the state, only to increase in other states."

Instead of this heavy-handed approach, we should be focusing on policies and programs that accomplish emissions-reduction goals without jeopardizing our state's economy, jobs and energy supply. The California Manufacturers & Technology Association supports addressing climate-change impacts on California in a cost-effective manner, which, for the purposes of manufacturers, means that any requirement that would add to the already high-energy costs must be avoided.

California policymakers should ensure cost-and-environmental effectiveness. A rigorous, peer-reviewed economic analysis on the costs and benefits of each program element should be conducted, with subsequent legislative approval of program elements prior to adoption. The state should also monitor and regularly report on the "leakage" of investment and emissions due to emission reduction strategies to ensure we are achieving true reductions to global emissions. It is imperative that we work also to address the areas of the world where emissions far outpace those of the United States, such as India and China. If we work to transfer our cleaner, environmentally friendly technology to these developing areas of the world, we can truly reduce this global problem.

Finally, a cautionary note about the headlong rush to "do something" on global warming before the Legislature adjourns on Aug. 31: Global-climate change is a long-term problem whose solution will require sustained effort and substantial investments far into the future. It is a 50-year problem without easy fixes. Arguably the most significant bill to be considered by the Legislature in a generation. AB32 has received very little scrutiny since it was rewritten in June. It was reviewed in a policy committee hearing that lasted little more than an hour, and it is entirely possible that it could end up on the governor's desk without any additional policy hearings. The magnitude of the problem -- and the risks of California going-it alone -- are reasons enough to take the time necessary to get it right.

AB32 is not the answer. There is a better way to lead.

Jack M. Stewart is the president of the California Manufacturers & Technology Association.

Page B - 7
URL: http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2006/08/29/EDG0SJ7NA01.DTL

Saturday, August 26, 2006

Is the Berkeley Daily Planet a Better Newspaper than the New York Times?

In Berkeley, the esteemed Daily Planet newspaper is available for a low price. I picked it up the other day and actually read parts of it. The article I report below is thought provoking. The author's article would have been even better had she considered calculating what is the current market price of purchasing each of the 15 items she lists on her "Urban Bill of Rights".

For example, her #7 states "The right to adequate space for storage, hobbies, and other personal activities in and around each dwelling unit, including play space for children in family housing." The cost of this in a given city such as Berkeley could be calculated using simple hedonic real estate pricing methods.

On an unrelated note, On the airplane ride I took on thursday from Oakland Airport to Los Angeles. The Oakland Mayor Jerry Brown was on the flight. I was surprised to see him. He seemed surprised that nobody recognized him. He was standing there by himself looking important but no crowd gathered. I must admit that I'm fascinated by celebrities and I have a good eye for spotting them. Maybe he isn't a star?


Column: The Public Eye: Notes on NIMBYism Part IV: The NIMBY Manifesto
By Sharon Hudson

In 1990, 60 percent of New Yorkers said they would live somewhere else if they could, and in 2000, 70 percent of urbanites in Britain felt the same way. Many suburbanites commute hours every day just to have “a home, a bit of private space, and fresh air.” But unfortunately, running off to suburbia or to the wilderness to find contentment is becoming environmentally and economically unviable.
We must draw people back into relatively compact urban areas. Showcase cities that have managed to attract would-be suburbanites into increased core densities have done so through neighborhood revitalization and by giving priority to quality of life, not density. This is the opposite of what Berkeley is doing.
Berkeley is making three serious mistakes. First, we are deliberately and unnecessarily increasing income-based inequities in quality of life. Second, we are moving toward an urban environment where man is disconnected from (his) nature. And third, we are creating an urban environment that undermines our cultural values and individual potentialities.
First, as discussed in Part II of this series (“Density, Equity, and the Urban NIMBY,” Aug. 11), we should not continue to enshrine poor and unequal quality of life in our land use policies and zoning decisions. Livability standards are most important, but least applied and enforced, in high-density areas. Renters and other high-density residents are expected to do without adequate living space, greenspace, quiet, and cars; and without cars, they lack the freedom, pleasure, and mobility taken for granted by average Americans. This is ethically unacceptable.
Second, our urban rights must include the right to a “minimum daily requirement” of nature, as discussed in Part III of this series (“A NIMBY Confronts Environmental Dualism,” Aug. 15). Most urban poor never leave the ghetto; most car-free Manhattanites rarely leave New York City. The only nature they experience has to be in their own neighborhoods. Good urban design creates space to experience a diversity of nature on a daily basis.
Finally, we need to design urban spaces to enhance quality of life, cultural richness, and personal fulfillment. The Centers for Disease Control defines quality of life as “an overall sense of well-being . . . including] all aspects of community life that [influence] the physical and mental health of its members.” The World Health Organization states that “health is a state of complete physical, mental and social well-being . . .” The Universal Declaration of Human Rights adds: “Everyone . . . has the right to . . . the economic, social and cultural rights indispensable for his dignity and the free development of his personality.”
What kinds of spaces are required to express our dignity and personality? Americans, Californians, and Berkeleyans must examine our own values and decide which ones to make space for. We cannot take land use examples from other cultures. Berkeleyans are not Parisians, nor Brazilians, nor even New Yorkers. I once asked a friend from Hong Kong what he did outside of work. He said: “Nothing, really. In Hong Kong we didn’t have any room for hobbies. I don’t know how to do anything or build anything. All I know how to do is go to work.” Lack of space for personal development makes Hong Kong a capitalist dream but a cultural wasteland. American values are different. We like private space for hobbies and recreation, and if the city doesn’t provide it, Americans will simply continue their urban exodus.
We cannot let planners and developers decide what we will do with our lives. I never hear planners discussing psychological health and cultural values. Planners have a different approach. As one Berkeley planner told me, no matter what they build, eventually those who can or must tolerate the new, worse environment will replace those who can’t. As this happens, resistance to further degradation lessens. But I reject this “race to the bottom.” And with enough time, planners and developers could also train Americans to live like drones in anthills—but why let them?
The reason Berkeley is making these three mistakes is that we have fallen under the control of developers and extremists, instead of implementing real smart growth. Accepted smart growth urban infill guidelines recommend more open space, more parking, smaller buildings, and greater housing variety than is called for by Berkeley’s current plans, codes, decision makers, false “smart growth” advocates, and, of course, developers. Real smart growth approximates what most of Berkeley looks like right now—two-story single-family homes with small yards, two- and three-story multi-unit buildings, somewhat taller buildings in mixed-use areas, plenty of greenery, adequate but not excessive parking, and attractive, walkable downtowns based largely on the preservation of historic buildings. This is what makes urban living humane, attractive, healthy, and sustainable. And it’s exactly what most Berkeley NIMBYs support.
Human beings can survive in environments of unbelievable degradation. People can adapt to horrors so well that they soon fail to perceive them as horrible. Thus it is important to remind ourselves of what is good before we become too accustomed to what is bad.
Simply stated, urban residents have a civil right to good quality of life. So I now propose an “Urban Bill of Rights,” a.k.a “The NIMBY Manifesto.”
The Urban Bill of Rights
1. The right to see significant greenery, the sky, and the sun from within one’s home.
2. The right to natural cross ventilation in one’s home.
3. The right to enjoy peace and quiet within one’s home with windows open.
4. The right to sleep at night without excessive artificial ambient light.
5. The right to be free in one’s neighborhood from pollution of air, water, soil, and plant life.
6. The right to be free from undesirable local environmental change caused by poor urban design, such as wind, shadow and noise canyons, excess heat caused by overpaving, etc.
7. The right to adequate space for storage, hobbies, and other personal activities in and around each dwelling unit, including play space for children in family housing.
8. The right to mobility, regardless of income. If automobile use is discouraged by prohibitive pricing, public transit must be adequate and low cost.
9. The right to parking space for each household.
10. The right of convenient access, on foot if possible, to basic daily needs, such as good quality food at reasonable prices, daily household and medical supplies, laundry facilities, etc.
11. The right of convenient access, by foot, private vehicle, or transit, to places of employment.
12. The right of equal access to the commons and to taxpayer-funded and other public facilities, such as government buildings, libraries, museums, bridges, and roadways.
13. The right of access within walking distance to nature, recreation, outdoor exercise, and discovery, including parks, open space, and areas inhabited by wildlife.
14. The right to equal and adequate police, fire, and emergency services, which shall not be infringed on the basis of income or neighborhood character.
15. The right to participate in and guide, through equitable, representative, democratic processes, land use decisions that affect oneself, one’s neighborhood, and one’s community.
This list can be refined through public discussion. Once accepted, urban rights would be delimited by the courts just like our other rights. Many of them are inexpensive and easy to implement, and all should be goals of good urban planning. I challenge our planning staff, land use and housing commissions, city council, and organizations pretending to advocate “livability” in Berkeley to think about these ideas in all their housing and land use decisions.

Is Los Angeles a Green City?

These are exciting days. Classes begin at Tufts next week. This week my new book titled "Green Cities" will be published by the Brookings Press. This weekend I was in Los Angeles studying its rental real estate market and observing its day to day quality of life.

A few observations.

1. Los Angeles certainly offers beauty

A. I loved watching the sunset while at the Santa Monica beach
B. The UCLA campus and the local community around UCLA is charming and quite pretty.
C. Homes in fancy places such as Brentwood feature beautiful flowers, plants and landscaping. Everything grows in the LA climate and sunshine.

2. The Market signals that LA is great. We saw many $1.7 million dollar homes that back in Boston might sell for $650,000. These were okay structures (some 3 bedrooms, 2.5 baths) that are transformed into multi-million dollar homes because they are in the fancy parts of LA. As a Chicago economist, this says to me that there is a lot of love for LA among upper-middle class and wealthy folks in this nation.

3. Los Angeles also has its ugly parts --- here I don't mean poverty areas.

A. I like to walk. In many places in LA I didn't see sidewalks. For example in Bel Air up in the Northeast corner above UCLA as you go up the Canyon --- hard to walk there!
B. noise and traffic density on I-405 and Wilshire Blvd. Los Angeles is certainly a car city. I found the air quality quite good when we were there but there are so many cars that Yahoo maps lie to you about travel times between any two locations. You must take the yahoo time and perhaps triple it to estimate the "true" travel time.

There also seem to be some strange land use patterns in Western Los Angeles. Enormous country clubs around UCLA and enormous graveyards and government buildings taking up land that might be more valued by home owners. I doubt that the country clubs represent "green space" that everyone can enjoy. I wasn't invited!

We also observed interesting spatial discontinuities and we drove through LA. Beverly Hills is adjacent to West Hollywood. The latter is funky and I were 25 years old again I would want to live and party there. Beverly Hills is not funky now that Eddie Murphy is no longer cool. The Los Angeles Times had an article that Beverly Hills is worried about losing its luster as a leading place to shop for the rich. To make itself more attractive for rich shoppers the Beverly Hills Rodeo Drive strip is thinking of placing in fancier granite for people to walk on!

Overall, we really like LA but we will need to rob a bank or two to live there!
My green cities book will yield me $1 per sale --- so if you feel altruistic, buy it!

Wednesday, August 23, 2006

A Small Sample Field Experiment in Real Estate Search

Knowing that field experiments are a powerful methodology in applied economics, I've decided to conduct one. Tomorrow, I will fly to Los Angeles and search for housing near UCLA. We will be renting there starting in January 2007. If you offer a blogger discount and have a nice place near campus, please contact me!

On an unrelated note, the New Yorker offers more than cartoons this week. The 8/28/2006 issue of the New Yorker has a fascinating article by Nassar and Gruber not about John Nash but titled "Manifold Destiny". This piece takes the lay reader into the macho world of academic math and in particular provides the strange details about a Russian who has refused the Field Medals. This would be the equivalent of Paul Krugman turning down the Nobel Prize in Economics if he were awarded it soon. Such modesty does not take place every day!

While you might think of math nerds as pure theorists who do not care about ego and status, this article highlights the bad behavior and craving for prestige that goes on within the top ranks of academic math.

Monday, August 21, 2006

Green Cities: Urban Growth and the Environment --- Chapter One as a .pdf file

Intellectual property usually is sold at a positive price. My new book seems to offer a counter-example. Posted to the Brookings Institution Press is Chapter One of my new book www.brookings.edu/press/books/chapter_1/greencities.pdf . For those of you who are interested in environmental issues and city quality of life, this book may be for you!

The book has 7 other chapters. The paperback version of this 160 page book is priced at $18. I should ask the prediction market guys like Justin Wolfers to create a market on betting on my total sales as of August 2007. Somehow, I believe that Freakonomics' sales represent an upper bound!

I must admit that writing an original book is hard work. Some economists simply staple together their past papers and write a preface to umbrella their work. I did not pursue this strategy. Instead, I tried to write a general interest book that surveys much of my own research and discusses some of the leading empirical work conducted by environmental and urban economists over the last 20 years.

I would hope that professors that teach classes on environmental policy , cities, urban economics, environmental economics and regulation could use parts of this book in their courses. I'll return to this point in future blog entries once the book is actually published later this month.

Superstar Cities and the Middle Class Housing Squeeze

Several urban economists are writing papers with the following theme. In a world of rising income inequality, and housing supply restraints --- desirable and productive cities such as New York City and San Francisco are experiencing sharp increases in home prices that benefit the rich incumbent home owners and squeeze out the middle class.

Some scholars have called such cities --- "Superstar Cities"
http://www.nber.org/papers/w12355 . Ed Glaeser and Joe Gyourko and John Quigley and Steve Raphael and others have documented the housing supply limitations. NIMBY attempts to use zoning to block new development. Combine these restrictions with an increase in the count of rich people seeking nice housing in nice cities and you get high coastal real estate prices relative to the mid-west.

Last Month the New York Times reported on this work:

THE NATION; Cities Shed Middle Class, And Are Richer and Poorer for It

*Please Note: Archive articles do not include photos, charts or graphics. More information.
July 23, 2006, Sunday
By JANNY SCOTT (NYT); Week in Review Desk
Late Edition - Final, Section 4, Page 1, Column 2, 1250 words

DISPLAYING ABSTRACT - SOME big American cities are flourishing as at no time in recent memory. Places like New York and San Francisco appear to be richer and more dazzling than ever: crime remains low, new arrivals pour in, neighborhoods have risen from the dead. New York is in the throes of ...

If Middle Class households can no longer afford to live in downtown New York City and are "exiled" to New Jersey, is this a big problem?

The NYT article quotes some Columbia faculty as saying that they want to live in a diverse city. A distinction needs to made here between cultural diversity and income inequality. Most Columbia B-School professors are well paid and can't call themselves "middle class". How do the faculty of Columbia gain from living in an income diverse city?

I recognize that diversity of culture within a city offers greater learning possibilities and greater "sampling" of cuisine opportunities. But, what are the benefits of income diversity?

Suppose that these "Superstar Cities" remained ethnically diverse but that the middle class was squeezed out to the suburbs. Would people be less concerned about the rise of superstar cities?

Economists tend to celebrate Tiebout sorting in the suburbs as efficient. If Superstar cities represent one big "club good", what is the problem? What social externality is exacerbated by this trend?

I would love to have a 4,000 square foot house to buy for $200,000 near UCLA but I appreciate that this opportunity does not exist.

Is this the typical case that the outcome is efficient but it is not perceived to be "fair"? People seem to greatly value fairness in day to day life.

Sunday, August 20, 2006

Information Technology Solves Government Asymmetric Information Problems

The New York Times today reports how some cities have used aerial photos to mitigate asymmetries of information with regard to which home owners have improved their properties. Cities are now collecting more property tax revenue due to this change and homeowners have less scope to lie as they seek reductions in their property taxes.

A broader point can be made that government use of information technology has improved urban quality of life. Do London’s cameras deter crime? Major city GIS maps of crime “hot spots” help police deploy their resources. Road pricing has become a reality now that vehicles can easily pay without stopping for entering a congested zone.
Broadly distributed data bases on which restaurants violate public health codes in California have created a “day of shame” for restaurants with mice and garbage. Broadly distributed data bases on which public schools have high test scores encourages accountability as parents choose where to live and home prices reflect the differentials. Both examples highlight how information technology affect individual choice.

Key asymmetries of information remain. Consider the Internal Revenue Service. If Mr. Smith reports that he earned $100,000 in 2005, did he really earn $130,000? Is he under-reporting his income? The IRS conducts audits to scare people into telling the truth but it is unclear whether the expected punishments are large enough. Who knows how many billions in tax revenue the government does not collect because it can’t measure people’s income accurately. Could improvements in IT mitigate this problem?

In the private sector issues of asymmetric information have been well studied by economists interested in adverse selection. George Akerlof’s concerns about how market efficiency is affected if only people trying to sell “lemons” appear at the used car market and that only sick people try to buy health insurance would vanish if used car buyers could cheaply be informed by a vehicle mechanic about the used vehicle’s condition or if health insurance sellers could cheaply receive a doctor’s report on an insurance buyer’s health. In both of these examples, information technology could reduce the asymmetries of who knows what. In the case of the used car, the seller has private information about its quality. In the case of the health insurance, the buyer has private information about his own health levels. The concern is that only the sick will buy health insurance. Thank goodness for hypochondriacs such as Woody Allen. Their existence tends to mitigate concerns that only the sick will buy insurance and this will lead to insurance companies going bankrupt.

New York Times
August 20, 2006
National Perspectives
Why Some Homeowners May Not Be Smiling for These Cameras
THERE are about 300,000 row houses in Philadelphia, which means there are about 300,000 row house owners in Philadelphia who would like to see their tax assessments lowered.
Some of them get in touch with the city’s Board of Revision of Taxes. A caller may say, “Our house is in the worst condition of any on the block,” said Barry Mescolotto, the board’s assistant administrator.
These days, Mr. Mescolotto has a good answer: “I’ll say, ‘I’m looking at a photo of your house, and it looks to be about the same as all the others.’ ”
“That usually ends the conversation,” Mr. Mescolotto said.
Until recently, assessors had to accept homeowners’ claims or visit the properties themselves. But in 2003, the city hired the Pictometry International Corporation, a company in Rochester, N.Y., to provide images of every building in the city.
Once a year, Pictometry flies a Cessna 172 over Philadelphia, taking thousands of black-and-white photographs. The low-altitude shots, unlike satellite images, show buildings at about a 40-degree angle. Pictometry’s computers organize the photos so they can be searched by address. Nearly 200 employees in Mr. Mescolotto’s office have the software on their computers.
Pictometry isn’t the only company offering aerial photos to assessors, but it has won adherents in more than 200 cities and counties, according to Dante Pennacchia, Pictometry’s chief marketing officer. Its competitors include an Israeli company, Ofek International, working with Aerial Cartographics of America, based in Orlando, Fla.
Mr. Mescolotto said that the Pictometry system, which costs Philadelphia about $100,000 a year, “probably paid for itself within about two weeks.”
“If you have a dog, or a locked fence, we may not be able to get into your backyard to see something you’ve built,” Mr. Mescolotto said. But Pictometry flies over dogs and fences.
In addition to home improvements, the software has also helped his office pick up more than 100 cellphone antennas that have been erected on existing structures. Each tower, he said, “adds so much value that, taxwise, it’s the equivalent of finding a new house.”
Pictometry’s software makes it possible for assessors not only to see buildings, but also to measure them, down to the hundredth of a foot. But trying to zoom in on people’s faces causes the photos to dissolve into pixels. “It’s not at the resolution where you can look in windows, or read license plates,” said Kenneth M. Wilkinson, the property assessor of Lee County in Florida. “The system preserves privacy.”
Mr. Wilkinson has made the Pictometry images available to the public over the Internet. (To see images of properties in Lee County, visit the property assessor’s site, leepa.org, and then click on Pictometry. Registration is free.) The site has received millions of hits, according to Mr. Wilkinson.
And that makes a few people unhappy. One of his employees, he said, received a telephone call from a retired New York City policeman, who didn’t want people to see that he had two Cadillacs in his driveway.
Another time, he said, a woman complained that her garage door was open, and people could see a mess inside. “You can’t make an appointment to have your picture taken,” Mr. Wilkinson said.
Mr. Wilkinson says that Lee County’s tax base has grown rapidly — to about $180 billion today from about $4.5 billion in assessed valuation when he took office 25 years ago.
He said the county is dependent on Pictometry. The contract with the company, signed in 2001, came in particularly handy after Hurricane Charley made landfall in Lee County in August 2004.
By law, the county had until Jan. 1, 2005, to adjust the assessed valuation of every property affected by the hurricane. Without Pictometry, “there is no way we could have had it done in time,” Mr. Wilkinson said.
In addition, Mr. Wilkinson said, petitions to lower assessments have declined since 2001, to about 500 a year from an average of 2,000 a year. “People are surprised how well we know their property,” he said.
Recently, Mr. Wilkinson’s office has been using Pictometry’s “change detection” feature: After flying over the county, the company prepares a list of properties that appear to have been altered since the last fly-over.
“The software takes us right to those properties,” Mr. Wilkinson said. “We can look, and see that you’ve added a pool.”
Scott Yamamoto, the property appraiser for Geauga County, Ohio, which is east of Cleveland, also uses the change-detection feature. The computer, he said, is programmed to look for “something that wasn’t there before, or something that was there before but isn’t there now.”
“We get a list, in spreadsheet form, of all the parcels where there was some type of change,” he said.
Unfortunately, he said, there are a lot of false positives. A pile of sand, or snow on the ground, can trigger the change detector. “Or a boat parked close to a garage can look to the computer like the garage has been expanded,” he said.
But Mr. Yamamoto is not complaining. The first time his office used the change-detection feature, he said, his office “picked up about $1.8 million in property value that we could not see from the ground.”
That translated into $35,000 in tax revenue last year for his rural county.
He said many taxpayers like the software, “because when they call you to talk about their property, you know right away what they’re talking about.”
“But,” he said, “a property owner isn’t going to call us and say, ‘I built a riding arena back in the woods, and you can’t see it — ha, ha, ha.’ ”

Saturday, August 19, 2006

The Merits of High Density Development in Brooklyn, NY

If people don't like sprawl, do they like high density? A recent New York magazine piece by Chris Smith does a great job tracing out the anxiety that incumbent Brooklyn residents are experiencing as a new large Atlantic Yards is planned. These incumbents are worried about their "Quality of life" being hurt by rising congestion and they should also wonder whether the value of their housing units will decline as supply increases.

Here are a few quotes from the article http://newyorkmetro.com/news/features/18862/index.html

“This is a great day for thousands of people who desperately need affordable housing,” he announces, standing outside the ESDC offices on Third Avenue. Atlantic Yards’ 2,250 subsidized apartments are among its strongest selling points, a seemingly ­apple-pie benefit trotted out in every press conference and direct-mail flyer. Stuckey, doggedly on-message, manages to use the phrase “affordable housing” five times in two minutes. Not once does he mention the 4,610 market-rate (unaffordable?) apartments and condos to be built.

The release of the environmental-impact statement, however, forced me to confront just what Atlantic Yards is going to mean—not just for my neighbors in Park Slope, Prospect Heights, Boerum Hill, and Downtown Brooklyn but also for the city as a whole. In 1,400 numbing pages of charts and bureaucratic jargon are the details of a traffic, noise, and cultural nightmare on the horizon: Colossal shadows sweeping across 50 square blocks. Some 60 intersections choked with traffic. More kids than the local schools can possibly handle.

Still, forming a clear-cut opinion isn’t easy. Ratner is building subsidized housing in a city where there’s a cruel 3 percent vacancy rate. He’s forecasting $1.5 billion in new tax revenues for the city and 3,800 new permanent jobs. Most of the site for the proposed project, the Long Island Rail Road yards, is quite literally a hole in the ground, flanked by a number of decaying buildings. So am I with the visionaries? The naysayers? The big thinkers? The little guy? The sports fans? The community gardeners? Whose side am I on?"


This looks like a classic case of public choice and heterogeneity. People will disagree over whether this project is good or bad. Mancur Olson would say that a small cohesive pressure group that loses the most from doing the project (i.e white upper middle class hipsters who already live in the community) have the greatest incentive to lobby against it. It will be interesting if the "silent majority" can launch a counter-attack. This Rattner looks quite well politically connected .

Thursday, August 17, 2006

Majoring in Economics ==> Fame? Here is The Right Tail of the Distribution

How do students choose their undergraduate major? In my case, I switched to economics after being bored in a political science class. Back in 1984 at Hamilton College, the political science teacher chose me and another student to sit in front of the class. We played a prisoner's dilemma against each other. She chose to "stay quiet" while I played "rat her out" and she went to jail. The rest of the class hissed at me for not playing nice. At that point, I knew I was in the wrong room and moved on to microeconomics and never looked back. A more substantive reason for why I chose economics is that I found that the New York Times each day was filled with economic news but I didn't think that the reporters covering these stories knew enough economics to do their job. They always had a good story for why the stock market fell the day before but I wondered whether they were trading based on their "models".

I can imagine that the new cohort of young people are still looking for good reasons to major in economics. Freakonomics provides some clues about what some of us do all day long. Perhaps another carrot is to look at some of the superstars who have majored in our field:


As I look at this list, I wonder how much credit economics deserves as a "treatment" causing their success?

Tuesday, August 15, 2006

Incentives to Purchase Hybrid Vehicles

High gas prices and social esteem gained from driving a hybrid around Berkeley are two reasons for driving a Prius or other hybrid vehicles. But, how many additional drivers will purchase a "brown" vehicle rather than a hybrid if Federal tax discounts and easy access to HOV lanes on highways are denied to new hybrid buyers? This strikes me as an interesting test of how many consumers are at "the margin" and respond to small changes in financial incentives to purchase one type of vehicle versus another.

SF Chronicle

Time running out for hybrid perks

Federal tax incentives on some models will soon expire; carpool lane access permits also drying up
- Michael Cabanatuan, Chronicle Staff Writer
Tuesday, August 15, 2006

Bay Area drivers vacillating over whether to buy a hybrid car need to decide quickly if they hope to snag those coveted yellow stickers that give them access to carpool lanes.
And for those contemplating a hybrid Toyota -- including the popular Prius -- there's an added inducement: cash. Waiting until Oct. 1 to buy a Toyota Prius will cost you $1,575 in federal tax credits.
"We don't want panic in the streets," said Karen Caesar, spokeswoman for the state Air Resources Board, which oversees the hybrid carpool lane program. "But if you're interested in a hybrid, now might be the time to go for it."
Most experts doubt that the waning hybrid purchase incentives -- including the federal tax credit of up to $3,150 and use of California carpool lanes -- will have a deleterious effect on sales, especially if fuel prices remain high.
"The focus has always been on the gas savings," said Susan Lopez-Guerra, president of LeaseMobile/California, which sells and leases cars, including an increasing number of hybrids. "As long as gas continues to stay at these high prices or continues to go up, I don't see the demand for hybrids going down, even if the carpool lane access stickers and tax write-offs are phased out at some point."
In a matter of weeks -- perhaps as few as one or two -- it will likely be too late for Bay Area drivers to get the stickers allowing certain hybrids admission to the carpool lanes at any time. Would-be buyers on dealers' waiting lists are likely to miss out on carpool lane stickers, but can assuage their disappointment by remembering that hybrids tend to get the best mileage in stop-and-go traffic anyway.
California set a limit of 75,000 carpool lane permits after President Bush signed legislation a year ago allowing access to diamond lanes for hybrids that get better than 45 mpg. Three vehicles qualify in certain model years: Toyota Prius, 2001-06; Honda Insight, 2000-04; and Honda Civic Hybrid, 2003-06.
As of last Wednesday, the state Department of Motor Vehicles had issued 62,831 yellow carpool lane stickers to hybrid owners, and another 3,319 will be issued soon, said spokesman Steve Haskins. That leaves 8,850 still available. The DMV receives about 220 applications a day for the stickers, but about 20 percent are rejected -- usually because the applicant applied before receiving license plates.
Confused? Let someone else do the math. "We're estimating it could be another eight to 10 weeks before we hit the cap," Caesar said. "If you apply in the next few weeks, you stand a good chance of getting your stickers. But we make no guarantees."
It can take seven weeks or longer to get license plates and another two weeks to get the carpool lane stickers from the DMV. Bay Area motorists also need to get a special FasTrak electronic toll tag before they can get their hybrid stickers, and if they do it online or by mail, it could take a week or longer. Signing up in person at the FasTrak offices in San Francisco can eliminate the wait, however.
All told, if nothing goes wrong, it can take nine weeks to get a hybrid carpool lane sticker. And the clock is ticking.
Tax incentives are even more complicated. After a manufacturer sells 60,000 hybrids, the tax credit for that vehicle is cut and eventually eliminated. So far, only Toyota has hit the limit, pushed mainly by sales of the Prius. Nineteen 2006 hybrid models made the federal list for tax credits. Ten 2007 models have qualified so far.
Some new-car shoppers said they might be dissuaded from buying a hybrid if they couldn't be assured of gaining access to the diamond lanes. But others said it wouldn't shape their car-buying decision.
"It's definitely made me stop and think," said Mark Baker, a Web developer from Alameda. Carpool lane access "was one of the reasons I was looking at a hybrid. If you're going down that road, and going to spend that kind of money, you're going to do all the numbers and consider all the factors."
Baker said he's now leaning against buying a hybrid, but added that his girlfriend, who would also drive the car, wants to buy a hybrid "on principle."
Penny Mudd, a software developer who commutes from Santa Cruz County to San Mateo, still plans to buy a hybrid whether or not she can legally cruise the carpool lanes.
"The (carpool lane) permit is not the deal," she said. "I want to try it out. In theory, it's greener. In theory, I'll pay less for gas. And in the back of my head, I think that if there's ever a run on gas, I won't have to wait in line as often as everyone else."

Sunday, August 13, 2006

When Do Corporations Take "Green" Actions?

High energy prices encourage conservation as Wal-Mart demonstrates below. Under what other circumstances do corporations "green" themselves? Lyon, Thomas and John Maxwell. Corporate Environmentalism and Public Policy, Cambridge University Press 2004 emphasize that some companies seek to preempt regulation by regulating themselves. This signals the regulator that they are "good" companies and may lead to laxer standards than if they had waited to be regulated.

Some companies may engage in green actions to differentiate their product from their close competitors. If a firm knows that it has a cost advantage in "going green", it can win a public relations battle by making its rivals look bad.

Another reason for "green action" is that some executives may have their own compensation separate from the firm's overall profitability. This would provide an incentive for the CEO to pursue secondary criteria beyond brute profit maximization. Paulson at Goldman Sachs was accused by some of devoting too much attention to green issues rather than green $ issues.

One under-studied topic is whether firms imitate each other. If Wal-Mart demonstrates that an environmentally friendly policy shift such as not idling its trucks is "good" for it, do other companies imitate this "leader"? if this local learning does take place, then greens should focus their attention on such focal points.

New York Times today

August 13, 2006
Armchair M.B.A.
Saving the Earth, and Saving Money

HIGH energy costs are helping to persuade American companies that they need to embrace environmentally friendly practices, says Gwen Ruta, who is in charge of creating and managing corporate partnerships for Environmental Defense, a nonprofit group based in New York. Here are excerpts from a conversation:

Q. Why should companies care about their environmental impact?

A. They need to care because if they don’t, their stakeholders do and they’re going to hear about it. On the other side of the coin, there are all kinds of opportunities. Pollution is by definition waste, and waste by definition is costly. Finding a way to lessen your environmental impact is finding a way of running your business more efficiently.

Q. What has Wal-Mart done to improve its practices?

A. It’s very standard in the industry to have these big trucks, these big 18-wheelers, idling when they are loading and off-loading, sometimes even overnight, to keep their air-conditioning running. Wal-Mart said no to that and said they were going to turn off the engine. They have installed some auxiliary power systems so the trucks can still be refrigerated. By doing that, they’re reducing greenhouse gases by 100,000 tons a year, which is like taking 20,000 cars off the road. They’re also saving themselves $25 million in the fuel it takes to keep those trucks idling. That’s a good example of a win-win.

Secondly, they’ve announced to their suppliers that within the next five years, all the wild-caught fish that Wal-Mart sells will come from sustainability-certified fisheries. That’s a very aggressive goal, and it sends a huge signal to the fishing supply community around the world.

Q. Are these just public relations moves?

A. It may have started for P.R. reasons, but the more they’ve done, the more they’ve convinced themselves of the business benefits. They’ve seen the synergy between environmental innovation and business. A lot of it is about efficiency, and that’s a hallmark of Wal-Mart.

Q. How do you put pressure on managements or boards to cooperate with you?

A. We certainly work with individuals all the way up to the top of a company. For example, we have a partnership with FedEx to help develop and deploy the first hybrid delivery trucks. We met with Fred Smith [the company’s founder and chief executive] and Dave Bronczek, who is president of FedEx Express, and brought them along as allies.

Q. Don’t you try to embarrass companies?

A. No. Maybe that’s why companies will work with us.

Q. So how did you cooperate with FedEx?

A. We approached FedEx with the idea of creating the next generation of delivery trucks. The goal was simple but revolutionary: we wanted to change truck technology in America. We knew we needed a demand signal to do that, meaning we needed a big truck buyer to say to the manufacturers, “We want you to do better.” FedEx has amazing clout in the truck market so they were a great partner. Together we developed a set of performance goals for a new truck: it had to improve fuel efficiency by 50 percent, it had to reduce emissions of soot, or particulates, by 90 percent, and it had to deliver as many packages and carry as much weight as a regular FedEx truck. Then we challenged their suppliers to meet our specs. Now we have trucks on the road that are reducing soot by 90 percent and are going 50 percent farther on a gallon of fuel.

Q. What was the key technology?

A. It’s not dissimilar from a Toyota Prius or the system that’s in a hybrid car. It’s a hybrid diesel-electric system.

Q. What will be the annual impact?

A. For every 10,000 hybrid trucks that replace conventional trucks on the road, we’re looking at reducing carbon dioxide emissions by about 80,000 tons, which is equivalent to planting two million trees. It would reduce diesel fuel usage by over seven million gallons and reduce nitrogen oxide, which causes smog, by about 1,700 tons. That would have the same effect as if you stopped traffic in New York City for a month.

Q. What will it take to change American automakers’ thinking on fuel efficiency?

A. Two things have to happen. One is that we need to have a better national policy. We had the opportunity recently to increase fuel economy standards for American fleets, and we didn’t do much with that. The other thing is that these corporate fleets are a good example of where we can use corporate purchasing power to make change up the supply chain.

Q. Are you optimistic that companies suddenly are more environmentally conscious?

A. I wouldn’t say “suddenly.” It’s like when a Hollywood star makes a breakout movie and people say he is an overnight success, but it’s really taken 15 years to get to that point. The first partnership we had started in 1989 with McDonald’s. We went to them and said, “Hey, you’ve got way too much packaging here.” Remember those Styrofoam clamshells? They were paying to buy them and paying to throw them away. We worked with them on a project that had 35 or 40 different recommendations. Eliminating the Styrofoam clamshells was the most visible outcome. That was 17 years ago and we’ve been working toward these goals ever since. I see the momentum building in the past few years. But it takes leadership on the part of these companies to make it happen.

William J. Holstein is editor in chief of Directorship magazine.

Saturday, August 12, 2006

Pigeons as Information Technology: A New Method for Monitoring Air Pollution

Environmental activists are well aware that information is power. The Toxic Release Inventory has empowered communities and gains wide media coverage when the "dirty dozen" companies are revealed. Now bold academics have devised a new means of collecting relevant air pollution data; pigeons with cell phones!

To be serious for a second, the interesting issue here is that even major cities such as Los Angeles only monitor air pollution in perhaps 25 different locations. A pigeon flies around many more places than that and thus can spatially sample from a huge number of locations. I do hope these pigeons get paid for their services.

I will never again curse a pigeon now that I appreciate that they are our new "google" part of the information technology revolution. Perhaps you should launch a IPO of a pigeon raising farm where you breed these cute creatures for their new mission (see below).

With regards to the Green Cities publication countdown, I'm hoping it is down to 12 days. The publisher has told me that the hardcopy and the paperback versions will be published at the same time.

Pigeons beam air quality info to blog

By JULIANA BARBASSA, Associated Press WriterFri Aug 11, 8:33 PM ET

Pigeons with backpacks and cell phones will be taking to the sky and sending air quality data to a blog as part of a whimsical project that blends science, art and activism.

Investigators at the University of California, Irvine hope the winged researchers will fill in gaps in knowledge about the air we breathe, and bring nonscientists into the debate on air quality.

"They transmit in real time, and all the information is available to the public," said Beatriz da Costa, a UC Irvine professor of arts, computation and engineering.

The pigeons will fly over Silicon Valley Saturday as part as ZeroOne San Jose, a technology and art exhibit.

Da Costa said the project was inspired both by the haze she saw hovering over Los Angeles when she moved to the city three years ago, and by a century-old photo of a pigeon carrying a spy camera around its neck.

"They were heavily used in World War II by several European countries," da Costa said of homing pigeons. "So I started thinking, what could we surveil right now that would be in the social interest?"

The birds will carry miniature backpacks equipped with a global positioning system monitor, pollution sensors, and cell phone transmitting equipment that can send the data directly to a blog where it is overlaid on Google maps. Visitors then can roll over the maps and learn about air pollution in the area.

It took da Costa and two graduate students working with her a year to develop equipment that is small and light enough, at 1.3 ounces, for the one-pound birds to carry.

Still, the project has drawn opposition from animal rights advocates, who questioned its scientific validity in a letter to UC Irvine's chancellor last week, saying the experiment could "result in injury and exhaustion for the birds."

The Bay Area Air Quality Management District already monitors air pollution at 28 different stations, and the data gathered by pigeons would be redundant, said Holly Mattern, spokeswoman for People for the Ethical Treatment of Animals.

"It's an experiment with animals that is unnecessary," Mattern said. "It just shows bad decision-making on a lot of people's parts."

UC Irvine's animal ethics panel reviewed the project, and found it was harmless.

"It's not that they don't feel it at all, but they're capable of carrying it," da Costa said of the pigeons. "They're trained to do it, and the worst that can happen is that they fly, then take a rest."

The birds fly for about half an hour at between 300 and 500 feet. Their value to air quality researchers comes from their mobility, since they could potentially fill in pollution information between the stationary monitors researchers have to rely on, investigators said.

"This is about raising awareness, and rethinking the way we gather data," da Costa said. "In this case, we're doing it in a fun way, using homing pigeons."


On the Net:


Sunday, August 06, 2006

Inside the Economist's Mind

When an academic economist finishes a project, he/she has published a paper in a refereed journal. Does the "journey" detailing how she came up with the idea, who she debated, who else was a rival in some riveting struggle, who contributed to honing the idea --- does any of this detail really matter? To gossips yes, but does the "process" really matter once we have the final contribution?

Apparently, I am in the minority on this one because we are about to be given a book that takes us into the "inside". "In candid interviews, these 16 great economists prove to be fabulous story tellers of their lives and times. Unendingly gripping for insiders, this book should also help non-specialists understand how economists think." see http://econ.tepper.cmu.edu/barnett/quotations.html

I don't care how the sausage is made. I care about the final product. Unless these oral histories reveal details about how organizations such as the University of Chicago's economics department have maintained their excellence for so long then the individual details of paper creation border on trivia.

While we are talking about the mind, you might want to read this intriguing paper. Revealed preference is back!

Saturday, August 05, 2006

Diary of a Mediocre Day

It was a sunny gorgeous day here in Berkeley, CA but now it is early August and I'm realizing that I'm way behind my ambitious summer research schedule.

As I was walking back from Starbucks, I realized that I hadn't ordered any microeconomics textbooks for my September Fletcher class. I felt guilty about cheating Pyndick and friends of well deserved royalty money. So, I sat down and ordered some books. I'm a big fan of this book.

My wife and I face the challenge that our nanny has unexpectedly quit. We have spent too much time debating what we are looking for as a new hire so permit me to post a job ad here. If you would like to earn a high wage for entertaining the child of two humble economists and can put up with all of his endless chatter, please send me an e-mail! You must like trains, Darth Vader and war. His birthday is early October and our local school district won't let him start kindergarten even though he is as tall as a 2nd grader.

Returning to economics, I am happy to announce that the February 2007 issue of the Journal of Regional Science will be great. I guest edited it and the 8 papers on environmental and spatial issues will soon all be classics. I know that all of you already subscribe to this journal but still make sure you read this issue!

On the broad topic of books, I now understand that my Green Cities book will be published in expensive hardcover in late August 2006 while the cheap paperback will appear in late October 2006. I had been under the impression that both would come out simultaenously. Brookings offers authors a 40% discount for purchasing their own books but these sales do not count for royalties.

I can also truthfully claim that Dora and I almost have a draft of our social capital book done. You can go to her MIT Economics webpage to see all 6 papers but this book is more ambitious than simply stapling them together. We have tried to write a truly interdisciplinary book that sociologists, economists and historians can all appreciate and hopefully learn from.

Finally, I was sent a mildly interesting book titled "How to spend $50 billion to make the world a better place" edited by Bjorn Lomborg. The book features 9 chapters by authors with each chapter also presenting an "opponent's view". This is certainly a great question. At the end of the book, the expert panel (that included a couple of nobel laureates and other famous economists) ranked the 9. I had two problems with this book. I wish that the dialogue spoken by the expert panel had been published to hear their debate and discussion. This links to my second concern. The papers are too short. They contain little substance and no analysis.

But, Lomborg deserves credit for attempting to start a serious discussion on how we prioritize the world's problems. It would have interested me if he had taken the "expert's" rankings of the 9 problems and presented this listing to different interest groups ranging from Bono to the United Nations to poor people in Africa and see if they agree with the experts and to ask them for why they disagree (if they did in fact disagree).

Thursday, August 03, 2006

Cross-Country Environmental Comparisons

Internet news junkies love stories that show that one nation ranks poorly relative to other nations with respect to some measure of environmental sustainability (see www.yale.edu/esi/). But, how are these indices created and could they "cause" a behavioral change in the "dirty" nations?

Rankings are playing a growing role in capitalism. Look at Zagat's success in ranking restaurants or how much University Deans sweat U.S News Rankings of their school. Doctors are now being ranked with respect to their "batting average" on performing surgeries (i.e what % of operations turn out well --- this implicitly assumes that all operations are equally difficult or that patients are randomly assigned to doctors --- if the better doctors are assigned the harder surgeries then a naive index may yield false results about who are the "best" doctors).

Can Green rankings "green" the world economy?

I have always wondered how firms respond to the "day of shame" when the Toxic Release Inventory shows that they have high emissions relative to other firms. Greens will hope that these firms respond by changing their operations and reducing their emissions. How do we know that they don't engage in "accounting tricks" to simply lie and understate their true emissions?

Ideally, what the world needs is a trusted "environmental certifier" who could make spot audits both of companies and of national governments to see whether reported emissions factors indeed are accurate. KLD claims that they play this role but I have wondered if they actually do. What information do they collect about companies? How do they know a "brown" company when they see one? (see www.kld.com)

Ideally, the ESI would be used to identify "best practices" around the world. If nations such as Nigeria see that Finland is scoring high on some ESI subindex maybe Nigeria's government could contact Finland's government and a discussion could begin about what Finland could teach Nigeria and what technology transfer could take place. Prescott has stressed barriers to technology transfer such that the poor nation has stake holder whose livelihood is threatened by the transfer of new technologies. Would that issue arise here?

Can the rankings generate enough international shame to mobilize
countries? ---- I don't think so --- this is the same issue of boycotts. In any boycott there is a free rider issue. Europe may be upset about U.S greenhouse gas emissions per-capita but are they going to stop importing Hollywood movies to protest? Is it obvious that such a boycott (even if it could be achieved) would change U.S emissions production?

Wednesday, August 02, 2006

Answering my Blog Mail

Every week I receive some very reasonable e-mail from blog readers. I'd like to try to answer two questions I've received. One is on Jim Heckman's work on "Essential heterogeneity" and its impact on estimating treatment effects. The other is about making cross-country environmental performance comparisons.

First a "simplified" Heckman Model:

A researcher wants to know how much weight do people gain when they eat a single Twinkee. So, the treatment here is eating the twinkee and the weight gain is the treatment effect. There is an asymmetry here. People KNOW their own twinkee effect before they eat the twinkee. To keep this really simple, if your last name begins with a "A" you gain 1 pound, if your last name begins with a "B" you gain 2 pounds, and so on such that if your last name begins with a "Z" you gain 26 pounds.
Assume that each letter is equally likely (so there are as many Adams as Quartz).

The researcher observes your weight and whether you ate a twinkee but the researcher doesn't know your last name or your treatment effect.

The researcher estimates using OLS: Weight = constant + B*1(Eat Twinkee) + U

where 1(Eat Twinkee) is a dummy variable that equals one if you eat the twinkee and it equals zero if you don't eat the twinkee.

Note that if a random set of people were forced to eat the twinkee, then the researcher would estimate a AVERAGE TREATMENT EFFECT = 13.5 pounds.

One of HECKMAN's points is that people self select (sounds familiar?) into whether they eat the twinkee or not.

To keep things simple, let everyone have the same utility function. People gain utility from eating a twinkee but they don't like to gain weight and they don't like to pay a high price for the twinkee.

Utility for person with last name starts with a B = 10 - Weight - Price = 10 - 2 - Price

Now assume that a twinkee is $2. Let's define an instrumental variable such that half the population is offered a twinkee for a price of $0. Note this "exogenous" reduction in the price of a twinkee.

When the price of a twinkee is $2, the marginal person who chooses to buy it and eat it (given the weight gain) has a B = 8 (so last name of Gonzales)

When the price of a twinkee is $0 , the marginal person who chooses to buy it and eat it (given the expected weight gain) has a B = 10 (so a last name of Igloo)

This instrumental variable (the cheap twinkee) gets people who will gain more weight to participate in the program (relative to who would have participated had the price of a twinkee remained at $2). Only if the twinkee price were negative would the real weight gainers (the Zebras) participate.
Heckman makes the point that the IV estimator may not be reflective of any interesting sub-population of the entire population. The mean treatment effect for this group at the margin may bear little resemblence to the Average Treatment Effect of 13 or other interesting percentiles of the treatment distribution.

Heckman also makes the point that the LATE estimator is instrument dependent in the presence of essential heterogeneity. For example, the LATE estimator would have been smaller had the instrument been a reduction in price of a twinkee from $2 to $1 rather than from $2 to $0 because in the former case the marginal person would have had a B=9 rather than a B=10.

Tomorrow I will answer this question:

"Environmental Performance Index (EPI) and the
Environmental Sustainability Index (ESI). I am interested in learning
about the following: the creators? motivations behind the indexes, the
refinements in methodology that attributed to England?s rather quick
jump in the ranking, the consequences of each indicator being weighted
equally, etc. Other key questions include: Do countries point to the
empirical data as leverage in environmental treaty negotiations? Have
governments approached other countries performing well on a particular
indicator to inform themselves about potential strategies they can
apply? Can the rankings generate enough international shame to mobilize
countries? Wh
at is being done to raise the awareness of citizens around the world of
their countries? performance?"

Tuesday, August 01, 2006

Environmental and Urban Economics Blog is One Year Old!

I now no longer remember my feeling of excitement when I posted my first blog entry. If you had told me in August 2005 that in August 2006 that I would still be blogging away, I would have been surprised.

Blogs are like new products from small firms. When they start out there is a lot of uncertainty about whether they will be successful and the failure rate should be high. Perhaps some blogs are implicitly subsidized by an author’s low value of time? I haven’t seen any blog entries on hazard models on blog failure.

One has to be honest about one’s self. The NFL coach of the Patriots always says “You are what you are”. This blog is not a smash success relative to others such as Delong or Mankiw or “Super Freak” blog. Other blogs have done a better job focusing like a laser on a key public policy issue such as Jim Hamilton’s blog and oil price dynamics.

I can comfort myself that I have intentionally chosen to focus on my narrow research niche; “environmental and urban economics”. Back in August 2005, I knew that my Green Cities book would be published in late 2006. The entrepreneur in me wanted to spread the word that I was an interesting guy with clever ideas. From the private e-mail I receive from people, I can tell that I’ve achieved this modest goal.

Once my book is published in late August 2006, this blog will evolve into more of a diary discussing debates and e-mails I have received about the book. For example, I have already written a short piece for London’s Policy Exchange based on this book. In addition, I’m getting ready to go to Beijing in October to discuss excerpts of the book with Chinese Policy Officials. Once I move to UCLA in January 2007, this blog will also focus more on California issues.

As I reflect on my blog’s birthday, I can’t resist offering a couple of observations about economics blogs;

1. Would the average quality of blogs be higher if posters could not “cut and paste”? The Becker Blog never resorts to this. I’m trying to steal less from the New York Times then I used to. I realize that to make a good comment on something you need to post a mention of what you are commenting on but ..
2. Why isn’t there more subtle discussion of applied economics in blogs? I understand that this is the wrong medium for presenting formal models and laying out and defining cumbersome notation. Still, each week the NBER posts numerous thought provoking micro studies and yet I rarely see people posting even humorous pseudo-referee reports on what they think of these studies. Here I am less guilty. On several occasions, I have discussed nber papers in some detail. Unlike in a referee report, my reports are clearly “signed” so I’ve been nicer than if I was under the “veil of ignorance”. Put simply, where is the debate? There is too much macro/political economy debate taking place in blogs but too little micro debate. Andrew Gelman’s statistics blog at Columbia is a great example of what I would like to see. I look at his blog out of admiration even though I don’t really give a crap about statistics. His blog shows deep thought about core issues. He is simultaneously thinking and having fun rather than pretending that he is on Jay Leno’s couch being witty.

3. I would like to see Jim Heckman start a rotating blog where he debates a researcher and then when the foe wears out a new rival enters the ring. Similar to American Idol, people could then vote to cast their ballot concerning who they thought won the debate and a cash prize would be given to the winner. This would be a nicer version of Russell Crowe’s Gladiator but it is the same idea.
4. Perhaps Google could figure out how to use its “trends” feature to figure out who are the top 50 most exciting economists in the world and they pay them to blog together and argue in public so that the public can see how economists talk to each other. David Warsh’s new book attempts to show how “sausage is made” but it focuses on a narrow slightly esoteric subject.