Tuesday, February 27, 2007

Perception and Reality: New York City's Quality of Life is Improving

I'm writing a paper about trends in big city quality of life. How much is crime, pollution and congestion in big cities improving relative to smaller cities? Why is exposure to crime, pollution and congestion declining in big cities? A mildly interesting issue is whether people's subjective perceptions quickly converge and match the objective progress. Put simply, do people who live outside of New York City still view it as a tough, rough town based on trends in the 1970s and 1980s (i.e think of the Son of Sam)? How long does it take these slow Bayesians to update their information?

This interesting New York Times article highlights that NYC wants to be proactive and to fight outdated stereotypes by hiring a Madison Avenue Ad guy to "get the word" out about how great NYC is. The financial benefit of improving its reputation is obvious, there are lots of tourists thinking about visiting NYC who might be lured by this campaign.


New York Times
February 27, 2007
Remaking the City's Image, With 50 Million Tourists in Mind
By PATRICK McGEEHAN

George A. Fertitta has helped sell a lot of pricey Belgian chocolates and French cognac to New Yorkers. Now he has to sell New York to Belgians, Frenchmen and others who may consider the city too costly, too dangerous or too American to visit.
Mr. Fertitta is spearheading Mayor Michael R. Bloomberg’s campaign to lure 50 million visitors a year to the city by 2015. That would be about six million more out-of-towners than the city, which is riding a long wave of tourism and economic growth, attracted last year.
A Madison Avenue veteran whose ad agency specialized in marketing luxury goods, Mr. Fertitta seems undaunted by the mayor’s goal. Indeed, he told a group of tourism industry executives over lunch last week at the “21” Club that he believed drawing 50 million visitors a year would be “kind of a layup” that could be achieved three years ahead of schedule.
There is a simple philosophy behind the tourism drive: If this many people will show up in New York with little prodding, imagine how many would come if the city actively encourages them.
To increase the influx, the city is spending more money than ever to promote itself overseas. Fueled by the mayor’s commitment of an additional $15 million a year, the city’s marketing operation, known as NYC & Company, has begun placing billboards in some European cities declaring that with exchange rates in their favor, New York is a relative bargain.
Those ads are aimed at knocking down one negative perception about New York: that it is prohibitively expensive.
An international ad campaign in the works, a first for the city, will try to dispel two other stereotypes: that New Yorkers are exceptionally rude, and that crime is rife in the city. Mr. Fertitta said he would rather foreigners picture “Sex and the City” than “Law & Order.”
Under Mr. Fertitta, NYC & Company has hired an advertising agency, Bartle Bogle Hegarty, to create the campaign, which is expected to begin later this year.
The marketing operation is also expanding its network of offices in other countries, including Russia and the Netherlands, to tailor its promotions to segments of the local populations, like wealthy older people and adventuresome younger ones.
“We will not waste a nickel of this money,” said Mr. Fertitta, referring to NYC & Company’s annual budget of $45 million, half of which is supplied by City Hall. “That’s why we’re going to make sure we’re fishing where the fish are.”
Mr. Fertitta, who has been chief executive of the revamped NYC & Company since last summer, also wants to turn the organization’s Web site into a local version of Expedia — one where tourists could electronically purchase their transportation, hotel rooms and show tickets.
That idea, however, may be a tougher sell with some directors of NYC & Company, which has 1,900 dues-paying members, mostly travel and tourism companies.
The executives of those companies, led by Jonathan M. Tisch, the chief executive of Loews Hotels, have historically directed the city’s promotional efforts, but their collective clout has now been diluted by the Bloomberg administration’s largess.
The members’ annual dues of about $4.5 million now account for just 10 percent of the operation’s overall budget, shifting power toward the city.
“Given the amount that the city is now contributing, a tilting toward more of a public-private partnership is warranted,” said Daniel L. Doctoroff, the deputy mayor for economic development. “But certainly it is not just reporting to me or to City Hall.”
Still, it is under Mr. Doctoroff’s direction that the city’s marketing operation has been reorganized.
Two other agencies have also been put under Mr. Fertitta’s charge: NYC Big Events, responsible for attracting awards shows and other high-profile events, and NYC Marketing Development Corporation, which licenses the city’s trademarks and sells citywide sponsorships.
And recruiting Mr. Fertitta was Mr. Doctoroff’s doing. He said he had asked several prominent advertising executives, including Keith Reinhard, the chairman emeritus of DDB Worldwide, for recommendations, and Mr. Fertitta’s name kept coming up.
“George is a passionate New Yorker,” Mr. Reinhard said in an interview last week. “He is a consummate marketing guy. He understands brands. He also knows how to build teams.”
Mr. Fertitta made a name for himself on Madison Avenue in the early 1970s when he teamed up with John Margeotes to found an agency that created enticing magazine ads for luxuries like Godiva chocolates, Remy Martin cognac and Cunard cruises.
Mr. Margeotes was the creative director, and Mr. Fertitta, always the first one in the door, ran the business.
“When I got to the office, he’d already done a half-day’s work,” recalled Mr. Margeotes, now an artist living in Massachusetts. “He got out that yellow pad and went down a to-do list and followed it religiously all day long.”
Mr. Fertitta, who still keeps his legal pads and manila folders arranged in a particular order along the edges of his desk, sold the last of his interest in the agency, Margeotes Fertitta Powell, in 2005 and started considering his next move.
He said he had not considered getting involved with city government before he met with Mr. Doctoroff.
The deputy mayor sold him on the need for well-honed, professional marketing skills to continue the tourism surge.
“What we’re really focused on now is taking a strategic look at how we can bring as many people to New York as possible and do it in the most efficient ways possible,” Mr. Doctoroff said.
For his part, Mr. Fertitta, who has lived nearly all his 60 years in Manhattan, sounds like the city’s chief cheerleader.
“New York is at its all-time high in all the positive things and at an all-time low in all the negative things,” Mr. Fertitta said, leaning back in a black chair in his sparse office in a Midtown high-rise.
But he acknowledged that many people in other places did not share that perception. The general reputation of the United States has suffered during the course of the war in Iraq, he said.
“The image of the U.S. is much lower than it was three years ago or five years ago,” Mr. Fertitta said. “The reservoir of goodwill after 9/11 has dissipated.”
Leaving politics aside, he said that of the primary objections that people have to visiting New York, the one most based in reality is the cost.
To change people’s negative views of New York’s grime, crime and prices, he said, the city can piggyback on the invaluable boost it gets from pop-culture cynosures like Carrie Bradshaw, the lead character in “Sex and the City,” the internationally popular TV show.
“To some people, New York City is ‘Sex and the City’ and the best shoes in the world,” Mr. Fertitta said. “They want to see where Carrie Bradshaw sat on the stoop.”
For others, a trip to the city means plush hotels, world-class restaurants and museums, he said.
“Our job,” Mr. Fertitta said, “is to identify a market and say, ‘This is the part of New York that you’re going to love and you’ll want more of.’ ”

Sunday, February 25, 2007

An Unfair Look at Malibu

Many celebrities live in Malibu. I didn't see any of them today but I now have a better understanding of why they live there. On a traffic free sunday, Malibu is a 35 minute drive from UCLA. UCLA is close to everything. On a map of Los Angeles, Malibu is way North and West of anything. I'm not sure what I was expecting. I thought it would be funky like Santa Monica and would have classy restaurants and stores like Pacific Palisades. That's not what I saw.

Instead, we drove and drove along Highway 1. To our right were steep hills with distinctive homes looking like they may slide down the hills and land on the roads. Now I understand why mudslides are such a big deal there. To our left was the ocean and the beach bum condos 200 yards from the Ocean. It was clear that these expensive condos have fantastic decks that overlook the Ocean. The stores stunk and looked like any strip mall street in California.

I did like the architecture of their City Hall. It didn't look like Cambridge MASS's city hall.

Malibu is isolated. These celebrities know that they will have their own beach and no bums or professors or anyone else will bug them in Malibu. They are miles from Los Angeles but have some ability to get to LA when they need to. It would interest me to see a 24 hour schedule for a guy like Brad Pitt. Does my day look anything like his day? He has more hair so maybe that takes more time. I guess we both go to Starbucks (but maybe he sends a flunky?).

After seeing this town, we realized that our destiny lies to the east of the Malibu.

Friday, February 23, 2007

NYC is a Green City: Go Ask the Beavers!

The New York Times today is filled with interesting green news. Paul Krugman's piece presents an interesting fact that California's per-capita energy consumption is 40% below the national average. He argues that higher energy prices are the cause. He presents a nice "double difference" arguing that California's energy consumption was the same as the rest of the nation when its energy prices were as low as the rest of the nation's 30 years ago.

The New York section had an interesting piece that urban biologists have spotted beavers again in the Bronx River. An optimist would say that this highlights the robustness and ability of urban ecosystems to recover from past blights.

The article does not devote enough attention to what were the cleanup treatments that caused the river to be cleaner and to contribute to creatures such as the beaver to return. How costly were these treatments? How much of the progress is due to deindustrialization unrelated to government policy?



February 23, 2007
After 200 Years, a Beaver Is Back in New York City
By ANAHAD O’CONNOR
A crudely fashioned lodge perched along the snow-covered banks of the Bronx River — no more than a mound of twigs and mud strewn together in the shadow of the Bronx Zoo — sits steps away from an empty parking lot and a busy intersection.

Scientists say that the discovery of this cone-shaped dwelling signifies something remarkable: For the first time in two centuries, the North American beaver, forced out of town by agricultural development and overeager fur traders, has returned to New York City.

The discovery of a beaver setting up camp in the Bronx is a testament to both the animal’s versatility and to an increasingly healthy Bronx River.

A few years ago the river was a dumping ground for abandoned cars and rubber tires, but it has been brought back to life recently through a big cleanup effort.

The biologists who discovered the beaver say they have nicknamed it José, after United States Representative José E. Serrano of the Bronx, who has directed $15 million in federal funds toward the river’s rebirth.

In an interview, Mr. Serrano said he had always envisioned the river getting cleaner, “but I don’t know to what extent I imagined things living in it again.”

A number of people reported seeing the beaver last fall, but biologists figured that the sightings were much more likely to have been of muskrats, which are somewhat common in the area.

But the biologists were intrigued enough to investigate, and after trudging the riverbanks, they spotted gnawed tree stumps and the 12-foot-wide lodge — evidence that pointed to beavers, which are rarely seen in the wild because they tend to work at night and avoid people.

Then on Wednesday, the biologists were able to videotape the animal on film, swimming up the river looking for more material to insulate its home. The animal is several feet long, two or three years old, and appeared to be a male in search of a mate, said one of the biologists, Patrick Thomas, the curator of mammals at the Bronx Zoo, which is run by the Wildlife Conservation Society.

He speculated that the beaver had traveled to the Bronx from Westchester County or other, more rural areas that are common beaver habitats.

He said that it would be interesting to see if a mate had accompanied José or whether one would come down and help start a new beaver community.

That would be unusual, to say the least, because such a community of beavers is something New York City has not seen since Times Square was still farmland.

A beaver sighting was reported last month in East Hampton on Long Island. Environmental officials said that if it was a beaver, it may have come across the Long Island Sound from Connecticut or from Gardiners Island, a tract of private land between Long Island’s forks.

The North American beaver vanished from New York City in the early 1800s as a result of trapping, fur trading, and deforestation. Beavers helped speed Manhattan’s development by attracting fur traders who were eager to feed huge demands for their pelts in Europe. To this day, beavers remain tightly linked to New York’s identity.

Images of the beaver are on the official seal and flag of New York City. It is the official state animal of New York State, and a Beaver Street is between Broadway and Wall Street in Lower Manhattan.

Then there is the City College of New York, which named its sports teams the Beavers.

The area along the Bronx River where José built his lodge is one of environmental triumphs and travesties. Cleanup efforts on the eight-mile stretch of river that snakes through the heart of the Bronx began in the 1990s. Today the river is stocked with 45 species of fish, and there have been increasing sightings of other wild animals near its banks, like turkey, deer and coyotes.

The size of José’s lodge and the abundance of poplars and other trees favored by beavers suggest that he may stay for a while, said Dietland Muller-Schwarze, a beaver expert at the State University of New York College of Environmental Science and Forestry. He said it had been only a matter of time before a beaver popped up in New York City.

“It had to happen because beaver populations are expanding and their habitats are shrinking,” he said. “We’re probably going to see more of them in the future.”

Thursday, February 22, 2007

A UCLA Anthropologist's Study of Urban Land Use by Middle Class People in Los Angeles

Have you ever wondered what anthropologists do all day long? When I meet faculty from other departments, I often ask myself this question. What do you do? What is the hard part of your research job? Below, this post will reveal the answer for one set of social scientists.

This is interesting on a couple of different levels. Can you figure out what I mean?


L.A. Region's Garages and Backyards Suffering from Major

Identity Crisis, UCLA Research Shows


Forget hot tubs beckoning sybaritic adults, garages brimming with
impressive cars and families frolicking on verdant lawns. From their
clutter-strewn garages to their mostly lovely but abandoned yards, busy
Southern California parents who own their homes rarely use residential
outdoor spaces for the purposes for which they were designed, said a
UCLA anthropologist who participated an in-depth study of how the
average dual-income family really lives in Los Angeles.



"Middle class families in Southern California don't live the way you
might expect," said Jeanne Arnold, an anthropologist with UCLA's Center
for the Everyday Lives of Families and a UCLA professor of anthropology.
"Most parents in dual-income families never spend leisure time in their
yards, their children play outside much less than expected and most cars
can't fit in garages because they're too full of clutter from the
house."



Five years ago, Arnold and a team of researchers set out to follow 32
families, all with young children, and with each parent holding a
full-time job. For four full days, Arnold's team tracked these families
at home, from the moment they rose to the moment they went to bed,
scrupulously documenting the ways they used their homes, yards and time.
In addition to videotaping family members at home during the four days,
including weekends, the research team recorded the activities and
whereabouts of each family member in the home at 10-minute intervals.
They produced photos and floor plans of the houses and yards, and family
members made self-narrated tours of their homes. The team accumulated so
much information that just processing the records took more than a month
per family. The first "material culture" analysis of these records will
appear in the March 2007 issue of the Journal of Family and Economic
Issues.



Despite the fact that contemporary Americans now control the largest
amount of private space per person in the history of urban civilization,
the team documented what Arnold calls "a storage crisis" among the first
24 of 32 families studied.



"From construction materials to excess furniture and toys, storage of
material goods has become an overwhelming burden for most middle-class
families," said Arnold.




"We found items blocking driveways, cluttering backyard corners and
spilling out of garages," said Ursula Lang, an architect in Berkeley,
Calif., and a study co-author.



The trend is fueling an "identity crisis" for the region's garages,
which rapidly are being converted into multipurpose storage spaces for
household goods or people, "pushing cars once and for all out to the
driveways and streets," the study warned.



"Rarely do cars see the inside of the garage," Arnold noted.



Just six - or one-quarter - of the families tracked were able to use
their garage in the traditional manner by parking at least one car there
regularly. And of those, only three families parked both of the parents'
vehicles in the garage. The other three families were able to squeeze
just a single car into the garage before turning the remainder of the
space over to storage.



About one-third of the families had converted their garages in part or
in whole into living spaces. But almost every garage that was still
recognizable as a garage was "dominated by, if not overtaken by,"
storage needs, the study stated. In two-thirds of these cases,
researchers characterized the density of items stored in these garages
as "high." The only family that did not use its garage for storage of
some sort was upper-middle-class and owned a large home with two
generously sized interior storage spaces.



"The findings show that about 75 percent of middle-class Los Angeles
homeowners use garages in ways that preclude parking cars there," Arnold
said. "This pattern differs a bit in the harsher climes of the East and
Midwest, where families more often protect cars from foul weather and
where many homes have basements that can absorb some of a household's
demand for storage. But increasingly we think the pattern may emerge
there, too"



Ironically, much of the garage-stored material goes unused. Half of the
families never even visited the garage spaces during the study, and more
than half of those who did spent 10 minutes or less among the
possessions sequestered at such a considerable trade-off. The routine
raised flags for researchers.



"Trapped in an energy-draining work-and-spend cycle, many young
dual-earner families seem to fuel their stress and frustration by buying
more possessions than their homes can absorb, adding to their debt and
routinely conscripting crowded garage spaces to function as chaotic
storage rooms," Arnold said.



If garages were overused, the yards of middle-class homes had the
opposite problem. While the average backyard was two times the size of
the homes' interior, and families often invested in special features and
carefully maintained the spaces, use was limited.



Adults were barely recorded in their backyards during the observed
times, and when they did step through their backdoors, they did chores.
In fact, 13 of the 24 families - or slightly more than half - did not
spend any leisure time at all in the backyard during the four days of
observation. This finding included both parents and children.
Interestingly, researcher logged little or no use of the priciest
improvements (pools, play sets, and formal decks and patio spaces).




Parents in only four families - or one in six - spent an hour or more
eating or playing outside with their children or visitors. Children
didn't fare much better. In only six of the 24 families - 25 percent -
did youngsters spend an hour or more in the backyard during the four
days.



"Relaxing in the backyard and extended play by children in the yard may
be cherished ideals, but they are rarely achieved among today's
time-stressed, electronically oriented families," Arnold said. "The
harried week of the dual-earner middle-class family - with job, commute,
keeping up the home, and structured activities for children on many
afternoons and weekends - allows little time for leisure outdoors."



Front yards were no more popular. Beyond fleeting exchanges between
neighbors or brief instances of children playing with a bike or ball in
the front, 20 of the 24 participating families spent no time to speak of
in their front yards. Only one family socialized on the front porch, a
once familiar activity in small-town America.



When families did linger in the front yard, they mostly carried out
chores, such as planting, weeding and pruning. And children who did
venture into the front yard tended not to play on the lush lawns that
the families went to great lengths to keep up. Against expectation,
little ones gravitated toward paved surfaces.



"Most kids' play in the front is on asphalt driveways, streets or
concrete sidewalks," Arnold said. "There were only a few instance of
play with tree-swings or bats and balls that carried onto the front
lawns. Indeed, the manicured lawns and formally landscaped areas in
front of quite a few of the houses seem to actively discourage play and
other rambunctious activity. They seemed to invite passersby to admire
the owner's good taste and conformity with neighborhood ideals."



Together with the low backyard use, the front yard patterns set off
alarms for the researchers.



"By any measure of intensity of use of middle-class homes, yard spaces
receive the least hours of use per square foot," Arnold said. "But the
disparity between the intensity of use of middle-class homes and the
yard space that surrounds them has probably never been as great as it is
today. More and more, the outdoor spaces at home do not seem to serve as
a regular outlet for the release of the stresses and strains of daily
life, especially for younger dual-earner parents."



To see an online version of the study, go to
http://dx.doi.org/10.1007/s10834-006-9052-5

Wednesday, February 21, 2007

Chicago's Top 150 Stars: Do Rex Grossman and Vince Vaughn Really Outshine Gary Becker?

I had thought that the recent efforts by economists such as Krugman, Sachs, Glaeser and Levitt had raised the economics profession's overall profile. The New York Times has also been devoting more coverage to describing who is "hot" in academic economics. But, these "treatments" appear not to have changed the overall pecking order. This Chicago based website's ranking would suggest that as usual that I am wrong.

Click here to see how Gary Becker and other well known economists compare to other Chicago notables ranging from Vince Vaughn, to Jesse Jackson to Rex Grossman. I was born in Chicago and lived there a total of 7 years of my life and somehow this ranking doesn't look like my ranking. Look for Jim Heckman to rise up this ranking and overtake Rex in the next couple of years.

Tuesday, February 20, 2007

The Frontier of Environmental Economics?

I apologize. I have stopped blogging for a while because I've been busy. Maybe I'm slowing down and have no more ideas to share? Maybe it is too sunny here in Los Angeles?

But, I'm always looking for something to get me excited about my work and today I have found it. Here is the roster of papers detailing what is the "Frontier of Environmental Economics" as defined by the folks at Resources for the
Future These papers look okay to me but if this is really our "frontier" then I'm a pinch worried.

Since I wasn't invited to this important event, I would like to hold a quick conference right here where I list my own research frontier. In the next 6 months, I will be talking (on this blog) about the following completed new papers:

1. Death and Media Coverage (joint with Dora Costa)

2. Environmentalists as a Source of Housing Supply Regulation

3. Who Are Early Adopters of New Energy Efficient Products? Evidence from Hybrid Vehicle Registrations

4. Local Economic Growth Near Polluting Power Plants: Implications for the Social Cost of Power Generation, and the Efficiency of Permit Trading

5. The Social Cost of Urban Agglomeration

If you'd like to hear me present these five papers, then meet me on the Beach between Pacific Palisades and Santa Monica. You'll know me when you see me.

Thursday, February 15, 2007

Further Brain Drain in New Orleans

When hurricane katrina hit, I predicted that New Orleans' durable housing stock would survive but would become a poverty magnet as predicted in the model published in the JPE in 2005 by Glaeser and Gyourko.

The article below focuses on selective out-migration from New Orleans. The more educated are always more spatially mobile. As moldy nasty housing survives, a housing filtering model would say that rents will fall. This will attract more poor people to migrate there and create a viscious circle as crime rises , tax revenue declines and local schools grow worse due to negative peer effects.

Will any Democrats propose a "Marshall Plan" to lead a big demand push to rebuild New Orleans? What would such a Keynesian push create? Two rail transit systems? A new art center? While these are bad jokes, my serious point is that educated "role models" would help to anchor the New Orleans economy but each individual skilled person's best response is to leave the city because "he is small".


February 16, 2007
In Setback for New Orleans, Fed-Up Residents Give Up
By SHAILA DEWAN

NEW ORLEANS, Feb. 15 — After nearly a decade in the city of their dreams, Kasandra Larsen and her fiancé, Dylan Langlois, climbed into a rented moving truck on Marais Street last Sunday, pointed it toward New Hampshire, and said goodbye.

Not because of some great betrayal — they had, after all, come back after losing everything in Hurricane Katrina — but a series of escalating indignities: the attempted carjacking of a pregnant friend; the announced move to Nashville by Ms. Larsen’s employer; the human feces deposited on their roof by, they suspect, the contractors next door; the two burglaries in the space of a week; and, not least, the overnight wait for the police to respond.

A year ago, Ms. Larsen, 36, and Mr. Langlois, 37, were hopeful New Orleanians eager to rebuild and improve the city they adored. But now they have joined hundreds of the city’s best and brightest who, as if finally acknowledging a lover’s destructive impulses, have made the wrenching decision to leave at a time when the population is supposed to be rebounding.

Their reasons include high crime, high rents, soaring insurance premiums and what many call a lack of leadership, competence, money and progress. In other words: yes, it is still bad down here. But more damning is what many of them describe as a dissipating sense of possibility, a dwindling chance at redemption for a great city that, even before the storm, cried out for great improvement.

“The window of opportunity is closing,” Ms. Larsen said, “before more people like us give up and say it’s too little, too late.”

Mr. Langlois, who has repeatedly called the health and sanitation departments, the police and City Hall, said he despaired of receiving any response. In November, the couple bought their first house, and in December, they bought their first handgun.

“My friends here are just the greatest, hard-working, tax-paying people,” Mr. Langlois said, “and I think a lot of us are feeling under siege.”

The couple are unlikely to make any money on the sale of their house.

For every household that, like this one, has given up, there is another on the verge. Tyrone Wilson, a successful real estate agent and consultant, said he and his wife, Trina, a lawyer, had given post-storm life a fair chance. But, Mr. Wilson said, at the end of the school year they are likely to take their three children back to Dallas, where they took refuge after the storm.

“We came back, we tried,” he said. “It’s really draining, and at a certain point you sit down and you say, ‘We don’t have to go through this.’ ”

As a city in flux, New Orleans remains statistically murky, but demographers generally agree that the population replenishment after the storm, as measured by things like the amount of mail sent and employment in main economic sectors, has leveled off. While many poorer residents have moved back to the city, the “brain drain” of professionals that the city was experiencing before the storm appears to have accelerated.

Some say the overall effect is negligible. Greg Rigamer, a demographer who has done work for the city, said that the lack of housing had constrained the recovery, but that many residents remained fully committed to the city.

“The pattern in is certainly stronger than the pattern out,” Mr. Rigamer said.

But in December, the number of houses on the market peaked at a high not seen since the late 1980s, while the number of sales has trended downward since last June, according to data tracked by the Brookings Institution in Washington. Statistics kept by commercial moving companies show a net loss to New Orleans. Employers say they have raised salaries for skilled workers.

One oft-cited survey by the University of New Orleans found that a third of residents, especially those with graduate degrees, were thinking of leaving within two years.

Susan E. Howell, who conducted the survey, cautioned that the sample was small and that the poor were underrepresented. There are indications that low-income New Orleanians — those who will need the most help from a cash-strapped city —are making their way back, despite a lack of affordable housing, piling into relatives’ homes and trailers.

U-Haul, the rental company that is more affordable than commercial movers, has had more inbound trucks than outbound, according to the company’s records, and the number of public school children and new applications for food stamps in Orleans Parish are rising. In Houston, a task force that helps Hurricane Katrina residents resettle has paid more than $1 million in moving expenses for 350 families returning to New Orleans.

“This is a serious problem for the city, because one of the things we had pre-Katrina was the lack of an educated population,” Dr. Howell said. “We had too many people at the low end and not enough at the high end, and Katrina sort of fast-forwarded that trend.”

Because many poorer people have taken longer to return, they have not dealt with as many months of frustration as families with higher income and more mobility, so their staying power has yet to be determined.

Reganer Stewart, 30, a hotel maid, said she had been living with her cousin and her cousin’s mother and four children since November. In January, Ms. Stewart’s 12-year-old daughter, Brandi, joined them, but was put on a waiting list for school and could not enroll until earlier this month.

Houston, which Ms. Stewart had not liked when she evacuated there, was growing more attractive as her search for an apartment here grew longer. “Most likely, we going to leave,” she said.

In battered but proud New Orleans, abandonment is a highly emotional subject, in part because many have made sacrifices to stay and rebuild. To some, leaving now is tantamount to treason. When a report appeared a year ago that Emeril Lagasse, the famed chef, had said the city would “never come back,” reservations at his restaurants were canceled and strangers berated him. He insisted he had been misquoted.

And in response to an article in The Times-Picayune of New Orleans about a woman who had decided to move on, Poppy Z. Brite, a New Orleans novelist, wrote: “This isn’t an easy place to be right now, and the decision to stay or go is deeply personal. But why must some people use the media to take a parting shot at the city?”

On another occasion, Ms. Brite said, “If a place takes you in and you take it into yourself, you don’t desert it just because it can kill you. There are some things more valuable than life.”

Such fierce sentiments help explain why a dozen people who were planning to move or had already done so declined to speak on the record for this article or allow their name to be used. One man, a chef, said he wanted to remain anonymous because he was likely to return someday. A university professor said she did not want to compromise her employer’s ability to recruit.

“If I was going to be really politically savvy,” she said, “I would say that I was going to do a job search about this time anyway.”

The decision to leave is especially difficult for natives, said Elliott Stonecipher, a demographic analyst in Shreveport, La., even if they are going no farther than the north shore of Lake Pontchartrain.

“They just won’t talk about it; they do not want to talk about it,” Mr. Stonecipher said, adding that the reluctance shows just how unusual the city is. “It’s remarkable that they just don’t want anybody to know that they gave in.”

Others have unimpeachable reasons: Paul Gailiunas, a doctor whose wife, Helen Hill, was murdered in their home last month, left immediately for South Carolina.

As for Ms. Larsen and Mr. Langlois, they have taken in all the fury at those who are leaving, in newspapers, neighborhood forums on the Internet and even in the bars and cafes of their neighborhood, the Ninth Ward. But while many of their own friends had expressed disappointment, none had blamed them.

“Not only do they understand why we’re leaving,” Ms. Larsen said, “but they say, ‘You know what, I’m thinking about getting out of here, too.’ It’s like they’re waiting for that one more bad thing to happen.”

Brenda Goodman contributed reporting.

Sunday, February 11, 2007

100% annual rate of return on Fancy New York Real Estate?

Burried in today's New York Times Real Estate section is an interesting case study of the rate of return to real estate investment in New York City's fancy upper east side. An investor has purchased an empty lot for $8 million. She plans to invest $5 million to build a 8,000 square foot mansion and then she claims that she will sell the finaly product in 1.5 years for $25 million! That's a pretty good rate of return.

How do you explain this case? Why wasn't there more competition to buy the lot and to bid up its land price? As this case below highlights, there was a recent tragedy on this property. Is this developer overly optimistic about the future demand for new NYC mansions? How risky an investment is this? Unless Wall Street collapses there must always be another hedge fund guy looking for a nice property.

The interesting piece of urban economics here is that we rarely observe the "market price" for land in a center city. Usually, the land is bundled with some structure alread on it and you buy the two of them together.

Are you going to argue that liquidity constraints (i.e that guys like me don't have $8 million to bid for the land) prohibit competition among developers? I don't know if I believe that either. Perhaps information about the land auction was not widely distributed? This would surprise me because the original owner of the land has the right incentives to "broadcast" this information nationally and even around the world.

New York Times

February 11, 2007
Big Deal
Now That the Dust Has Settled ...
By JOSH BARBABEL

JANNA BULLOCK, a Russian-born real estate developer, just spent $8.3 million to buy a prime vacant lot on East 62nd Street with just a small image problem: it is the site of the explosion that destroyed a town house last year in the ultimate real estate war. The house’s owner, Dr. Nicholas Bartha, died of injuries he received when he set off a gas explosion to prevent his wife from getting the property in divorce proceedings.

Some buyers might hire a feng shui consultant to re-energize the space or bring in exorcists to banish any demons lurking in the soil. Instead, Ms. Bullock is focusing her energies on turning the site into a force for good: the ultimate green town house, complete with a cistern to fill the pool and a geothermal heating and cooling system created by channeling 1,500 feet down into the earth.

“I don’t want to have any association with the tragedy — to me it is an empty lot,” said Ms. Bullock, who renovates Upper East Side town houses and larger mixed-use developments in Russia.

Her broker, C. B. Whyte of Stribling & Associates, put it this way: “Memories are short. Things happen every day in New York. How often can you get a brand-new house built on the Upper East Side?”

In short, while Dr. Bartha’s death and the demise of a classic town house in a landmark district were a tragedy, one person’s mistake is another’s design opportunity. While the final plans have not been set and must be approved by the Landmarks Preservation Commission, the project architect, Preston T. Phillips of Bridgehampton, N.Y., is thinking about a “much more dramatic and modernist facade,” faced with glass and pale limestone to echo details of the Links Club next door.

The plans call for a building 20 feet wide covering 8,000 square feet on 5 floors. A collection system on the roof and in the rear courtyard would channel rainwater to an underground cistern to feed a courtyard waterfall and a 12-by-36-foot swimming pool in the basement.

The East 62nd Street house near Madison Avenue is Ms. Bullock’s fifth East Side town-house project. She began renovating apartments as a hobby and said that she had now turned it into an 18-hour-a-day obsession. She bought one town house, the former home of The New York Observer, for $9.5 million in January 2005 and sold it 11 months later, after renovation, for $18.5 million. She is about to put a second 25-foot limestone town house on East 67th on the market for $35 million.

Along the way, she has mastered some marketing techniques to bring cachet to her projects. She turned over two of her properties undergoing renovation for use as charity designer showcases and has agreed to provide a third, at 14 East 82nd Street, for use as the Kips Bay Decorator Show House in April.

Dr. Bartha blew up his house last year to avoid eviction and a forced sale to provide his wife with $4 million in court-ordered payments. But it turned out the empty lot was worth far more than a vacant house. Ms. Bullock said that she expected to spend well over $5 million to put up the new house and planned to offer it for about $25 million when it was completed in about 18 months.

Two Billboards Are Rising in the Meatpacking District

THE 14-story Hotel Gansevoort towers over the meatpacking district and celebrates the district’s trendy mix of butchers, restaurants and boutiques. It has a reputation for comfort and style, a heated rooftop pool and even an outdoor rooftop fireplace. Now it is getting an unusual new addition.

According to plans filed with the city’s Building Department, the hotel’s owners are putting up a 75-foot-tall steel pillar on Gansevoort Street at the rear of the property and erecting two huge advertising signs, one 20 feet high and 60 feet wide, and the other slightly smaller, 14 by 48 feet, facing northward along Hudson Street. The smaller sign will be illuminated at night.

Billboards are usually permitted in manufacturing zones like the meatpacking district, but preservationists are complaining that the new signs will be unwelcome in an area that has outgrown its roots and has become a destination for the arts and tourism. Andrew Berman, the executive director of the Greenwich Village Society for Historic Preservation, said the signs would mar the neighborhood and turn the district into a “huge outdoor mall for advertisers, a mini-Times Square.”

“Large billboards bring in dollars hand over fist,” he said. “They market their hotel off the neighborhood, and now they are creating the visual pollution of an urban New Jersey Turnpike.”

Elon Kenchington, the chief operating officer of the Gansevoort Hotel Group, would not discuss the revenue from the billboards. But he said they were angled to minimize the impact on nearby residential buildings and would add warmth and light to what is “pretty much a dead area.” He said that the hotel had signed a long-term contract with an outdoor advertising company, which is putting up the billboards, but that the hotel would retain the right to reject ads it found unsuitable.

In a letter to the Buildings Department, Mr. Berman complained that the signs would violate a series of technical standards established for large billboards. On Wednesday, the department rejected most of his contentions but said it had asked the hotel to provide more information on several points.

In 2001, the city adopted zoning rules limiting new billboards in SoHo and NoHo in response to neighborhood complaints and tightened regulations on signs elsewhere. Much of the meatpacking district is now protected by landmark status. But the hotel site was excluded from the historic district, Mr. Berman said, apparently because the development plans were well under way.

Naomi Campbell Sells Park Avenue Apartment

WHEN she pleaded guilty last month to assaulting her maid with a cellphone, Naomi Campbell, the supermodel with a temper, issued a brief statement to the court beginning with the words, “I had an apartment at 500 Park Avenue. ...”

Now public records released last week show that Ms. Campbell had sold her expansive loftlike apartment on Park just four days before her court hearing on Jan. 16.

The apartment, where the assault took place, is on the 12th floor of the modern aluminum and glass building at 59th Street. It has 3,100 square feet of space, with 18-foot ceilings, a four-person marble whirlpool and a separate staff entrance, according to the listing by Raphael De Niro, a broker at Prudential Douglas Elliman and a son of the actor Robert De Niro.

The apartment went on sale last April at $5.5 million. But in September, Ms. Campbell dropped the asking price to $4.95 million, and in October, to $4.75 million.

According to city records, the final sale price was $4.5 million. The buyer is Walter Rogers, an American businessman based in London who had previously lived in the building.

Still, Ms. Campbell appeared to come out ahead on the real estate deal. She bought the apartment for $3.9 million in November 2004.

Thursday, February 08, 2007

The Oldest Old: Will You Live to Age 95?

My grandfather turned 95 today. His sister lived to age 95. What was in the Polish drinking water from their youth? Relatively few blogs written by economists talk about their families. Maybe the families are boring? Or maybe the opposite? Could the family be so strange that we want to hide the family secrets from our academic friends and rivals?

My grandfather was a shoe salesman. He was a high energy, charming guy who could talk anybody into buying another pair of shoes. When I was a kid, the first thing he would do when he saw me was to pinch my toe to see if I needed bigger shoes.

He held a funny asset portfolio. He never bought a house but made some money in the stock market. He has spent his life in Queens, New York as the planes fly over head and a thousand immigrant languages are spoken on the streets.

My grandfather officiated at our wedding in May 1998 at the Harvard Faculty Club. Dora and I aren't religious. Dora suggested that my grandfather could lead the wedding event. In Massachusetts a person can receive a one day license to marry other people. My father had to write a recommendation letter for his father to attest that Grandpa Harry had a good character. My grandfather believed that his power to marry people lasted for more than 1 day and pertained to any state he lived in.

My son Alex is partially named after my Granpda Harry. Alex is Alexander Harry Costa Kahn. We wanted to give him the option as a teenager to recreate himself and become Harry Costa rather than living his life as Alex Kahn.

I am very proud of my grandfather today. My father told me that his father was simply relieved to not have turned 100 today because "100 is very old".

New Public Transit in a Fancy Part of Los Angeles?

Does Representative Henry Waxman have consistent legislative preferences? Here is a passage from the great book "Mega-Cities",

. In the case of the siting of the Los Angeles Red Line, Altshuler and Luberoff (2003) stress that the transportation agency followed the path of least resistance:
“As originally conceived, this segment was to run for about five miles under Wilshire Boulevard, the most densely developed corridor west of the Mississippi River, before turning north toward the San Fernando Valley. In the mid-1980s, however, homeowners in a mid-Wilshire neighborhood objected that the line would stimulate too much development in their vicinity and might expose them to more crime by facilitating travel from low income areas … When Congress did eventually approve funding for the line, it did so with a proviso (inserted by Representative Henry Waxman who represented mid-Wilshire) that it could not pass through the mid-Wilshire area. Instead it would now turn north before it reached the neighborhoods in which substantial opposition had emerged and it would serve Universal City area. Because the new alignment was through less dense areas, it had considerably lower patronage potential than the original routing, but it faced no significant opposition – and that was what counted politically. In a similar vein, localities frequently minimized controversy by siting new transit lines in existing rail or freeway corridors, chosen for their availability rather than their optimality from a patronage standpoint. This strategy was used, for example, in Portland and Sacramento and for portions of the Los Angeles’ new Blue Line (Altshuler and Luberoff 2003, p204).”

This article below highlights that UCLA people will have easier access to the beach and the Rand Institute. What year will this project be done? Perhaps in 2030? My grandkids will enjoy it and then maybe they can connect to BART and ride North to Berkeley?


http://www.latimes.com/news/local/los_angeles_metro/la-me-subway8feb08,1,4420053.story?track=rss

House votes to repeal law blocking subway construction on L.A.'s Westside
Rep. Henry Waxman persuades lawmakers that a ban on federal funding for tunneling, which he pushed in 1985, should now be lifted. The move eliminates an obstacle to extending the line.
By Richard Simon
Times Staff Writer

February 8, 2007

WASHINGTON — Two decades ago, Rep. Henry A. Waxman wrote into law a ban on the use of federal funds to build a subway tunnel in the Fairfax district of Los Angeles, worried that construction could trigger an underground gas explosion.

On Wednesday, the Los Angeles Democrat — now convinced that new technology could make drilling safe — persuaded the House to repeal his 1985 law, removing a major political obstacle to extending the line to the Westside.

The one-page bill passed on a voice vote.

The Senate is likely to follow suit soon, and President Bush is expected to sign the repeal into law.

Roger Snoble, chief executive officer of Los Angeles County's Metropolitan Transportation Authority, said the measure "opens the possibility of securing federal money to extend our subway westward to help alleviate the area's crushing traffic congestion."

A subway extension from its western terminus at Wilshire Boulevard and Western Avenue to the ocean about 13 miles away would cost at least $4.8 billion and require years of planning, design and construction. Securing federal funds at a time of massive budget deficits and fierce competition for dollars will also be no easy task.

"There is still much work to do before the subway can be extended," Rep. Diane Watson (D-Los Angeles) said in a statement after the vote.

Waxman sought the tunneling ban after more than 20 people were injured in a methane gas explosion at a West 3rd Street clothing store.

But with traffic congestion growing worse, local officials led by Los Angeles Mayor Antonio Villaraigosa asked him to reconsider the ban.

"Very few issues affect the quality of life in Los Angeles more than traffic gridlock," Villaraigosa said in a statement. "Getting stuck in traffic is more than just an inconvenience — it keeps us away from our families, it pollutes our environment and it costs our economy. Building a subway to the sea will get Los Angeles moving again."

Villaraigosa noted that Los Angeles ranks first in the country in the amount of time that drivers spend in traffic jams — about 93 hours a year.

Waxman said he agreed to repeal his earlier bill after an independent panel of experts "indicated that technologies have been developed that could make tunneling in the area safe."

A similar repeal measure was approved by the House last year, but died in the Senate in the waning days of Congress.

California Sens. Barbara Boxer and Dianne Feinstein, both Democrats, this week introduced legislation to repeal the 1985 tunneling ban.

"It's time to make this project a reality," Feinstein said of the extension.


--------------------------------------------------------------------------------
richard.simon@latimes.com

Wednesday, February 07, 2007

A Necessary Step for Greening Cities: Sewer Pipe Investment Upkeep

Capital depreciation sounds like a pretty boring subject but this article below highlights that "boring" capital maintenance investments are key for keeping basic urban functions (such as having clean water) up and going. This issue repeats itself over and over. When Universities run a budget deficit, the Deans start talking about "deferred maintenance". That's a buzz word for letting the place slowly fall apart. This article highlights an interesting asymmetry. Politicians are proud to attend a ribbon cutting ceremony where they unveil a shiny new "state of the art" infrastructure whether its a sewage treatment plant or a new rail transit system.

BUT, it's less sexy for a politician to invest in upkeep and maintenance to improve the performance of an already existing system. Somehow tax payers must take its services for granted and assume that such a piece of capital will "never age".

It would interest me to see a report by some engineers where they go to each of the largest 200 cities in the U.S and examine the condition of the sewage treatment systems. Which cities have the best systems and why? Are the newest systems the best? Are the ones built using union labor the best? Do the richest cities have better infrastructure systems? Do the ones with most powerful Congressional representatives get more pork to build a better system?


New York Times
February 8, 2007
Gaping Reminders of Aging and Crumbling Pipes
By WILLIAM YARDLEY

PORTLAND, Ore. — After a sinkhole swallowed a sewer-repair truck here on the day after Christmas, the truck’s crew crawled to safety, muddy and mystified.

Last summer in Irving, Tex., a 2-year-old boy disappeared near a sinkhole. One theory was that he was kidnapped. Another was that he was lost in the sewer system that had broken open and caused the collapse.

In December, firefighters in Brooklyn rescued a grandmother carrying groceries who fell into a hole that opened beneath her on a sidewalk. And in Hershey, Pa., a damaged storm drain caused a six-foot-deep sinkhole in Chocolate Town Park, nearly sinking the town’s New Year’s Eve celebration.

Local and state officials across the country say thousands of miles of century-old underground water and sewer lines are springing leaks, eroding and — in extreme cases — causing the ground above them to collapse. Though there is no master tally of sinkholes, there is consensus among civil engineers and water experts that things are getting worse.

The Environmental Protection Agency has projected that unless cities invest more to repair and replace their water and sewer systems, nearly half of the water system pipes in the United States will be in poor, very poor or “life elapsed” status by 2020.

“I’m not exaggerating,” said Stephen P. Allbee, a project director in the agency’s water division who helped make the projections. “It’s a really, really big public issue, and it’s going to be with us for a long time.”

Local geology or underground hazards are blamed for many sinkholes: weak limestone in Florida, old mineshafts in Pennsylvania. But increasingly, the authorities say, as America’s cities grow older and basic repairs are put off, when the ground gives way the problem is bad pipes.

In its 2005 “Report Card for America’s Infrastructure,” the American Society of Civil Engineers gave water and wastewater infrastructure across the country a D-minus and suggested it would take an investment of $390 billion to bring wastewater infrastructure alone up to par.

Estimates vary on what the costs could be, but nervous water utilities and environmental groups have been campaigning to educate the public and local elected officials to get more money for repairs. But they face an uphill battle, persuading people to pay higher water and sewer rates, and politicians to approve those rates instead of building new schools, parks, libraries and roads.

“You can’t easily go to a ribbon-cutting or have your picture taken in front of a new sewer line,” said Dean Marriott, director of the Portland Bureau of Environmental Services, which oversees sewer maintenance in the city. “Everyone simply counts on them working. Most people don’t know how they work or even where the system is.”

Still, Mr. Allbee, the E.P.A. official, said age and neglect could prove as fatal to a system as a catastrophic natural event or a terrorist attack.

“You can lose that system all at once because of terrorism,” Mr. Allbee said, “but you can lose it over time by just not taking care of it.”

The American Water Works Association, whose members include more than 4,700 utilities, has begun an advertising campaign “to raise this conversation about buried water infrastructure above ground,” said Greg Kail, a spokesman for the association.

One advertisement, placed in spots from bus shelters in Miami to newspapers in Anchorage, features a picture of a faucet with the words, “Do you know how often you turn me on?” Another ad in the works will focus directly on problems with water mains, and include the phrase, “Don’t let me break down in front of you.”

“The concept is to personify the infrastructure,” Mr. Kail said. “We’re not trying to scare people. We’re trying to make them aware that this is a real concern that deserves our attention to keep it from being a crisis in the future.”

The bulk of the water and sewer lines beneath American streets were installed in three phases: at the end of the 19th century, in the 1920s, and just after World War II, echoing periods of population growth in cities and expansion into suburbs.

A burst of environmentalism in the 1970s, including passage of the Clean Water Act, led to improvements in water and sewage treatment facilities and increased federal scrutiny of the water supply. But the condition of underground water and sewage pipes, many of which were built to last only 50 to 75 years, has not always received the same attention. At the same time, demand has increased.

“The pipes age, and the population increases,” said James W. Rush, editor of Underground Infrastructure Management, a trade magazine for public utility administrators. “Those are the two factors that are always at work.”

Portland has had a boom in downtown development, adding demand to its water and sewer systems.

The city is in the 16th year of a 20-year, $1.4 billion, federally mandated project to reduce sewage overflows into the Willamette River from about 100 days a year to 4 days or less. Signs in the city promote two enormous sewer and storm water lines being dug as part of the project, one on the west bank of the Willamette that is 14 feet in diameter and another on the east side that is 22 feet in diameter.

“I’ve walked them,” said Mr. Marriott, the Portland official. “You could roll a marble from one length to the next — beautiful, beautiful work. What goes in them is stuff that used to go in the river.”

Overflows are a problem in many cities, and fixing them is not cheap; Portland has some of the highest water and sewer rates in the country. Mr. Marriott said the average residential sewer bill in Portland has risen to about $45 a month from about $14 in the early 1990s, when the city began the mandated improvements.

Once the project is completed, he said, rates will probably stay high so that the city can fix other problems, like the sewer pipe decay that officials believe most likely helped cause the sinkhole in December, the one that swallowed the sewer truck.

Mack McEachern was there on that chilly morning. First the water in his apartment on Southeast Oak Street stopped running. Then the boiler in the basement began to fade. When a plumber found nothing wrong with the pipes inside, water-utility workers came to check an exterior main. The city inspected a clogged sewer line. Something was wrong with the system, but what?

Mr. McEachern recalled how he stood outside and watched the big sewer truck start to pull away, supposedly without having pinpointed the problem.

Then, he said, “The ground shook.”

Sunday, February 04, 2007

What Does a 5 Million Dollar Home Look Like in Los Angeles?

Some sundays in Los Angeles, my wife, my son and I take a look at homes for sale near UCLA. We like to see how other people live and find out what is the purchasing power of a $1 in Los Angeles. Today, we were in a nice part of Brentwood. No, I didn't OJ or any other celebrities but we got a full tour of a $5 million dollar house. Shockingly, on Super Bowl Sunday nobody else wanted to see it so the real estate broker was very happy to talk to us.

Here is what I saw. The home had a nice walled front yard. There were numerous lemon and orange trees growing and yielding fruit in the middle of February. For a guy born and educated in Chicago, that's a weird site!

Next to the front door was a cute swimming pool. My son lay down a piece of outdoor furniture next to the pool and looked quite happy. I asked him if his credit card company would allow him to charge the property. The house itself was a dump. It looked a depreciating Bread & Breakfast inn that I've seen all over New England. The entire property couldn't have been more than 1/3rd of an acre. The backyard lacked privacy and you could get a good sense of what the neighbors were doing. The house may have had 4 bedrooms but the upstairs was scary with the old feel of a Salem Witch house. I ran out.

While the fruit trees and the pool were nice, it strikes me that this house is a tad expensive.

What could $5 million buy in Clayton MO near Washington University?

What could $5 million buy in Upper Marion PA near Penn?

Even in my old town of Boston, $5 million could buy you something quite impressive.

But, in LA --- $5 doesn't see to add up to much. My son and I agreed that we'd pitch a tent and live outside if we had to live there.

Thursday, February 01, 2007

Pro-Union Labor Laws and the Rising Cost of Urban Infrastructure Projects

The other day, the New York Times reported that New York City is having trouble completing transit projects because of high bids by potential contractors. I offered a conjecture that bidder collusion may be part of the explanation. I’ve received some interesting e-mails and would like to offer a slightly revised explanation.

Some states are Right to Work states while other states are not. New York State is in the latter category. This means that labor unions are well treated in this state. New York City has signed a PLA.

“A Project Labor Agreement (PLA) is a pre-hire collective bargaining
agreement between an owner (in this case the New York's Metropolitan
Transportation Authority) and labor unions that mandate, among other things, that all workers be hired out of the union hiring halls. In return for this exclusive access to work, the unions agree not to strike or cause other disruptions to the job.


The problem with PLAs is they discriminate against a majority of
construction workers, who choose not to belong to a union, by not allowing them to participate on a PLA project. According to the U.S. Department of Labor and unionstats.com, open shop contractors (non-union) make up 75.3 percent of the private construction industry in New York.”

While this creates “good jobs” for the union workers, this reduces the competition for the contracts. The only firms at risk to get the public sector contract are the unionized firms. If these firms are able to collude, by agreeing to not bid on each other’s favorite contracts, then both these firms’ capitalists and workers will all do great.

The losers from this cozy setup are taxpayers in New York City who receive a high tax bill per dollar of services received and the workers and owners of non-union firms who were never at risk to receive the contract.

The PLA acts as a barrier to entry impeding non-union firms from bidding on public sector contracts. This should help the unionized firms to collude because it is easier to collude among a smaller set of firms who already have pre-existing relationships. If construction firms can freely enter the contract bidding then collusion among incumbent bidders will not be effective at raising the offer.

My theory can be tested! Similar to Tom Holmes’ JPE paper in 2000, a researcher could collect data on contract bids for similar transit projects in cities in Right to Work states and compare them to contract bids for similar transit projects in cities located in Non-Right to Work states that are adjacent to Right to Work states. This design would identify the role of unionization in affecting the cost structure of doing public investment.

If there was free entry in bidding for contracts, collusion would be less likely and taxpayers would get a better deal. Of course, the city government would need a mechanism to judge the quality of the work conducted and to reward or punish the firm accordingly.

http://www.dol.gov/esa/programs/whd/state/righttowork.htm
http://en.wikipedia.org/wiki/Right_To_Work

The bigger issue here is the cost of building a “Green City” in pro-labor towns such as New York City, Boston and San Francisco. If public infrastructure projects are more expensive (due to the union wage premium), then taxpayers will be less willing to invest in them. The net result is a public infrastructure capital stock that is 2nd rate.