Thursday, July 31, 2008

President Obama and the Rise of Field Experiments

My 7 year old son continues to lobby us to vote for Obama. I am feeling the audacity of hope running through my cynical limbs but that New York Times article yesterday recounting Obama's days as a Senior Lecturer at the University of Chicago's Law School made me a pinch nervous. Why didn't Obama interact with the brilliant faculty of that school? Why didn't he publish anything? Did he anticipate that he would run for higher office and didn't want to leave a paper trail?

He is a cool cat. He could play 007 in the Movies or he could be our President. That's a versatle guy.

If Obama is elected, will he be open minded about pushing his Administration to run field experiments? First, a definition. Suppose that we want to know whether some new housing program for the poor is effective or not at improving their quality of life. In an experiment, HUD would take a pool of people who are eligible to participate in the program and would randomly assign a fraction to the "treatment" group and would randomly assign the rest to the "control group". The control group would receive nothing. You may say that this is unfair but tracking their quality of life dynamics provides an interesting counter-factual to infer what would have happened to the treatment group had they not received "the treatment". In this case, the treatment might be a suburban apartment at a subsidized price.

Running such experiments would be an effective way to determine what parts of activist government are cost-effective. Such experiments could be run in every part of government ranging from the energy, health care, treasury, HUD and others.

Will Austan Goolsbee help twist arms of stubborn government officials who "know what works" and don't want to let the nerd economists in do a kosher evaluation.

If Obama would declare that he is for field experiments, then he would earn my vote!
I am the marginal voter.

Sunday, July 27, 2008

Chinese Translation of my Green Cities book

I should send Ed Mills two copies of the 2008 Chinese Translation of my Green Cities book. Maybe he would like this one more than the original english version? I still like my book a lot. My co-author Siqi Zheng helped make this translation happen. I'm grateful to her for her help.

If you bothered reading my last blog entry, I wanted to expand it a little. As you might remember, I briefly listed what I think are the 6 biggest issues in environmental economics. I would encourage all young environmental scholars to be working on these topics!

Let me return to endogenous technological innovation. Intuitively, if the people of Berkeley all install solar panels do firms in this industry enjoy large learning by doing effects? Does their cost of production decline as a function of cumulative experience? Why does this matter? If learning by doing effects are large, then we can be optimistic that a big green demand push today (either due to government subsidies or population expressed environmentalism) will help to lower the price and raise the quality of future green products. Just as the Pentium computer is better than the old 386 PC, learning by doing would mean that future solar panels will be of higher quality than products today because the producers gained experience. The devil here is how you measure these learning gains.

A second source of endogenous technological innovation is the induced innovation hypothesis. As the price of inputs (such as energy costs) go up, which firms are nimble enough to change their production processes to minimize their consumption of the now costly inputs such as oil? We know that Southwest Airlines has done well recently in terms of profitability because it hedged gasoline prices and bet that gas prices would go up and they locked in to purchase gas at a lower price but in the medium term if they are betting that gas prices will stay high are they ordering air planes that are more fuel efficient? What strategies are they embracing to deal with expensive natural resources in the short run, medium term and long run?

I can see how a business professor can write nice single company case studies here. The challenge would be how you pool these case studies to be able to conduct a statistical analysis of how heterogeneous firms respond to expectations of rising natural resource prices.

Friday, July 25, 2008

Big Questions in Environmental Economics

I have returned from 4 days and nights at the NBER Summer Institute. The highlights included Marty Weitzman's talk on "fat tails" at the Environmental Meetings and the dinner celebrating Marty Feldstein's major contributions as President of the NBER for the last 30 years. It does amaze me that Dr. Feldstein took over the bureau at the age of 38. If you want to see this year's conference program go to www.nber.org/~confer.

There were over 100 people attending the environmental meetings. While I can't say that every paper presented was great, each of them highlighted different exciting things going on in environmental economics. My friend Matt Kotchen asked over lunch what I thought were the top issues in environmental economics these days. I sat down and thought about this and here are my top 5. They are not in order;

1. How large are learning by doing effects for renewable energy technologies such as wind and solar?

2. How much damage will we suffer from climate change if average world temperature increases by T degrees? Where T takes on the values 1, 2, 5, 10, 30 c? Marty Weitzman's point is that each of these states of the world have non-zero probability of taking place. So, how much damage and who suffers the damage from each of extreme weather events?

3. When carbon pricing is introduced, which industries, nations and households will bear the incidence of this taxation?

4. Are consumers indifferent between "natural capital" and man-made engineered products? So for example, think of gentically modified foods versus organic foods -- are you indifferent? Is there any price differential such that you would be indifferent or do you view the GMO as "frankenfoods" that you wouldn't touch?

5. What are the causes of environmentalism? When people are environmentalists how does this affect their answer to #4 above?

6. Building on #5, we need structural consumer demand estimates of the willingness to pay for "green" products (think of the Prius) or tofu and how these estimates vary by population demographics and ideology.

Friday, July 18, 2008

Ed Glaeser Likes 1/2 of Paul Ehrlich's New Book

It's Our Earth, Now What Do We Do With It?
By EDWARD GLAESER, Special to the Sun | July 18, 2008
http://www.nysun.com/arts/its-our-earth-now-what-do-we-do-with-it/82183/

Political movements are often built on literary foundations. Abolitionism owed much to "Uncle Tom's Cabin." Progressivism had Upton Sinclair and Ida Tarbell. Books, fiction or not, have the power to convince us impressionable readers that we face dire threats, such as unclean meat or pesticides. Political entrepreneurs, promising to protect us from those threats, can then work on the fertile ground of our fears.

The environmental movement has been very successful at making America afraid. Forty-five years ago, Rachel Carson's "Silent Spring" convinced the public that DDT was a great threat to our ecosystem; more recently, Vice President Gore's "An Inconvenient Truth" created widespread alarm about global warming. In 1968, Paul Ehrlich's "The Population Bomb" terrified millions with its claim that humans had overtaxed the environment and that "in the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now."

Inconveniently for Mr. Ehrlich, but luckily for the rest of us, his prediction did not come true. Yet still, despite its empirical failings, "The Population Bomb" was in many ways a great success. By convincing its many readers that ignoring the environment was a perilous course, the book advanced the cause of green activism and set the stage for the landmark environmental legislation of the Nixon era.
It seems particularly appropriate that in this year of rising commodity prices, exactly 40 years after "The Population Bomb," Paul Ehrlich is back. Together with his wife Anne, he has written "The Dominant Animal" (Island Press, 428 pages $35), a book that is being billed as a new and vital environmental warning from the once consummate Cassandra.

Luckily, the book is better than its publicity. Paul Ehrlich is a distinguished entomologist, an expert on lepidoptera. The book's first 200 pages provide a well-written presentation of evolutionary science that shows the depths of Mr. Ehrlich's knowledge. Co-evolution is taught through the poisonous monarch butterfly and its mimic, the viceroy. Geographic speciation is explained with hermit thrushes. The Ehrlichs' description of island equilibria is particularly compelling.
Stripped of the Ehrlichs' political agenda, the book could have been a very nice piece of popular science on the rise of mankind to world dominance. Of course, from Thomas Huxley to Richard Dawkins, evolution has long attracted some of the finest popular science writers. And there was no guarantee that a new book on evolution would survive in the highly competitive world of Darwinian literature.

Perhaps as a result, "The Dominant Species" goes beyond its evolutionary origins. The second part of the book once again sounds the environmental tocsin. I found this part of the book unobjectionable, but the warnings are hardly as exciting today as they were 40 years ago. Enough books on environmental doom have been printed to kill off a forest of giant redwoods. Moreover, the Ehrlichs are no longer making exciting, if irresponsible, claims about the imminent demise of millions. Instead, their more moderate warnings have become the conventional wisdom.
Most of my Republican friends would now agree with the Ehrlichs' view that climate change is a real danger, and that people do not internalize the full environmental costs of producing toxic chemicals and driving. Today, we need sound policies that will make us better stewards of our "natural capital," as the Ehrlichs call it, more than we need more alarms.

Unfortunately, the authors' forays into policy making are the most painful part of the book. The authors have thrown together a left-wing wish list crammed with proposals that stray far from their science. How can environmental issues get better treatment in America? The Ehrlichs propose we "stop gerrymandering." Ah yes. The best thing to save the spotted owl would be to spend millions of hours trying to pass a constitutional amendment that would prevent legislatures, which seem likely to be overwhelmingly Democratic after the next census, from redrawing the political map.

On foreign policy, they recommend that "congress should insist in the short term that the executive branch work with Russia on what may be the most crucial environmental problem of all — the threat of a humanly and ecologically catastrophic nuclear war." Is it really wise, or constitutional, for Congress to pass a resolution that forces the hand of the executive branch in conducting diplomacy? Such a resolution would do wonders to ensure that the State department has as little bargaining power as possible in its dealings with Russia.

The authors are particularly ardent in their opposition to population growth. It is true, as they point out, that there are environmental costs of having more people — all of us use natural resources and energy and bear some responsibility for greenhouse gas emissions. But there are also benefits, especially to the people being born. Each new person has a brain that might come up with new technologies that could reduce humanity's environmental impact. As an urban economist, my life's research has focused on the many ways in which we are all enriched by the people around us. Are there many parents who think that the world would have been better off if they had decided to have one less child?

The Ehrlichs are right that we face real environmental threats, but there are better and worse ways of facing those threats. Today, we need sophisticated policies that weigh costs and benefits, not more warnings. Ironically, the very success of environmental alarmism has convinced many of us that the environment is too important to be left to the environmentalists.

Mr. Glaeser is the Glimp Professor of Economics at Harvard, director of the Taubman Center for State and Local Government, and a senior fellow at the Manhattan Institute.

Air Conditioning and Global Tourism Increase the Demand for Southern Florida in the Summer

Seasonality is a boring word. Many environmentalists are now talking about it saying that in a world of high energy prices that trucking berries and other fruits from distant farmers to urban consumers will rise in price and that these urban consumers will respond by eating a more seasonal diet. High energy prices will encourage eating "locally".

This New York Times article turns this logic around. In a nutshell, it argues that South Florida used to be a seasonal place. Nobody wanted to be there in summer (too hot and humid) while everyone wanted to be there in Winter.

Air conditioning and global tourism (fueled by cheap air travel) have transformed southern florida into a year round place. At the end of the article, the global tourism point is fleshed out. British tourists love the fact that Southern Florida is warm and sunny. South American tourists view it as "cool" relative to their home climate and given that their seasons are flipped they want to be there during their "winter" (our summer).

This article has some nice economics detailing how a real estate owner makes substitution decisions when the price of renting her unit varies so sharply over the course of a year. I don't see much behavioral economics here.


New York Times
July 18, 2008
At Home in the Florida Sizzle
By CHARLES PASSY

DENNIS ROONEY can tell you all about the lazy joys of a sticky Florida summer. The beaches that beckon with water temperatures in the nearly bathlike 80s. The roads that are suddenly traffic-free. Even the sight of those tropical afternoon thunderstorms, which constitute a kind of nature-as-theater.

But as it turns out, the real joy of a Florida summer may come in the winter. Because Mr. Rooney chooses to vacation in his two-bedroom home in Delray Beach during July and August, he’s free to rent it out in the prime winter stretch.

“The going rate is four grand a month,” said Mr. Rooney, a Manhattan writer and audio producer. He adds that the winter income “pretty much” covers his year-round costs for the home, including mortgage and maintenance.

But Mr. Rooney’s story is hardly an isolated one in South Florida, long known as a haven for winter seasonal residents (a k a snowbirds) seeking escape from the northern cold. As owners of vacation homes face the financial realities of having that special South Florida getaway, they’re often making something of a devil’s deal. That is, they spend portions of the summer in the state, when it’s at its most hellishly hot and humid (and hurricane prone). In return, they’re fully able to realize the potential for rental income in the blissfully mild winter.

Then again, it’s not strictly about the money. Some appreciate the fact that summer is a decidedly quieter time in South Florida, as evidenced not only by the lack of congestion on the highways, but also by the fact that you can garner a table at some of the most popular restaurants without so much as a reservation.

Plus, some folks just like it hot.

“We have the reputation of staying out from sunrise to sunset,” said Marilyn Horton, a semiretired educator who has a vacation home with her husband, Jim, in Fort Myers Beach. The couple, whose other home is in Niantic, Conn., spend a few weeks every year there in the off-season, dividing the daylight hours between the pool at their gulf-front condo building and the beach.

The Hortons also visit in the winter, but they recognize a certain supply-and-demand business aspect to vacation-home ownership. They’re careful to leave the peak period, from February to mid-April, open for renters.

The reason is that they are often able to more than double the rent for the unit in the winter — $1,400 a week versus $575 to $850 for the occasional summer rentals they book. But just as important, they don’t have to scurry to find tenants in the high season. The rental business comes almost automatically to them, particularly through the Web site WeNeedaVacation.com, on which the couple advertises their property.

“We get hundreds of inquiries,” said Mr. Horton, also a semiretired teacher.

To be sure, such strategizing isn’t entirely new to vacation-home owners in South Florida. And the concept isn’t limited to just that part of the country. In ski areas in New England and Colorado, there are more than a few owners who try a similar approach, staying in the mountains in the summer — they’re just as beautiful without snow — and leaving the skiing to their high-paying tenants in the winter.

But there are factors that have made South Florida particularly suitable for this going-against-the-grain way of viewing vacation-home ownership.

FIRST and foremost, the dynamic of many South Florida vacation communities has changed, with the concept of high and low seasons starting to blur. A half-century ago, Miami Beach all but rolled up its sidewalks at the end of April. Now, those same streets are alive with late-night revelers throughout the summer, since the South Beach clubs pay little heed to the calendar.

Miami Beach “is an all-year playground,” said Laura Adler, a real estate agent who splits her time between South Florida and Aspen, Colo., catering to vacation-home buyers in each.

Much the same thinking extends to the Palm Beach area, where theaters that used to stay quiet during the warm-weather months now keep busy year-round, and the Florida Keys, where a huge fishing community settles in during the summer, taking advantage of the calmer waters.

A result is that property owners need not feel they are being cheated by visiting in the summer. At the same time, they’re still able to take advantage of the fact that winter is the most desirable period, so they can sharply raise their rental rates.

On top of that, South Florida is seeing a growing number of foreign buyers, who often view the summer as the true peak season. In the case of South Americans, that’s because our summer is their winter — they come to escape the cold (or, at least, the cooler) temperatures right when many South Floridians are wishing they could escape the heat. And Europeans, particularly Britons, simply take a more benign view of the summer, perhaps because they’re contending with damp, rainy weather for much of the rest of the year.

“I’ve never once run into a European who said it’s too hot,” said Paul McRae, president and broker at the Fort Lauderdale-based Galleria Collection of Fine Homes, which handles all sales for the Trump International Hotel & Tower in Fort Lauderdale. The condo hotel has 298 guest rooms, with the remaining units starting around $700,000, and is set to open early next year. Mr. McRae estimates that more than 50 percent of his buyers are looking primarily at summer use.

Which brings up another factor behind the summer boom: the rise in condo hotels throughout South Florida in the last decade. After all, this form of property ownership, in which a buyer buys a hotel unit and then lets the hotel rent it out in exchange for the hotel’s taking a cut of the receipts, is built around the idea of building rental income to defray the owners’ costs. So it is only natural that those who buy units, which they can readily use at any time, would be hesitant to grab the prime winter dates for themselves. At the Trump International Beach Resort in Sunny Isles Beach, between Fort Lauderdale and Miami Beach, a two-bedroom unit can go for close to $1,200 a night in February.

OF course, the concept of maximizing rental income does not apply only to condo hotels. As South Florida experienced a huge rise in values of all kinds of housing, from roughly 2000 to 2005, it became a speculators’ market. And those speculators are now eager to get the highest possible rental receipts, since they are planning to hold on to their properties only until the market rebounds and they can make a profit.

Others who use their Florida homes only in the summer include people who have bought homes for their later retirement years. “If it’s something they’re buying for future use, the goal is to cover as much of the expenses as they can,” said Kathy Jones, Florida coordinator for WeNeedaVacation.com.

The same applies in the case of a home that’s been inherited. Martha MacPherson, who works in software sales in Boston, takes as much advantage as she can of a Marco Island home passed down to her and her sister from her mother. But since Ms. MacPherson is really thinking ahead to retirement, she’s now renting out the home in the winter as a financial necessity.

“The place is paid for, but you’ve got condo fees,” she said.

Still, those who rent out their units in the winter aren’t necessarily deprived of the occasional in-season vacation. The key is being flexible.

That is how Linda Spencer, a Deerfield, Mass., pottery designer, approaches vacation-home ownership. She has three properties throughout the Florida Keys. If her rental business is strong, she stays ensconced in New England. If there’s an opening on the calendar, she’ll grab it, regardless of whether it’s summer or winter.

In fact, she prefers summer in the Keys, particularly for the great boating and snorkeling opportunities it affords. “I wouldn’t be hanging out that long in the water during the winter,” she said.

But what about the brutal heat and humidity?

As far as Ms. Spencer is concerned, it’s hot almost anywhere you go in the summer.

“It was just 101 degrees in Cape Cod,” she said, “and people there don’t have air-conditioning.”

Wednesday, July 16, 2008

Academic Achievement

While I won't win a Clark Medal and the monthly IDEAS email tells me that I have barely cracked the top 5% of academic economists, I have now achieved something that I'm proud of. How many Chicago Economists can say that their work is profiled on the front page of the City of Berkeley's Webpage? I'm waiting for Becker, Glaeser, and Heckman to join me there in the rare air.

Is the Berkeley City Hall talking about my AER piece from 2007 or my 2006 Green Cities book or my 2008 Heroes and Cowards book? Or perhaps my Fall 2007 Readers Digest piece?

No, the buzz is about this;

Working Papers
2008-19, Green Market Geography: The Spatial Clustering of Hybrid Vehicle and LEED Registered Buildings, Matthew E. Kahn and Ryan K. Vaughn
www.zimancenter.com/research_working_papers.html

Should Urban Farming be Scaled Up?

I've always wondered what the price of gasoline would have to be for Harvard to start drilling in Harvard Square. Now, I'm not a geologist and I don't play one on TV but there could be some oil deposits under that Burger joint. More seriously, when do high commodity prices lead to radical changes in land use patterns?

Fun Blog Reading from The Economist . The full draft of the Glaeser/Kahn paper should be released as NBER Working Paper in a couple of weeks.

Ed Glaeser is Pro-Houston

Housing will soon be a pinch more affordable around the country. For reasons perhaps related to humidity and housing supply regulation, Houston is an affordable city for the middle class seeking out the American Dream. In this editorial, Ed Glaeser contrasts New York City and Houston. If I'm reading this article correctly, it appears that Rice University should make Ed an offer. Ed Glaeser Celebrates Houston

More Celebrities Spotted Close to UCLA and Over-Bidding for Art on Cruise Ships and

I was just walking my son to school within .25 miles of UCLA and a tall woman with a friendly dog walked past us. Upon second glance, I convinced myself that it was tennis great Venus Williams . She is taller than I am and appears to be in better shape.

While the Arts Section of the New York Times rarely interests me, this piece is worth reading.

In a nutshell, when wealthy people go on cruise ship vacations they over-bid for art in auctions held on the ship. How would you explain this fact?

1. absence of information --- bidders are unable to easily access google to lookup the market price of a specific piece of art such as a Picasso doodle and without this info the winner's curse kicks in.

2. non-separable preferences --- when you are relaxed on a cruise, you view yourself as a "big spender" who deserves the best things in life. as you let your guard down, you over-bid for junk that you would never bid on if you were on land in the middle of your normal life.

#1 is a weird explanation because if you know that you do not know the value of a commodity that you are bidding on then this should lead you to shave down your bid because you know that ex-post that you will be a "victim" of over-paying (if you win the bidding).

#2 is also weird because you should be aware that a piece of Art is a durable and you will be stuck with it when you get off the cruise. #2 would be a better explanation for consuming a fancy bottle of wine or rare lobster while on the cruise. But again, a perosn with mature preferences should be aware that even if their passions are stirred up while on the cruise that the cruise will end and they will revert to being their "old self" who doesn't want a $50,000 Picaso.

So, my point is that cruise ships offer economists an interesting lab for testing behavioral models. When people are relaxed do they make very different choices? Dan
Ariely suggests that when men are in a state of "arousal" that they make weird choices. I'm saying that this cruise ship is running the opposite experiment.

Tuesday, July 15, 2008

UCLA vs. USC: The Verdict from Google Trends

UCLA is the blue line and USC is the red line. Google is ranking these two schools as roughly equal in terms of "buzz". How much of this traffic is generated due to college sports versus college economics?

http://www.google.com/trends?q=ucla%2C+usc&ctab=0&geo=all&date=all&sort=0



The "eruptions" on the graph take place when big sports contests take place such as the Rose Bowl.

Monday, July 14, 2008

Corporate Environmentalism at UCLA

Exciting things are taking place at the UCLA Institute of the Environment. If the existence of a webpage is any sign, we now have an active New Research Center at UCLA focused on Corporate Environmentalism . What will this research center actually do?

Suppose that you work at a company located somewhere in Southern California (i.e metro Los Angeles). Your company might be wondering how AB32 Climate Change legislation will affect your company's profitability? or what new business opportunities California's climate change regulation might offer? Your company may sell products with green features such as LEED certified buildings or organic toothpicks (I'm kidding about this one). Alternatively, pollution may be a byproduct of your cement plant's production process.

We want to be talking to such firms and offering some cheap advice. Why do we want to talk? What is our stake? To quote a Sprite commercial; "what is our motivation?" My environmental economics class has over 100 students right now. I bet that it would have 200 if I uncapped enrollment. Many of my students are fascinated by free market environmentalism. They want to work for firms that are making money and are exciting and are "green". We need to identify business partners seeking smart, ambitious students to work for them.

My own motivation is that I want to learn more about how "real" businesses actually operate and make decisions that have environmental consequences. As I get to know these firms and as they get to know me, I'm hoping that they would trust me to share their data with me and perhaps be willing to run some experiments to learn about what works and what doesn't work in day to day operations. For example, what research have they done in terms of marketing plans and cost analysis in determining whether "green" varieties of their products truly offer profit opportunities? Have they run formal experiments to measure whether their consumers are willing to pay a price premium for green products? Consumers may say that they are willing to in feel good surveys but when they actually face a market choice do they "vote with their wallet"?

What will our Center do in the short run? We are arranging for business leaders to visit our Institute of the Environment to give presentations on what they are doing and what challenges they face in implementing their "green" business plans. Such presentations allow us to learn about such firms and introduce our students to such firms. Los Angeles is a diverse big city and UCLA needs to raise its intellectual profile. I get the sense that people think UCLA = basketball and USC = football. This simple formula vastly undersells both schools.

In the short run, I'm getting ready to go to the NBER Summer Institue next week and then to spend a few weeks in Berkeley, California. The Summer Institute is a good opportunity to remember Boston humidity and to hear some interesting environmental and real estate papers. I'm looking forward to seeing old friends and to work with some of my co-authors. Will it rekindle my love of Boston? I doubt it. I worked at Harvard for 2 years and at Tufts for 6 years. My 8 years in or close to the 02138 zip code were enough for now. California is the place to be. The Internet offers access to the ideas being generated in Cambridge.

Berkeley features my favorite in-laws who are eager to see their grandson. In August, I'll need to clean up a couple of "revise and resubmits" for good journals and get some papers ready for journals. I also have a big think project that I'm not ready to show to my blog readers yet. Just think of it as a poor man's Freakonomics for the greens. Think of Paul Ehrlich meets Milton Friedman in a wrestling cage match.

Friday, July 11, 2008

Gas Prices Around the World and Arbitrage

Buy gas in Saudi Arabia and sell in nearby Kenya and earn a marginal profit of $5.4 per gallon!

Green Harvard

Harvard's total energy bill is greater than $100 million per year. The university thinks it can do better. What will be the full cost of the retrofit? Will each faculty member be forced to drive a Prius to work to meet the carbon targets? What about air travel to Washington D.C? Will the Kennedy School faculty be expected to ride a bike there if they want to testify on the Hill?


In Aggressive Move, Harvard Outlines Significant Cuts to Carbon Emissions

Adopting task force recommendations, Faust commits Harvard to 30 percent reduction by 2016

Published On 7/9/2008 12:11:40 PM

By CRIMSON NEWS STAFF


University President Drew G. Faust adopted a task force's recommendations for addressing climate change on Wednesday, committing Harvard to reducing its greenhouse gas emissions 30 percent below 2006 levels by 2016.

Faust announced the formation of a student and faculty task force in February to study cuts in Harvard's greenhouse gas emissions, giving the committee until the end of the academic year to outline a set of recommendations.

In a statement today, Faust praised the group's recommendation for a 30 percent cut as "ambitious and far-reaching" and "reflecting both the urgency of the climate problem and Harvard's opportunity to show leadership in addressing the issue." The sizable reduction target and the very aggressive timetable make the goal among the most ambitious that any university has committed itself to.


Full Report on Green Harvard

Campus environmentalists lauded Faust's decision, with former Environmental Action Committee Co-Chair Mitchell C. Hunter ’09 saying that he was "extremely pleased" with the announcement.

"[The plan] demands huge efficiency gains from our current operations, aims at continuous improvement above and beyond our stated goals, does not make any convenient exemptions and, most importantly, includes future growth," Hunter said. "This means that if the University wants to grow, it will have to build extremely efficient buildings and take responsibility for any remaining emissions with reductions elsewhere on campus or high-quality offsets."

Emissions reductions beyond 2016 are not yet defined, but Faust called the 30 percent target an "initial short-term goal," indicating that the University will develop plans for further reductions beyond that date.

While Harvard will rely "to the maximum extent practicable" on reducing its own emissions to meet the targets, it will also "need to acquire or create high-quality carbon offsets in order to meet the recommended goals." Carbon offsets are the practice by institutions or governments finance emissions reductions—such as by planting trees or paying for energy efficiency programs—in other parts of the world.

Faust added that while it is important for Harvard to reduce its emissions, its "greatest contributions to solving the problem of climate change should reach far beyond our actions to limit GHG emissions arising from our own campus operations."

"Our research and teaching must generate knowledge about how we, not just at Harvard but across the United States and around the world, might use the discoveries of science, of technology, and of policy analysis to create a sustainable environment for generations to come," she said.

The chair of the task force, Kennedy School professor William C. Clark, said that while he was "delighted" by Faust's decision, "the big question mark at this point" will be the plan's implementation.

"The challenge ahead is to engage every single level of this community in coming up with suggestions and out of the box thinking and behavioral change," Clark said. "This can't be run out of a committee or a committee's office—it has got to be something that engages everything from Mass. Hall through the people who run and clean the buildings, faculty, and, in my view, onto the alumni."

Student organizing efforts in recent months have focused on pressuring Faust to sign a pledge committing Harvard to "climate neutrality."

While Hunter said that student activists "still would have preferred" such a pledge, they were pleased with the outcome because the task force's recommendations will put Harvard "on track to achieve climate neutrality even before the 2036 timeline that the EAC originally advocated."

The University-wide reduction targets come a year and a half after the Faculty of Arts and Sciences announced plans to reduce its emissions 11 percent below 1990 levels by 2020.

In addition, Harvard entered into a binding agreement with Massachusetts last September to keep its future carbon emissions from its Allston campus at just 30 percent of the national standard for a similar project. In exchange, Harvard will be able to seek approval for each individual project instead of for the entire campus, thus potentially speeding regulatory approval for some of the construction.

The newest announcement won praise from Commonwealth officials who had worked with Harvard on the Allston deal.

"With today's announcement of a goal to reduce greenhouse gas emissions campus-wide by 30 percent in the next decade, Harvard is once again rolling up its sleeves to tackle head-on the challenge of climate change," said Ian Bowles, the Massachusetts secretary of energy and environmental affairs. "Governor Patrick and I applaud Harvard for its leadership and ingenuity. We hope and expect that the university will serve as a model for similar efforts by other institutions in the months and years ahead."

—Paras D. Bhayani and Clifford M. Marks contributed to the reporting of this story.


http://www.thecrimson.com/article.aspx?ref=523923

Charlie Rangel and the Full Pay of Politicians

What are the full set of perks that big politicians get for being the boss? What would be the market price of these perks? Be honest, isn't this a small price to pay to get excellent people to work for our government? Would government attract a lower quality set of leaders if the Congress knew that they would "only" earn $160,000 each year while hedge fund guys make a few bucks more?

I would like to see a full list of the Congressional Perks;

Original Rangel Story on his nice 4 apartments at submarket rates

Charlie Rangel Defends His Cheap Rent


Perks and Parking

Some Google Links on Congressional Perks


Now, the New York Times seems to be coming around to the Kennedy and Bloomberg model that we elect very rich people to be our leaders. JFK worked for $1 a year. Was that a good deal for the tax payer? Ted Sorenson would say yes. These "fat cats" won't steal from us and instead will work for the "public good". I will allow Ken Arrow to define what those 2 words mean. He will say that that is "impossible".

Thursday, July 10, 2008

John Quigley Goes Green

I just learned that good research is taking place at UC Berkeley. Who would have guessed? What is my evidence? John Quigley has gone green.


http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hn061608.html#story1

Professor John Quigley Discovers Green Building Pays Greenbacks


Everyone's talking about "going green," but in the building industry, the cost of investment has been difficult to justify - until now. Haas Professor John Quigley has undertaken the first systematic analysis of environmentally sustainable construction and its economic impact on the real estate market.



In the working paper, "Doing Well by Doing Good? Green Office Buildings," Quigley and co-authors Piet Eichholtz and Nils Kok of Maastricht University, Netherlands, determined investments in proven green building practices lead to sizable increases in a property's market value and effective rent, the average per-square-foot rent paid.



Green-certified buildings produced an 8.5 percent increase in effective rent. The additional annual rent for going green amounts to almost $309,000, based on the average size building. Likewise, the incremental value of a green structure is an estimated $5.1 million more than an ordinary building. The study did not calculate the incremental cost of investing in green building practices.



When asked why he decided to research the economic value of green-certified buildings, Quigley, the I. Donald Terner Distinguished Professor in Affordable Housing and Urban Policy, replied, "To see if this was hype or real." While Quigley's work concludes the resulting profitability is real, he is continuing to research why green commercial buildings produce higher rents and market value by using engineering data from the Environmental Protection Agency (EPA).



The research focused solely on commercial property. It first identified 694 buildings, green certified by the federal government's Energy Star program or the private LEED (Leadership in Energy and Environmental Design) standard. The control group consisted of nearly 7,500 other office buildings within a quarter-mile of the certified buildings.



Quigley was surprised at the results. "If I were an owner of commercial property, I would investigate the cost of attaining an Energy Star rating. If that is at all a reasonable investment, I would think about doing it," he says.



His research offers quantitative evidence for builders and investors who value the social responsibility factors of green buildings but, up to now, lacked data about the financial performance of these investments. Quigley says, "Finding there is a linkage between energy and profitability of rental properties is potentially significant and leads to more extensive uses of this information."



In July, Quigley will be attending a conference in Istanbul, Turkey, to extend his study of the economic effects of green building to Europe and the Middle East. The complete document, "Doing Well by Doing Good? Green Office Buildings," will be available in fall 2008.

News from New York City

When do policy makers listen to economists? Do we lead or lag policy? In the case of urban policy, the New York Times today has a nice piece on Congestion and Parking Price Differentials. My colleague Don Shoup should approve. During peak hours, parking prices will double. This should lead to some revenue for the poor mayor of New York City and should lead to less "cruising" by people looking for a rare spot. As the "cruisers" don't bother to cruise during peak hours there should be less congestion.

Is a doubling of parking rates sufficient to induce a response? At least the city is trying an experiment here. It is clear to me that there is too little experimentation by risk averse city policy makers. There are dozens of experiments that I would like to run in Los Angeles.

In other news, I have been scooped by today's New York Times. I was planning to write this as a research paper and to call it "International Superstar City". The declining dollar raises interesting issues concerning real estate transactions.

Finally, this piece about suburban New York City caught my eye; wiffle ball . I've been on both sides of this fence. As a teenager in Scarsdale in the early 1980s, I gravitated to where the action was. There wasn't much action but most of it took place on public property. As an older man in Belmont, MA --- I lived next to a public park. At night, teenagers would hangout in the park, drink beer, and make a lot of noise and leave trash and sometimes shoot off fireworks. I called the cops a couple of times but the "busy" Belmont cops never bothered to show up. There must have been some important felony cases that they were working on.

This is a classic case of "new news". The adjacent homeowners who live next to the wiffle ball field never expected this "amenity" would open up. The externality here appears to be 2 fold; more noise than expected and more flood risk than expected. The teenagers are claiming the commons and should give something to the neighbors who they are implicitly stealing from.

Saturday, July 05, 2008

Big New Homes in Queens, New York --- the Bukharians Celebrate the Good Life

Drive around West Los Angeles in Santa Monica, Westwood or Beverly Hills or Brentwood and you will see the contrast between the old housing stock and the new. Simple small 3 and 4 bedroom homes are next to new grand "McMansions". These latter homes can be 4500 square feet on a lot size of 6500 square feet. When local opposition to the new homes arises, is this due to a true concern about neighborhood continuity and
"Historic Preservation"? Or do the incumbent home owners find the new homes to be tacky and make them envious as the new guys yell out "We have $$$".

While you don't think of Queens, New York as the epi-center of "Consumer City", something similar is taking place there. In this case , various immigrant groups are trying to co-exist and have different visions of how they want to express their freedom in America.

In a diverse world, how do you celebrate diversity? In the case of Queens, are the incumbents worried that their neighborhood will tip and become "100% tacky"?
Will the Urban Planners here be as smart as King Solomon in figuring how to proceed here?


New York Times
July 5, 2008
Questions of Size and Taste for Queens Houses
By KIRK SEMPLE

To the Bukharian Jews of Central Asia, a big house is an essential tradition: a place to shelter multiple generations, to hold large parties, memorials and holiday dinners, to reaffirm a community’s unity.

So wherever they have put down roots, Bukharians — or, as they are sometimes called, Bukharans — have built aggressively, including in central Queens, where tens of thousands have settled since the early 1990s and the collapse of the Soviet Union.

Nowhere has their love of big homes been on more opulent display than in a section of Forest Hills known as Cord Meyer, an upper middle class neighborhood long cherished by its residents for its tranquillity and architectural charm.

There, Bukharians have been tearing down the neighborhood’s sedate Tudor, Georgian and Cape Cod-style homes, paving over lawns and erecting white-brick edifices that borrow from old Europe, with sweeping balustrades, stone lions bracketing regal double doorways, chateau-style dormers and pitched roofs, Romanesque and Greek columns and ornate wrought-iron balconies accented with gold leaf that glints in the sun.

But while the Bukharians’ arrival has been a boon for the area’s residential construction industry, it has been a bane for some neighbors. These residents have complained about the Bukharian tendency to build boldly and big, saying that the new houses are destroying their neighborhoods.

“There is a lot of history in the Cord Meyer area and a lot of historical houses that have a specific aesthetic character in that community,” said Melinda R. Katz, a city councilwoman whose district includes Forest Hills. “A lot of the houses that are going up there are just simply too big relative to the other houses that are there and have been there for generations. They are out of character.”

The Bukharians contend that they are being misunderstood.

Indeed, what might seem on its surface like a parochial neighborhood quarrel over yards, fences and taste has revealed the complex civil society of a tight-knit immigrant community and the cultural tensions that have resulted from its rapid growth.

“Don’t be upset with our people because we like to be large,” pleaded Boris Kandov, president of the Bukharian Jewish Congress of the U.S.A. and Canada, an umbrella group for Bukharian associations.

“Let me tell you something,” he continued in halting English. “In Queens, most of the houses is old. New people build a new city. It’s good for community.”

More than 30,000 Bukharian Jews have settled in central Queens, mainly in Forest Hills, Rego Park, Kew Gardens Hills and Fresh Meadows. They now occupy sections of the commercial strips along 108th Street in Forest Hills, operate dozens of places of worship and yeshivas, run a weekly newspaper and prosper in a wide range of fields including jewelry, medicine and real estate.

Critics of the new Bukharian architecture in Queens, many of whom are Jewish as well, have presented their complaints in private conversations with elected officials, at small civic meetings and on blogs. Some have taken the view that the Bukharian community is highly insular and that the Bukharians’ tendency to build different from the rest of the neighborhood reflects that.

“I could spit and throw up,” said a Forest Hills resident of 51 years as she stood with her husband outside a big house under construction at 112th Street and 68th Avenue. The woman, who like other opponents interviewed for this story spoke only on condition of anonymity, admitted that she had never spoken with any of the Bukharian newcomers.

“They don’t want to talk to us,” she said. “They want to be alone.”

Councilwoman Katz said that while the Bukharian homes in her district have complied with the city’s building and zoning regulations, she, too, was concerned about their size and the loss of green space, particularly in the Cord Meyer area between 108th Street and the Grand Central Parkway, where nearly every block has at least one newly completed house and another one under construction.

Ms. Katz, who is chairwoman of the Council’s Land Use Committee, has been working with the City Planning Department on new zoning regulations that would limit the size of new houses in Cord Meyer and other architecturally sensitive areas and create what she calls “a more stable community.”

The Bukharians have made their architectural mark elsewhere in Queens, albeit not as ostentatiously as in Forest Hills. In the middle class neighborhoods of Kew Gardens Hills and Fresh Meadows, for instance, they have not so much been tearing down the signature brick row houses as adding extensions, paving over yards and erecting walls around their properties.

“We like to utilize every single square inch of land, every inch of territory,” explained Rabbi Shlomo Nisanov, head of a Bukharian synagogue and community center in Kew Gardens Hills. “For some reason, people don’t appreciate it.”

One afternoon late last week, Mr. Nisanov, a blocky man who was born in Uzbekistan and emigrated to Kew Gardens Hills when he was a child, took a stroll through his neighborhood and delivered something of a short course in Bukharian immigrant culture.

He showed how in the space of a decade, Bukharians, mainly from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, had come to dominate some residential blocks, as relatives bought homes within walking distance of one another and some extended families crowded under one roof. Their houses were easy to identify by their bricked front patios and front walls.

“What makes Bukharian Jews unique is they love to stay together,” he said.

The Bukharian tendency to pave over everything is practical, he continued. Bukharians preferred a terrace or patio to a lawn, which he called “useless land.” A yard required mowing — “a waste of time,” he said.

“Exhibit A,” he said, gesturing to a brick row house on 76th Road. It had a verdant front yard that seemed to beg for mowing and pruning. “You see this?” he said dismissively. “What is this? What are we seeing here?”

He then pointed to the house next door. “Exhibit B,” he declared. The house was fronted by a well-swept terrace of red and black paving stones and enclosed within a five-foot-high wall that, he said, ensured some privacy. Any remaining green was an accent rather than a feature.

“You can eat outside, the kids have a place to play,” the rabbi said. “You have usage of the front of your house.”

“It’s nice, it’s beautiful,” he added. “What are you afraid of?”

Mr. Kandov, who immigrated to the United States from Uzbekistan in 1987 and runs a limousine fleet and other family-owned businesses, said the largeness of the Bukharian home in Queens was an expression of freedom after years of oppression in the Soviet Union.

“Why are we in America?” he said while sitting in his office in his group’s headquarters, a five-story, 43,000-square-foot building in the main commercial district of Forest Hills. “Because we’re dreaming of this freedom! We were dreaming to build big house.”

On the walls hung two enormous paintings in thick gold-colored frames, one showing the British surrender to Washington at Yorktown and the other depicting Moses’ liberation of the Jews in Egypt.

“It’s not to show that we’re rich,” he insisted. “I’m feeling this. Bukharian Jews feel O.K., it’s good, thanks God.”

Alexander Yakubov, a Bukharian real estate agent in Forest Hills, said his decision to partially demolish an old house in Forest Hills to make way for a larger one had nothing to do with grandiose notions of spiritual expression and everything to do with the economy of home ownership.

The house was old, he said, and it would have cost more to renovate and expand than to knock down and build new. “Anybody would love to save money and move into a ready house,” he said.

The most ostentatious Bukharian construction has given Rabbi Itzhak Yehoshua, the chief rabbi of the Bukharian Jews in the United States, some pause. He said he urged modesty among his congregation in order to avoid tensions in the community, but he has met resistance.

“I tell them all the time that our ancestors taught us about being humble,” he said during an interview in his small office in the Bukharian Congress building in Forest Hills. “They say, ‘Rabbi, this is our home for entertainment, it’s our fortress. Now we work’ — and they work very hard — ‘and this is our understanding of America.’ ”

He went on: “I am very happy and proud that my congregation interprets freedom to be successful and to work honestly and to settle and to help the community. And each house is another stone to help create the Jewish community.”

Worried about the widening divide between the Bukharian and non-Bukharian communities in central Queens, Cynthia Zalisky, executive director of the Queens Jewish Community Council, a social services agency for immigrants, said she has been trying to soften the discussion about the Bukharian homes.

“It’s a very delicate situation,” she admitted. Property owners are entitled to their design decisions within the law, she said, but she is also trying to encourage the Bukharian immigrants to view themselves as “part of a whole, not just an entity unto themselves.”

“We’re trying to see whether there’s some compromise here,” she went on. “We got to put our heads together like the United Nations.”

Thursday, July 03, 2008

A Sketch of the Costa/Kahn Research Agenda

This was just published in the NBER Reporter (http://www.nber.org/reporter/2008number2/costa.html). Before the Internet and the World Wide Web, these NBER Reporters were a pinch more exciting but I still think they convey valuable information. Dora's research summary helps me to remember my own work and it shows the continuity across the different papers.

Understanding Social Networks

Dora L. Costa*

Heroes and Cowards: The Social Face of War

When are men willing to sacrifice for the common good? What are the benefits to men of friendship? How do communities deal with betrayal? And what are the costs and benefits of being in a diverse community? Matthew Kahn and I answer these questions in an interdisciplinary book, Heroes and Cowards: The Social Face of War (forthcoming, Princeton University Press for NBER). Building on a series of joint NBER Working Papers, we weave a single narrative from the life histories of 41,000 Union Army soldiers, diaries and letters, and government documents.

One summer we both read Robert Putnam's thought-provoking book Bowling Alone (2000). We were fascinated by Putnam's account of the decline in American civic engagement over time. Putnam emphasized the growing popularity of television as a pivotal cause of the decline in community participation, but we wondered whether an unintended consequence of the rise of women working in the paid labor market was that PTAs and neighborhood associations lost their "volunteer army." We started to write a paper testing whether the rise in women's labor force participation explained the decline in residential community participation.1 To our surprise, we found little evidence supporting this claim. Instead, our analysis of long-run trends in volunteering, joining groups, and trust suggested that, all else equal, people who live in cities with more income inequality were less likely to be civically engaged. These results contributed to a growing literature in economics documenting the disturbing fact that people are less likely to be "good citizens" when they live in more diverse communities.

Our early work on community participation attracted academic and popular media attention. Although we were flattered, we were aware that our measures of "civic engagement" bordered on "small potatoes." We were examining low stakes outcome measures such as entertaining in the household, joining neighborhood associations, and volunteering for local clubs.

In the summer of 2001, we realized that the American Civil War, 1861 to 1865, provided the ideal "laboratory." The setting was high stakes - roughly one out of every six Union Army soldiers died during the war. Unlike people in civilian life today, Union Army soldiers could not pick and choose their communities. Even when they signed up with friends, some men ended up in homogenous units and others in heterogenous units and they could not leave their units unless they deserted. Their "communities" were the roughly 100 men in their units - men they lived with 24 hours a day.

We answer the question of when men are willing to sacrifice for the common good by examining why men fought in the Civil War.2 During this war most soldiers stood by their comrades even though a rational soldier would have deserted. Punishments were too rare and insufficiently severe to deter men from deserting. What then motivated these men to stand their ground? Was it their commitment to the cause, having the "right stuff," high morale, officers, or comrades? We examine all of these explanations and find that loyalty to comrades trumped cause, morale, and leadership. But loyalty to comrades extended only to men like themselves - in ethnicity, social status, and age.

Sacrifices for the common good are costly. Standing by their comrades raised men's chances of dying. What then are the benefits to men of friendship? We can reply by looking at who survived the extreme conditions of Civil War POW camps.3 We can see the effects of age, social status, rank, camp population, and the presence of own officers on survival. We can also see that the fellowship of their comrades helped soldiers survive POW camps and, the deeper the strength of ties between men, the higher their probability of survival. Ties between kin and ties between comrades of the same ethnicity were stronger than ties between other men from the same company.

If loyalty toward your own kind is admirable, how do communities deal with betrayal? In the Civil War companies were raised locally and hometowns were well aware of who was a "coward" and who was a "hero" during the war. Some towns were pro-war and others anti-war. Men who betrayed their pro-war neighbors by deserting moved away, driven out by shame and ostracism.4 Community codes of conduct are re-enforced not just by loyalty but also by punishments.

By examining men's lives during the war we saw that more diverse communities are less cohesive. Their members are less willing to sacrifice and derive fewer benefits from being part of the community. Are there then any benefits to being in a diverse community? When we look at the lives of black soldiers after the Civil War we can understand the tensions between the short-run costs of diversity and its long-run benefits. Men did not like to serve with those who were different from them, so much so that they were more likely to desert, but in the long-run the ex-slaves who joined the Union Army learned the most from being in units with men who were different from themselves.5

Whether diversity fosters understanding or distrust is a long standing question in the social sciences that has become particularly timely with rising immigration and growing income inequality. We find that the same types of social network variables that determined who deserted from the Union Army and who survived POW camps predict commitment to organizations in civilian life today. Organizational membership is lower in metropolitan areas with greater racial and ethnic diversity and higher income inequality; support for income redistribution is higher when the aid recipients are from the same racial and ethnic group; and laboratory games show that trust is higher when the players look like each other.6

Our work emphasized the importance of ethnicity, state of birth, occupation, age, and kinship for the formation of social ties in the past. We are not claiming these were the only factors that influenced the formation of social ties among Union Army soldiers. Nor are we claiming that these factors are as important now as they were in the past. Race and ethnicity no longer predetermine friendships and marriages. Although racial and ethnic diversity still affect community participation, they have become less important relative to income.7

Although people want to be friends with others they can relate to, they may learn the most from those who are different. In recent Supreme Court cases a brief filed by eight universities emphasized that students educate each other, that cross-racial learning takes place, and that this learning is valued by students and by the labor market. Nevertheless, few large-scale studies actually measure the benefits of diversity in either a university or an employment setting and campus newspaper accounts suggest large amounts of racial self-segregation.

Like college students, Civil War soldiers preferred to interact with others who looked like them. For white Union Army soldiers, similar men were those of the same ethnicity, occupation, and age group. For black soldiers, similar men were those from the same state or even plantation and from the same slave or free background. But, in the long run (and studies of college roommates have never been able to examine the long run), Union Army soldiers benefited from their interactions with men who were different. Freemen taught the former slaves to write and helped them forge a freeman's identity. Both slaves and freemen first learned of new cities and states from their comrades who had come from those places.

There is increasing interest in building "good" communities today. The World Bank, on its social capital Web site, writes "Increasing evidence shows that social cohesion - social capital - is critical for poverty alleviation and sustainable human and economic development" (http://web.worldbank.org). This social capital has both positive and negative consequences. Union Army deserters were never re-integrated into their communities, not because of legal punishments, but because of shame and ostracism.

We have highlighted the tensions between cohesion and diversity. A community of similar people is likely to be cohesive and its members are likely to sacrifice time, effort, and even their lives for each other. But in a diverse community members can learn from one another.

Health and Social Networks

Our research agenda on social networks does not end with our book. Our new NIA-funded research combines our interests in social networks with my research agenda on the determinants of health at older ages. Using data on Union Army veterans, I find that a large proportion of the poor health and longevity experience of men in the past relative to men in more recent cohorts can be explained by such early life experiences as infectious disease, poor nutritional intake, and physical job demands. For example, Joanna Lahey and I found that season of birth had a strong effect on the older age mortality rates of men who lived to age 60. This effect was much more pronounced among Union Army veterans than it is among more recent populations, probably because of the elimination of the summer-time diarrheal deaths with the improvement in sanitation and because of the improvement in vitamin levels among women pregnant during the long winter months.8 Lorens Helmchen, Sven Wilson, and I found that being born in the second relative to the fourth quarter predicted the probability of Union Army veterans developing arteriosclerosis at older ages, perhaps because nutritional deprivation in utero leads to compromised immune function and higher inflammation rates.9

If older age health and longevity is partially determined by earlier life conditions, then senescent processes may be plastic and highly controllable and life expectancy rates are likely to continue to rise until improvements in early life conditions have been exhausted. Older age mortality rates may therefore not decrease as rapidly for the post-baby-boom cohort as they have for earlier cohorts. However, because of rising incomes, the value of even marginal improvements in life expectancy is now higher than the value of the very large increases in life expectancy experienced at the beginning of the twentieth century.10

Early life conditions may also partially explain observed racial health disparities in modern populations and among Union Army veterans. Data on Union Army veterans reveal very high rates of arteriosclerosis among black relative to white veterans, differences that can be explained by blacks' greater life long burden of infectious disease.11 The effects of infectious disease rates are clearly observed in black-white differentials in birth weights, prematurity rates, and stillbirths among children born in the first third of the twentieth century under the auspices of Johns Hopkins University Hospital.12

Economic and epidemiological research has linked social networks to health. People who report themselves to be socially isolated, both in the number and quality of their personal relationships face a higher mortality risk from all causes and from several infectious, neoplastic, and cardiovascular diseases. A large body of literature links stress, whether in the form of war, natural disasters, divorce, lack of control on the job, or even disrupted sleep patterns, to cardiovascular disease. Social networks could either mitigate or accentuate the effects of stress. They could mitigate the effects of stress through beneficial effects on psychological and physical well-being. But, they could accentuate the effects of stress if the stressor leads to the loss of friends or family (for example the well-established effect of death of a spouse on the mortality of a survivor).

By studying how the interactions between unit cohesiveness and combat mortality, and between POW camp experience and the strength of social networks within the POW camp, affected older age mortality and morbidity, we can investigate the interaction between stress and social networks in one of the few human populations to provide us with measures of stress, of long-run outcomes, and of exogenous social networks. We are finding that being in a more cohesive company reduced the negative, long-term consequences of wartime stress on older age mortality and morbidity, particularly from cardiovascular causes. 13 Focusing on the role of stress factors in health and mortality may be a fruitful line of research, particularly as we exhaust the gains from public health advances.

* Dora L. Costa is a Research Associate in the NBER's Programs on Development of the American Economy, Aging, and Children. She is also the Director of the NBER Working Group on Cohort Studies and a professor of economics at UCLA.

1. D.L. Costa and M.E. Kahn, "Understanding the American Decline in Social Capital, 1952-1988", NBER Working Paper No. 8295, May 2001, and Kyklos, 56(1) (Fasc 1 2003), pp. 17-46.

2. D.L. Costa and M.E. Kahn, "Cowards and Heroes: Group Loyalty in the American Civil Wa.," NBER Working Paper No. 8627, December 2001, and Quarterly Journal of Economics, 118(2) (May 2003), pp. 519-48.

3. D.L. Costa and M.E. Kahn, "Surviving Andersonville: The Benefits of Social Networks in POW Camps", NBER Working Paper No. 11825, December 2005, and American Economic Review, 97(4) (2007), pp. 1467-87.

4. D.L. Costa and M.E. Kahn, "Shame and Ostracism", NBER Working Paper No. 10425, April 2004, and "Deserters, Social Norms, and Migration," Journal of Law and Economics, 50 (2007), pp. 323-53.

5. D.L. Costa and M.E. Kahn, "Forging a New Identity: The Costs and Benefits of Diversity in Civil War Combat Units forBlack Slaves and Freemen", NBER Working Paper No. 11013, December 2004, and Journal of Economic History, 66(4): pp. 936-62.

6. For a summary of social capital research see D. L. Costa and M.E. Kahn, "Civic Engagement and Community Heterogeneity," Perspectives on Politics, 1(1) (March 2003).

7. D.L. Costa and M.E. Kahn, "Understanding the American Decline in Social Capital, 1952-1988".

8. D.L. Costa and J.N. Lahey, "Becoming Oldest-Old: Evidence from Historical U.S. Data," NBER Working Paper No. 9933, September 2003, and Genus, 61(1) (2005), pp. 21-38, and D.L. Costa and J.N. Lahey, "Predicting Older Age Mortality Trends," Journal of the European Economic Association, 3(2-3) (March-April 2005).

9. D.L. Costa, L. Helmchen, and S. Wilson, "Race, Infection, and Arteriosclerosis in the Past", Proceedings of the National Academy of Sciences, 104 (2007), pp. 13219-24. Written for the NBER conference, Economics of Health and Mortality, http://www.nber.org/books.html .

10. D.L. Costa and M.E. Kahn, "Changes in the Value of Life, 1940-1980," NBER Working Paper No. 9396, December 2002, and Journal of Risk and Uncertainty, 29(2) (September 2004), pp. 159-80.

11. D.L. Costa, L. Helmchen, and S. Wilson, "Race, Infection, and Arteriosclerosis in the Past"

12. D.L. Costa, "Race and Pregnancy Outcomes in the Twentieth Century: A Long-Term Comparison," NBER Working Paper No. 9593, March 2003, and Journal of Economic History, 64(4) (December 2004) pp 1056-86.

13. D.L. Costa and M.E. Kahn, "Health, Stress, and Social Networks: Evidence from Union Army Veterans," NBER Working Paper No. 14053, June 2008.

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Can My Princeton Press book be turned into a Best Selling T-Shirt?

Seth Ditchik of Princeton University Press has created a novel new product. He took my forthcoming social capital during the U.S Civil War book (joint with Dora L. Costa) 's text and fed it through http://wordle.net/. Here is the output based on the Word Count analysis of our Forthcoming Book . Who knew that tabulating words could create such art?

For those enterprising young business people who are seeking the next hot t-shirt, I encourage you to start mass-producing these.

Does Watermelon = Viagra? The Consumer Surplus from Mother Nature

In 1997, Constanza --- not the guy from Seinfeld, wrote the paper arguing that natural capital is worth trillions of dollars (see http://www.uvm.edu/giee/publications/Nature_Paper.pdf). Most neo-classical economists didn't fully believe his method for generating his big numbers. But, now that scientists have claimed that watermelon yields "viagra-like" effects --- we may need to re-examing Constaza's claim. An economist would ask you to compare the "bang per buck" here (no pun intended) so you need to compare the marginal utility per dollar spent on watermelon to the marginal utility per dollar spent on viagra. Should a smart Wall Street guy, short the stock of Pfizer (they make Viagra).

Scientists: Watermelon yields Viagra-like effects

By BETSY BLANEY, Associated Press Writer Thu Jul 3, 7:45 AM ET

A slice of cool, fresh watermelon is a juicy way to top off a Fourth of July cookout and one that researchers say has effects similar to Viagra — but don't necessarily expect it to keep the fireworks all night long.

Watermelons contain an ingredient called citrulline that can trigger production of a compound that helps relax the body's blood vessels, similar to what happens when a man takes Viagra, said scientists in Texas, one of the nation's top producers of the seedless variety.

Found in the flesh and rind of watermelons, citrulline reacts with the body's enzymes when consumed in large quantities and is changed into arginine, an amino acid that benefits the heart and the circulatory and immune systems.

"Arginine boosts nitric oxide, which relaxes blood vessels, the same basic effect that Viagra has, to treat erectile dysfunction and maybe even prevent it," said Bhimu Patil, a researcher and director of Texas A&M's Fruit and Vegetable Improvement Center. "Watermelon may not be as organ-specific as Viagra, but it's a great way to relax blood vessels without any drug side effects."

Todd Wehner, who studies watermelon breeding at North Carolina State University, said anyone taking Viagra shouldn't expect the same result from watermelon.

"It sounds like it would be an effect that would be interesting but not a substitute for any medical treatment," Wehner said.

The nitric oxide can also help with angina, high blood pressure and other cardiovascular problems, according to the study, which was paid for by the U.S. Department of Agriculture.

More citrulline — about 60 percent — is found in watermelon rind than in the flesh, Patil said, but that can vary. But scientists may be able to find ways to boost the concentrations in the flesh, he said.

Citrulline is found in all colors of watermelon and is highest in the yellow-fleshed types, said Penelope Perkins-Veazie, a USDA researcher in Lane, Okla.

She said Patil's research is valid, but with a caveat: One would need to eat about six cups of watermelon to get enough citrulline to boost the body's arginine level.

"The problem you have when you eat a lot of watermelon is you tend to run to the bathroom more," Perkins-Veazie said.

Watermelon is a diuretic and was a homeopathic treatment for kidney patients before dialysis became widespread.

Another issue is the amount of sugar that much watermelon would spill into the bloodstream — a jolt that could cause cramping, Perkins-Veazie said.

Patil said he would like to do future studies on how to reduce the sugar content in watermelon.

The relationship between citrulline and arginine might also prove helpful to those who are obese or suffer from type-2 diabetes. The beneficial effects — among them the ability to relax blood vessels, much like Viagra does — are beginning to be revealed in research.

Citrulline is present in other curcubits, like cucumbers and cantaloupe, at very low levels, and in the milk protein casein. The highest concentrations of citrulline are found in walnut seedlings, Perkins-Veazie said.

"But they're bitter and most people don't want to eat them," she said.

Drill for Gas in Upstate New York? Energy Supplies, Inequality and Environmental Degradation --- Some Tradeoffs!

Upstate New York may have a fair bit of natural gas underground in the Marcellus Shale formation, which in New York runs from Lake Erie across to the Catskills. Given that upstate New Yorkers are always talking about the need for "new jobs" for their region, will Senator Clinton endorse this? There are counter-veiling interest groups here. Environmentalists will be upset about the environmental degradation from drilling for this resource and the new infrastructure such as roads that would be needed to send it to consumers. This article also hints that local land owners face negative spillovers if their neighbors drill. The article also has a pinch of sociology to it as it also hints at envy over the few "lucky" land owners who get rich from the new drilling activity while many others drill dry holes.

A Chicago economist would say that these land owners could pool their "lottery tickets" and form a local mutual fund. So I own 10 acres of land in upstate New York and 99 other people also own 10 acres. We could write a contract that says "If Exxon find natural gas in any of the 100*10 = 1000 acres, each of us will receive 1/100 of the payment regardless of where the natural gas is actually found". We know all about risk pooling contracts. If people are so risk averse and envious, why don't they sign this contract before hand? You will say "transaction costs" --- well that's not a good answer -- a good lawyer could make a good profit playing this middleman who gets all the neighbors to sign on.

The more interesting issue is how Upstate New York will make this "tradeoff" decision; there are benefits from drilling --- this drilling activity will create jobs and wealth but there will be some environmental degradation? How much? have engineers made green progress such that they can drill without too much land damage? My risk pooling solution would address the "envy" issue at least for the participating land owners.



New York Times
July 3, 2008
Our Towns
A Land Rush Is Likely, So a Lawyer Gets Ready
By PETER APPLEBOME

WALTON, N.Y.

Chris Denton first got a glimpse of his future and that of much of upstate New York back in April 1999 when he got a phone call to his solo-practice law firm from someone he knew in the petroleum industry. “Do you know about the Jimerson well?” Mr. Denton recalled being asked.

He did not.

“Well, you’re going to have to start studying oil and gas law,” Mr. Denton said he was told. “That well came in in excess of 3,500 pounds per square inch bottom hole pressure. It’s like a Texas well. You won’t be able to do real estate law unless you start learning this stuff. There’s going to be a lot of drilling, it’s going to mean a lot of money, and you need to learn it now.”

He began studying the next morning.

Almost a decade later, the 58-year-old Mr. Denton, the son of an Army colonel who taught history at West Point, is still learning it. But he is one of a handful of people who have any grasp of the moving parts as the state lurches toward a new era of natural gas production in the Marcellus Shale formation, which in New York runs from Lake Erie across to the Catskills.

There are no guarantees, of course. Wells that look promising can be duds. Legislators could confound powerful gas industry lobbyists and slam on the brakes. Someone might invent a magic energy machine or a hydrogen fuel cell that could replace the gas sitting under pastures in the Catskills. Pigs could fly.

Far more likely is this: A frenzied land rush that is already making some landowners rich and infuriating others who leased their land too early for too little. Thousands of gas wells drilled upstate, many using more than a million gallons of water laced with dozens of toxic chemicals like hydrochloric acid, benzene, toluene and xylene, to fracture shale thousands of feet underground to release the gas trapped within it. Enormous questions about industrial noise, truck traffic and new roads gouged into hills; about holding ponds created to trap the polluted and spent water used in drilling; about land reclamation; about the effects on the New York watershed.

Mr. Denton has organized perhaps a hundred forums for farmers and landowners about the leasing process, how to protect themselves, what’s at stake. He has also put together several groups of landowners, each group controlling as much as 50,000 acres, so they have some leverage in negotiating economic and environmental issues with national and international energy companies.

He was in the audience at a forum last week, listening to the cautionary tales told by landowners from Wyoming and Colorado, noting the gas industry representatives, none of whom raised their hands when asked to identify themselves at the start of the meeting.

The meeting, organized by the Catskill Mountainkeeper environmental group, included both curious landowners and staunch environmentalists, many of whom wanted not to regulate gas drilling in the state, but to stop it.

“What I’m hearing is that some people have already given up,” said one woman near the front of the century-old Walton Theater here. “And if anybody wants me to make nice to someone who’s going to come and rape my land, that’s not going to happen. I don’t want to live in an industrial zone. I don’t want them here. And that’s what I want to talk about, how to keep them out. Not how to make nice with them.”

Mr. Denton, for what it’s worth, figures that stopping gas development can’t happen, and it shouldn’t.

It can’t because all the planets are lined up for vast gas exploration upstate. The price is high, and many of the people with land to lease are poor and desperate. Gas could be an economic bonanza for individuals and state government. The new horizontal drilling technology is far more sophisticated than ever. A similar formation, the Barnett Shale, has been a huge success in Texas, and gas companies are rushing to be sure they get a piece of the next hot play, which is the Marcellus Shale here.

“The place to put your money now is in the Northeast,” Mr. Denton said. “They’re not shooting for 15 or 20 percent return on equity. They’re looking for 200 or 300 percent every year. You might hit a dry well, but when you hit one, your return can be extraordinary.”

AND, in his view, the goal shouldn’t be to stop the drilling, because if we want our big cars and big houses and urban empires of light in the Northeast, we can’t expect to be an energy consumer and never a producer.

“The Amish are the only people who have any credibility about saying no,” he said. “They live what they espouse. If we want our gas-guzzling cars and S.U.V.’s and all the benefits of modern technological society, it’s a little hard to understand how we say no.”

Instead, the question more likely is: Do we do it right? And can we? Federal energy legislation promoted by the Bush administration in 2005 exempted the gas industry from many clean-air and clean-water regulations. Albany, where the state recently passed legislation that made it easier for the Department of Environmental Conservation to issue permits for horizontal drilling, may not be a great bet to do any better than the federal government.

The smell of money is in the air, and the game is just starting.

E-mail: peappl@nytimes.com

Wednesday, July 02, 2008

Commuting Cost Arithmetic

If the price of gas remains at $5 a gallon or higher, will people move back to Center Cities? Many bloggers seem to be assuming that people work in the Center City and live in the suburbs . This is a 1950s view of suburbia. Ed Glaeser and I have written about this point extensively. Haven't you read this and this ?

When people work in the suburbs, will they save many gallons of gasoline if they move to the center city? Yes, they will be closer to their center city friends and stores but they will still need to reverse commute by car to their jobs (unless they can ride the Google Bus from Center City San Fran to Mountainview).

So this raises the question of whether high gas prices will push employers to move back to the center city? Employers who need land (think of Google) will be unlikely to want to rent out 35 stories of a skyscrapper.

High gas prices are likely to LOWER gas prices at the suburban fringe making it more desirable location for firms seeking to cost minimize. As such land is less desirable as suburban housing, firms will seek it out and their employees will locate nearby with a short commute from their suburban house.

Is $5 gas a significant commute cost? This depends on your wage. Consider the following deep math;

Suppose you own a vehicle that gets 25 miles per gallon and you work 25 miles from where you work. Suppose you drive at 25 miles per hour.

Then to get to work, you need to purchase 1 gallon of gas and use 1 hour of your time.


Total One Way commute cost = price of a gallon of gas + hourly wage


Case #1: you make minimum wage = 5 + 7 = 12 and the share of expenditure on gas = 5/12

Case #2: Ivy League graduate = 5 + 100 = 105 and the share of expenditure on gas = 5/105

So this simple example highlights how the wage can swamp the price of gas for the high skilled but for the less educated, gas is a huge part of the commute cost.

Tuesday, July 01, 2008

AB32 and Outsourcing Economic Analysis

AB32 commits California to reducing its greenhouse gas emissions 80% below 1990 levels by 2050. This is ambitious but will compliance be costly for the state? "Rather than assessing the costs that will be borne by industry, Mary D. Nichols, who heads the California Air Resources Board, said the agency’s “macroeconomic analysis” had shown that the state’s gross domestic product would increase by 1 percent when the plan was fully put into place." NYT Article with quote

I wondered how Mary knows this so I did some investigative snooping --- from looking at the AB32 webpage, I found out that the The E3 Consulting Firm has been providing the heavy lifting of making forecasts of how the state's economy will evolve in this new regulatory environment. Here is what E3 says about themselves;


CPUC GHG Modeling

The California Public Utility Commission (CPUC) has selected a team led by Energy and Environmental Economics, Inc. (E3) to model the electricity sector’s compliance with AB32, California’s Global Warming Solutions Act. This law requires a reduction in statewide greenhouse gas (GHG) emissions to 1990 levels by 2020.

The modeling will provide the CPUC and California Energy Commission (CEC) with critical information on how different methods of reducing GHGs will achieve emission reduction goals for the sector and affect utility costs and consumers’ electricity bills. This information will be used by the CPUC and CEC to advise the California Air Resource Board (CARB) on setting and implementing GHG standards for the electricity sector.

Monitor this web page for notices, materials, and links related to the CPUC GHG Modeling project.


So, here is my question for you readers --- we are talking about multi-billion dollar regulation here and the state has outsourced the ex-ante evaluation efforts to a consulting firm that I have never heard of before. Who are the "researchers" at E3? Have they published in peer reviewed journals? Do they attend the annual economics meetings? If I might be a snob, where did they get their degrees from?

My counter-proposal is for the Air Resources Board to convene a set of UC economists to question this consulting firm about the real assumptions burried in their "fancy" computable general equilibrium model. I know how to read these models and I have many questions for the guys in the suits.