Tuesday, September 30, 2008

Welcome to New Economics Bloggers

Marginal is above average in these two cases. Welcome Glaeser and Mulligan . An old IO literature asks what triggers entry into a market? Market Size? We are waiting for this All Star to enter this market.

Entering Wall Street: The Cost of Graduating During a Bust Year

Are business cycles costly? When I was a student at the University of Chicago, we were taught that they weren't. Downtimes were a good time to take a vacation. It was "cheap" to take leisure when your wage is low but the shock's effects would soon vanish. Paul Oyer of Stanford has argued that this "conventional wisdom" is wrong. This paper about MBA's prospects will scare some people today. If you enter the labor market during a bad "macro" year, you never recover relative to similar Wharton grads who enter the market during boom years. He has written a paper with a similar punchline for academic economists.

Saturday, September 27, 2008

The 2008 Nobel Prize in Economics and Market "Exuberance"

Does anyone know what is the date when the Swedes choose the new Nobel Laureate in Economics? The actual winners will be announced in about 2 weeks. The recent market turmoil raises the likelihood that Richard Thaler and Robert Shiller will share the Nobel. My claim is that the Swedes have been nudged as recent events encourage them to reward two great scholars and to simultaneously make a political statement about neo-classical economics.

While I will congratulate the winner of this year's prize, I would like to see a nobel prize in environmental economics. Perhaps a windfall profit tax on the Nobel could collect enough revenue to bail out Wall Street?

Randomization Mitigates the Bail Out Lemons Problem

Rob Shimer raises a number of key points in his post . I have a dumb question. If Wall Street firms who want to participate in the bailout must submit all of their assets to sale to the Treasury (rather than the subset that they want to sell) would this solve the Lemons problem? So, my solution is to introduce a randomization device. Each asset would be assigned a unique ID and the Treasury would pre-commit to draw from a random number generator (like the Lotto). If Asset B owned by firm j's number is drawn then it is sold to the government. I will leave it to smarter guys to figure out what the price should be. I like this proposal by Lucian Bebchuk of Harvard to set up an internal Treasury competition among fund managers who have the right incentives to maximize returns.

A "Bail Out" Proposal that the Median Voter Will Support

Congress cares about what the voters want. The median voter is a home owner. Home owners want their key asset to go up in price. Chris Mayer proposes a solution to reduce defaults and prop up home prices. He wants to lower interest rates down to their historical spread. If people could borrow at these interest rates (financed with "bail out" $), then demand for housing would rise, home prices would rise and defaults would slow down.

His proposal would redistribute income to the middle class at the expense of the poor and the rich. Why? The poor are renters so they would now face higher prices for housing and they are tax payers and part of their taxes would go to subsidizing the interest rates of home buyers. The rich would face higher taxes due to the progressive nature of the tax code and the rich will want "Jumbo" loans (greater than $700,000) and thus won't qualify for these subsidies that Mayer proposes.


I must admit that there is a key detail in all of this that I don't get. Suppose that the Treasury took the set of homes where the owners have defaulted on their mortgages and auctioned them off to new buyers at lower prices. Yes, Wall Street would take a loss but how much capital has been destroyed?

So, suppose that 3 million homes are in foreclosure. That sounds quite large.
Suppose that they were worth $400,000 each and now are worth $200,000 each. That's a whopping 50% decline in average prices.

that is "destruction" of 600 billion dollars. Where does 700 billion come from? That's the bailout number.

I'm not a macro economist. What "multiplier effect" am I ignoring?

Here is Chris Mayer's plan.


New York Times
September 27, 2008
Op-Ed Contributor
Help Housing
By CHRIS MAYER

A T the heart of the financial crisis is an unprecedented decline in house prices. Yet the government response so far has been to try to prop up insolvent financial institutions while doing nothing about the underlying housing problem. The proposed Wall Street bailout would not stop the next wave of defaults, which are coming from the rapidly rising delinquencies in near-prime mortgages.

The government needs to directly stabilize the housing market. This is equivalent to treating the infection with antibiotics, instead of applying a cold compress for the fever. Both the fever and the infection need treating.

The first step should be to reduce mortgage interest rates. In a normal mortgage market, rates are about 1.6 percentage points above the interest rate for 10-year Treasury notes. Recently, the difference has been closer to 2.5 percentage points.

The government is in a great position to cut rates by about a point: Through Fannie Mae, Freddie Mac and the Federal Housing Administration, it now controls nearly 90 percent of all mortgage originations. These lower rates would apply to most home buyers who take out a loan under $729,750 for a house that they will live in.

Along with lower rates, the government should provide temporary down-payment assistance for buyers. The government could, for example, match the amount of money that buyers use for a down payment, up to $15,000. Because the government now controls the bulk of all mortgage financing, this money could be provided directly at closing. Homeowners who refinance their current mortgages could also receive assistance, allowing them to avoid foreclosure.

Programs like these would draw buyers into the housing market and reduce the backlog of unsold and vacant homes. Investors and speculators would be ineligible and would face the full cost of their mistakes.

By stabilizing house prices, these programs would benefit the bulk of Americans, who own a home but did not get involved in the subprime mortgage market. Price stability would more directly achieve the goals of the Wall Street bailout: increase the value of mortgage-backed securities (by increasing the value of the underlying houses) while injecting government capital into the financial system.

Some in Congress have suggested allowing homeowners to go to bankruptcy court to lower their mortgage payments. But this would only make credit more expensive by reducing the willingness of companies to lend money. It would also worsen the current problems by letting bankruptcy judges reduce mortgage balances — imposing even greater losses on the owners of the mortgages, whose problems are at the heart of the financial crisis. Such a program would also be limited to only the most indebted and, in some cases, financially irresponsible homeowners.

Some might argue that propping up house prices is what got us into this mess. But with the recent decline in house prices, my calculations suggest that the cost of owning a home today, relative to renting, is about 10 percent lower than its average over the past 20 years.

The credit crisis will not be over until house prices stop falling. Direct assistance for home buyers and homeowners is the best, and the fairest, way to make that happen.

Chris Mayer is a professor of real estate and the senior vice dean of Columbia Business School.

Friday, September 26, 2008

Sustainability Report Card Gives UCLA a "B-"; I disagree

Everyone loves rankings. But a B-? UCLA's Green Report Card What are these guys smoking?

If I had to objectively discuss whether UCLA is green or not, I'd make the following points;

1. The campus is beautiful. So we are green on aesthetics. This is a nicer campus than any other University in the US including Stanford and Princeton.

2. Given the perfect weather, our electricity bills must be lower than more humid areas

3. California's electric utilities are greener than any other state's (perhaps Oregon is close). So the power we use doesn't add up to too much co2 especially after LA DWP stops buying from the out of state coal fired power plant.

4. There is little need for winter heating like at the Ivy League schools.

5. The UCLA Institute of the environment is actively engaging the students, see www.ioe.ucla.edu

6. Investments are being made to make the campus more energy efficient.


Now on the "Brown" Front;

1. faculty do live far away from Westwood because West LA is quite expensive, so the carbon footprint from commuting must be large relative to Harvard's or other schools such as Tufts

2. the graduate students receive large scholarships to attend here and they buy Hummers and create a lot of CO2 as they drive around (I'm kidding about this point).


Returning to this brilliant report card,

Apparently, we received an "F" for the subcomponent called "Shareholder Involvement".

This sounds like a silly category.

Overview

The Shareholder Engagement category examines how colleges conduct shareholder proxy voting. As investors, colleges have an opportunity to actively consider and vote on climate change and other sustainability-related shareholder resolutions. Forming a shareholder responsibility committee to advise the trustees allows schools to include students, faculty, and alumni in research and discussion of important corporate policies on sustainability. In addition, such committees offer exceptional educational opportunities at the intersection of policy, business, and sustainability. Points were awarded to schools that had formed such committees as well as for past votes on sustainability-related proxy resolutions (when such records were available).


Key Findings

* Approximately one in nine schools has an advisory committee on shareholder responsibility. Eleven percent of schools have a committee of multiple stakeholders (e.g. students, faculty, staff, alumni) to help inform the trustees’ decisions on shareholder proxy resolutions.



* The average grade for the Shareholder Engagement category was “D-.” For a summary of grade distribution for this category, please refer to the chart on the right.

Thursday, September 25, 2008

Do Cops Reduce Crime? Sociologists vs. Economists

Each day UCLA emails me a news blast highlighting important new work by UCLA faculty. Below I report one that examines whether a Los Angeles police effort has reduced crime.

The full report is available here:

http://www.law.ucla.edu/docs/did_safer_cities_reduce_crime_in_skid_row.pdf

If you are an intellectual who likes to read and think, please contrast that paper
with this paper:

http://www.people.hbs.edu/rditella/papers/AERPoliceCrime.pdf


In "Causality studies", the usual issue is imputing the counter-factual; what would have happened in the absence of the treatment. You must decide which paper has the more convincing empirical design.


Study finds police crackdown in skid row did not reduce serious, violent crime


Lauri Gavel, gavel@law.ucla.edu

310-206-2611

Sara Wolosky, wolosky@law.ucla.edu

310-206-2221



Two years after the city of Los Angeles launched the Safer Cities Initiative (SCI), representing one of the most targeted concentrations of police resources in the world outside of Baghdad, a UCLA School of Law study has found that the effort has failed to reduce serious or violent crime in the city's skid row area.



"While there was a reduction in overall crime in skid row, it was strikingly similar to the reduction seen in areas outside the initiative's focus," said UCLA law professor Gary Blasi, who conducted the study. "Importantly, our study shows there was no statistically significant effect on serious, violent crime in Skid Row, with the exception of a very small effect as to the crime of robbery."



Serious, violent crimes are defined by law-enforcement officials as homicide, rape, robbery and aggravated assault. A UCLA School of Law report released last year — "Policing Our Way out of Homelessness?" — noted that during the first seven months of the initiative, just 0.7 percent of the arrests by the 50 officers assigned to the Safer Cities Task Force were for serious, violent crimes.



"Our study shows that the Safer Cities Initiative did not cause the overall decline in skid row crime," Blasi said. "Even if we attribute the decline in skid row robberies to the SCI, each additional officer was responsible for a reduction of just under one robbery per year. One can argue that the same 50 officers might have had much more impact on serious or violent crimes in other parts of Los Angeles with higher rates of such crimes."



According to Blasi, the additional police officers assigned to the 50 square blocks of skid row cost the city general fund about $6 million, more than was spent on shelter for the homeless across the entire city. When the Safer Cities Initiative was announced in 2006, it was supposed to include two components: increased enforcement and increased services.



"The enforcement component was delivered swiftly, with 50 additional patrol officers and 25 to 30 additional narcotics officers and mounted police assigned to the 50 blocks of skid row," Blasi said. "However, the enhancement part of the equation — more shelter, drug treatment and services for homeless people with mental disabilities — never materialized, and we are all worse off as a result."



The new study — "Has the Safer Cities Initiative in Skid Row Reduced Serious Crime?" — is available at www.law.ucla.edu/docs/did_safer_cities_reduce_crime_in_skid_row.pdf.



"Policing Our Way out of Homelessness" (2007) can be found at www.law.ucla.edu/docs/policingourwayoutofhomelessness.pdf.



The UCLA School of Law, founded in 1949, is the youngest major law school in the nation and has established a tradition of innovation in its approach to teaching, research and scholarship. With approximately 100 faculty and 970 students, the school pioneered clinical teaching, is a leader in interdisciplinary research and training, and is at the forefront of efforts to link research to its effects on society and the legal profession.

Wednesday, September 24, 2008

The New York Times' Green Blog

In today's New York Times, there were some subtle ideas in this "H" section on the environment and business. Today, I learned about the existence of the New York Times "Green Blog" . After visiting this site, I like it but I'm hoping that they will add some "meat" to this blog by including actual statistics and statistical research. They face no "page limits" so why can't such a blog be more sophisticated with respect to how evidence is presented and analyzed? Data sets could be posted or linked there to allow other people to download such information for replication and to show people in developing countries what might be useful information to collect in nations just starting to engage in formal measurement of the "green economy".

Switching subjects

People who know me know that I'm a free rider who isn't very engaged in anything.
This is ironic given my work on social capital;
http://press.princeton.edu/titles/8734.html

But, here is a "grass roots movement" that I'm willing to participate in;
A petition I will sign.

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

I see that Dr. Luttmer has signed. If he's in, then I'm in.

Monday, September 22, 2008

Obama vs. McCain: The Commitment to Excellence

Obama has lost votes in some parts of the country because he has been tagged as an ivy league elitist. Yet, there is a flip side to this point. Being an ivy league graduate who worked at the University of Chicago, won't he appoint "the best and the brightest" to his cabinet and leading White House posts? Would he tolerate political hacks? If the "best and the brightest" (such as a Larry Summers sequel at the Treasury) make fewer mistakes in office, shouldn't our risk averse masses be swayed a pinch? Who will be John McCain's "Dream Team"? It would interest me if the candidates could pre-commit and announce now who their cabinet and white house staff would be if they are elected.

Before the Super Bowl, the sports columnists break down the two teams comparing the QB, running backs, coaches, defensive line and grading them against each other. Should these candidates do the same thing? They both made strange choices for Vice President. In his biography of JFK, Ted Sorenson makes a big deal about how JFK sought out the best and brightest for his team. His set of economists at CEA was pretty good.

If an Ivy League East Coast Obama wins, will we get a test of the theory that the Ivy League can govern during these troubled times? Did Bill Clinton's Administration really test this theory?

Thursday, September 18, 2008

UCLA Researchers Evaluate the Iraq Surge Using a Time Series of Satellite Pictures

Who says that UCLA is about sunshine and basketball? Below, I report some serious research and I didn't even do it! Forgot Iraqi Bond prices, if you want to know whether the surge works turn to the Satelites. "By the launch of the surge, many of the targets of conflict had either been killed or fled the country, and they turned off the lights when they left." So local deaths can decline either because the probability of death declines or because the number of people at risk for the event declines. The second explanation can happen due to self protection as scared people flee. The pentagon has claimed that theory #1 explains the facts while my "light tracking" geography colleagues here at UCLA claim that theory #2 can explain the facts.


For Immediate Use

Sept. 19, 2008



UCLA study of satellite imagery casts doubt on surge's success in Baghdad



Meg Sullivan, msullivan@support.ucla.edu

310-825-1046



By tracking the amount of light emitted by Baghdad neighborhoods at night, a team of UCLA geographers has uncovered fresh evidence that last year's U.S. troop surge in Iraq may not have been as effective at improving security as some U.S. officials have maintained.



Night light in neighborhoods populated primarily by embattled Sunni residents declined dramatically just before the February 2007 surge and never returned, suggesting that ethnic cleansing by rival Shiites may have been largely responsible for the decrease in violence for which the U.S. military has claimed credit, the team reports in a new study based on publicly available satellite imagery.



"Essentially, our interpretation is that violence has declined in Baghdad because of intercommunal violence that reached a climax as the surge was beginning," said lead author John Agnew, a UCLA professor of geography and authority on ethnic conflict. "By the launch of the surge, many of the targets of conflict had either been killed or fled the country, and they turned off the lights when they left."



The team reports its findings in the October issue of "Environment and Planning A," a leading peer-reviewed academic journal that specializes in urban and environmental planning issues.



The night-light signature in four other large Iraqi cities — Kirkuk, Mosul, Tikrit and Karbala — held steady or increased between the spring of 2006 and the winter of 2007, the UCLA team found. None of these cities were targets of the surge.



Baghdad's decreases were centered in the southwestern Sunni strongholds of East and West Rashid, where the light signature dropped 57 percent and 80 percent, respectively, during the same period.



By contrast, the night-light signature in the notoriously impoverished, Shiite-dominated Sadr City remained constant, as it did in the American-dominated Green Zone. Light actually increased in Shiite-dominated New Baghdad, the researchers found.



Until just before the surge, the night-light signature of Baghdad had been steadily increasing overall, they report in "Baghdad Nights: Evaluating the U.S. Military 'Surge' Using Night Light Signatures."



"If the surge had truly 'worked,' we would expect to see a steady increase in night-light output over time, as electrical infrastructure continued to be repaired and restored, with little discrimination across neighborhoods," said co-author Thomas Gillespie, an associate professor of geography at UCLA. "Instead, we found that the night-light signature diminished in only in certain neighborhoods, and the pattern appears to be associated with ethno-sectarian violence and neighborhood ethnic cleansing."



The effectiveness of the February 2007 deployment of 30,000 additional U.S. troops has been a subject of debate. In a report to Congress in September of that year, Gen. David Petraeus claimed "the military objectives of the surge are, in large measure, being met." However, a report the same month by an independent military commission headed by retired U.S. Gen. James Jones attributed the decrease in violence to areas being overrun by either Shiites or Sunnis. The issue now figures in the U.S. presidential race, with Republican presidential candidate John McCain defending the surge and Democratic hopeful Barack Obama having been critical of it.



Reasoning that an increase in power usage would represent an objective measure of stability in the city, Agnew and Gillespie led a team of UCLA undergraduate and graduate students in political science and geography that pored over publicly available night imagery captured by a weather satellite flown by the U.S. Air Force for the Department of Defense.



Orbiting 516 miles above the Earth, Satellite F16 of the Defense Meteorological Satellite Program, Operational Linescan System (DMSP/OLS) contains infrared sensors that calculate, among other things, the amount of light given off in 1.75-square-mile areas. Using geo-referenced coordinates, the team overlaid the infrared reading on a preexisting satellite map of daytime Iraq created by NASA's Landsat mapping program. The researchers then looked at the sectarian makeup in the 10 security districts for which the DMSP satellite took readings on four exceptionally clear nights between March 20, 2006, when the surge had not yet begun, and Dec. 16, 2007, when the surge had ended.



Lights dimmed in those neighborhoods that Gen. Jones pointed to as having experienced ethno-sectarian violence and neighborhood ethnic cleansing in his "Report of the Independent Commission on the Security Forces of Iraq."



"The surge really seems to have been a case of closing the stable door after the horse has bolted," Agnew said.



Long-term obstacles to meeting Baghdad's power needs may have contributed to the decrease in night lights in the city's southwestern parts, the researchers acknowledge. But Baghdad's shaky power supply does not fully account for the effect, they contend, citing independent research showing that decaying and poorly maintained power plants and infrastructure were meeting less than 10 hours of Baghdad's power needs prior to the fall of Saddam Hussein.



"This was the part of the city that had the best sources of connection and the most affluent population, so they could actually generate power themselves, and they were in the habit of doing so well before the U.S. invasion," said Agnew, the president of the American Association of Geographers, the field's leading professional organization. "But we saw no evidence of a widespread continuation of this practice."



In addition to casting doubt on the efficacy of the surge in general, the study calls into question the success of a specific strategy of the surge, namely separating neighborhoods of rival sectarian groups by erecting concrete blast walls between them. The differences in light signatures had already started to appear by the time American troops began erecting the walls under Gen. Petraeus's direction, the researchers found.



"The U.S. military was sealing off neighborhoods that were no longer really active ribbons of violence, largely because the Shiites were victorious in killing large numbers of Sunnis or driving them out of the city all together," Agnew said. "The large portion of the refugees from Iraq who went during this period to Jordan and Syria are from these neighborhoods."



Previous research has used satellite imagery of night-light saturation to measure changes in the distribution of populations in a given area, but the UCLA project is believed to be the first to study population losses and migration due to sectarian violence. The outgrowth of an undergraduate course in the use of remote sensing technologies in the environment, the UCLA project was inspired by a desire to bring empirical evidence to a long-running debate.



"We had no axe to grind," said Agnew. "We were very open. If we had found that the situation was different, we would've reported it. Our main goal was to bring fairly objective and unobtrusive measures to a particularly contentious issue."



The study will be available Sept. 19 at www.envplan.com/abstract.cgi?id=a41200.



UCLA is California's largest university, with an enrollment of nearly 37,000 undergraduate and graduate students. The UCLA College of Letters and Science and the university's 11 professional schools feature renowned faculty and offer more than 300 degree programs and majors. UCLA is a national and international leader in the breadth and quality of its academic, research, health care, cultural, continuing education and athletic programs. Four alumni and five faculty have been awarded the Nobel Prize.

Life Under Ground

Along the Venice Canals in West LA, Dora and I toured a $2 million dollar home on a 2,000 square foot lot. That's not a lot of land my friends. With such expensive land, how do people respond? You can't build up due to building codes. You can't afford more square footage so there is only one direction to go. Down.


http://www.latimes.com/features/home/la-hm-builddown20-2008sep20,0,6560616.story

From the Los Angeles Times
TRENDS

Homeowners dig down for more space

With more limits on the height and footprint of homes, particularly in beach cities, the underground area adds footage for such extras as theaters and wine cellars.

By Janet Eastman
Los Angeles Times Staff Writer

September 20, 2008

COME ON DOWN, Stefan Lemperle says. Here, 13 feet under the ground, there's sunlight and fresh air, an open-to-the-sky patio with a rock-lined pond, a high-ceilinged lounge and a media room large enough to host dozens of friends.

Lemperle's new glass tower of a home in La Jolla comes with a swank subterranean space that's anything but the dank basement of eras past. "It's beautiful," says Lemperle, "and it's a bonus."

At 1,800 square feet, this level of the house is longer and wider than any of the three stories that sit above-grade. But to city planners here who are meticulously calculating whether a home is too big for its lot, basements are like carports: These square feet simply don't count.

In beach cities with strict restrictions about the height and footprint of homes, residents and architects are digging down to get the most out of small lots. Building down can yield a bigger home that draws less attention from the street and fewer sneers from neighbors tired of maxed-out mansions rising next to modest bungalows.

The trend is particularly strong in affluent communities such as Coronado Island and La Jolla, which have some of the most expensive land in the state.

"Almost every new home we see now includes a basement," says Lee McEachern, permit chief for the San Diego office of the California Coastal Commission. "It's been increasing for the last several years until now I can't think of an application for a new home that doesn't have plans for underground space."

The phenomenon is less common in Malibu because that city includes some basement space when calculating a home's size, says Craig George, manager of the city's Environmental and Building Safety Division. But Charles Posner, a California Coastal Commission planner, says he's seeing requests to build basements on small lots in Venice and Marina del Rey.

The trend is clearly strongest in pricey San Diego County, where Harry Jackman says every house erected on Coronado Bay in the last five years has a basement.

As construction managerof the Coronado-based planning, design and construction company the Jackman Group, he carved 4,300 extra square feet underneath an 8,000-square-foot lot. One client in Bonita will have two basements: one in front of the house, with light wells to illuminate bedrooms, and one in back of the house for parking cars.

San Diego architect Steven Florman devised a below-grade museum and diorama space for a La Jolla homeowner to spread out his battalions of miniature soldiers.

Across from the Hotel del Coronado, contractor Fred Perry has built a house with 2,000 square feet of sub space to hold 6,000 bottles of wine as well as the homeowner's car collection and occasional houseguest.

Critics might question why anyone needs 6,000 bottles of wine, let alone an underground space to store them. But McMansion backlash notwithstanding, some homeowners simply want their space, and despite the complications and expense, basements are seen as an increasingly attractive option for Southern Californians.

"Footage is footage," Perry says. "You can't tell you're underground."

INDEED, the new basements just may represent the future of design for densely built, space-starved communities, says San Diego architect Jonathan Segal, who is not shy about declaring his plan for Lemperle as an example of "the new generation of ocean-front architecture."

Building underground is urban, he says, and more exciting than suburban sprawl. It's also practical -- perhaps the best way to offset "unforgiving land costs" -- $4 million for this 4,200-square-foot, pie-shaped lot, half of which must be reserved for patios or landscape to meet building restrictions. Adding the basement created 72% more living space, expanding the home to 4,300 square feet total.

"Basements are the new baseline, what has to happen to make the project make sense financially," Segal says. "If you could imagine that house without a basement, you'd have a 1 1/2 -bedroom house. And it would not be valued at $10 million, as it is now."

Though Lemperle declined to reveal his final outlay for construction, his contractor, Randal Howard, did say the basement cost 50% more to build than the other floors.

Excavation took a year: Workers drilled 30 holes, each 30 feet deep, to drop in support beams. Imagine writing a check for $25,000 to move telephone lines -- temporarily -- to accommodate a 70-ton crane.

After digging about 6 feet, crews hit water -- a series of underground streams trickling toward the ocean. They could have just built a giant concrete barrier to keep out the water, but they decided to collect and filter the water too -- about 1,000 gallons a day -- so what was pumped to the storm drain contained fewer pollutants.

Few visiting Lemperle's subterranean patio would know that the pump lies beneath the wood deck and that the water splashing a stack of rocks is actually some of that filtered runoff. The water is so clean, Lemperle jokes, he should bottle it.

The three stories of glass walls are matched with glass floors that allow sunlight to flood the basement. Natural light also comes in from the below-grade patio, about the size of a single-car garage.

Fresh air streams in from two sliding doors that lead to either the lounge (with a stainless-steel bar and Bontempi bar stools) or the media room (with the classic white Barcelona chair and ottoman).

Lemperle, a surgeon and inventor of medical devices, selected the finishes and furnishings himself. For the underground rooms, he found two faux-pony-skin Paul Klee chairs, a Hamilton sofa chaise lounge and leather tables by Minotti, and an Eero Saarinen walnut table and white tulip chairs from Knoll.

Custom cabinets made by Jacobs Woodworks of San Diego envelope the Gaggenau appliances and Dornbracht faucet in the underground dining room. Below the glass ceiling hangs metal sculpture by local artist Matt Devine.

Lemperle moved into the house in December, and since then he's been figuring out how to live in it. Surfers wave while waiting for a ride. Helicopters sometimes fly a little too close. But shutting them out is easy. He just walks downstairs.

"I'm totally happy," Lemperle says. "I have plenty of space, and I get a good workout running up and down four floors."

home@latimes.com


--------------------------------------------------------------------------------


If you want other stories

The Benefits of Environmental Regulation: The Case Study of California's AB32

Economists like data and numbers. California's Air Resources Board is now offering some firm predictions concerning the benefits to our state's economy from enacting AB32. I hope they are right but are they right? More AB 32 Economics .

I would like to see the Air Resources Board convene a panel of California academic economists to sit down and in public discuss and debate what we know and what we don't know about the economic consequences of this legislation. The ARB appears to be surprisingly certain about their consequences of their regulatory actions. I respect people who can see the future.

If we are honest about what we don't know (such as how residential energy consumers will respond to higher prices), this would help to shape academic research such that California's environmental economists would be working on research that truly informs policy making. I do not need to be named to this panel of "wise people" but I would be happy to suggest 10 to 15 people who would do a great job. These people are not politicians or professional consultants, they are academics.


http://www.arb.ca.gov/newsrel/nr091708.htm

Release 08-80
FOR IMMEDIATE RELEASE
September 17, 2008
Stanley Young
916-322-2990 w
916-956-9409 m
www.arb.ca.gov


ARB analysis finds that reducing greenhouse gas pollutants also provides net benefit to California's economy and public health
Economic analysis sees continued robust growth; public health analysis forecasts health benefits

SACRAMENTO-The Air Resources Board today released two reports that highlight how implementing AB 32, California's pioneering climate change law, will provide net benefits to both California's economy and public health.

"The facts are in. These reports support the conclusion that guiding California toward a clean energy future with reduced dependence on fossil fuels will grow our economy, improve public health, protect the environment and create a more secure future built on clean and sustainable technologies," said Mary Nichols, ARB Chairman.

The reports analyze the economic and public health impacts of the recommended measures in the draft Scoping Plan, the State's policy framework that outlines how California will reduce greenhouse gases 30 percent by 2020, as required under AB 32.

The economic analysis indicates that ARB's strategy will create jobs and save individual households money. And, California will achieve those benefits while enjoying a net benefit in economic growth between now and 2020, compared to the "do-nothing" scenario where California continues to rely heavily on fossil fuels as it does today.

The public health analysis demonstrates that implementing the recommendations to reduce greenhouse gas emissions will build on existing air pollution programs that reduce smog-causing chemicals and toxic soot, providing significant additional public health and environmental benefits.

The economic analysis compares the recommendations in the draft Scoping Plan to doing nothing and shows that implementing the recommendations will result in:

Increased economic production of $27 billion
Increased overall gross state product of $4 billion
Increased overall personal income by $14 billion
Increased per capita income of $200
Increased jobs by more than 100,000
The public health analysis shows that programs under AB 32 will improve on existing air pollution cleanup programs. As a result, in 2020:

An estimated 300 premature deaths statewide will be avoided
Almost 9,000 incidences of asthma and lower respiratory symptoms will be avoided
53,000 work loss days will be avoided
The recommended approach that was analyzed includes a mix of strategies that combines market-based regulatory approaches, other regulations, voluntary measures, fees, and other policies and programs to reduce greenhouse gas emissions. The economic analysis used analytical models that measure economy-wide impacts of those policies and measures.

The analysis indicates that the bulk of the economic benefits are the result of investments in energy efficiency that more than pay for themselves over time. Additionally, the results in the economic analysis may underestimate many economic benefits since the models do not include lower costs from innovation and improved technologies expected under a market-based program.

ARB is seeking public comment on both reports. Those comments will be considered in the development of the proposed Scoping Plan prior to it being presented for adoption to the Air Resources Board at its November hearing.

ARB is the lead agency for implementing AB 32, the Global Warming Solutions Act of 2006, and is part of an administration-wide effort to address climate change and mitigate the most severe projected impacts of global warming by reducing greenhouse gas emissions statewide.

Both reports, with appendices, can be found at http://www.arb.ca.gov/cc/cc.htm.

The Air Resources Board is a department of the California Environmental Protection Agency. ARB's mission is to promote and protect public health, welfare, and ecological resources through effective reduction of air pollutants while recognizing and considering effects on the economy. The ARB oversees all air pollution control efforts in California to attain and maintain health based air quality standards.

####

Wednesday, September 17, 2008

Who is an Expert?

After reading this piece, I'm wondering if my students would learn more economics if I cancel class and send them to a Hollywood movie where the bald star economist offers witty insights about our economy. I'm not a Doctor but I play one on TV

Suburban Employment in Singur, India

I'm guessing that not everybody out there has read my paper on Employment Sprawl . Our paper did not discuss employment sprawl in developing nations and this would appear to be a good topic for future research. The New York Times today reports on the awkward land use transition taking place in India's rural areas. Farm land is being reallocated by the market for industrial purposes. The less educated farm workers are worried about their future because they don't have the skills to compete in the "new economy". This clash between rural interests and urban interests is likely to play out over and over around the urbanizing world.

It would interest me whether the children of the displaced farmers are able to get a good education to join the "urban elite" or whether this is not a Horatio Alger "Rags to Riches" story that the poor today will have children who will be poor tomorrow. Where is the Coase Theorem when you need it?

One obvious solution here would be for the new factories to signal that they will hire low skill workers for jobs ranging from driving vehicles to cleaning up. For example, eco-tourism resorts have created jobs for local residents. I'm surprised that the industrial interests have not thought about ways to productively co-opt the displaced farmers.






September 17, 2008
India Grapples With How to Convert Its Farmland Into Factories
By SOMINI SENGUPTA

SINGUR, India — Barely a month before Tata, one of India’s most powerful conglomerates, was due to roll out the world’s cheapest car from a new factory on these former potato and rice fields, a peasant uprising has forced the company to suspend work on the plant and consider pulling out altogether.

The standoff is just the most prominent example of a dark cloud looming over India’s economic transition: How to divert scarce fertile farmland to industry in a country where more than half the people still live off the land.

At the heart of the challenge, one of the most important facing the Indian government, is not only how to compensate peasants who make way for India’s industrial future, but also how to prepare them — in great numbers — for the new economy India wants to enter.

In recent years, clashes over land have dogged several major industrial projects in virtually every corner of this crowded democracy of 1.1 billion people, most of them rural and poor.

In eastern Orissa State, betel leaf farmers have held up a $12 billion project by Posco, the South Korean steel maker, occasionally kidnapping company officials. In western Goa, several proposed Chinese-style special economic zones were scrapped after sustained public protests. And outside Mumbai, India’s commercial capital, village councils insist on a referendum this month on an economic zone proposed by Mukesh D. Ambani, the nation’s richest man.

In nearly all these cases, the peasants who resist most intensely are often those who know they are qualified to do little beyond eke out a living off the land.

If that fundamental anxiety feeds their protests, farmers and farmhands, often egged on by the politicians who seek their support, also stage protests to ratchet up the price of the land or to renegotiate deals.

The target of their ire is often the government, which in most cases acquires the land and turns it over to industrial developers. The central government has yet to release a long-awaited national policy on how to compensate those who lose their land.

“If the price is right, people will sacrifice the emotional attachment, but if you no longer have the guarantee of living off the land, then what do you do?” asked Subir Gokarn, chief economist for Standard & Poor’s in India. “The people who are being displaced are not the people who see themselves as benefiting immediately from the employment opportunities.”

Medha Patkar, one of India’s best-known opponents of large industrial projects, said, “Land is livelihood, it’s not just property.”

Last month in this rich farm belt in West Bengal State, protesters laid siege to the new Tata Motors plant, on one occasion preventing workers there from leaving.

The protesters now want the government to return roughly a third of the 997 acres that the state acquired for the Tata factory. Some of the land was taken by force from farmers.

Their demands have since forced the state government, controlled of all things by an elected Communist administration, to sweeten the deal without taking apart the factory site.

On Sunday, in an effort to assuage the protesters, the government announced a new, more generous compensation package for those who had been evicted. It included a 50 percent increase in the price paid for the property and job training for one member of each displaced family. The ruling party and its opponents have been staging competing protests this week.

That new deal only revealed the deep wedge of anxiety that the factory has driven through this cluster of villages.

“We are farmers,” said Tayab Ali Mandal, 52, of Joymolla village. “We know only farm work; we don’t know any paper-pencil work.” He gave up his land last year, but bitterly. Now, he wants it back, and he rejected the government’s latest offer of a job in the plant.

He said he would rather that his 16-year-old son continue to work in a small factory embroidering clothes, a traditional craft in his community. “I won’t go inside that place even to urinate,” he said. “We are disgusted by that place.”

Gopal Santra and his clan, who refused to accept money for the land they lost, said they hoped the renewed agitation would prompt the state to raise its offer even more.

The Santras also had land across the street from the Tata plant, which they sold to a private party a month ago for more than four times the price the state is now offering.

Still others, like Sheik Muhammad Ali, who welcomed the Nano, Tata’s flat-faced, pint-size car, to his fields, threatened to put the naysayers in their place.

Mr. Ali, 50, had readily given up his land, and through his contacts with Communist Party workers, started a business supplying cement to the factory developer.

On Sunday, he was seething at the protesters who had halted work on the plant for the last two weeks and, in turn, his business.

“There’s a limit to our patience,” he barked. “If you take my plate of rice, will I just let you go off with it?”

Bidyut Kumar Santra, 30, a rare high school graduate in Joymolla, was among the lucky few to get jobs on the assembly line and, in turn, he realized how poorly equipped he was to keep up with events on the factory floor. The engineers all spoke English, to him an alien tongue.

“I feel ashamed, like what kind of education did I get?” Mr. Santra said the other day and vowed to make certain that his son, who is in first grade, learns to speak English.

The villages of Singur, where the Nano was to be produced, stand at the crossroads of the two Indias.

For Tata, it is ideally located along a new national highway that heads north to New Delhi, the capital, and intersects an important east-west artery.

For farmers, it is ideally located on the fertile delta plains of the Ganges River and fed by irrigation canals, making the earth so rich and red that it yields two rice harvests a year, in addition to potatoes, cucumbers and squash.

West Bengal lured Tata here with heavy incentives, including a generous land lease and tax breaks from the state’s industrial development agency.

Some of these details of the company’s hitherto secret contract with the government have emerged in recent days, prompting the company to go to court, where a ruling blocked further disclosures. If Tata were required to give back 300 acres of land from the factory site, as the opposition demands, it would have to evict auto-parts makers who are setting up shop next to the main Nano plant. Their proximity allows Tata to save on the cost of production. Those savings and the generous land and tax deal allow Tata to offer the Nano at an astonishing price of less than $2,500. The plant’s fate is uncertain. Tata, while welcoming the government’s proposed compensation package, has remained silent on its plans.

The company has several other plants where it could produce the Nano in time for the Hindu festival season next month, traditionally a time of big spending. It has dangled the possibility of making the Nano elsewhere if the cost of production and the price of the world’s cheapest car rise too high.

Tuesday, September 16, 2008

Death to "Revise and Resubmit"

What is Important news? You can't deny that this ranks right up there with the Mao/Nixon Summit? They are a cute couple.

September should be a productive month for UCLA researchers. We aren't teaching for another week. Perhaps, the 59-0 loss to the mighty BYU in football has everyone off kilter. I have been dragged into revising some "revise and resubmits". I'm thinking of only sending my research papers to Economic Inquiry.

Let me quote Preston Mcafee the editor at EI.

http://www.mcafee.cc/EI/NoRevisions.html

Economic Inquiry
A Journal of the
Western Economic Association International

Editor's Announcement: No Revisions Option

Journal time to publication lags have become embarrassing. Many authors have 5 year submission-to-print stories. More insidious, in my view, is the gradual morphing of the referees from evaluators to anonymous co-authors. Referees request increasingly extensive revisions. Usually these represent improvements, but the process takes a lot of time and effort, and the end result is often worse owing to its committee-design. Authors, knowing referees will make them rewrite the paper, are sometimes sloppy with the submission. This feedback loop - submitting a sloppy paper since referees will require rewriting combined with a need to fix all the sloppiness - has led to our current misery. Moreover, the expectation that referees will rewrite papers, combined with sloppy submissions, makes refereeing extraordinarily unpleasant. We - the efficiency-obsessed academic discipline - have the least efficient publication process.

The system is broken.

Consequently, Economic Inquiry is starting an experiment. In this experiment, an author can submit under a 'no revisions' policy. This policy means exactly what it says: if you submit under no revisions, I (or the co-editor) will either accept or reject. What will not happen is a request for a revision.

I will ask referees: 'is it better for Economic Inquiry to publish the paper as is, versus reject it, and why or why not?' This policy returns referees to their role of evaluator. There will still be anonymous reports.

Authors who receive an acceptance would have the option of publishing without changes. If a referee noticed a minor problem and put it in the report, self-respecting authors would fix the problem. But such fixes would not be a condition of publication.

During the course of the experiment, an author may opt for submission under the old system. The old system remains the default; to opt in to the new system, please select 'no revisions' from the drop down menu.

Journal of Labor Research copies No Revisions!

Monday, September 15, 2008

Can Incentive Programs be Phased Out Without Consequences?

I see that Roland Fryer is bringing a Keynesian helicopter drop of cash to Chicago public schools. Roland Fryer's treatment rolls out to Chicago . I'm thinking of enrolling my son to help us pay for a our Los Angeles house.

"Fryer said he believes Chicago's program is currently unique in the nation. Every five-week reporting period, each A will yield up to 5,000 eligible freshmen $50, a B will bring $35, and a C will net $20 in English, math, science, social science and physical education. Kids will get half the money each marking period and the other half at graduation."

Should a C get -$10? Where is the Chicago School tough love?

Will grading be curved or will the grade distribution look like Harvard's (all A's)?

Will nerds get beat up more because they now are carrying more cash (from their A's) then they used to carry?

So will petty theft rise or fall in these neighborhods? If there are kids who dropped out of school or are in their 20s, how can they access these cash awards?

Will Dr. Fryer require explicit signals so a kid who gets an "A" one week must wear an A t-shirt?

Another mildly serious question; what is the expected after tax wage that Dr. Fryer is paying these students?

Suppose that the wage per hour that Dr. Fryer is offering is equivalent to more than the pre-tax minimum wage, will students who graduate refuse to work in the legal sector at the minimum wage because they view it as a "pay cut" relative to what they earned in high school as professional students?

While I'm cracking jokes here, and I do support the experiment, I am interested in what are the unintended consequences of this experiment. Are people creatures who really need to receive an immediate reward for costly action? Do we ever sacrifice to receive long run amorphous benefits? Why is Dr. Fryer so certain that students need immediate gratification to take costly action? If his incentive system reinforces this, will the "treated" students ever do "something for nothing"? Will they be less civically engaged and do less volunteer work as adults?

Sunday, September 14, 2008

Off Shore Wind Power

The New York Times Magazine is picking winners. They profile Peter Mandelstam as a visionary who will help to green our energy supply by building wind turbines off shore. This was an interesting case study but in my quick read of this piece, I didn't see a sophisticated discussion of the following issues. First, nobody lives offshore. Thus, by siting a power plant offshore you avoid suburban NIMBY issues. I would guess that the threat of lawsuits in siting new power plants creates uncertainty that business must hate. Lucas Davis has a new paper on siting power plants on shore. Second, this piece makes a big deal that off shore can be sited closed to major cities. Again, the transmission lines must run under the water rather than near any suburbanites. Again, no Meryl Streeps will freak out if they can't see the power infrastructure. I wonder how liability works with wind turbines off shore. Do they pose risks to fish? Will ecologists protest or is this an example of a "Tragedy of the Commons" that would make Coase happy? The turbines are sited in an area that is expensive to build but causes low social damage in generating power and shipping it to final consumers.




September 14, 2008
Wind-Power Politics
By MARK SVENVOLD

“The moment I read that paper,” the wind entrepreneur Peter Mandelstam recalled, “I knew in my gut where my next wind project would be.”

I was having lunch with Mandelstam last fall to discuss offshore wind in general and how he and his tiny company, Bluewater Wind, came to focus on Delaware as a likely place for a nascent and beleaguered offshore wind industry to establish itself. Mandelstam had been running late all morning. I knew this because I received a half-dozen messages on my cellphone from members of his staff, who relayed his oncoming approach like air-traffic controllers guiding a wayward trans-Atlantic flight into Kennedy. This was the Bluewater touch — crisp, informative, ever-helpful, a supercharged, Eagle Scout attentiveness that was part corporate style, part calculated public-relations approach. It would pay off tremendously in his company’s barnstorming campaign of Delaware town meetings and radio appearances to capture what he had reason to believe would be the first offshore-wind project in the country’s history.

These features were, unsurprisingly, manifestations of Mandelstam himself, who arrived in a suit and tie, a wry smile, his wiry hair parted in the middle and tamped down like someone who had made a smooth transition from a Don Martin cartoon. Mandelstam, a 47-year-old native New Yorker who is capable of quoting Central European poets and oddball meteorological factoids with ease, had long committed himself — and the tiny company he formed in 1999 — to building utility-scale wind-power plants offshore, a decision that, to many wind-industry observers, seemed to fly in the face of common sense. Offshore marine construction was wildly, painfully expensive — like standing in a cold shower and ripping up stacks of thousand-dollar bills. The very laws for permitting and siting such projects had yet to be enacted. Indeed, the recent past was littered with failed offshore wind projects. Never mind that there were so many more opportunities in the continental United States to build land-based wind farms, which cost half as much as offshore projects. While wind-energy companies in Europe were moving offshore at great speed, neither Mandelstam nor anyone else had ever successfully built an offshore wind farm in the United States. Failed, stalled or delayed projects sounded like a catalog of coastal shipwrecks: Long Island, Padre Island, Cape Wind. Entrepreneurs, of course, need to anticipate the next market, but when it came to offshore wind, Mandelstam seemed too far ahead of the curve to ever succeed.

Then in 2005 Willett Kempton, a University of Delaware professor in the school’s College of Marine Studies, began teaching a course on offshore wind power. “In our department,” Kempton recalls, “most of my colleagues were working on some aspect of the global-warming problem.” Coal-fired power plants, a major contributor of carbon in the atmosphere, had recently been linked in Delaware to clusters of cancer outbreaks and to high levels of mercury in the state’s fishery. One of the first things Kempton and his class did was go down the list of clean-energy options for Delaware — “It was a pretty short list,” he said. Solar power was still far too expensive to be economically sustainable. And the state had no land-based wind resource to speak of. But a team of students, led by Amardeep Dhanju, became curious about measuring the winds off the coast to determine whether they might serve as a source of power. What he found was that Delaware’s coastal winds were capable of producing a year-round average output of over 5,200 megawatts, or four times the average electrical consumption of the entire state. “On the wholesale electricity markets,” Dhanju wrote, “this would produce just over $2 billion” in annual revenue.

It so happened that the day Dhanju’s semester-long research project was discussed, Kempton had invited several wind entrepreneurs to class. Mandelstam was the only invitee to show up in person. It was then that Mandelstam had his eureka moment. The amount of power Dhanju was describing, Mandelstam knew from Kempton, was but a small fraction of an even larger resource along what’s known as the Mid-Atlantic Bight. This coastal region running from Massachusetts to North Carolina contained up to 330,000 megawatts of average electrical capacity. This was, in other words, an amount of guaranteed, bankable power that was larger, in terms of energy equivalence, than the entire mid-Atlantic coast’s total energy demand — not just for electricity but for heating, for gasoline, for diesel and for natural gas. Indeed the wind off the mid-Atlantic represented a full third of the Department of Energy’s estimate of the total American offshore resource of 900,000 megawatts.

The Mid-Atlantic Bight was particularly attractive to Mandelstam because offshore winds blow strong and steady throughout the day, which means offshore wind is more likely than land-based wind in the Northeastern United States to generate electricity when demand is high. More important, offshore wind farms, Mandelstam explained, can be built close enough to big, power-hungry cities — or “load centers” — to avoid construction of expensive and politically unpopular transmission lines. “That’s a chronic problem facing land-based wind in West Texas or in California,” Mandelstam said, “or in the Dakotas, or Wyoming,” where wind resources are often many hundreds of miles removed from the cities they are meant to serve. In Europe, Mandelstam said, developers are planning to build upon this inherent advantage by connecting offshore projects to one another using high-voltage direct current cables. In America, such a system could supply the needs of local load centers and also export huge amounts of electricity, becoming part of a long-sought coastal megagrid, a robust, highly efficient, undersea transmission system capable of dispatching electricity anywhere along the East Coast, from Massachusetts to Florida.

As I listened to Mandelstam, the contours of what seemed to be a savvy and competitive business plan began to sharpen into focus. His aim was to exploit a huge, unheralded and presently untapped energy resource precisely at a time and place of colossal energy demand — demand that is increasing at roughly 2 percent every year. Renewable Portfolio Standards and other state-driven initiatives requiring that a percentage of power (to increase annually) be generated by renewable sources, would, in effect, guarantee a growing market for developers like Mandelstam. Add to this the recent, spectacular rise in fossil-fuel energy prices, which has galvanized public attention around the need for alternative energy sources, and it seemed that Mandelstam — by dint of being first in what some were predicting could be a trillion-dollar-plus build-out, had a pretty good shot at becoming king of the Mid-Atlantic Bight.

In late 2005, however, it was safe to say that nobody outside of Kempton, a cluster of grad students and Mandelstam himself imagined offshore wind power actually coming to Delaware. Which is not to say they shouldn’t have been thinking about it. Delaware citizens had recently experienced the kind of awakening toward which most environmentalists believe we’re all headed — a collective recalibration of what it costs to keep the world up and running. It began with the restructuring of the state’s electricity market and the subsequent removal of price caps, which had for seven years kept electricity prices artificially low. “Everything skyrocketed,” recalls Karen McGrath, formerly of the Chamber of Commerce for the small coastal communities of Bethany-Fenwick. “Prices went up anywhere from 60 to 100 percent.” The state’s General Assembly responded by passing a law — House Bill 6 — that called for Delaware to generate more of its own electricity. Under the new state law, the state’s Public Service Commission solicited proposals for the construction of an electric-power plant. Wind power was not even mentioned, but, as Willett Kempton later recalled, “it wasn’t excluded, either.”

Kempton brought this fact to the attention of Mandelstam and others in August 2006, and Mandelstam and his staff flew into action. “We worked day and night from August until December,” Mandelstam said. He knew that his plans for an offshore wind farm would face fierce opposition, as had other projects, perhaps none more famously than Cape Wind in Nantucket Sound. Conceived in 2000, when the price of oil was $25 a barrel, the Cape Wind project remains the best-known unbuilt offshore wind farm in America. A small, vocal, well-organized and politically connected minority argued that a wind farm would irrevocably spoil a pristine, treasured seascape, a sentiment perhaps most famously expressed in a New York Times editorial by Robert F. Kennedy Jr.: “I wouldn’t build a wind farm in Yosemite Park. Nor would I build one on Nantucket Sound.”

Against such pronouncements, and to the question of a sacrosanct American horizon best reserved for God’s signature, Mandelstam is sometimes prompted, in a way that seems inevitable in a story like this, to evoke the windmills in Cervantes’s “Don Quixote.” “Quixote is a romantic and chivalrous knight who doesn’t want anything to change,” Mandelstam said. “He actually says that windmills are monsters with which he is going to do battle. That’s a delusion that he projects onto these windmills.” To combat these perceptions, Mandelstam hired a British consultant, RPS, that specializes in computerized models to show Delaware citizens exactly how the wind farm would look after its construction. Mandelstam says he thought these would help Delaware citizens to see offshore wind turbines as Sancho Panza, Quixote’s sidekick, saw them — not romantically but practically, as a new technology benefiting humanity. “I think it’s a very powerful literary example of a human phenomenon,” Mandelstam said. “When you see wind turbines rather than imagine them in your mind’s eye, then you perceive a new object in the landscape for what it is — rather than projecting upon it your own fear.” It helped, of course, that Bluewater’s turbines would be sited more than 12 miles out to sea, as opposed to the 5 to 7 miles for Cape Wind, so that, once constructed, the turbines would appear on the horizon no larger than half the size of a thumbnail, and then only on clear days.

“The Europeans see offshore wind turbines as sentinels,” Mandelstam told me, “protecting them from energy domination by foreign powers. When you put that against a few winter days of seeing turbines on the beach as you walk your dog, I think that’s a very easy trade-off.”

Mandelstam’s visual consultants showed the public what the turbines would look like when built. He hired consultants to address public concerns about the effects of wind turbines on migrating birds. He commissioned private meteorologists to verify the wind resource. And he and his team met regularly with the Delaware public to discuss the impact of the wind farm on ratepayers. “In one 21-day period, we spent $380,000 to do a geophysical investigation of the sea floor,” Mandelstam said. “On land, the same geophysical work would cost $5,000.” Four months and $5 million later, on Dec. 22, 2006, Mandelstam and his staff submitted the Bluewater Wind Park proposal, a 3,400-page document describing a 200-turbine, 600-megawatt, $1.5 billion offshore wind farm that would serve as a new electrical power plant.

Still, Bluewater was up against two energy Goliaths. NRG, a generation company with $5.9 billion in annual gross receipts, proposed building a coal-fired power plant; Conectiv, a subsidiary of Pepco Holdings, a Washington-based electric company with annual revenues of $8.3 billion, filed to build a natural-gas power plant. Conectiv’s sister company Delmarva Power immediately began to wage a negative advertising campaign. It used radio spots to try to turn people against wind energy, as did NRG, whose clean-coal plant was well represented by Mike Houghton, an NRG lobbyist and a major fund-raiser for Gov. Ruth Ann Minner. Six months before the bids were officially due, Governor Minner publicly endorsed NRG’s clean-coal proposal.

And yet, despite the long odds against Bluewater, Delaware’s citizens began swinging heavily in favor of the offshore wind project. They were receptive to Bluewater’s director of communications, Jim Lanard, who appeared weekly on a local talk show. “When I first invited Jim onto my show,” recalls the host, Randy Nelson, “nobody cared about wind power, but within five months, Jim would come on, and all the phone lines would light up.” According to Nelson, the Bluewater project captured the attention of a citizenry hungry for an alternative to coal-fired plants. “Out here, the Delaware shore is all we’ve got for an economy,” he says. “And the coal plant seemed to put the Delaware shore at risk. It’s hard to overstate just how much people hated that.” For his part, Mandelstam waged a low-budget campaign of town meetings throughout the state, emphasizing price stability — how Bluewater’s 25-year utility contract protected ratepayers from rising fossil-fuel prices. Mandelstam and his firm reinforced wind power’s environmental benefits and brought their visual simulation images to show how slight the change would be to the Delaware seascape. “They answered questions,” says R. Chris Clark, a Fenwick Island Council member. “They were the only ones doing town meetings.” People also responded to the economic benefits that the Bluewater project would bring to the state — hundreds of new union jobs, roughly $100 million in direct local union construction wages and spinoff industries. As a first-mover in offshore wind, Delaware was likely to become a development hub for a big build into the mid-Atlantic. The construction of the Bluewater Wind Park, moreover, would be part of an important step in decommissioning several old coal-fired power plants, the removal of which would, by some estimates, save the state $750 million in health-care costs.

Over time, comments to the Public Service Commission were nearly 10 to 1 in favor of the wind project. A survey conducted by the University of Delaware concluded that 91 percent of the state’s residents supported wind power offshore — even if it meant paying more per month for electricity. Soon Bluewater began picking up important endorsements. One of the first came from Jack Markell, the state treasurer and a current gubernatorial candidate. Dozens more followed, including a judicious opinion published by the state’s Audubon Society, but perhaps none were more important — or telling of the change in public opinion — than those from the half-dozen coastal tourist towns whose “viewshed” would be slightly but more or less permanently altered.

Then in May 2007, after the longest and most exhaustive review process in its history, the Public Service Commission unanimously selected the Bluewater Wind Park as the winner of the open competition and ordered Delmarva Power, the same company that had been actively campaigning against the wind farm, to begin negotiating a contract — what’s known in the business as a long-term power purchase agreement, or P.P.A., with Bluewater. The decision seemed nothing short of miraculous. “Two years ago,” Mandelstam told me shortly thereafter, “if I told the governor of Delaware that I was going to build a wind farm off the coast, she would have laughed in my face. Maybe it’s energy prices. Maybe it’s the Al Gore movie. But nobody’s laughing now.”

In the golden light of last October, things seemed to be going very well for Bluewater, especially after the infrastructure conglomerate Babcock & Brown announced its decision to purchase the company, signaling that a major player had squarely faced the many significant obstacles of offshore wind and placed a big bet on Bluewater in Delaware. Just as Delaware seemed to become more continental in its outlook, a sea change of favorable public opinion was well under way on Wall Street, where wind power, at least the onshore variety, has become a new American frontier, a $9 billion market that is expected to grow to $65 billion by 2015.

Last year, onshore wind power added more than 5,200 megawatts of new electrical capacity to the grid — or nearly a third of America’s new generating capacity, surpassing all other forms of new generation except natural gas and amounting to enough electric capacity to power one and a half million homes. While it’s true that wind is still a tiny part of the energy picture — just 1 percent of the total electricity portfolio in the United States and 3.3 percent in Europe — more than a quarter of the 20,000 megawatts of the world’s new wind capacity last year was installed in North America, where all the global wind-energy players have set up shop, lured by the low U.S. dollar and the high rate of returns. “In America,” explains António Mexia, chief executive for Energias de Portugal, which bought the Texas wind company Horizon Energy, “you can put up a 200- or 300-megawatt wind park. You can’t do that in Europe.” Indeed, in the continental United States, resources are vast — with more than eight thousand gigawatts of potential electricity blowing overhead. “The amount of wind energy potential in this country,” says Walt Musial, a principal engineer at the National Renewable Energy Laboratory’s National Wind Technology Center, “is bigger than the national grid itself.”

But the explosive growth in land-based wind farms owes more than a little to state and federal subsidies for the wind industry: state renewable energy credits; accelerated depreciation credits; and, perhaps most important, federal tax credits for equity investors who help wind developers finance and construct wind farms. This last subsidy is keyed to actual electricity production, which is why it is called a production tax credit, or P.T.C. Large wind farms simply can’t be financed without the P.T.C., which, in effect, decreases by as much as 40 percent the financing that developers need to build a project. “That’s huge,” says Bruno Mejean, managing director at Nord/LB New York, a German-based bank and an active wind-energy lender. “You cannot finance these projects without this 40 percent component. That’s what makes wind power viable commercially.” Investors are happy with the P.T.C. because for a modest return on their money they get huge corporate tax breaks. Wind developers are happy because P.T.C.’s allow them to build bigger projects.

But for some, P.T.C.’s are a problem, not the solution. Senator Lamar Alexander of Tennessee, the third-most-powerful Republican in the Senate and perhaps the most outspoken opponent of wind energy in Congress, argues that the wind industry is disproportionately subsidized, which has made harvesting wind a lucrative opportunity for entrepreneurs like Mandelstam and the investors who finance their projects. Alexander says he feels that wind should be given tax breaks no different from those for other forms of renewable energy, like nuclear power: “If I had the money to spend, I’d spend it on conservation and efficiency, nuclear power and on cleaning up the coal plants that already produce half of our electricity.”

Those who remain skeptical of wind energy as a viable solution to America’s energy question tend to focus on the problems of intermittence and variability: the wind doesn’t always blow, and it seldom blows at the same speed. Therefore, turbines generate variable amounts of electricity. All of this can be very troublesome for the grid, which requires consistency and predictability. “There’s a third element,” says Lisa Linowes, executive director of the Industrial Wind Action Group, “and that is that wind power is unpredictable power. The wind often blows when you don’t really need the electricity — at night, or off-peak periods. What to do then?” To date, according to Linowes, there is no effective utility-scale mechanism for storing off-peak wind power. Eric Rosenbloom, president of National Wind Watch, a Massachusetts-based group, adds that wind power’s inherent unreliability requires that backup natural-gas power plants be built alongside wind plants, and that this “increases, rather than decreases, both the overall expense of wind power and its carbon footprint.”

Within Delaware itself, opponents of Bluewater focused on the economics of the project. One report financed by Delmarva Power argued that Bluewater would raise the average electric bill by $20 or more a month. If natural-gas prices flattened or decreased, the company could pass those savings on to its customers — but not if it were stuck in a long-term contract at the Bluewater price of 10 cents per kilowatt hour for the next 25 years. Delmarva’s president, Gary Stockbridge, argued that cheaper land-based wind farms should be considered, even though a search for land-based wind power would, of necessity, take Delmarva into out-of-state electricity markets, in contravention of the very state law that prompted the bid for new energy generation.

Spurred by these objections, a handful of powerful state legislators — among them the State Senators Charles Copeland and Harris McDowell III — stepped in last December and managed to force a deadlock among four state agencies that were set to ratify the power purchase agreement between Bluewater and Delmarva. In a move that surprised everyone (“There were audible gasps in the room,” recalls one witness to the proceedings), the vote was tabled. A local paper, The News Journal, called it a legislative coup d’état orchestrated beyond public scrutiny, at the 11th hour, by an “old-boys’ network,” as it was put in The News Journal, who now seemed to be airing the views of the wind park’s most vocal opponent, Delmarva Power.

All winter, the Bluewater Wind Park remained in limbo, while its chief legislative opponent, Senator Harris MacDowell III, conducted hearings that seemed, by many accounts, designed to torpedo the project. Meanwhile, Delmarva pressed its advantage, buying radio, television and print ads and hiring its own consultants to make its case. “From a risk perspective,” Stockbridge said in a phone interview in December, “do we really want to lock in to what amounts to a period of 30 years to a technology when it’s most expensive and most risky? Offshore wind is just not ready yet.”

So how was it that, six months later, after millions of dollars spent fighting one of the most protracted political battles in Delaware history, Gary Stockbridge sat before a room filled with reporters to announce that offshore wind power in America was, in fact, ready? Delmarva, he revealed, had signed a power purchase agreement with Bluewater Wind to build a scaled-down, 200-megawatt wind farm off the coast.

When I met Mandelstam at lunch a day after Delmarva’s surprise announcement, he was beaming and wearing little wind-turbine cuff links, a present from his wife, Dawn. “The offshore wind industry grew up yesterday,” he said. “Delmarva came to understand that offshore wind was beneficial for its ratepayers, and that wind would fit onto its system.”

Though Mandelstam praised various legislators and Delmarva for coming to an agreement, he conceded that no small part of this realization was linked to the rise in energy prices. “Energy markets went significantly higher — and scarily so, particularly in the last six months,” he said. Indeed, oil has skyrocketed, and the price of Appalachian coal has more than doubled this year. Tom Noyes, a Bluewater supporter, blogger, and Wilmington-based financial analyst, says that a year ago, “the numbers that both sides of this debate were throwing around were largely academic. Now, those numbers are visceral.” Against this backdrop of steadily climbing energy prices, Bluewater’s offer of stable-priced electricity — an inflation-adjusted 10 cents per kilowatt hour for the next 25 years — became something that no utility, it seems, could credibly oppose. “A few decision-makers got it early on,” Mandelstam said, “some got it slightly later and Delmarva finally got it.”

For those looking for a parable of civic action in Bluewater’s unlikely victory in Delaware, it is useful to remember how much the outcome seems to have hinged on one man: State Senate Majority Leader Anthony DeLuca. While never publicly opposing the Bluewater deal, DeLuca had serious concerns about how electricity rates would affect his constituency and was believed by many observers to be among the leadership that succeeded in orchestrating the December coup. The same man was widely credited for brokering the deal between the antagonists. “I managed to get criticized by both sides of the argument,” DeLuca said, “for asking the same question: Are you really going to build a wind farm?” He continued: “We were headed for two very large companies spending 25 years as adversaries. The net result of this is that we’re going to spend 25 years with two very large companies being partners.”

Whatever eventually persuaded DeLuca, the lesson in Delaware is clear. “It’s about the importance of leadership,” says Ryan Wiser, a staff scientist at the Lawrence Berkeley National Laboratory who has studied the barriers to renewable energy and the economics of wind power. Wiser cites Colorado as an example of a state shifting from fossil fuels to wind and other alternative sources of energy after electing a new governor, Bill Ritter, on a platform of green energy. “In a two-year period, Colorado made a total about-face,” Wiser says. What was the difference? “The utility was the same. The economics were more or less the same. The decisive factor was the change in leadership.”

Delaware’s project, it turns out, joins more than a dozen offshore wind projects in the United States, the largest among them aimed toward the Mid-Atlantic Bight. A report released by the National Renewable Energy Laboratory suggests that the technological challenges of wind power will not, in fact, prevent it from becoming an important part of the nation’s energy supply. “Wind power,” says Walt Musial of the N.R.E.L., “is not a niche player. That’s something that the American public may not fully be aware of.” According to many academics and industry researchers, the grid is, in fact, far more adaptable than wind-power opponents suppose. In Texas and California (states with the largest amount of installed wind capacity), utilities are working to enable the grid to adapt to variable and intermittent loads. In New York, it seems that wind energy could provide the state with 20 percent of its energy capacity without causing trouble to the grid. “You can’t say that because wind power is intermittent it can never be used,” says Revis James, director of the Energy Technology Assessment Center at the Electric Power Research Institute, a nonprofit agency whose funds are provided almost entirely by electric utilities. Musial agrees: “Intermittency and variability are not going to prevent us from going into wind energy.” He points to countries like Denmark, which generates 20 percent of its electrical supply from wind. “And they haven’t done anything different to their grid structure,” he adds.

Nonetheless, many hurdles remain. Federal regulations governing the construction of offshore wind farms, for instance, haven’t even been written. In the absence of a coherent federal energy policy, moreover, the states have begun to shape America’s energy future. The result is a hodgepodge: 50 different states with different energy resources and utilities with varying degrees of receptivity to new forms of power generation.

“What we need,” says Lester Brown, founder and president of the Earth Policy Institute, “is the grid equivalent of the Eisenhower Interstate Highway System.” Wind energy, according to Brown, would be the centerpiece of such a program because of its ability to scale up fast. T. Boone Pickens, the oil-and-gas billionaire, has just introduced his own program, which features a major deployment of wind power at the national level. According to the D.O.E., the net incremental cost of such a project would be $43 billion, enough to bring wind energy to supply 20 percent of the nation’s electricity by 2030, bringing about a total economic benefit of more than $440 billion.

In the end, the back and forth between wind-energy supporters and opponents is ultimately about the role the federal government should play in shaping the energy market. “You and I are subsidizing wind energy,” the banker Bruno Mejean reminded me with a smile when I spoke to him last year. “How you feel about that depends upon how you frame the argument. If it’s about energy security, then we should do as many wind farms as we can. But by paying the prices for the energy and by providing the tax breaks, big corporations like Florida Power and Light, General Electric and others are reducing their taxes at our expense. It’s a political hot potato.”

Is it right for Congress to single out an industry like wind power and favor it with tax credits? Mandelstam argues that when it comes to energy, free markets are a mirage. “Let’s be honest,” he says. “The government makes policy decisions about technologies and industries all the time. The P.T.C. helps finance wind-energy projects that actually get built and that actually produce energy. It leverages private dollars and private initiative, and at the end of the day is a tiny subsidy.” He notes that most of the world’s oil supply is owned by national governments: “No serious economist or public policy analyst would suggest that this industry, by some reckoning the largest on the planet, operates as a free market. Within the United States, the regulations and the laws both for fossil fuel and for the electricity market are a web of sometimes contradictory regulations and subsidies. It’s a fiction that there’s a free market with energy.” But if energy markets aren’t free, then who is at the helm?

It may seem strange for an entrepreneur to call for more government regulation, but when it comes to energy, that is what Mandelstam is doing. “As a student of history, you go back to a guy named Thomas Edison, and his first power plant, and the thing one has to point out is that the government and regulators have been integrally enmeshed in the energy business ever since it began on Pearl Street in 1882.” He points to Europe as an exemplar: “We were the world leader in wind. Europe overtook us quite a while ago and continues to beat us all the time because they got the public policy right.” Wise regulation, according to Mandelstam, and a thoughtful debate about energy policy is the best way to correct that. “Let’s line up all the subsidies of coal and nuclear power and oil and natural gas and wind — and let’s have a debate,” Mandelstam urges. “That hasn’t happened in the last eight years, and now, frankly, we’re paying the price for it.” n

Mark Svengold is the author of “big Weather: Chasing Tornadoes in the Heart of America” and “Empire Burlesque,” a collection of poems. He teaches at Seton Hall University.

Saturday, September 13, 2008

Debate at the University of Chicago and the Pursuit of Money

The University of Chicago appears to be having a debate about ideas and influence. At a university, are all academic departments equal? It would interest me if the President and Provost of that great University anticipated that not all of the faculty on campus view the MFI as a pareto improvement? Do they care? Do you judge a University based on its best departments or its median department? More Milton Friedman Institute Debate .

The non-economists seem to be trying to start the old debate of "what is excellence?" They don't seem to trust the economists to know greatness when they see it. The funny thing about the letter that I cite above is that this smart Professor appears to claim that he knows a lot about economics. This is a recurring problem. Everyone thinks that they are an economist. Reading the Dubner/Levitt blog , it now looks to me that Dubner views himself to be an professional economist. Since everyone and anyone can be an economist, this give you the right to judge Milton Friedman and to ignore our opinion about where he stands as one of the UC's greats.

Thursday, September 11, 2008

What do James McPherson, Robert Putnam, Ed Glaeser, Mike Hout, Claude Fischer and Stan Engerman Have in Common?

Yes, they are all dudes. But that's not an "A" answer. They all claim to have read the new costa/kahn book. If you don't believe me, go Heroes and Cowards . Book endorsements are funny things. The endorser earns immortality for a book he didn't write. I really like their quotes. Dora deserves all of their praise. She should have dropped me as a co-author because I'm in retirement now.

David Victor Reviews Friedman's New Book

Thomas Friedman is no Milton Friedman. David Victor writes a sophisticated review of TF's new book in yesterday's new york times. Thomas has had a good life running around the world pontificating. He should enter a graduate program in public policy, graduate and then start to write for the Times. Perhaps, he should sit down and read some of MF's work?

In general, the New York Times could do a better job in selecting "important" books to review. It shows a bias towards political books and "topical" books. It appears to seldomly review big think books. Somebody should do a statistical analysis of what types of books the Times does profile.


September 10, 2008
Books of The Times
Call to Arms for an American-Led Green Revolution
By DAVID VICTOR
Skip to next paragraph
HOT, FLAT, AND CROWDED

Why We Need a Green Revolution — and How It Can Renew America

By Thomas L. Friedman

Illustrated. 438 pages. Farrar, Straus & Giroux. $27.95.

When the Soviet Union chucked Sputnik into space in 1957, it galvanized America to come from behind and win the space race. The federal government opened its checkbook to finance an array of projects. Students shifted to new subjects like astronautical engineering and Russian studies to help the United States understand and eclipse the Soviet Union. The moon shot inspired a patriotic nation and produced useful commercial technologies along the way. The space race was expensive, but it worked.

Thomas L. Friedman’s latest book is a plea for a new Sputnik moment. His breezy tour of America’s energy policy documents a nation that has become dangerously dependent on fossil fuels. The bulging bank accounts of oil exporters like Russia, Iran and Venezuela give them the swagger and ability to cause lots of mischief.

Even more worrisome is all the carbon dioxide that comes from burning fossil fuels, not just oil but also coal and, to a lesser degree, natural gas. Since carbon dioxide pollution accumulates in the atmosphere, humans are recklessly changing the climate. The United States’ record is particularly poor because we are, per capita, among the biggest gulpers of oil and belchers of carbon dioxide. The need for American leadership has never been greater.

And if all that’s not bad enough, Mr. Friedman, a columnist for The New York Times and three-time Pulitzer Prize winner, shows that the economic opportunities created by a technology-driven world where the economic playing field has been leveled are making these trends a lot worse. The stunning growth of Asia’s tiger economies, especially China’s, has been a miracle for the world’s industrial output but a horror for the environment.

Asia’s growth hinges on coal, which is bad news because today’s coal technologies are particularly intense emitters of carbon dioxide. The best data show that in the last six years alone, China’s coal-fired growth has been so rapid that the country has expanded its coal production by an amount equal to the entire output of the United States coal industry. Couple that with the worldwide population shift into cities, and the result is Mr. Friedman’s title: “Hot, Flat, and Crowded.”

The litany of dangers has been told many times before, but Mr. Friedman’s voice is compelling and will be widely heard. Dependence on fossil fuels is no longer just a topic for woodsy seminars or the grist for conspiracy theories from the threat industry. Mr. Friedman shows that both energy and environmental fears are going mainstream — “green is the new red, white, and blue” — and that is a great opportunity for bipartisanship. Unfortunately, the nation’s cockpit in Washington is stuffed full of special-interest lobbyists and partisan bickerers. China and other nations, Mr. Friedman warns, will seize the opportunities to invest in new green industries and leave us in the dust.

The alarm bells ring with pithy Friedmanisms. My favorite is his broadside against cheap talk about the coming “green revolution.” A revolution is needed, to be sure, because a whole suite of new technologies — from smarter biofuels that cut our dependence on oil to better power plants and a new digital-era electric grid — are badly needed to supplant today’s dirty fuels system. But buzz is not the same as revolution, because real revolutions force new directions, not just new talk. People get hurt.

Today, Mr. Friedman says, “the adjective that most often modifies ‘green revolution’ is ‘easy.’ That’s not a revolution. That’s a party.” This costume party is more about conspicuous environmentalism than facing the hard truths essential to effective energy policy, like what it will really cost to make a change and why that investment is worth it.

Mr. Friedman’s strength is his diagnosis of our energy and environmental nightmares. But blind spots appear when he turns to remedies. One is renewable power. Like most observers, Mr. Friedman assumes that the road out of today’s mess is studded with wind turbines and solar plants. Maybe that’s true, but maybe not. Such renewable resources account for only a tiny fraction of current power supply, and when the titans of today’s energy industry think about cutting carbon dioxide, they are more likely to imagine building carbon-free nuclear power plants or advanced coal plants that safely bury their pollution underground.

These two camps — the emerging renewable-resources industry and the titans who actually have their hands on the controls in today’s energy system — are pulling in different directions. Economists will rightly have heartburn that these 412 pages never dwell much on the cost of different policy options, nor does Mr. Friedman ever question his claim that building a renewable-energy system is automatically a good idea because many new jobs will flow (at unknown expense) into these new industries.

The other blind spot is politics. The most intriguing chapter in Mr. Friedman’s book is his last, which poses the toughest challenge. Can America be like China, where a visionary government can impose a new direction on the country in the face of national emergency? Or will America devolve into a country that is so mired in red tape and local opposition that it builds absolutely nothing anywhere, near anything? Societies like that get stuck because they can’t embrace new technologies, like the cherished wind turbines and the power lines needed to carry their current.

Mr. Friedman’s lament is that the United States is becoming such a place because parochial interests have created gridlock. But most striking is that this seasoned observer of the American political scene offers not much of a blueprint for fixing the political problem except the bromide that we need new leaders who are willing to embrace better policies.

Heads will be nodding across airport lounges, as readers absorb Mr. Friedman’s common sense about how America and the world are dangerously addicted to cheap fossil fuels while we recklessly use the atmosphere as a dumping ground for carbon dioxide. The Sputnik is heading into orbit, thanks to high energy prices, growing fear of the changing climate and pleas like Mr. Friedman’s. But whether we as a nation — and with us, the world — are really prepared to do anything to solve the problem is still in doubt.

David G. Victor, director of the energy and sustainable development program at Stanford University and an adjunct senior fellow at the Council on Foreign Relations, is writing a book on global warming.

Wednesday, September 10, 2008

Growth Theory at Columbia University

Columbia University is a wild place. I mean that in a nice way. I taught there for several years and I always try to keep up on the gossip going on there. There is always something funny happening at that School. If you need some evidence, take a look at this: Xavier's Conservative Suit . Xavier is fortunate that Dick Cheney wasn't at that event. The VP might have mistaken XSM for a zebra and taken a shot at him.

It looks to me that Xavier and Jeff Sachs should sit down a write a paper together.

Tuesday, September 09, 2008

White Roofs for All?

The house we bought in Westwood has a white roof. Today I learned that I'm serving the public good by accident. Buildings with white roofs cut energy consumption by 20% (see below). How will residential and commercial buildings owners respond to this news? Will they run to get some paint? Such white roofs reflect light and must heat up less. Will white roofs quickly diffuse? Which interest groups will label them ugly? Will celebrities in Malibu and Beverly Hills take the lead here painting their roofs white and this will trigger a chain reaction so that the masses such as myself follow their lead?



For Immediate Release: September 9, 2008
Media Contact: Adam Gottlieb - 916-654-4989

Scientists Promote "Global Cooling" with White Roofs and Cool Pavements
Scientists Call For International Effort in World's Largest Cities


SACRAMENTO -- California scientists today announced a formula to calculate how much carbon dioxide (CO2) can be offset by increasing the reflectivity of urban surfaces like rooftops. The news was announced at the California Energy Commission's Fifth Annual Climate Change Research Conference.

"White roofs can cut a building's energy use by 20 percent and save consumers money," says California Energy Commissioner Art Rosenfeld. "The potential energy savings in the U.S. is in excess of $1 billion annually. Additionally, by conserving electricity we are emitting less CO2 from power plants," Rosenfeld added.

Together with Rosenfeld, Lawrence Berkeley National Laboratory (LBNL) scientists Hashem Akbari and Surabi Menon have successfully quantified the effects of white roofs in populated settings in terms of CO2 offset. In a study to be published in the scientific journal "Climate Change," Akbari, Menon, and Rosenfeld estimate that replacing nonreflective, dark roofing materials with white ones on an average house with 1,000 square feet of roof would result in an equivalent CO2 offset of 10 metric tons annually. With an offset value of $25 per metric ton, that could be worth $250, according to European CO2 markets.

Scientists have known for centuries that putting white roofs on homes and buildings is a simple and effective way to reflect the sun's powerful rays. Similarly, cool-colored pavements aid in the reduction of "urban heat islands." When rooftops and pavements are more reflective, global warming can be reduced.

Since 2005, commercial buildings with flat roofs in California have been required to have white roofs. Residential sloped roofs are also becoming more efficient. Beginning in 2009, new residential roofs and retrofit constructions in California will be required to have "cool-colored" roofs which reflect a higher fraction of the sun's rays than current roofing materials of the same color.

Because white roofs act as a geo-engineering technique to cool the earth on a global scale, Akbari, Menon, and Rosenfeld propose an international campaign to organize 40 of the world's largest cities in tropical and temperate zones to develop programs to require white roofs and "cool pavements" when roofs are initially constructed and pavements installed. The projected estimate for worldwide CO2 emissions in 2025 is 37 billion metric tons; a proposed global CO2 offset would be 44 billion metric tons, valued at $1,100 billion, and enough to offset more than one year of the total global CO2 emissions.

"This idea of a 'cool cities' campaign could lead to significant energy savings, improved air quality, reduce the heat island effect in summer, and more importantly, cool the globe," says Hashem Akbari. "This simple and effective idea can organize the world into taking measured steps to mitigate global warming. Our findings will help city leaders and urban planners quantify the amount of CO2 they can offset using white roofs and cool pavements."


Note: A copy of the LBNL Research Highlights of the journal article is available for downloading as an Acrobat PDF file.


Live, streaming video of the Climate Change Conference is accessible at:
http://www.climatechange.ca.gov/events/2008_conference/


# # #

For more information:
http://www.energy.ca.gov/releases/2008_releases/2008-09-09_cool_roofs.html



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