For all students who have ever slept through an econometrics lecture, have you ever wondered what your professor is really like as a guy? Chant (X'X)^-1(X'Y). This set of interviews offers the "inside scoop". I'd suggest reading the Dhrymes Interview. It is unintentionally very funny and highly correlated with the man I knew at Columbia. The photos didn't come out well but that is small price to pay.

Today is my father's 70th birthday. My brother and I are having trouble believing this. I think of him as age 35 but I'm 43 so the math doesn't look right. All boys are sons of great men but my father is a giant. For the last 40 years, he has worked his tail off at NYU helping to make that Hospital and Medical School great. I have met dozens of his patients who are grateful for his efforts on their behalf. Martin L. Kahn is a serious man who was endowed with a lazy older son. His grandson will be a giant. I'm working on him! Greatness skips a generation.

Politicians must know that they are not good at picking winners but the urge to use such power must be irresistible. Los Angeles has a 20 acre "green field" site and it would love to offer incentives to build something like Silicon Valley but focused on green tech. What is the best way to achieve this goal? Similar to having a successful Shopping Mall, one model would be to identify an anchor (in the case of a mall a department store); charge them lower rents to attract them and then pilot fish who gain from the spillover effects (i.e idea flow) will locate nearby. In the case of green tech, who is such an intellectual anchor? Could the Mayor know such an entity ex-ante? In this article the LA Times discusses the early jockeying for receiving special tax breaks here; New Los Angeles "Green" Cluster .

Would Jane Jacobs be impressed? Her diversity theory would suggest that the Mayor should build an ecosystem of various green projects and hope that such proximity yields power lunches and synergistic new ideas and permutations of existing efforts.

It will be interesting to see whether these "green firms" share ideas; so my question is what is the root source of agglomeration here? Why would green firms be attracted to locate near each other? Is it simply the tax breaks? Or is it labor pooling? or intellectual spillovers? Once these firms come up with good ideas, will they outsource the mass production to China and Vietnam? Will Los Angeles workers be productive enough such that their output per wage be high enough to justify production in Los Angeles?

In print, my quote in this Los Angeles Times Article on the "green" military" doesn't look too smart. I apologize. The scale of the U.S Military is such that it creates a "big push" for any activity that the Pentagon focuses on. So, if the Generals "go green", then green entrepreneurs will know that there is a credible demand for their end product. This should reduce the uncertainty of the benefits of engaging in costly irreversible R&D research to build the prototypes. Again, there are high fixed costs of entering a green market and there is stochastic demand (i.e gas prices bounce around). If the government can pre-commit to buy green, then the green entrepreneurs enter the industry and endogenous technological change is more likely to take place.

In other news, the Clark Medal to Emmanuel Saez is a great choice. For all of you who moan and groan that modern economics is frivolous or too "mathy" , Saez deflects all of you.

1. He has written "hard" RESTUD papers on optimal tax
2. He has done excellent non-experimental long term descriptive work on income inequality stuff (the stuff that Krugman loves and my parents love). Here he collected unique tax data to study the right tail and has repeated this around the world.

3. He has run some really cool field experiments focused on important topics and teaming up with real world companies to run these experiments such as local learning and retirement program take up rates.

Work in any 1 of these categories would have gotten him tenure somewhere very good. To have achieved all 3 of these is really impressive.

Saez works on important questions and uses the appropriate techniques to make progress on the question at hand. We can all learn from this pragmatic approach to scholarship.

The decline of U.S manufacturing has lowered low skilled worker wages and greened cities that in the past specialized in such activities. Could the rebirth of U.S "green" manufacturing offer the low skilled higher wages and blue skies? I'm still trying to understand what are the exact details of how the "green jobs" push translates into specific policies? Is this simply a relabeling of Keynesian public works projects? Is this a justification for a ramp up in basic research funding (I would support this!)? Will the focus on this approach reduce President Obama's desire for an explicit carbon tax? If this is the case, then I don't like this!


April 22, 2009
'Green jobs' at heart of Obama's Earth Day push on energy
By ALEX KAPLUN, Greenwire

The Obama administration is using Earth Day for launching another all-out effort to sell the American public and key lawmakers on "green jobs" as the solution for the United States' environmental and economic woes.


The jobs push starts at a critical time for the administration's energy agenda. The House Energy and Commerce Committee is starting hearings on a comprehensive climate and energy bill that President Obama has long portrayed as key to in his efforts toward economic recovery (see related story).


The administration must also try in the next few weeks to push through Congress a budget resolution that raises spending in several energy-related areas, again with the promise of creating millions of new jobs in the renewable-energy arena.


It has become increasingly clear that the administration's central theme -- not to mention its pitch to key lawmakers -- is that energy-related legislative priorities are based not only on environmental merits but on their ability to create jobs.


Both Obama's allies and his critics say such a message is aimed at broadening the constituency for such initiatives -- rallying the traditional "green" vote as well as blue-collar workers and the U.S. manufacturing base.


"This is the kind of 'for everybody Earth Day agenda' that the Obama administration stands for," White House Council on Environmental Quality adviser Van Jones said yesterday. "There's a wingspan on these jobs goes from GED to Ph.D."


Jones added, "The administration is committed that green jobs be good jobs, and there's a strong commitment to make sure that it actually happens."


The success of the pitch could be pivotal in moving a House cap-and-trade bill that has taken hits in recent weeks. The administration and Democratic leaders in Congress still insist they can pass the bill by the end of the year.


But recent efforts to move a climate bill through the budget process hit a brick wall of opposition, and even a number of Democrats -- particularly from Midwestern states -- have started to express concerns over the legislation's impact on their states' economies.


The administration and various interest groups see the promise of increased jobs spurred by the implementation of a carbon cap and increased incentives for renewable energy as the primary way of addressing such criticism, and a number of environmental groups have already launched campaigns that sound very much like the administration's pitch on a "green economy."


Obama visits turbine plant


Obama himself will deliver the green jobs message later this afternoon in Iowa. The president is scheduled to tour a former Maytag plant in Newton, Iowa, that is now manufactures towers for wind energy. The Maytag plant closed in 2007 but reopened about a year later as a $21 million Trinity Structural Towers plant that employs about 150 workers.


Obama will give a speech at the plant that the White House says will lay out the administration's energy agenda, primarily with a focus on green jobs and reduced oil dependence.


Jones yesterday described the visit as another cog in the administration's goal of reaching out to parts of the country that traditionally have not been at the forefront of most environmental debates.


"I think normally you would not expect the president of the United States to spend Earth Day standing in a closed plant in Iowa," Jones said. "You will see a manufacturing hub that was part of the last century's economy coming back as a manufacturing hub of the next century's economy."


It will also be Obama's first visit since Inauguration Day to the state that in many ways launched his political career by delivering a somewhat unexpected caucus victory in the Democratic presidential primaries.


But the administration's push today will stretch beyond Obama's visit to Iowa.


Energy Secretary Steven Chu and Labor Secretary Hilda Solis wrote editorials that will run in newspapers in Alabama, Colorado, Nebraska, New York, Pennsylvania and Texas that tout the the administration's "green jobs" agenda.


"This focus on jump-starting the creation of an American clean energy sector will be the foundation of the president's energy policy," they wrote. "With the depletion of the world's oil reserves and the growing disruption of our climate, the development of clean, renewable sources of energy is the growth industry of the 21st century."


Chu, along with U.S. EPA Administration Lisa Jackson and Transportation Secretary Ray LaHood, testified on Capitol Hill today at the Energy and Commerce Committee hearing on climate change, and the three also built their statements around the benefits of a "green" jobs economy.


And Vice President Joe Biden announced the funding of $300 million through the economic stimulus bill for state and local governments and transit authorities to expand the use of alternative-fueled vehicles (see related story).


Copyright 2009 E&E Publishing. All Rights Reserved.

For more news on energy and the environment, visit www.greenwire.com.

I am the proud son of an ex-Scarsdale female lawyer, so this story of abandonment and forcing a two girls of ages 10 and 12 to walk 3 miles home makes me think.

I do not know Ms. Primoff or her charming daughters. A couple of thoughts. The kids are not 3 and 5. When I was age 10, I was allowed to walk anywhere I wanted to in Westchester. I was a lazy kid and would not have walked to charming White Plains (it isn't that charming at all; it is concrete and commercial).

Some Kids at age 10 in New York City are allowed to ride the subway on their own. A 3 mile walk should take these kids 1.2 hours, that's good exercise --- I wouldn't call that waterboarding.

While today's parents "baby" their kids up to age 43, at some point children do need to show some independence. Different families will have different rules. If it was 100 degrees on the day Ms. Primoff dropped them off then perhaps the girls = victims argument has more weight.

Credible threats are important --- by establishing herself as "old school", Ms. Primoff might have had more success stopping bad future decisions by these girls as they throw underage drinking parties at their Scarsdale Mansion while mom works.

Don't forget your dynamics folks!

Joe Tierney better be ready to debate his ideas. You will know why I like this Salon Piece on the Carbon Kuznets Curve Revisited . Today Josh Angrist is at UCLA. "Harmless Econometrics" is selling quite well. I was thinking of buy a few copies for friends at Midwestern schools.

On the day before Earth Day, the NY Times Joe Tienery gets politically incorrect and argues that economic development is a "friend" of fighting climate change. He throws a healthy punch at the I = P*A*T formula. But, as someone who has written an entire book on this issue, permit me to comment.

Here are the energy facts for the United States over the last 60 years. Note that energy consumption per-capita increases and now has been flat for about 20 years. This is despite ongoing income growth. So, Tierney is right that energy consumption per dollar of output has declined BUT note that total energy consumption just keeps rising (population growth). Given that all Mother Nature cares about is total GHG, she would be upset. The data reveal that there is some truth to Tiernery's story but not enough progress has taken place during a century of growth to reduce our GHG emissions. Why? The short answer is incentives. Economic development is not sufficient for achieving environmental progress we all also need explicit incentives not to pollute.


Economic development "solves" environmental problems under the following circumstances;

1. the health and amenity consequences of the pollution caused by the status quo technology are immediate
2. the growing middle class do not like the pollution
3. on the supply side, economic development causes engineering triumphs that unbundle the pollution from economic activity.

Under these conditions , a democracy will choose to regulate itself to enact incentives to fight off the annoying pollution.

So, in the case of indoor air quality or urban lead emissions these 3 conditions hold.

As Arik Levinson and Hilton have documented, as nations get richer --- yes they consume more gasoline but they consume higher quality gasoline and (lead per gallon)
declines faster than gasoline consumption increases so in richer nations total lead emissions from driving declines ; in terms of the math

total emissions = technique*quantity where technique = lead per gallon


In the case of Climate change, the 3 conditions do not hold. There is a latency to climate change. There is currently no private incentive for households to not drive that Hummer (free riding) and even President Obama appears to be unable to enact cap and trade so there is no market incentive to induce innovation (i.e the next Prius) to unbundle GHG emissions from miles driven. If our engineers could invent a car that gets 1 million miles per gallon, then GHG would shrink; but what incentive do they have to achieve that right now?

Ehrlich would worry that Tienery's optimism will Lull Larry Summers into not enacting carbon regulation because our economy will just "magically" get green. While I am a Chicago economist, even I don't believe that. We need a credible carbon nudge from government and the Chinese need this nudge as well.

NY Times on Social Networks and Survival

I have actually written a paper on this subject. You can consult the 2007 AER to find it, or you can click here. Costa and I do a better job on the econometrics and the identification strategy than the New York Times but the facts are the facts. Whether in the U.S Civil War POW camps or in today's senior citizen homes, be nice!

Matthew Kahn on Green Jobs . My editor at Foreign Policy (Blake H.) is a terrific writer and editor. If my piece is well written, don't give me the credit for that! You will see that I act tough in tackling the conventional wisdom. I'm hoping that President Obama's economists are prioritizing enacting a carbon incentive. Simply to get Tom Friedman off of their back should be sufficient incentive but this carbon pricing would also offer a few other more valuable long term benefits.

The LA Times Festival of Books will take place next weekend at UCLA. I will take my son to hear Alonzo Mourning speak and my wife may go hear Brooke Shields or Marsha Brady (I don't know her real name) speak about their respective new books. I believe that Harvard Press published the last two.

Once all of that excitement is out of the way, I will work as a CSPAN interviewer. Edward Humes , the author of Ecobarons, is in for a surprise. I will be interviewing this dude on cable TV. If you watch the show, you will see me acting as a man who knows environmental economics. I'm reading his book right now. It has a slight free market environmentalism flavor to it. In a diverse world, some greens are doing some good.

The LA Times book reviewer had some tough things to say about this book (see
http://www.latimes.com/entertainment/la-ca-edward-humes5-2009apr05,0,2781447.story

I'm on page 20 and will keep reading. One serious point. There are 8 billion people on this planet. --- that's a lot potential choices for a journalist to pick and choose what stories he wants to present. The great thing about statistical analysis is that we are completely honest about how we draw our sample and what it is representative of. Any journalist's story has an element of "cherry picking". Search for the quotes you want.