Saturday, January 31, 2009

Motivations for Going "Green"

Why do some people take pro-green actions while others do not? Abstracting from explicit pollution taxes and other regulations that introduce financial penalities for having a large carbon footprint, why do we differ? Over the course of two days, the New York Times has explored two possible explanations. One is social pressure. A company called Positive Energy is turning "keeping up with the Jonses" on its head to help encourage energy efficiency. This company claims that in Sacramento when people are randomly assigned the treatment of easy to digest information on how their monthly electricity consumption over the last 12 months compares to their immediate neighbors and how it compares to the left tail of the energy consumption distribution in Sacramento, that the average household reduces its electricity consumption by 2%.

Tomorrow, the New York Times will investigate why Nuns in New York City are going green. Joseph Huff-Hannon has written a piece about a group of nuns whose next convent will be quite "green". The sisters were able to finance this building using $ they collected from Columbia University.

As a social scientist, I will be interested in the demonstration effect and the local learning effects from the nuns' new convent. Will people visit this convent to see what "green buildings" are like? could this spur others on to "green" their buildings? How does "green" word of mouth work? Are the nuns influential people in their community and their experience with green energy efficiency will spread and there will be a "social multiplier" effect that encourages the diffusion?

As far as I can tell, the article does not discuss whether the nuns have made a wise financial investment in going green. At what price of electricity and/or carbon permits will the green investment pay for itself? In english, if this green convent costs 20% to build in upfront costs but then reduces the average electricity consumption by 10% per year, then there is a price of electricity and a carbon tax (I'm assuming that New York City's power generation creates greenhouse gases and Glaeser and I document this point) such the nuns have not only made a wise "green" investment but have also made a wise economic investment.

As the New York Times article on weatherization last week documented, there appears to be a lot of opportunities in residential, industrial and commercial real estate to increase our energy efficiency. If we did this, then we would not need to build so many polluting power plants. An economist would say that a higher price of electricity would create the right incentive to "look for leaks" but if this is not politically possible then perhaps we need more nuns.

Thursday, January 29, 2009

Urbanization and Reforestation

Around the world, people are moving to cities. The U.S historical experience shows that an environmental benefit of moving people from the countryside to the cities is that the rural trees grow back. See Alex Pfaff's nice work on this point.

A similar dynamic is now playing out in Central America's and South America's Rainforests. History provides some useful lessons! New York Times Piece on trees

The Times as Rogue Sociologist

In this Internet age the New York Times is trying to seek out its profit niche. This article on Dating Wall Street Dudes was interesting. Bloggers can't compete with this stuff. The New York Times had to invest to find this set of daters and to encourage them to form a focus group to get these young ladies to speak from the heart and wallet. Symmetry should have required the Times to have paid the Wall Street hourly wage to their boyfriends in order to assemble these "Masters of the Universe". Once seated, these guys could tell their side of the story. Such a "he said/she said" going on in public is good stuff.

More generally, this suggests that the New York Times should be studying new short run sociological trends going on in cities. Academics move to slow to detect these and require too much data to convince themselves that observed behavioral change isn't a statistical fluke. I'm not convinced that bloggers actually speak to other people. --- So, it is up to the media to get out and talk to people --- not simply quilting together quotes from "experts" to flesh out a story that a journalist wants to write.

What are other sociological possible topics the Times could cover?

1. Are the Obama daughters the cool kids at their new school? At the school, Who has tried to freeze them out and why?

2. Nepotism among Successful politician's children. Returning to Caroline Kennedy; are any of the children of successful politicians doctors or scientists? (i,e. in positions of influence unrelated to what their father/mother does and the network they have tapped into)

3. For people who used to make 5 million a year who are now making 1 million a year, is Dennis Gilbert right? Are they happy? How have the reconfigured their lives?

Wednesday, January 28, 2009

NAFTA and Vehicle Pollution

Have you ever read a newspaper article and this shifted your research agenda? I must admit that this happened to me after I read this piece. I have written about "pollution havens" and the pollution content of international trade between rich and poor countries but this article, with its focus on the choices of consumers, got me thinking.

I called Lucas Davis. Lucas is a great economist and I knew that he is an expert on pollution issues in Mexico. We started to work together to build up an empirical project taking a close look at the scale and composition of used private vehicles that have been exported from the United States to Mexico under NAFTA over the calendar years 2005 to 2008. Over 2.5 million vehicles were "mailed" to Mexico. Given that Mexico's total vehicle stock was 20 million vehicles, this is a significant expansion. Today we received a nice writeup, see Salon Article Today about the Davis/Kahn paper

If you have the time and patience, here is a Free copy of the Davis/Kahn paper.

In a nutshell, here are our key findings:

1. At a point in time, used vehicle trade between the rich country (the exporting USA) and the poor country (the importing Mexico) causes average emissions in each nation to decline! Yes, the USA exports "dirty" vehicles to Mexico and these vehicles are dirtier than our average vehicle so since marginal > average, average emissions decline in the USA after we export. BUT, the vehicles that Mexico imports are CLEANER than the average vehicle on the Mexican roads so from the Mexican perspective, marginal < average --- so average emissions decline in both nations.

For you retired labor economists, this is one of the funny Roy Model cases. You remembers the joke of the student who transfers from Yale to Harvard and this lowers the average brains at each school.

2. Vehicles are durables and durables can live a long time. In the USA, 99% of vehicles are scrapped and dead at age 15. In Mexico, vehicles can live on to age 30. We argue that a perverse environmental effect of trade is that by moving a 12 year old USA vehicle to Mexico, this vehicle would have lived 3 more years in the USA but lives on another 10 years or more in Mexico and thus its total greenhouse gas emissions goes up because of endogenous life expectancy.

We recognize that Mexicans drive fewer miles than people in the USA but this doesn't offset this lifeexpectancy effect.

We also recognize that Mexican buyers of used USA vehicles are of 2 types. There are past bus takers buying their first vehicle and there are previous Mexican vehicle owners who owned a really low quality vehicle. Used vehicle trade may lower the emissions of the 2nd group as they move up the quality ladder. The "bus people" experience an increase in their emissions because buses are "green" per-capita.

Tuesday, January 27, 2009

Crowded Off the News by the Birth of Octuplets

I boasted to my students today that I would be interviewed by Reuters TV concerning President Obama's Green Jobs plans. I had even created a list of cogent points that I spent 15 minutes in class today talking about. But, as usual, my opportunity past. The birth of octuplets is certainly bigger news than anything I have to say and the camera man who would have interviewed me is still at the California hospital nearby covering this story.

I've also had to live with the cosmic injustice that the new Senator from New York is younger than me I was happy to read that she is UCLA Law School Graduate.

Now back to that pack of new diaper wearers.

Q&A: The Incredible Birth of Octuplets
Jeanna Bryner
Senior Writer
2 hrs 47 mins ago

The birth of eight babies at a California hospital yesterday is a gestational feat that has happened only one other time in the United States, doctors said.

The event required a team of 46 to carry out the Caesarean section at Kaiser Permanente Medical Center. As of this writing, Mom and all eight babies - six boys and two girls - were said to be doing fine, despite being 9 weeks premature.

This birth of octuplets raises a slew of questions surrounding multiple births:

How could a woman conceive octuplets?

"It would be very unlikely that this would be natural," said James Airoldi, maternal fetal medicine specialist and director of Obstetrics at St. Luke's Hospital and Health Network in Bethlehem, Pa. "It's very likely this was the result of some form of ovarian stimulation with the use of fertility drugs." This method would cause the ovaries to produce more follicles (each of which releases an egg) than normal.

"In vitro fertilization won't get you this [octuplets], because most doctors who do in vitro fertilization will only put two or three embryos back," Airoldi said, adding that even if a doctor inserted three embryos back into a woman's uterus and one of these split to produce twins, you'd only get four embryos.

"There's no doctor who would've put seven or eight embryos back in. That would be totally irresponsible of any doctor," he said.

The likely cause: so-called ovarian stimulation and fertility drugs, which cause a woman to produce more eggs than normal.

Do multiple babies share the same placenta?

Only identical twins, which would come from the same egg that splits, could share the same placenta, a pancake-shaped organ that attaches to the inside of the uterus and is connected to the fetus by the umbilical cord. The placenta delivers nutrients and oxygen from the mother's blood to the fetal blood, while transferring the baby's waste in the other direction.

The other babies, which come from separate eggs, would each pull nutrients from a separate placenta.

Does a mom carrying octuplets need to eat more?

"We recommend 300 extra calories per baby," Airoldi said, adding though that with eight babies, the extra calorie intake would not be feasible (multiply 300 by 8 ... 2,400 extra calories).

"They can't because their bellies are so big. So usually it amounts to trying to eat small frequent meals and trying to keep your calories up to at least 3,000 calories per day," he added.

Does carrying octuplets put more stress on a woman's body?

A resounding yes. "These babies are the most efficient parasites in the world," Airoldi told LiveScience. "They are taking every ounce of iron to build their red blood cells and every ounce of calcium to build their bones. So if mom isn't supplemented, mom is going to end up with nothing in the bank."

Have multiple births increased in the United States?

"Absolutely," Airoldi said. "I'll see 25 patients a day and at least five of them will be multiple gestation."

Over the past two decades, multiple births in the United States have skyrocketed, with the number of twins born between 1980 and 2003 increasing by more than 65 percent and the number of higher-order multiples (triplets or more) jumping four-fold during that time, according to the National Center for Health Statistics. Today, more than 3 percent of all babies born in the United States are multiples, with most being twins.

Why? The fact that more women are getting pregnant at older ages and the use of fertility drugs and other artificial fertility methods, according to Airoldi.

For older women, "their ovaries are trying to get that one last party in, that one last shot at conceiving so they have this overshoot phenomenon where they may release two eggs at once, trying really hard to desperately conceive before they go kaput," Airoldi said.

"Older women that conceive are at higher risk of multiples," he said. "And we are seeing women conceiving at later ages. And we also see higher rates in fertility medication used to conceive."

Monday, January 26, 2009

The "Confidence" Production Function

I know how to make a cup of coffee. I know how to make a decent economics lecture. I don't know how to produce a unit of "confidence". The micro-econometrics literature has emphasized the importance of accounting for heterogeneity. In a diverse world, how do different policy actions that President Obama, Drs. Bernanke, Romer and Summers may propose affect individuals' "confidence" that the USS Enterprise is flying in the right direction on its way back to prosperity?

When I read Paul Krugman's columns, he seems to be saying that government needs to send a credible signal that it is "on the job" and that everything will be okay. The hope appears to be initialize a self-fulfilling prophecy.

There needs to be some explicit discussions by researchers who work on social networks and social interactions (so the macro guys would be Brock and Durlauf) on how you set off a macro chain-reaction.

For example, suppose that Paul Krugman is an influential person in the sense that if he were to start to write OP-ED pieces saying that the crisis is over that other people (like my mom) would read this and increase her optimism about our short run future.

The math equation here is that my mom's probability of being bullish on America depends on her own views of the fundamentals and what she thinks the influentials (i.e Paul Krugman) thinks.

So we get into an infinite regress here. Under what conditions does Paul Krugman grow more optimistic about our short run future? He clearly would be more optimistic if there was an enormous New Deal. While John Cochrane may not agree with him, suppose we get the New Deal.

Krugman gets optimistic and this causes my mom and her friends to get optimistic. This beneficial contagion spreads and consumer demand rises and factories start to hire again. The banking sector would get unfrozen as ambitious bankers see money flying around again.

In aggregate, the recession ends.

Is this story right? Note that the recession ends even if the Government Big Push achieves nothing but make Dr. Krugman optimistic.

Now I am giving him a very large treatment effect coefficient in this confidence production function but it is up to macro-economists to estimate this equation.

So, my question for macro-economists is whether they need to start to work with sociologists on determining how social-interactions feed into "panic" (the loss of confidence) and who are the influentials for helping to bring back confidence in the cheapest way possible.

Does Obama have FDR clout? What did FDR do to earn that clout? Has Watergate and past wars made us too cynical about Presidents for the new generation of presidents to have this historic clout in boosting our "confidence"?

What did Keynes say about what is the production function of "Animal Spirits"?

Sunday, January 25, 2009

Are Drug Companies Major Polluters in LDCs? The Case of India's Water

Drug companies have always been accused of price gouging. Now , the Associated Press is making the case that drug manufacturing and the disposal of unused drugs is a major cause of water pollution in the USA and in the developing world. In terms of polluting rivers, the easy geography answer here would be to not allow multiple drug factories who produce pills with the same chemicals to locate near each other. If they were spread out, then water samples indicating elevated chemical levels would allow authorities to immediately to know which factory is responsible for the dumping and they could be held accountable. Without such a 1 to 1 mapping, how will drug factories be held accountable for their water pollution?

In the US the problem appears to be drug disposal. Abstracting from changing our culture, how do you incentivize pill poppers to dispose of their chemicals in a responsible way? Perhaps there is another drug that these individuals could take that would help them be more responsible for their other pills' disposal? On college campuses, we could introduce another garbage bin for these pill. As we separate our trash into an uncountable number of categories, there isn't much extra cost of adding an extra bin.

World's highest drug levels entering India stream
By MARGIE MASON, AP Medical Writer Margie Mason, Ap Medical Writer

PATANCHERU, India – When researchers analyzed vials of treated wastewater taken from a plant where about 90 Indian drug factories dump their residues, they were shocked. Enough of a single, powerful antibiotic was being spewed into one stream each day to treat every person in a city of 90,000.

And it wasn't just ciprofloxacin being detected. The supposedly cleaned water was a floating medicine cabinet — a soup of 21 different active pharmaceutical ingredients, used in generics for treatment of hypertension, heart disease, chronic liver ailments, depression, gonorrhea, ulcers and other ailments. Half of the drugs measured at the highest levels of pharmaceuticals ever detected in the environment, researchers say.

Those Indian factories produce drugs for much of the world, including many Americans. The result: Some of India's poor are unwittingly consuming an array of chemicals that may be harmful, and could lead to the proliferation of drug-resistant bacteria.

"If you take a bath there, then you have all the antibiotics you need for treatment," said chemist Klaus Kuemmerer at the University of Freiburg Medical Center in Germany, an expert on drug resistance in the environment who did not participate in the research. "If you just swallow a few gasps of water, you're treated for everything. The question is for how long?"

Last year, The Associated Press reported that trace concentrations of pharmaceuticals had been found in drinking water provided to at least 46 million Americans. But the wastewater downstream from the Indian plants contained 150 times the highest levels detected in the U.S.

At first, Joakim Larsson, an environmental scientist at the University of Gothenburg in Sweden, questioned whether 100 pounds a day of ciprofloxacin could really be running into the stream. The researcher was so baffled by the unprecedented results he sent the samples to a second lab for independent analysis.

When those reports came back with similarly record-high levels, Larsson knew he was looking at a potentially serious situation. After all, some villagers fish in the stream's tributaries, while others drink from wells nearby. Livestock also depend on these watering holes.

Some locals long believed drugs were seeping into their drinking water, and new data from Larsson's study presented at a U.S. scientific conference in November confirmed their suspicions. Ciprofloxacin, the antibiotic, and the popular antihistamine cetirizine had the highest levels in the wells of six villages tested. Both drugs measured far below a human dose, but the results were still alarming.

"We don't have any other source, so we're drinking it," said R. Durgamma, a mother of four, sitting on the steps of her crude mud home in a bright flowered sari a few miles downstream from the treatment plant. High drug concentrations were recently found in her well water. "When the local leaders come, we offer them water and they won't take it."

Pharmaceutical contamination is an emerging concern worldwide. In its series of articles, AP documented the commonplace presence of minute concentrations of pharmaceuticals in U.S. drinking water supplies. The AP also found that trace concentrations of pharmaceuticals were almost ubiquitous in rivers, lakes and streams.

The medicines are excreted without being fully metabolized by people who take them, while hospitals and long-term care facilities annually flush millions of pounds of unused pills down the drain. Until Larsson's research, there had been widespread consensus among researchers that drug makers were not a source.

The consequences of the India studies are worrisome.

As the AP reported last year, researchers are finding that human cells fail to grow normally in the laboratory when exposed to trace concentrations of certain pharmaceuticals. Some waterborne drugs also promote antibiotic-resistant germs, especially when — as in India — they are mixed with bacteria in human sewage. Even extremely diluted concentrations of drug residues harm the reproductive systems of fish, frogs and other aquatic species in the wild.

In the India research, tadpoles exposed to water from the treatment plant that had been diluted 500 times were nonetheless 40 percent smaller than those growing in clean water.

The discovery of this contamination raises two key issues for researchers and policy makers: the amount of pollution and its source. Experts say one of the biggest concerns for humans is whether the discharge from the wastewater treatment facility is spawning drug resistance.

"Not only is there the danger of antibiotic-resistant bacteria evolving; the entire biological food web could be affected," said Stan Cox, senior scientist at the Land Institute, a nonprofit agriculture research center in Salina, Kan. Cox has studied and written about pharmaceutical pollution in Patancheru. "If Cipro is so widespread, it is likely that other drugs are out in the environment and getting into people's bodies."

Before Larsson's team tested the water at Patancheru Enviro Tech Ltd. plant, researchers largely attributed the source of drugs in water to their use, rather than their manufacture.

In the U.S., the EPA says there are "well defined and controlled" limits to the amount of pharmaceutical waste emitted by drug makers.

India's environmental protections are being met at Patancheru, says Rajeshwar Tiwari, who heads the area's pollution control board. And while he says regulations have tightened since Larsson's initial research, screening for pharmaceutical residue at the end of the treatment process is not required.

Factories in the U.S. report on releases of 22 active pharmaceutical ingredients, the AP found by analyzing EPA data. But many more drugs have been discovered in domestic drinking water.

Possibly complicating the situation, Larsson's team also found high drug concentration levels in lakes upstream from the treatment plant, indicating potential illegal dumping — an issue both Indian pollution officials and the drug industry acknowledge has been a past problem, but one they say is practiced much less now.

In addition, before Larsson's study detected such large concentrations of ciprofloxacin and other drugs in the treated wastewater, levels of pharmaceuticals detected in the environment and drinking water worldwide were minute, well below a human dose.

"I'll tell you, I've never seen concentrations this high before. And they definitely ... are having some biological impact, at least in the effluent," said Dan Schlenk, an ecotoxicologist from the University of California, Riverside, who was not involved in the India research.

And even though the levels recently found in Indian village wells were much lower than the wastewater readings, someone drinking regularly from the worst-affected reservoirs would receive more than two full doses of an antihistamine in a year.

"Who has a responsibility for a polluted environment when the Third World produces drugs for our well being?" Larsson asked scientists at a recent environmental research conference.

M. Narayana Reddy, president of India's Bulk Drug Manufacturers Association, disputes Larsson's initial results: "I have challenged it," he said. "It is the wrong information provided by some research person."

Reddy acknowledged the region is polluted, but said that the contamination came from untreated human excrement and past industry abuses. He and pollution control officials also say villagers are supposed to drink clean water piped in from the city or hauled in by tankers — water a court ordered industry to provide. But locals complain of insufficient supplies and some say they are forced to use wells.

Larsson's research has created a stir among environmental experts, and his findings are widely accepted in the scientific community.

"That's really quite an incredible and disturbing level," said Renee Sharp, senior analyst at the Washington-based Environmental Working Group. "It's absolutely the last thing you would ever want to see when you're talking about the rise of antibiotic bacterial resistance in the world."

The more bacteria is exposed to a drug, the more likely that bacteria will mutate in a way that renders the drug ineffective. Such resistant bacteria can then possibly infect others who spread the bugs as they travel. Ciprofloxacin was once considered a powerful antibiotic of last resort, used to treat especially tenacious infections. But in recent years many bacteria have developed resistance to the drug, leaving it significantly less effective.

"We are using these drugs, and the disease is not being cured — there is resistance going on there," said Dr. A. Kishan Rao, a medical doctor and environmental activist who has treated people for more than 30 years near the drug factories. He says he worries most about the long-term effects on his patients potentially being exposed to constant low levels of drugs. And then there's the variety, the mixture of drugs that aren't supposed to interact. No one knows what effects that could cause.

"It's a global concern," he said. "European countries and the U.S. are protecting their environment and importing the drugs at the cost of the people in developing countries."

While the human risks are disconcerting, Sharp said the environmental damage is potentially even worse.

"People might say, 'Oh sure, that's just a dirty river in India,' but we live on a small planet, everything is connected. The water in a river in India could be the rain coming down in your town in a few weeks," she said.

Patancheru became a hub for largely unregulated chemical and drug factories in the 1980s, creating what one local newspaper has termed an "ecological sacrifice zone" with its waste. Since then, India has become one of the world's leading exporters of pharmaceuticals, and the U.S. — which spent $1.4 billion on Indian-made drugs in 2007 — is its largest customer.

A spokesman for the Pharmaceutical Research and Manufacturers of America, representing major U.S. drugmakers, said they could not comment about the Indian pollution because the Patancheru plants are making generic drugs and their members are branded. A spokesman for the Generic Pharmaceutical Association said the issues of Indian factory pollution are "not within the scope of the activities" of their group.

Drug factories in the U.S. and Europe have strictly enforced waste treatment processes. At the Patancheru water treatment plant, the process is outdated, with wastewater from the 90 bulk drug makers trucked to the plant and poured into a cistern. Solids are filtered out, then raw sewage is added to biologically break down the chemicals. The wastewater, which has been clarified but is still contaminated, is dumped into the Isakavagu stream that runs into the Nakkavagu and Manjira, and eventually into the Godawari River.

In India, villagers near this treatment plant have a long history of fighting pollution from various industries and allege their air, water and crops have been poisoned for decades by factories making everything from tires to paints and textiles. Some lakes brim with filmy, acrid water that burns the nostrils when inhaled and causes the eyes to tear.

"I'm frustrated. We have told them so many times about this problem, but nobody does anything," said Syed Bashir Ahmed, 80, casting a makeshift fishing pole while crouched in tall grass along the river bank near the bulk drug factories. "The poor are helpless. What can we do?"


AP National Writer Martha Mendoza contributed to this report from California.

Climate Change Policy and the Modern News Media

We know that consumers maximize utility and firms maximize profits. What do government officials maximize? What do reporters seek to maximize? What is the central goal of the New York Times or the New York Post? Educating the public? Entertaining the public? Simply making money? I haven't carefully read this piece on The Media and the Climate Change Policy Debate but it looks important. The media certainly plays a "causal role" in influencing the policy debate and the actual set of policies that are enacted. It is useful to see how a smart insider from the media business views the dynamics of how the media covers events. My one pet peeve is that I would like to see the New York Times hire more PHD economists to do their business and economic reporting. Now, I know from first hand experience that not all economists are good writers. The elite media could certainly choose those individuals who write well but in this age of specialization, I think it would help the media to focus on people with some baseline expertise in what they are talking about and who know how academics use evidence and theory to test hypotheses. In the rush to take theories from "the lab" and turn them into real world policy, we need to have more honest debates about the uncertain consequences of well meaning policy actions --- this true both for macro "TARP" issues today and for climate change policy debates that I hope are coming soon.

Saturday, January 24, 2009

Mary Nichols' Editorial on Climate Change Policy

In Sacramento yesterday, I had the opportunity to attend a group lunch with Mary Nichols. Mary was the Director of UCLA's Institute of the Environment when I joined the UCLA faculty in January 2007. Later in the day, I also had a very productive meeting with some key staff members of the Sacramention Municipal Utility District (SMUD). Sacramento is an exciting place. I don't know why members of the Sacramento Kings ever say that it isn't a lively city.

First 100 Days: Obama’s first climate change target

By Mary D. Nichols – Reuters
January 22, 2009

Mary D. Nichols is Chairman of the California Air Resources Board, the lead agency for implementing California’s landmark climate change law, the Global Warming Solutions Act of 2006. The views expressed are her own. –

After eight years of inaction on climate change by the federal government, we can now look forward to the Obama administration tackling global warming head on. With not a minute to lose, Lisa Jackson, the soon-to-be new head of the EPA, should move quickly to capitalize on the momentum of states that have so far been the leaders in fighting global warming. There is no better place to start than by establishing a national greenhouse gas emission standard for automobiles based on California’s landmark clean car law.

California has always been a pioneer in setting tough automobile emission standards. Our regulations paved the way for lead-free gas, the catalytic converter, and many other innovations that were later adopted as the national standard. As a result, we have eliminated 99 percent of harmful pollution pouring out of autos today compared to a 1960s era car, leading to clearer skies and cleaner air in our cities.

In 2002, California continued its track record of pioneering environmental legislation when it passed a law that directly addressed greenhouse gas emissions from cars. Personal vehicles produce 20 percent of the nation’s greenhouse gases, and so are increasingly being addressed by governments that are serious about averting catastrophic climate change. Thirteen other states have formally adopted and three states are considering adoption of California’s cost-effective and technologically doable program.

Indeed, the motivation is not only environmental - owners of these cars will save thousands of dollars over the vehicle’s life because cars that meet the standard are also likely to be more fuel efficient.

Together with California, these 16 states constitute almost half the country’s new vehicle sales, creating a huge market for the best that Detroit has to offer.

Despite these benefits, the EPA blocked California from enforcing its greenhouse gas emission standards for cars. It also delayed responding to the Supreme Court, which required that the EPA consider using the federal Clean Air Act to create a program similar to California’s program to reduce emissions from all the nation’s vehicles. Just last month, the outgoing administration failed to carry through on its promise to publish new CAFE rules – national fuel economy standards – as required by Congress.

The new Obama Administration should use this opportunity to set a new foundation for American energy and climate security. Soon-to-be Administrator Jackson should immediately follow through with President Obama’s promise to allow California’s regulations to come into force. She should also begin the process to create a national greenhouse gas standard for cars based on California’s approach – a 30 percent reduction by model year 2016 - and establishing even greater reductions in the future.

At the same time, the Obama Administration should direct the Department of Transportation to fix its flawed CAFE rules to be compatible with new climate change needs. It also needs to address a regulatory process so distorted that fuel economy standards are based on the technology of the “least capable manufacturer,” holding our nation’s energy security hostage to the lowest common denominator. Instead, Obama should direct DOT to work in concert with EPA to create standards that work for both fuel economy and the reduction of greenhouse gases.

Coordinating these two approaches will also provide automobile manufacturers with THE stable set of national policies they have been calling for. This strong national program will also send a clear signal to Detroit to fire their lawyers who have been wastefully battling California’s regulation and hire the engineers who will build the cars consumers want and that will support the future success of America’s auto industry in a global market.

If we’re going to wring the carbon out of our economy, we will need the coordinated actions of government agencies across all sectors and additional investments for rapid economic recovery under a comprehensive national climate change framework. That will take time to develop, and some careful planning. In the meantime, the EPA can immediately draw upon the experience of states like California and its leadership under Governor Schwarzenegger to use its existing authority under the Clean Air Act and take effective and early action against climate change.

By acting now, the EPA will show the world that the United States is finally taking its place among the community of nations to address the pressing challenge of, in the words of our new president, a planet in peril. California, and many other states, stand ready to help.

"Green" Energy Regulation Mandates and their Consequences

In the quest to reduce greenhouse gas emissions, states such as California are passing regulations encouraging the adoption of Renewable Portfolio Standards (RPS) and low carbon fuel standards. Intuitively, the RPS will require electric utilities to produce more of their electricity using renewable resources such as wind and solar. Will this shift in the portfolio away from "dirty" coal and natural gas (the traditional sources of fuel) lower greenhouse gas emissions per unit of power? This New York Times Editorial argues that the marginal effect of these costly RPS regulations will be to decrease natural gas use by electric utilities. Natural gas is expensive and relatively clean, so this author argues that the RPS standard will only have a small net effect on reducing California's average carbon dioxide emissions per unit of electricity generated. He argues that a perverse consequence of focusing on the RPS standard is to reduce investment in new technologies to capture CO2 from coal. He doesn't say whether his company has a stake in this technology but he correctly points out that a cap and trade system (rather than a RPS mandate) would encourage this technology. Such a carbon capture technology would have worldwide benefits because we expect that China will continue to produce power using coal fired plants.

The Low Carbon Fuel Standard is a similar "portfolio" regulation. This gasoline regulation requires that the average fuel used by vehicles have lower carbon content. This paper argues that such regulation is an implicit subsidy for fuels that contain carbon but that are cleaner than the average fuel. So, if people drive more using such "clean dirty" fuels, then this regulation may actually increase carbon emissions from transportation.

As economists point out these "foreseen" ex-ante consequences of well meaning regulations, will the policy makers listen to us and adjust the regulations? Or will they ignore our forecasts and allow the future to play out so that future economists in the year 2030 can write ex-post papers for the JPE and the Journal of Law and Economics on the "unintended consequences of regulation x , y and z".

Friday, January 23, 2009

Three Cheers for Slate Magazine

As we hope you know, Dora and I are trying to sell our new book "Heroes and Cowards". We recognize that you need to make your own luck. Our book examines social economics from a micro perspective. We face the challenge in early 2009 that with the excitement about the New President and financial crisis, microeconomic issues have been pushed to the sidelines. Everyone wants to talk "macro" but our base of knowledge there is not so deep. Fortunately, there is one brave microeconomist who is willing to still discuss "micro" topics. His name is Ray Fisman. In my biased opinion, he writes a mean Slate column -- Ray Fisman's new piece in Slate Magazine.

For all those bloggers who have so far refused to discuss our book, we are requesting that you return them to our UCLA address. We'll pay for the return postage.

Wednesday, January 21, 2009

Celebrity Real Estate Pricing

Some famous people live in Los Angeles. I may not be one of them but I know where they live and how much they want you to pay to live in their homes.

Switching gears, I thought that this was a fascinating NY Times article. Globalization offers benefits but who is producing the various goods we consume? Should we trust them? Do foreign legal systems hold them accountable if they cheat or screw up? Perhaps, we should all watch Arthur Miller's All My Sons together? I just saw John Lithgow at a UCLA party but I didn't ask him for acting lessons.

Monday, January 19, 2009

Paul Krugman Names Names

When doctors disagree about a diagnosis and what cure to prescribe, another doctor is called is in for a 2nd or 3rd opinion. In an interesting blog post, Paul Krugman names some leading economists who he claims have stated nutty things, in the name of defending their ideology, during this economic crisis. Is he right?

Having recently listened to Paul Krugman's excellent Nobel Lecture, I know what a great economist he is. If he would answer my phone, here are the questions I would like to ask him:

In the Keynesian short run plans, I see no discussion of pre-empting unintended consequences.

1. If the deficit spending triggers inflation expectations, what will be the costs of such inflation? What will the Fed do then to damper this expectation?

2. If the Chinese (armed with their capital account surplus) expect that the U.S will inflate, what will happen to nominal interest rates here as a risk premium?

3. If we bail out all of these banks, what regulations will be enacted to prevent future "moral hazard" and bad behavior?

4. Given that Dr. Krugman has stated that cost/benefit analysis is a tool used by conservatives to slow down government spending, how will Larry Summers and friends determine which Government projects are "good" versus "bad"? How 3 years from now will they evaluate whether such programs "have worked"? Who will do the evaluation? What is the counter-factual?

Put simply, how will we judge whether the Keynesian Stimulus was money well spent?

5. The losers right now from slumping asset prices (including my family) are a mixture of behaviorialist suckers and sophisticated Wall Street players, how will the Obama Administration configure its policies to protect the former while not bailing out the later?

6. What do people do during recessions? I agree that the old Chicago joke that "it is a good time for leisure" isn't that funny, but if these individuals are going back to school or investing in their human capital, how costly is this recession in terms of long run growth?

7. Building on #6, what do firms do during a recession? If they are reorganizing, then there could be long run productivity benefits from recession (creative destruction) if they are positioning themselves for Keynesian government payoffs then they have may have incentives to position themselves as low profit.

Game theorists have not been blogging much but I think that there are important strategic considerations that the Big Government crew sweeps under the rug. A very satisfying feature of the Prescott/Lucas/Sargent "rules of the game" was sending clear signals to firms about the game. Now the rules of the game are up in the air and subject to negotiation and shocks. This "endogeneity" of the rules of the game can't be good for long run growth.

Sunday, January 18, 2009

New Uses for Your Kids

The New York Times today has 2 articles arguing that your kids help you to have a more productive career. On the front page is a long article highlighting how some ambitious academics are volunteering their own kids to participate in fMRI brain scans. Recruiting subjects is costly and this gets around "parental consent" forms. A statistician may wonder whether researching two of your own kids equals 2 observations? These are unlikely to be independent draws.

In the Style section, there is a long article about New York City private school parents who use the school's directory (that includes addresses, names and contact info) to network with the rich and famous.

In Los Angeles, I must admit that I have taken my son's school's directory and used it. Did I "cold call" people on the list offering them stock trade advice? No. I typed in their addresses into to see what type and value of the home the famous live in. If they had simply invited me over for tea, I wouldn't have had to resort to such techniques.

After reading today's Times, I'm thinking about how to deploy Alex. My father always called me his 401k Retirement Plan. I had hoped that Alex would be like the little guys in Charlie and the Chocolate Factory helping the factory to work (the umpahlumpahs) but I turned out to be wrong on that one. He is a demander for household services not a supplier.

Saturday, January 17, 2009

Al Capone's Obituary Shows You What You Can Accomplish in 48 Years of Life

Chicago produces great gangsters and great economists. There must be something in that Lake Michigan water. Some lessons can be learned from Al Capone's career arc. The New York Times was less politically correct in 1947. I will let you find out what I mean..

These are tough days now in 2009. Today at the Santa Monica Farmer's Market, a bum who was listening to my son complain to me about something walked over to us and told my son to stop whining. My son was shocked but this older man (who could be a Philosophy Professor somewhere in Los Angeles) was making a good point.

Returning to Al Capone;

January 26, 1947
Capone Dead At 48; Dry Era Gang Chief

MIAMI BEACH, FLA., Jan. 25 --Al Capone, ex-Chicago gangster and prohibition era crime leader, died in his home here tonight.

"Death came very suddenly," said Dr. Kenneth S. Phillips, who has been attending Capone since he was stricken with apoplexy Tuesday.

"All the family was present. His wife, Mae, collapsed and is in very serious condition."

Dr. Phillips said death was caused by heart failure.

Six Years of Power

Alphonse (Scarface) Capone, the fat boy from Brooklyn, was a Horatio Alger hero--underworld version. More than any other one man he represented, at the height of his power from 1925 through 1931, the debauchery of the "dry" era. He seized and held in thrall during that period the great city of Chicago and its suburbs.

Head of the cruelest cutthroats in American history, he inspired gang wars in which more than 300 men died by the knife, the shotgun, the tommy gun and the pineapple, the gangster adaptation of the World War I hand grenade.

His infamy made international legend. In France, for example, he was "The One Who Is Scarred." He was the symbol of the ultimate in American lawlessness.

Capone won great wealth; how much, no one will ever know, except that the figure was fantastic. He remained immune from prosecution for his multitudinous murders (including the St. Valentine Day Massacre in 1929 when his gunners, dressed as policemen, trapped and killed eight of the Bugs Moran bootleg outfit in a Chicago garage), but was brought to book, finally, on the comparatively sissy charge of evasion of income taxes amounting to around $215,000.

For this, he was sentenced to eleven years in Federal prison--serving first at Atlanta, then on The Rock, at Alcatraz--and was fined $50,000, with $20,000 additional for costs. With time out for good conduct, he finished this sentence in mid-January of 1939; but by then he was a slack- jawed paretic overcome by social disease, and paralytic to boot.

Native of Naples

Capone was born in Naples on Jan. 17, 1899, the son of an impoverished barber. The family moved to New York and settled in the Mulberry Bend district near Brooklyn Bridge. Here, after he quit school in the fourth grade to knock about the streets, he met Johnny Torrio whom he was to succeed, many years later, as head of the bootleg and vice syndicate in Chicago.

The parents, devout people, moved to South Brooklyn and Al, barely out of his teens, one day bullied one of the neighbors, an undersized, quick tempered Sicilian, in a Fourth Avenue barber shop. His victim backed Capone into a corner and slashed him twice with a razor. He and Capone never crossed trails again, nor did Capone, on his infrequent visits to the old neighborhood after he reached great power, ever seek him out or order his destruction.

In 1910 John Torrio left the Five Points and Mulberry Bend to try his evil genius in Chicago. The advent of prohibition in 1920 saw great expansion of the Torrio interests. He took to bootlegging in a big way.

Torrio needed more men, tough men. He sent for the fat boy and Capone took the next train for Chicago to join Torrio at $75 a week. This was big money for him at the time. He had managed to stay out of the World War because he didn't like that type of fighting. Later he encouraged the legend that he had been a machine gunner in the AEF, but this was Capone poppycock.

Served as "Rod" in Chicago

For three or four years after Capone's arrival in Chicago he served as a "rod," or professional killer, for Torrio and at the same time proved himself unusually good at organizing the vice and bootleg phases of the Torrio chain.

Greed begets greater greed. Torrio wanted a hog's share of the "take" and short-changed his men. This resulted in a split, the opposition taking form under the leadership of Dion O'Banion, a murderous fellow who, paradoxically, had an inordinate love for flowers.

Most of his men were Irish; most of Torrio's Italian, and the war took on a bitter racial angle. On Nov. 10, 1924, three Capone men walked into the florist shop opened by O'Banion more for a hobby than for profit. They riddled him with shot and he fell back among his roses and carnations. Capone and Torrio attended the burial, sent loads of wreaths as a sentimental gesture and tried to look innocent.

Later in 1925 a gang caught up with Torrio and fired five shots into him. He decided, at this juncture, that he had had enough. He pulled out and Capone was left in command.

Immediately Capone began a campaign of expansion. He established agents along the east coast to handle his rum cargoes, he had men in Florida and in the Bahamas; he had men along the Canadian border. Capone caravans crisscrossed the nation with valuable loads of contraband to slake the thirst of the Middle West.

By the end of 1925 Capone was riding high. He had a magnificent home on Prairie Avenue, where he lived with his wife, Mae, and their Sonny, six years old. His brother, Ralph (Bottles) Capone, was on his staff. Another brother, Frank, had died in a brawl in Cicero. Matthew, his youngest brother, kept out of it entirely.

Word came to Chicago at this time that Peg-Leg Lonergan, head of the downtown Brooklyn waterfront bad men, was plaguing some of Capone's old friends. Peg-Leg's idea of sport was to lead a handful of longshoremen into the Adonis Social Club in Twentieth Street, near Fourth Avenue, and badger the Italian customers, all old neighbors of Capone's.

The Adonis Club had sentimental attachments for Capone. In the cellar of the club, in his 'teens, he had perfected his pistol work by shooting at beer bottles. He was in the place on Christmas night, 1925, with five furtive-looking men-at-arms from Chicago, when Peg-Leg and his boisterous crew came in awhooping, to take down the regular patrons.

At 3 o'clock next morning police of the Fifth Avenue station reached the club on the run, attracted by a fusillade of gunfire. Peg-Leg lay dead near the door, Aaron Harms and Needles Ferry, two of his pals, lay dead under the piano, staring with unseeing eyes at the orange, red and green paper twists that bedecked the ceilings and fixtures. A fourth Lonergan man crawled on the sidewalk, badly wounded.

Capone and eight other men, together with a couple of girl patrons of the Adonis Club were rounded up and questioned by the Fifth Avenue detectives. The fat man from Chicago, blazing with diamonds, assumed an air of injured innocence. He insisted he had come all the way from the Windy City to pay a Christmas call on his mother and that he had merely happened to be in the night club when the shooting started.

He was turned out with the rest because all the other witnesses, like himself, related that they did not happen to be looking at the particular moment when the guns opened fire. Without witnesses the police had no case. Capone, having paid his Christmas call and having delivered three neat homicides as gifts, returned to Chicago.

Emboldened by frequent success, Capone came out in the open to support Big Bill Thompson in 1929 in what was known as the "pineapple" primary. Opposition candidates were subject to all the little violent tricks in the Capone bag, including the tossing of this iron fruit. His men had shot and killed William McSwiggin, State's Attorney for Cook County, and if they could get away with that (as they did) he felt he could get away with anything.

Before the pineapple primary he had also staged the cruelest murder in the annals of American gangster crime.

He had hired Fred (Killer) Burke of the Egan's Rats, a St. Louis gang, to perform this particular job. The Killer dressed three of his men in police uniforms, walked in on seven Moran men in the SMC Cartage Company Garage on St. Valentine's Day, 1929, and sprayed them with Thompson sub-machine guns and sawed-off shotguns until the last of the seven stopped twitching.

The Capone crowd lost the pineapple primary, in spite of terroristic tactics. Dissension, subsurface but sinister, got to work in the organization. The fat boy tried to stem it with a brutal show of power at a hotel banquet where he brained the guests of honor--two defecting brothers who thought their plotting had been secret--with a baseball bat. He had also been warned of a double-cross by Frankie Uale, his Brooklyn agent, and Uale had been shot to death by Killer Burke and his crowd.

In May, 1929, Capone surrendered to the police in Philadelphia to get a year's peace from the increasing threat of the Moran guns. The charge in the Philadelphia case was carrying concealed weapons.

In October, 1931, he went on trial for income tax evasion, guarded in the Federal court chamber by one of his own men. A court attendant spotted the bodyguard's shoulder holster and the thug was sentenced for contempt.

His highly paid counsel tried to persuade a grim-lipped jury that their client was a persecuted man. The plea fell on deaf ears. When Judge Wilkerson pronounced sentence the fat man's face went dark and the ugly scar went white.

Capone entered Atlanta penitentiary on May 5, 1932, to work in the prison overall shop. In August 1934, he was chained and fettered and taken, with other felons, to forbidding Alcatraz. This was the beginning of the end for America's "Public Enemy Number One," a title in which he had gloried.

In February, 1938, he became violent. Word came out of Alcatraz that the prison doctors had decided that the great Capone was done; "subject to intermittent mental disturbances."

In November, 1939, Capone was released from prison and was admitted to the Union Memorial Hospital in Baltimore to take treatment for paresis. Later he settled at Miami Beach.

Friday, January 16, 2009

Job Creation

Rather than putting money in bottles and burying them below my Westwood house, I have unintentionally been pursuing another Keynesian approach for creating jobs in this tepid economy. Dora and I had ordered an outdoor gate to be installed on both sides of our house. Yesterday, when we were at work --- the installation guys started their work. Last night, we saw two clues that something had gone wrong. Our water had been turned off and the appliances in the kitchen did not work. While I don't fully understand cause and effect, it dawned on me that the only "treatment" that the house had received was that the "outdoor gate guys" had been working on the new gate. I wondered whether these events were related but this "Freakonomics" was beyond me.

Today, we turned the water back on for the house but the kitchen appliances still had no electricity. I called the electrician and left a message. Today, when I was walking around the house I saw a small geyser about 4 inches high. On one side of our house the gate installers had clearly nailed in a nail into a water pipe and this had created the geyser. Without telling us, these guys shut down our water to stop this geyser and this geyser started again when we (not knowing about the man made leak) started up our water again.

Carlos, my trusty electrician, then came by and started to investigate why the kitchen electricity was out. He soon discovered that on the other side of the house where the other gate was being installed that the installers had hammered a nail into my home's side wall. Unlucky for me, they hit (without knowing it) an electric wire --- smashing it in half and stopping my kitchen's flow of electricity.

So today, there were 20 guys at my humble home --- painting, fixing the plumbing, and working on the electricity .

By the end of the day, I had the satisfaction of knowing that I had personally done my part to stop this recession and created jobs for my Los Angeles (without any $ from Big Ben Bernanke). Plus the geyser was dead and the kitchen appliances now worked again.

So , my fellow economists; what are you doing to jump start our economy? Can you match my effort? Dora and I are trying to sell our new book. We are employing half of Los Angeles and I am teaching 170 students the basics of free market environmental economics. That is active involvement in the market place.

Switching back to academic economics, while my tale of job demand based on short run shocks provides one snapshot of our economy. John Cochrane (one of Chicago's great teachers) offers you the opportunity to learn form him in this sensible Op-Ed.

John Cochrane's New Op-Ed --- It makes a lot of sense

The Complete Set of Costa/Kahn Blog Posts on the Civil War

All good things come to an end. To her surprise, Dora enjoyed being a part-time blogger. It appears to me that women are under-represented in the blog writing and reading world. Perhaps, they have other things to do with their free time? In case you missed them, here are Our 5 posts this week at the Volokh Conspiracy . We were quite impressed with the comments that were posted on our posts. We were encouraged that a broad set of people appear to be interested in our work.

I would like to thank my UCLA colleague Eugene Volokh for his willingness to share his vastly popular platform. All book authors can hope for is the opportunity to get the word out and to be given a chance to compete.

Thursday, January 15, 2009

Natural Capital Can Defeat Physical Capital

Maybe I do miss New York City. This flock of angry birds tried to cause a disaster. I hope that New York City's underemployed lawyers will consider suing them. It is an amazing story at a time when we need some good news. Reading this article below, I bet it will help some high school physics students to wake up and pay attention. Force = mass*what? If anyone knows how they will dry off that airplane and fish it out of the river, please email me. Will the passengers sue to get their luggage back?

How Birds Can Down a Jet Airplane
Robin Lloyd
Thu Jan 15, 5:32 pm ET

Early reports suggest that a bird strike caused a jet plane to crash in the Hudson River near Manhattan today, leaving questions about how a little flying animal could down a big airliner.

More than 200 people have been killed worldwide as a result of wildlife strikes with aircraft since 1988, according to Bird Strike Committee USA, and more than 5,000 bird strikes were reported by the U.S. Air Force in 2007. Bird strikes, or the collision of an aircraft with an airborne bird, tend to happen when aircraft are close to the ground, which means just before landing or after take-off, when jet engines are turning at top speeds.

The incidents are serious particularly when the birds, usually gulls, raptors and geese, are sucked into a jet engine and strike an engine fan blade. That impact displaces the blade such that it strikes another blade and a cascade can occur, resulting in engine failure.

A 12-pound Canada goose striking an aircraft going 150 mph at lift-off generates the force of a 1,000-pound weight dropped from a height of 10 feet, according to Bird Strike Committee USA.

Today's incident, which occurred just after US Airways flight 1549 (an Airbus 320) had taken off with more than 150 passengers and crew members from LaGuardia Airport in New York, en route to Charlotte, N.C., involved a flock of geese, according to CBS News. Reports indicate no deaths or serious injuries as of this writing.

Large aircraft are certified to be able to keep flying after impacting a 4-pound bird, however 36 species of birds in North America weigh more than this, according to the committee. Even smaller birds, such as starlings, can cause engine failure.

The greater the difference in the speed of the plane and the bird, the greater the force of the impact on the aircraft. The weight of the bird is also a factor, but the speed difference is a much bigger factor.

Flocks of birds are even more dangerous as they can result in multiple strikes.

Delicate birds, delicate aircraft

Dale Oderman, associate professor of aviation technology at Purdue University in Indiana says birds can be very dangerous to aircraft, particularly in the first several thousand feet after take-off, where the birds are flying.

"Obviously, geese or another large bird would be much more hazardous than a little black bird," Oderman said. "The speed at which the two are moving causes the bird to get ingested into the engine. And the engine is very delicate to withstanding a major impact."

He added: "It just shuts the engine down."

Basically, if the birds get too close to the engine's intake, it's like a vacuum - the birds just get sucked in.

"The initial stages of a jet engine are made up of a lot of compressor blades. Those aren't very big and they can be very easily damaged," Oderman told LiveScience. "Even if one of those things breaks off, then the one blade will go through the rest of the engine and it's like shrapnel to the engine."

And in the case of the Hudson River crash, the birds apparently took out both engines.

"Apparently in this particular case it seems both engines were hit. If it was a flock of birds they flew thought it wouldn't be a surprise to me," Oderman said.

Airports, Oderman said, take several precautions to keep planes safe from birds. For instance, they often don't plant many trees nearby, as these are nesting areas for birds. Since La Guardia is right on the water, he noted, there are a lot of water birds around.

Bird strike remains

Bird strikes are on the rise, according to the committee. After a bird strike in the United States, the remains, called snarge, are sent to the Smithsonian Institution's Feather Identification Laboratory to identify the species, according to WikiPedia.

Bird and other wildlife strikes to aircraft result in more than $600 million in damage a year, according to Bird Strike Committee USA. Five jet airliners have had major accidents involving bird strikes since 1975, the committee says. In one case, about three dozen people died.

NASA worries about bird strikes, too.

During the July 2005 launch of Discovery on mission STS-114, a vulture soaring around the launch pad impacted the shuttle's external tank just after liftoff. With a vulture's average weight ranging from 3 to 5 pounds, a strike at a critical point on the shuttle - like the nose or wing leading thermal protection panels - could cause catastrophic damage to the vehicle.

NASA put safety measures into place in 2005 to reduce the odds of bird strikes with the shuttle. The agency particularly wants to avoid bird strikes to the shuttle's fuel tank that could damage the heat shield during launch and landing.

For instance, NASA has a special during launch countdown where they can stop to wait for birds to pass. And during landing, NASA has a sound cannon that they fire to make sure the runway is clear from birds to make sure shuttle isn't damaged during landing.

Senior Writer Jeanna Bryner contributed to this story.

Wednesday, January 14, 2009

Is Tampa, Florida a Green City?

Feces-throwing monkey on the loose in Tampa Bay
Associated Press

CLEARWATER, Fla. – Wildlife officials said a rhesus monkey known to throw feces when mad is on the loose in Tampa Bay. Authorities have been trying to capture the primate since Tuesday afternoon, but it managed to evade a bucket truck and tranquilizer dart.

Gary Morse with the Florida Fish and Wildlife Conservation Commission says the adult male is thought to have escaped from an unlicensed source. It was last seen in Clearwater.

The monkey is not considered dangerous.

A Delicate Transition

Washington DC is far away from Berkeley, California. Dr. Steven Chu is obviously a very smart Nobel Laureate and has taken a step towards the middle of the political distribution. I am hoping that he embraces incentives as part of his push at the Department of Energy to help our economy "decarbonize".

January 13, 2009
Energy Nominee Shifts His Stance

WASHINGTON — Physics met politics at the confirmation hearing Tuesday for Steven Chu, the Nobel laureate scientist chosen by President-elect Barack Obama to head the Department of Energy, and the physics bent a bit, as Dr. Chu backed away slightly from earlier statements he has made — that gasoline prices should be higher, and that coal was his “nightmare.”

Dr. Chu, whose last job was director of the Lawrence Berkeley National Laboratory, answered an array of questions from the Senate Committee on Energy and Natural Resources — about his position on new nuclear reactors (yes, at least for a few plants), offshore drilling (only as part of an energy package) and new coal-burning power plants (a few, until we figure out a better way). He told the lawmakers that “last year’s rapid spike in oil and gasoline prices not only contributed to the recession we are now experiencing, it also put a huge strain on the budgets of families all across America.”

Last September, though, he told The Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” At the hearing, responding to a question about that statement, he said, “What the American family does not want is to pay an increasing fraction of their budget, their precious dollars, for energy costs, both in transportation and keeping their homes warm and lit.”

The answer is efficiency, using less so that even if the price rises, the bill does not, he said.

He also said that coal, which has a wide political constituency, would continue to be used, and that the trick was to convert it to electricity cleanly.

Dr. Chu, who is 60, got a friendly welcome from the committee, but really warmed up when Senator Blanche Lincoln, Democrat of Arkansas, asked him how plants could be turned into substitutes for petroleum.

“Actually, now we’re getting to science, I love this,” he said, to laughter around the room. He said he had supervised research to figure out, “How do you break those plants down into the kind of sugars these little critters, the yeast and bacteria, can actually use.” Gene-altered bacteria have been developed to turn sugar into substitutes for gasoline, diesel and jet fuel, he said.

Several senators reiterated the idea that the Energy Department faced terrific scientific challenges, and that a Nobel physicist was the appropriate person to head it. Senator Dianne Feinstein, a California Democrat who introduced him to the committee, referred to him as “one of the great brilliant thinkers of his generation.” Around Washington, Dr. Chu draws wide approval for emphasizing energy efficiency and new technology as approaches to the problems of energy prices and global warming.

But his science-based frankness sometimes contrasts with ordinary energy politics, which are often more centered on narrower economic interests.

For example, in a presentation at Berkeley in April 2007, now preserved on YouTube, he declared, “coal is my worst nightmare,” words previous energy secretaries would be unlikely to utter.

“We have lots of fossil fuel,” he said in that presentation. “That’s really both good and bad news. We won’t run out of energy but there’s enough carbon in the ground to really cook us.”

And he has said frankly that some of the technologies that federal dollars are pursuing would be nice to have, but are not today ready for use, either because they are too expensive to be practical, or not demonstrated to be safe. In this category he puts sequestering the carbon dioxide from power plants, recycling nuclear fuel to reduce its volume and recover unused fuel, and making ethanol from cellulose, which is essentially woody wastes or non-crop plants.

In the course of the hearing, the main mission of the department — making, maintaining and dismantling nuclear weapons, and cleaning up from six decades of nuclear weapon production — got intermittent mention. According to a report on nuclear weapons spending by Stephen I. Schwartz and sponsored by the Carnegie Endowment, the budget for nuclear weapons in 2008 was over $52 billion. Robert Alvarez, who was a policy advisor to the energy secretary in the Clinton administration, said in an interview that the department is spending about 11 times more money on nuclear weapons than on energy conservation.

Dr. Chu’s plans for steps that would reduce consumption of oil and electricity may come at an inopportune moment, as consumption is falling anyway, taking pressure off the electric grid and other energy systems. The Energy Information Administraton, which analyzes data for the department, predicted on Tuesday that for 2009, electricity consumption would fall 0.5 percent, and oil product consumption by 2 percent. Dr. Chu faces a variety of conflicting mandates. For example, he said that using more renewable energy was a national priority and thus would require a national electric grid. To help create such a grid, a 2005 law gives the department the authority to designate high-priority corridors, to overrule local objections to new power lines. But Senator Robert Menendez, a Democrat, complained that the department had designated his entire state, New Jersey, as part of a corridor. Dr. Chu promised to investigate.

Another problem is nuclear waste. Dr. Chu repeatedly said that of the carbon-free power generation in this country, 70 percent was nuclear. But Mr. Obama has expressed deep skepticism about the plan to bury nuclear waste at Yucca Mountain, the site near Las Vegas that the government has worked for 20 years to develop. A solution would have to be found, Dr. Chu said, but construction of new plants should resume now, after a hiatus of 30 years, even before the solution is developed.

Tuesday, January 13, 2009

The Top 16 Civil War Books: and we rank 14th

You need good eyesight to see this but 14th isn't bad. I believe that I was the 14th best student in my graduating phd class from a certain pro-keynes midwestern school where it never snows and the faculty often have long office hours.

More UCLA Research: A Press Release on a Book I Have Read

It is 85 degrees here today and my students were yawning at me in class. I guess that I'm boring. Yesterday UCLA sent a talented photographer to take some pictures of my co-author and I. If you need a laugh, click here for an "action" photo. The truth hurts but Dora looks good. Today, the school issued this kind news release. I'm waiting for a call from my Chancellor. Do my quotes make any sense? I don't think so, but that's life.

For Immediate Use
Jan. 13, 2009

U.S. Civil War illustrates costs, benefits of diversity, say UCLA economists
Book finds loyalty, sacrifice highest among soldiers of similar background

Meg Sullivan,

Diversity is a double-edged sword, making individuals less likely to be altruistic than they might be in a more homogeneous setting but also inspiring them to scale new intellectual heights and to explore new horizons, argue two UCLA economists in a new book.

"People enjoy being around people they can relate to, and they are uncomfortable with diversity," said Matthew Kahn, a co-author of "Heroes and Cowards: The Social Face of War," which will be published Jan. 21 by Princeton University Press. "But even though people don't like being exposed to people who are different, they benefit from the experience in the long run. They learn the most from those who are different."

While recent research into lower rates of volunteerism and lack of taxpayer support for local projects in diverse communities has reached similar conclusions, the latest findings are based on a surprising set of subjects: 41,000 soldiers who served in the U.S. Civil War between 1861 and 1865.

"Union soldiers, whether in prison camps or in the field, were the most loyal to men who looked like themselves — of the same ethnicity and occupation, from the same state or hometown, or of the same age or related by blood," said co-author Dora L. Costa, a UCLA economics professor. "We believe that by going back so far in time we're getting at an effect that's universal. This reaction to diversity may be hardwired into us."

Curious about the forces that motivate individuals to acts of heroism, Costa and Kahn set out to mine millions of records on Union soldiers that have been gathered since 1991 into a database funded by the National Institutes of Health.

Tracing enlisted men throughout their tour of duty and into retirement, the Union Army Dataset merges official Union records with now-public census data between 1840 and 1910, essentially providing a cradle-to-the-grave look at the soldiers. Details include a soldier's original economic status, degree of literacy and hometown; his military record, including whether he deserted or ended up in prisoner of war camps and how he fared there; and his eventual residence, livelihood, economic status and degree of literacy.

The researchers then subjected these variables to the same sort of statistical analysis as social scientists who conduct research on living subjects in experimental conditions. The results, insist the UCLA team, are just as valid — and possibly even more trustworthy — than glimpses into human behavior gleaned from laboratory experiments.

"Unlike university laboratory researchers, we examined life-or-death choices," Costa said. "We could never orchestrate an experimental exercise with such high stakes. These are decisions that really mattered to people. As a result, they paid a lot of attention to their decisions, and those decisions reflect profound truths."

Men who served in war companies with men who shared similar characteristics — a common religion, race, ethnic group, socioeconomic status, hometown or even plantation — behaved markedly differently from their counterparts in more diverse companies. For starters, they had much lower desertion rates than the norm of one desertion per 10 Union soldiers. Union soldiers who served alongside men from the same occupations deserted at one-third the rate of counterparts in more diverse companies, as did former slaves who served with former slaves from the same plantation.

"Economic theory says you would look out for your own welfare," Kahn said. "Yet we kept seeing all these very moving examples of people wanting to sacrifice for others."

And the absence of diversity actually outranked other potential sources of loyalty. Costa and Kahn expected to find that company morale or commitment to the cause played as big if not a bigger role in keeping a soldier on the battlefield. Yet they found that companies with the lowest amount of diversity — such as companies in which friends, relatives or neighbors served together — had the lowest desertion rates. The least diverse companies had one-third fewer desertions than more diverse companies with high morale or strong ideological commitments.

"This was one of the most ideological wars in U.S. history," Costa said. "If we find that serving with similar people or buddies matter the most here, then we know the effect is big, and in fact, that's what we found. Even when the ideological stakes are huge, it's serving alongside comrades that keeps you in the war — not commitment to cause."

In addition to inspiring enlistees to persevere, peers also proved important to surviving such grim prisoner of war camps as Andersonville, a Confederate death trap that claimed the lives of close to 40 percent of its captives. Survival rates for Union soldiers born in Ireland, for instance, improved only from 60 percent to 64 percent if they were incarcerated with 15 comrades from their original company, Costa and Kahn found. But the soldiers' survival rates shot up to 90 percent when those 15 comrades were not only from the same company but were also fellow Irish immigrants.

"We believe that your comrades would help you get healthy if you got sick and share their food rations," Kahn said. "So in P.O.W. camps, diversity actually turned out to be a bad thing. It hindered survival rates."

But diversity was not without its benefits. Costa and Kahn focused on three separate kinds of African American troops: troops that consisted primarily of freed slaves, troops that consisted primarily of freemen (African Americans who were not born into slavery) and troops that mixed both kinds of African American enlistees.

While companies with both former slaves and freemen had higher desertion rates than units that consisted primarily of one group or the other, former slaves in the diverse companies learned to write at higher rates than their counterparts in more homogenous units, Costa and Kahn found. In companies comprised almost exclusively former slaves, only 16 percent of soldiers learned to write during their tour of duty. That number nearly doubled in companies in which former slaves mixed with freemen.

"For former slaves who had been prevented from learning to read and write in slavery, diverse companies were almost like a job training program, preparing them for improved economic opportunities down the line," Kahn said.

In addition to being more likely to learn to literacy skills, former slaves in diverse companies also were more likely than their counterparts in more uniform companies to change their slave names, the researchers found.

"Adopting a new name was a measure of taking on the identity of a free person," Costa said. "These former slaves started to see themselves differently as a result of the more expanded horizons of the men with whom they served."

African American soldiers from diverse companies also were much more likely than their counterparts to move away from home after the war. This was especially the case among illiterate soldiers for whom word of mouth was their primary source of information. The economists found that for every 10 percentage-point increase in comrades who hailed from a particular state different than the home state of an illiterate solider, the likelihood of that illiterate soldier ultimately relocating to that state jumped by more than 30 percent.

"We call this 'the Zagat Guide effect,'" Kahn said. "So if we're in the same company, and I'm from New Jersey, you are more likely to move to New Jersey after the war. We believe that I taught you about the benefits of New Jersey. Serving in a diverse unit helped open horizons for men who had previously enjoyed no mobility whatsoever."

"Heroes and Cowards" represents the most extensive use to date of Civil War data amassed by the University of Chicago and Brigham Young University under the direction of Nobel laureate economist Robert Fogel. For the past decade, Costa has been second-in-command on the unparalleled NIH-funded project.

Compiled from records in the National Archives, the Union Army Dataset focuses on Union rather than Confederate records because of the North's famously generous medical benefits for veterans, the authors explained. The most widespread form of assistance to the elderly before the advent of Social Security, these benefits ultimately extended to 90 percent of Union Army veterans. Records for these benefits allow researchers to track the health, whereabouts and other outcomes of Union veterans into old age and to link them to census data for the men, which in turn revealed even more information.

After losing the war, Confederate states offered benefits to veterans on a state-by-state basis, and they did so only when they could afford them, the authors explained. With the South's financial collapse following the war, many Confederate veterans did not receive medical benefits, confounding any attempt to track them through public documents as they aged.

"Confederate records just aren't as comprehensive or useful for this kind of analysis as the Union records," Costa said.

The confluence of increased privacy protections on medical, military and census data and the replacement of a draft armed forces with a voluntary one make military records from later U.S. conflicts less valuable for research purposes than the Civil War documents, the authors contend.

"This material is really a treasure trove," Costa said. "The Union records provide an awesome laboratory for studying human behavior that doesn't exist anywhere else and can't exist again."

UCLA is California's largest university, with an enrollment of nearly 38,000 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 323 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.

For more news, visit the UCLA Newsroom.

Monday, January 12, 2009

The Wall Street Journal Takes a Break from Madoff and Financial Crisis

I guess it is fair for a historian to review our book; Wall Street Journal Review of Heroes and Cowards . My only complaint with this review (besides for the typo in the title) is that the reviewer appears to be unaware of the empirical social science literature that we are contributing to concerning the empirics on social networks.

Sunday, January 11, 2009

Are We All Keynesians Now?

Here is Gary Becker's Subtle Post offering some old school Chicago pushback against the fashionable young keynesians. Greg Mankiw also had a nice piece in the New York Times business section today. I must admit that Los Angeles is far from Washington DC. I'm not hearing any good gossip about what is really going on in elite Obama policy circles. If we could listen in as Obama's Economics Team debates the merits of different policies, what is the basis for how they "know" that a specific treatment (such as infrastructure investment or a tax cut for the lower middle-class) will be effective? What past recession experiences are relevant for today? Is the world that stationary?

The Obama Team doesn't have the time to run a field experiment to determine what works. In addition, it wants "general equilibrium impacts now! To my surprise, Paul Krugman has come out against cost/benefit analysis of public policy

"The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts."

So, how do we determine and debate what policies are "good" and how do we rank them?

So are academic economists "shovel ready" such that we are armed with free lunch policies that will jump start our economy, stop climate change and help to get the U.S ready for a 21st century long run economic competition with China?

I don't think so.

People tell me that they lack "confidence" , business lacks "confidence" --- nowhere in an economics textbook have I seen a "confidence" production function. At first glance, the fundamentals of the economy are pretty good. Our human capital stock is high. Our health capital stock is high.

How many people would trade their US passport for another nation's?

As all eyes turn to Washington waiting for the New President to help them, I do wonder what steps people would take now if they knew that no help was coming. Are we in a deep freeze as people and firms position themselves for the Keynesian $ that is about to flow? What fiscal stream of future taxes and inflation will be required to pay for this today?

Saturday, January 10, 2009

Diversity and Immigrant School Choice

Immigrants have voted with their feet that they like this country's total package of opportunities and lifestyle relative to their nation of origin. Once here, this diverse group differs with respect to whether they want to fully assimilate. This interesting New York Times article today Immigrant Charter School in Minneapolis highlights some of the tradeoffs of "going native" here in the U.S.

The general theme I see here is the tradeoffs of bridging and bonding social capital. Within group social interactions encouraging bonding social capital. The mother quoted in this article appears to be concerned that a byproduct of her children "bridging" and meeting typical U.S kids is that her children are picking up bad habits of back-talking and seeking material goods. She didn't like this "treatment effect" and pulled her kids out of the school to encourage them to be more "traditional".

In a diverse city such as Los Angeles, it is interesting how the population does choose to live in ethnic pockes and income pockets of like minded people with similar interests and backgrounds. Which neighborhoods in Los Angeles are truly "integrated"? Does it matter if each household wants to engage in "bonding" social capital but has little private desire to "bridge"?

In our heroes and cowards book, Dora and I argue that there will be less learning if you don't interact with people who are different than you. No one can force you to talk to strangers but there are interesting issues of how we configure society to encourage such social interactions. Should Starbucks offer a 50% coffee price discount to people who talk to strangers there for 30 min?

Friday, January 09, 2009

Guest Blogging Next Week at The Volokh Conspiracy

Dora and I appreciate the warm introduction that Eugene gave us tonight here The Volokh Conspiracy. We will arrive there on monday with the first of 5 posts on our heroes and cowards book.

Peak Oil Interest and the Price of Gasoline: Evidence from 2008's Wild Ride

Permit me to display some data. In graph #1, I reproduce a graph of monthly gasoline prices in the year 2008. Note that it peaks in July 2008. In graph #2, I present the prominent blog "Oil Drum" and its monthly visitor count during the same months of 2008. Do you see a relationship?

Next, here is the Oil Drum website's monthly count of visitors. Clearly, September 2008 is an outlier but throwing that out they appear to move in lock step.

What is interesting here is the clear causality. I don't believe that the OIL Drum blog causes gas price dynamics. The causality runs from oil price dynamics causing interest or declines in interest in the Oil Drum blog. When oil prices are peaking, the OIL Drum is hot hot hot.

Is this a general point? It what other cases do market price fundamentals drive Internet interest?

Thursday, January 08, 2009

Eric Morris is Freakonomics

My co-authors appear to begetting younger over time. This could be the curious case of Brad Pitt or this could be an old picture of a great man named Eric Morris who now blogs for freakonomics .

Eric may not be able to dunk a basketball but he is a deep thinker. I have known him for 2 years now. As we struggled to get this green paper through the review process at a leading planning journal, I have always been impressed by Eric's effort and tenacity. And now I see that on top of his PHD studies and his transportation studies that he is moonlighting as a blogger (and I won't even name his other Los Angeles activities), I am quite impressed.

My son attended Eric's birthday party last year at a local pizza place and Alex liked him. If Alexander Harry Costa Kahn likes you, then you know you must be okay.

The Case for Los Angeles

The rest of the nation has a strange view of Los Angeles. I should know. I grew up in New York City and then moved to a well known NYC suburb that is supposed to have good public schools. For those of you who are impatient, here is my case for LA: Los Angeles 5 day weather forecast .

On an egotistical note, there is a slight chance that the Costa/Kahn new book will be reviewed in a leading newspaper this week. I have learned to not count my chickens prematurely but we will see.

As a guy who has published 2 books in the last 3 years and who has a chunk of something new written, I now view myself as 65% of a player. This New York Times on the Book Publishing Industry caught my eye.

There are some leading economists (not named Kahn) who have received some large advances for their books. It appears that the risk sharing has changed such that moving forward authors will be promised a larger share of the profits.

How this affects the incentives of book agents to hussle and sell books at the power lunches in NYC's expensive bad restaurants remains an open question.

Tuesday, January 06, 2009

A Fixed Effects Estimator for Measuring the Labor Market Returns for Being a Dude

This is certainly creative research but I wonder if the authors have a credible instrumental variable to help them achieve "randomization" in determining who is assigned the "treatment" of switching genders. Without reading the article, I'm assuming that the authors have a panel data set that includes the select set of people who choose to switch genders and they estimate the change in earnings for "switchers" who change from being men to women and for women who become men. Ideally, in order to establish causal effects, we would like these transitions to be randomly assigned but most universities IRB boards would not sign off on such an experiment.

Before and After: Gender Transitions, Human Capital, and Workplace Experiences

Kristen Schilt, University of Chicago
Matthew Wiswall, New York University

A BEJEAP Contributions1 article.


We use the workplace experiences of transgender people – individuals who change their gender typically with hormone therapy and surgery – to provide new insights into the long-standing question of what role gender plays in shaping workplace outcomes. Using an original survey of male-to-female and female-to-male transgender people, we document the earnings and employment experiences of transgender people before and after their gender transitions. We find that while transgender people have the same human capital after their transitions, their workplace experiences often change radically. We estimate that average earnings for female-to-male transgender workers increase slightly following their gender transitions, while average earnings for male-to-female transgender workers fall by nearly 1/3. This finding is consistent with qualitative evidence that for many male-to-female workers, becoming a woman often brings a loss of authority, harassment, and termination, but that for many female-to-male workers, becoming a man often brings an increase in respect and authority. These findings challenge the omitted variables explanations for the gender pay gap and illustrate the often hidden and subtle processes that produce gender inequality in workplace outcomes.

Submitted: August 8, 2007 · Accepted: July 29, 2008 · Published: September 11, 2008

Recommended Citation
Schilt, Kristen and Wiswall, Matthew (2008) "Before and After: Gender Transitions, Human Capital, and Workplace Experiences," The B.E. Journal of Economic Analysis & Policy: Vol. 8 : Iss. 1 (Contributions), Article 39.
Available at:

Time to Buy Inflation Indexed Bonds?

If you think some inflation will start soon, what asset should you buy? Gold is too heavy. Inflation Indexed Bonds offer some rate of return.

If the Obama Administration foresees years of trillion dollar debts, how will the U.S pay off these IOUs? Raise taxes sharply on future generations? Entice China and Sovereign Wealth Funds to buy up our bonds forever? An alternative is to inflate this debt away. If future US Fed Chairs believe that international investors do not have credible alternatives to invest in then the U.S could get away with this. Alternatively, if globalization leads to a "level playing field" such that the U.S is no longer viewed as the only "safe haven" for investing then the U.S would be punished for defaulting on its current debt by inflating away.

In searching for some material on the benefits of inflation adjusted bonds, I found this nice short piece

Monday, January 05, 2009

My Sketch of the 2009 AEA Meetings in SF

The party is over. I fly back to LA this afternoon and start to teach tomorrow morning. The first job talk at UCLA is thursday. Back to work. I did enjoy attending the AEA Meetings this weekend. It was an opportunity to talk with old friends and talk and talk some more.

I did attend some impressive talks by David Card and Avinash Dixit.

I will tell one silly story. At the main conference hotel, Paul Solman from PBS Jim Lehrer NewsHour was interviewing superstars (i.e Alan Krueger, Marty Feldstein, Caroline Hoxby). I could see these interviews taking place but I couldn't hear what these folks were saying to him. I know Paul and I went up to him and asked him if anyone had said anything interesting to him. He told me that he asked each of them " Why didn't economists warn the public about the financial crisis? Why didn't we see it coming?" I told him "we did, but we were trading on that information." He cracked up and then proceeded to tell his camera crew to film me for that brilliant sound bite.

The egoist inside me was pleased as this interview took place in the Hilton Lobby as all the other economists were watching me be interviewed. Whether this will air on TV this week is an open question. He then asked me what should be done to end the crisis. At that point my bubble was popped as I said on TV; "I have no idea but I have faith in free markets. In a world of 6 billion people, some excellence will rise to the surface."

Fortunately, there are some deeper thinkers than me. Today Dr. Glaeser offers a nuanced look at big keynesian plans. While he has lived in Cambridge, MA for 17 years now, he retains his Chicago world view and exudes a healthy balance between the two world views. Glaeser's Globe Op-Ed