Tuesday, April 28, 2009

Interviews with Econometricians

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

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

Monday, April 27, 2009

Green Tech Corridors in Center City Los Angeles

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

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

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

Sunday, April 26, 2009

The "Green" U.S Military?

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

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

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

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

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

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

Thursday, April 23, 2009

Green Jobs and Gray Economists

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

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

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

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

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

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

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

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

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

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

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

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

Obama visits turbine plant

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

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

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

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

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

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

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

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

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

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

Copyright 2009 E&E Publishing. All Rights Reserved.

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

Scarsdale Female Lawyers = "Bad Moms"?

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

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

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

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

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

Don't forget your dynamics folks!

Tuesday, April 21, 2009

Andrew Leonard's Salon Column on the EKC and Carbon

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

Greenhouse Gas Dynamics and Economic Development

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

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

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

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

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

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

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

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

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

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

New York Times Writes that Friends Cause Life Expectancy

NY Times on Social Networks and Survival

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

Sunday, April 19, 2009

My "Green Jobs" Article Published in the May 2009 Issue of Foreign Policy

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

UCLA and the LA Festival of Books

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

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

The LA Times book reviewer had some tough things to say about this book (see

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

LOUIS UCHITELLE and Ed Prescott Could be Buddies

Similar to the Case-Schiller home price index --- suppose that there exists a mutual fund based on the bundle of Academic Economists' ideas. In this Animal Spirits book Review , Lou Uchitelle argues that this pricing index is worth $0 right now except for the work of a couple of maverick scholars. I am willing to buy this security from him. Are you?

When I was a kid, my father would devote part of his August vacation to locking himself into a quiet place to see if he could still pass the basic Cardiology exams. In today's New York Times, they post the High School 2009 AP Economics Exam . I suggest that each Academic economist should have to also "re-certify". Note all of the Keynesian questions at the start. To my friends at Minnesota, we will grade your exams carefully.

Saturday, April 18, 2009

Renewable Energy Production and Environmental Tradeoffs

Where is a benevolent planner when we need one? Larry Summers should devote a few minutes to this issue and offer an optimal allocation of land and water to maximize our western social welfare function. To remind you of the key elements here; to combat climate change -- we want to transition from coal and natural gas generated electricity. Solar and Wind offer two "green" substitutes but they take up land and in the case of Solar use water (see below). The BLM faces a tradeoff between green power generation and natural resource use. The hope, of course, is that the smart engineers come up with a way to make solar work without using so much water.

Solar finds it hard to squeeze water from desert

By RITA BEAMISH, Associated Press

OAKLAND, Calif. – A westward dash to power electricity-hungry cities by cashing in on the desert's most abundant resource — sunshine — is clashing with efforts to protect the tiny pupfish and desert tortoise and stinginess over the region's rarest resource: water.

Water is the cooling agent for what traditionally has been the most cost-efficient type of large-scale solar plants. To some solar companies answering Washington's push for renewable energy on vast government lands, it's also an environmental thorn. The unusual collision pits natural resources protections against President Barack Obama's plans to produce more environmentally friendly energy.

The solar hopefuls are encountering overtaxed aquifers and a legendary legacy of Western water wars and legal and regulatory scuffles. Some are moving to more costly air-cooled technology — which uses 90 percent less water — for solar plants that will employ miles of sun-reflecting mirrors across the Western deserts. Others see market advantages in solar dish or photovoltaic technologies that don't require steam engines and cooling water and that are becoming more economically competitive.

The National Park Service is worried about environmental consequences of solar proposals on government lands that are administered by the Bureau of Land Management. It says it supports the solar push but is warning against water drawdowns, especially in southern Nevada. In the Amargosa Valley, the endangered, electric-blue pupfish lives in a hot water, aquifer-fed limestone cavern called Devil's Hole.

"It is not in the public interest for BLM to approve plans of development for water-cooled solar energy projects in the arid basins of southern Nevada, some of which are already over-appropriated," Jon Jarvis, director of the Park Service's Pacific West Region, wrote to the BLM director in Nevada.

Jarvis' e-mail from February, obtained by The Associated Press, noted that the rare pupfish's dwindling numbers prompted Nevada to ban new groundwater allocations within 25 miles of the pool.

Jarvis urged the BLM to promote technologies that use less water and hold off on permits until it finishes its assessment of the solar program next year. The BLM tried suspending new applications last year but relented under pressure from industry and advocates of renewable energy.

"Water is a big concern and the desert tortoise is a major concern, and the amount of site preparation is a concern," said Linda Resseguie, a BLM project manager. The government in reviewing each project wants to make careful decisions over what it considers "a potentially irreversible commitment of lands," she said.

Water is among the complications in deserts where more than 150 solar applications have been submitted for hot spots in Nevada, California, and Arizona, plus a few in New Mexico.

Companies are wrestling with routes for long-distance transmission lines and habitat for the threatened desert tortoise. They also are worried about a proposal being developed by Sen. Dianne Feinstein, D-Calif., for a Mojave national monument, which could put up to 600,000 acres off-limits alongside already protected park and military lands. It could affect at least 14 solar and five wind energy proposals.

The Spanish-owned energy company, Iberdrola, has submitted 12 applications in four states. Its solar managing director, Kim Fiske, said her company is planning to use photovoltaic technology in Amargosa Valley but elsewhere will evaluate each site's feasibility for water. Photovoltaic systems use conducting material to convert sunlight directly to electricity and need only nominal amounts of water to wash their solar panels, compared with the traditional steam-turbine solar that uses much larger volumes of water for cooling towers.

"Water usage is becoming the larger issue. Some companies still want wet cooling and say it's less efficient to do dry cooling, and they need 10 percent more land to get the same output," said Peter Weiner, an attorney representing solar companies. Some are exploring hybrid systems that use water during the hottest part of the day.

The government won't say how much water would be needed by applicants because those proposals are still in flux. But National Park Service hydrologists last fall tallied more than 50,000 acre feet per year — nearly 16.3 billion gallons — proposed by applications in Amargosa Valley alone, or enough to supply more than 50,000 typical American homes. Nevada previously said the basin could support only half that. Since then, some companies have dropped out or switched to photovoltaics, making that estimate of 16.3 billion gallons outdated.

Nevada's policy and legal mandates restrict water in the driest areas. California regulators warn that wet-cooled projects face an uphill climb. The two under review there so far on government land use minimal water. First up is Oakland, Calif.-based BrightSource Energy's five-square mile, air-cooled, mirror complex near the Mojave National Preserve.

In Arizona, most solar proposals are away from populous areas with the most water restrictions.

Water is "a hot button for everybody," said Fiske. "Everyone is concerned about water. It's probably one of the biggest issues."

Thursday, April 16, 2009

The Chronicle of Higher Education Crosses the PG-13 Ratings Line

Am I the only academic who believes that academics should stay dressed while at their University? I would need a significant raise to hang out at this gym. I realize that the Chronicle of Higher Education wants higher readership but to print topless pictures crosses the line.


Move from University of Chicago to UCLA and Raise Your Productivity!

Al Harberger is setting a good example for his UCLA colleagues. He just collected the big bucks in recognition of his important contributions. To my friends who are still at the University of Chicago, keep him in mind. If you move West, you can simultaneously get a better tan and get more work done. You know where to reach me.

LA Times

Economics teacher honored

UCLA economics professor Arnold C. Harberger was awarded a $250,000 prize from the Lynde and Harry Bradley Foundation in recognition of his work in aiding market reforms in Latin America and other parts of the developing world, officials said Wednesday.

Harberger, 84, has taught at UCLA since 1984. He will receive the award at a Washington ceremony in June.

The conservative Milwaukee-based foundation says it is devoted to strengthening American democracy and free enterprise. The late Bradley brothers were successful businessmen in electric components and motors.

Harberger, who is also affiliated with the University of Chicago, has worked with the United States Agency for International Development from its inception in 1961. He has helped train economic leaders around the world and has served as the agency's chief economic advisor since 2006. In a telephone interview Wednesday, he said he plans to visit Ghana in June for the agency.

Asked whether he plans to spend his award on any indulgences, the professor said: "Oh my goodness, I don't think I'm going to buy any special things. In these perilous times, it helps to restore the portfolio."

-- Larry Gordon

Local Learning Effects and the Next Prius

There are more and more empirical papers coming out investigating whether neighbors learn from each other. Whether we are talking about Pineapples or 401K retirement plans or solar panels, economists are trying to randomize the initial conditions (i.e the assignment of the first person in the chain) and then studying the diffusion of information and choices. This randomization obviates concerns over selection bias and unobserved heterogeneity (i.e that the early adopters signal a special unobserved error term). This literature should interest environmental economists. Keynes said that we are all dead in the long run but the short run may not be that long if diffusion of info occurs fast. The diffusion of green products would help a lot to decarbonize our economy. While we need incentives (i.e carbon pricing), another necessary condition is information about the true green benefits of each product. This local learning literature makes me more optimistic about this path.


Menstruation and Education in Nepal

Emily Oster, Rebecca Thornton

NBER Working Paper No. 14853
Issued in April 2009
NBER Program(s): HE LS

---- Abstract -----

This paper presents the results from a randomized evaluation that distributed menstrual cups (menstrual sanitary products) to adolescent girls in rural Nepal. Girls in the study were randomly allocated a menstrual cup for use during their monthly period and were followed for fifteen months to measure the effects of having modern sanitary products on schooling. While girls were 3 percentage points less likely to attend school on days of their period, we find no significant effect of being allocated a menstrual cup on school attendance. There were also no effects on test scores, self-reported measures of self-esteem or gynecological health. These results suggest that policy claims that barriers to girls' schooling and activities during menstrual periods are due to lack of modern sanitary protection may not be warranted. On the other hand, sanitary products are quickly and widely adopted by girls and are convenient in other ways, unrelated to short-term schooling gains.

Black Carbon and the Environmental Kuznets Curve

Today's New York Times reports that scientists have surprised themselves and learned that an unintended consequence of cooking and heating with low quality, dirty fuels such as wood and dung in the developing world is to increase the production of "black carbon" and increase greenhouse gas emissions. From the work of scholars such as Kirk Smith of UC Berkeley, we have known for a long time about the ambient air pollution caused by using these stoves. The EKC literature has argued that with economic development that people move up the energy ladder and use higher quality, cleaner fuels such as LPG and electricity.


Here is my question. The CO2 EKC literature has argued that there is no turning point because of the free rider issue; GHG emissions just keep rising with respect to national per-capita income. If we now factor in Black Carbon into the GHG emissions, how does this change the GHG/per-capita income relationship in the cross-section? How much have we been under-stating developing nation's total GHG emissions because black carbon has not been factored in?

Wednesday, April 15, 2009

Los Angeles as a Green "Silicon Valley"

Los Angeles has reinvented itself many times. Whether it is Hollywood or producing military hardware, the economy continues to search for a growth engine. Can green innovation be our next job and wealth creator? It will be interesting to see how UCLA can team with our buddies at Caltech and USC to do some serious things. I am still waiting for the economists at Caltech to be willing to share their fMRI machine with me. I would view this as a first step in my willingness to work with them in the future. I am still waiting for the economists at USC to give me their football tickets and a chance to talk to Pete Carroll about his life enthusiasm. I would view this as a first step in my willingness to work with them in the future.

All kidding aside, This is a very serious project. Which cities will generate competing proposals? I would guess that Boston could put a mildly serious proposal together. As someone who has "voted with his feet" , I can state that Los Angeles beats Boston. Perhaps not in snowfall or in terms of Legal SeaFood Restaurants per-capita or in terms of NFL football, but along other dimensions the choice is clear.

Why will this venture work? Returning to themes from International Trade, part of the reason is the "home market effect". See this paper. As AB32 represents a commitment device to decarbonize, the state is willing to demand "green products". Why can't these products be produced elsewhere and shipped to Green California? A green Jane Jacobs story would say that learning during this time of uncertainty is crucial and green learning is more likely to take place in hotbeds of free market environmental and energy clusters . Where will these form? In high amenity, educated areas (i.e San Diego, San Fran and LA). If AB32 offers any implicit incentive for home grown technology then this further creates incentives to center the green snowball in California. Given that LA is a much larger city than San Diego or San Fran, the home market effect would predict that the snowball will be centered in LA.

In other news, I have been invited by CNN to serve as an interviewer a week from Sunday on one of their cable shows. Maybe this is my future as the next Charlie Rose or Bill Moyers?


From the Los Angeles Times

L.A. to partner with 3 universities on clean technology

A goal of the joint effort with Caltech, UCLA and USC is to better compete for federal money for such programs and a proposed state climate change center.

By Maeve Reston

8:12 PM PDT, April 15, 2009

Los Angeles Mayor Antonio Villaraigosa announced a partnership Wednesday with three local universities aimed at positioning the city to compete for hundreds of thousands of federal dollars for clean technology research and a proposed state institute to study climate change.

The partnership with Caltech, UCLA and USC is part of the agenda Villaraigosa outlined in his State of the City speech Tuesday to lure and retain companies that focus on green endeavors such as solar, wind, battery and hydrogen fuel cell technologies.

Villaraigosa said the CleanTech LA alliance, which also includes the Los Angeles Chamber of Commerce, Los Angeles Business Council and Los Angeles County Economic Development Corp., represented a "giant leap forward in our effort to make this city the global capital of clean technology."

"We're formalizing a partnership to leverage what we've done over the last four years in the city, what we're doing at all three universities to develop the jobs of the new economy," the mayor said, touting the clean trucks program at the Port of Los Angeles and his goal of drawing 20% of the city's electrical power from renewable energy by 2010.

UCLA Chancellor Gene Block said the partnership would ensure that the region "asserts its place as a hub in the emerging new clean-technology business." Most recently, the mayor's office has been working with the Community Redevelopment Agency to transform a four-mile industrial stretch -- along the Los Angeles River east of downtown -- into an incubator for clean-technology companies.

The area, which is rich in tax incentives, would be anchored at the northern end by a planned Department of Water and Power research center at the agency's Main Street site that would house laboratory projects with researchers from Caltech, USC and UCLA.

UCLA officials said they hope to test small-scale wind turbines at the site. USC officials are drawing up plans for a research center with the DWP to study how to make data centers more energy efficient.

Officials said the partnership stemmed from the city's intent to compete for a possible California climate change institute. Los Angeles was not even in contention four years ago as a site for the California stem cell research institute, and many city officials now view that as a missed opportunity.

A version of the climate change center proposal was approved by the Legislature last year but vetoed by Gov. Arnold Schwarzenegger, who said the legislation was "too limiting and too premature."

State Sen. Alex Padilla (D-Los Angeles) reintroduced a proposal for the center in February. No decisions have been made about the process for locating the center -- but it is clear that competition with other cities will be fierce if the proposal advances.


Pay by the Pound: The Linear Pricing Kernel

Is discrimination treating different people the same or treating similar people differently?

AP Wire
United Air to charge obese double on full flights

LOS ANGELES (Reuters) – United Airlines, a unit of UAL Corp, will require obese passengers bumped from full flights to purchase two seats on a subsequent flight, matching the policy of some other carriers.

The change brings the Chicago-based in line with eight other airlines including Continental, Delta, JetBlue and Southwest, United spokeswoman Robin Urbanski said on Wednesday.

"Last year we had 700 complaints from passengers who had to share their seats," she said.

Under the new policy, obese passengers -- defined as unable to lower the arm rest and buckle a seat belt with one extension belt -- will still be reaccommodated, at no extra charge, to two empty seats if there is space available.

If, however, the airplane is full, they will be bumped from the flight and may have to purchase a second ticket, at the same price as the original fare, Urbanski said.

If the bumped passenger chooses to cancel the trip, the ticket will be refunded with no additional charge.

The policy is effective immediately.

Tuesday, April 14, 2009

Radical Thinking at UCLA

I do not endorse what I report below but it is interesting to hear non-neo-classical economists talk about why the financial crisis exists. These guys have an authoritative tone and the UCLA main newspaper gives them ample coverage. Who is an economist anyway?


Economists explain why U.S. economy is in free fall

Inflated real estate prices trigger a subprime lending crisis leading to the collapse of banks and a global recession. That, broadly speaking, is how our current financial crisis occurred. But just how did we get into this mess — and can we really spend our way out of it?

A recent discussion between two noted economists, UCLA’s Robert Brenner and UC Riverside’s Gary Dymski, shed valuable light on the underlying causes of the worst economic slump since the Great Depression and the challenges for recovery. Titled “Economic Meltdown: Causes and Consequences,” the March 9 public event was hosted by the Center for Social Theory and Comparative History, with the Center for European and Eurasian Studies as a cosponsor.

Three narratives, not mutually exclusive, have been shaping understanding of the subprime crisis, said Dymski, an economics professor at UC Riverside and the director of the UC Center at Sacramento, which promotes the policy-research efforts of the UC community and provides policy advice to California’s decision-makers.

“The first narrative is this idea that there’s something wrong with borrowers who got into subprime loans and an overextension of the housing market,” said Dymski. The second narrative alludes to the “greed and overreach of megabanks,” and the third refers to the well-known theme of “U.S. profligacy coming to roost.”

The roots of the crisis, however, lie in the creation of a shadow banking system that began in the decades leading to the 1970s. With the end of the U.S.-sponsored Bretton Woods initiative, which created the International Monetary Fund and established the postwar global economic order in 1944, American banks were in deep trouble because of increased competition and high interest rates. “Their well-off customers were flying to money market mutual funds and other instruments, and they were losing their blue chip customers,” Dymski explained.

While the banks managed to maintain their viability as credit-making and holding institutions, the savings and loans system was in jeopardy, Dymski
Gary Dymskinoted. As a result, the banks tried to reinvent themselves by creating the mortgage-backed securities system, which guaranteed loans and placed limits on the interest carried by borrowers. “These mortgages were as safe as houses and were backed by pension funds and securities funds that, in a time of global crisis, looked like a very safe bet because in the end everyone understood that Uncle Sam stood behind these protocols,” explained Dymski, adding that this market became the biggest in the world by the end of the 1980s, and eventually a safe haven for capital fleeing the Latin American and Asian financial crises of the 1990s.

“Subprime loans were seen as a necessity because house prices were rising and, in some cases, incomes were falling,” Dymski said, adding that about half the loans were made with zero down payment. But by the time the subprime crisis hit, the growth of mortgages exceeded the growth in national GDP, undermining the entire economic system.

“Another component was racial inequality and its march from exclusion to exploitation,” said Dymski, referring to federal laws passed in the 1970s in response to the civil rights movement’s demand for extending credit to low-income minority groups that had historically been denied loans, especially to buy homes.

“A term was coined in geography — financial exclusion — and banks wanted to get into the lower-end [remittances] market and payday loans, debit cards and subprime loans,” said Dymski, adding that the subprime lending market became a “business in the ’hood.” In fact, by 1998, one-third of all mortgage loans were being made to African Americans and a fifth to Latinos and other lower-income communities, resulting in a dramatic 900 percent growth in this business from 1993 to 1999, he said.

Indeed, the collapse of Wall Street, where the troubles began, has dealt a devastating blow to the global system. “But, from Fed chair Ben Bernanke, former Treasury Secretary Hank Paulson to Timothy Geithner on down, economists have, with few exceptions, denied the need to look beyond finance to diagnose the catastrophe,” said Brenner, director of the UCLA’s Center for Social Theory and Comparative History and a noted authority on economic history. “They insist, even now, the real economy is strong, the so-called fundamentals beyond question.”

In reality, “advanced capitalist economies have been experiencing steadily declining economic vitality over the past three decades, business cycle by business cycle, right into the present, with the important exception of the bubble years of the second half of the 1990s,” said Brenner, whose 2006 book, “The Economics of Global Turbulence,” was hailed by the New York Times as “the best financial history of the period yet.”

The basic source of the crisis is low-priced manufacturing goods and the “systemwide fall and failure to recover the rate of profit” by U.S. corporations, a development that, from 2000 to 2007, was accompanied by virtually no increase in either employment or real GDP or wages, Brenner said. The major reason for this decline, he explained, is a persistent overcapacity in global manufacturing, especially since the 1950s and 1960s, when one manufacturing power after another entered the world economy and produced the same goods that were already being produced by the earlier developers — only cheaper.

“Historically, problems of profitability were dispersed by the least productive firms falling by the wayside, leaving strong firms to pave the way for a new boom,” Brenner said. “But this outcome was prevented throughout the postwar period, especially from the late 60s to the early 70s, by ever-greater borrowing, public and private, sponsored by the government.”

So, what to make of the Obama administration’s deficit-financed stimulus package aimed at reviving the global economy? Given the dire economic climate, consumers are saving rather than spending — if they aren’t also paying off debts — and companies would be “crazy to invest,” assuming banks gave them credit in the first place, said Brenner.

In any case, there’s a “huge irony — a paradox” in trying to revive a global economic system that continues to rely on an indebted nation like the U.S. as the “buyer of last resort,” said Brenner, adding: “This is one of the key underlying problems in the development of the world economy.”

VoxEU Piece on Zheng/Kahn Work on Quality of Life in China's Cities

So, it turns out that I haven't retired from active research. I was notified that I recently wrote this; Zheng/Kahn on China's "Green Cities" . At the bottom of the article, you can find links to our 2 research papers. This is ongoing research. In a nutshell, we are using standard hedonic compensating differentials techniques to study home prices and wages (both within major Chinese cities and across them). While the U.S compensating differentials literature is mature, there is a lot of work to be done on this topic in the developing world (see the last paragraph of the Voxeu piece).

Monday, April 13, 2009

I Live Two Miles from Michael Jackson's Junk

We wondered what was going on at this department store next to the Beverly Hills Hilton. Now we know and it called Thriller . Michael Jackson should take up economics.

Sunday, April 12, 2009

Big Cities as Marriage Markets

Why are there so many single people in center cities? The lure of Seinfeld? Singles need little room so are well matched with small, old apartments offered in these amenity filled areas relative to living in boring, big McMansion Suburbia? Another answer is option value. By this, I mean what can happen in a uncertain world when millions of people live in close proximity. This type of story below is less likely to take place in Westchester. The velocity of the Center City causes more random permutations that makes this happy story actually have a happy ending. I want to know how many of you angry economists actually smiled after reading this article. The guy could have been you! Maybe Columbia and NYU aren't such bad jobs?


April 12, 2009

Dixie Feldman and Jeffrey Laite

AS a setting for romance, the rolling thunder of a subway car, careening through the depths of Manhattan, is not high on the lists of most New Yorkers. But that’s where love found Sarah Feldman and Jeffrey Laite one morning in January 2007.

Ms. Feldman, known as Dixie, was in the middle of a heartbreak-induced depression when she left her Midtown apartment and took a downtown R train. Having just ended a 23-year exclusive relationship, she was determined to show the universe that true love hadn’t eluded her. So she set aside the mountains of self-help, philosophy and metaphysics tomes she had collected and headed to SoHo to buy lingerie at Agent Provocateur.

“It was an act of faith, spending lots of money on fancy lingerie that I was sure no one would ever see,” said Ms. Feldman, who is 46 and works in New York as the senior editorial director for The N, a digital cable network aimed at preteenagers.

As she entered the train, she noticed a man standing and reading “History of Philosophy, Volume IX.” That impressed her.

“I infer that people who read philosophy are people who think about life and wonder about it and just don’t take everything at face value,” she said. “I like that in a person.”

After silently willing him to look her way (he did not), she finally gathered the courage to ask him about the book. Mr. Laite, now 48, and she began chatting about whether reading philosophy had actually changed their lives. (She said yes; he was unsure). When he noted that there was a Monty Python ditty, “The Philosophers’ Song,” she sang it aloud.

Soon her stop came, and she suddenly faced a problem: should she stay and chat, or exit the train? She chose the latter, but just as the doors snapped shut she called out her e-mail address and said, “If you have any more book recommendations, let me know.”

She bought lingerie, but spent the rest of the day kicking herself for her hasty exit.

The redheaded Ms. Feldman equally intrigued Mr. Laite, a confirmed bachelor who said he had not been in a serious relationship “since the first Gulf War.” When they met, Mr. Laite, a freelance project coordinator for the banking industry, was heading home to Bay Ridge, Brooklyn, and was not thinking about romance. He was not unhappy being single; he simply figured this was how it was going to be and filled his days working, reading, going to movies and concerts and seeing friends.

Still, he Googled her that night and found a photograph of her holding one of her birds (she lives with four parrots and two dogs in her one-bedroom apartment). “I wanted to continue the conversation,” he said, and e-mailed her the names of his favorite books, including “Mere Christianity” by C. S. Lewis and “Zen Mind, Beginner’s Mind” by Shunryu Suzuki.

They struck up a correspondence and discovered their shared affinity for swing music. In one exchange, Ms. Feldman mentioned that she was listening to a recording of Gene Krupa’s and Buddy Rich’s famous 1952 drum battle, adding, “Buddy so wins!”

“That might have been the first time I thought we would have more than a friendship,” Mr. Laite said. Still, he did not ask her out. “I wanted to be sure this was serious,” he said. “At my age, you don’t want to waste your time or anyone else’s.”

Dana Laite confirmed his brother’s caution: “My father asked me if I thought Jeff was dating, and I said, ‘He’s just conserving his energy until he meets the right one.’ ”

Soon, Ms. Feldman’s and Mr. Laite’s e-mail exchanges became flirtatious. At one point she told him of a bad work experience she’d had and, “I immediately wanted to reach out and make her feel better,” he recalled. “The relationship was becoming important to me.”

In late February he asked her out for pancakes. In agreeing to meet him, Ms. Feldman listed some of her harrowing potential deal-breakers: “I can’t drive, I can’t cook, I have four parrots, and upon opening a box of Pop-Tarts I will always eat them all, immediately.”

Each was nervous. Ms. Feldman thought of canceling a hundred times (her friends would not let her), and Mr. Laite showed up at 10 a.m. bearing not flowers but a stress ball. But the ease with which they fell in with each other surprised them both — so much so that Ms. Feldman found herself putting her head on his shoulder as they strolled along the street.

At the end of their breakfast date — 24 hours later — Ms. Feldman asked Mr. Laite what state, other than New York, he would he want to live in. “Well, what state are you in?” he replied.

She swooned.

The depth of their feelings tickled each of them, because on the surface they are opposites. Mr. Laite lives his life largely in books and movies and has a “spartan routine that would put a Samurai to shame,” said Ms. Feldman, whose apartment is the color of Pepto-Bismol, with a pink chandelier shaped like a giant octopus, expensive art commingled with paint-by-numbers paintings and a vast array of vintage memorabilia.

They dated for about three weeks before the word “love” popped up. Three months later they took a trip to Las Vegas. On the plane Mr. Laite looked at her and realized that they would be married. “Not planned, or hoped or wished for, but realized as a fact,” he said. “She’s smart, she’s funny, she puts up with my nonsense. She puts me at ease more than anyone else I’ve known. She makes me feel that I’m good for her.”

It took him a year to propose, which he did on his birthday the following June.

Still, their marriage will be decidedly nontraditional since the economy thwarted their plans to buy a two-bedroom co-op.

“I am a big believer in the man-cave, and my one-bedroom apartment is like Liberace and Carol Channing had a baby,” she said. “Jeff’s been a bachelor for 25 years or so — to be married is already kind of jarring.” They will maintain separate residences and spend weekends together.

They were married March 29 at Providence, a restaurant in Midtown Manhattan, which was decorated with all sorts of kitschy memorabilia, most of it culled from the bride’s private collection. The wedding had a “party like it’s 1929” theme, Ms. Feldman said. “A soulful era of contrasts: innocence and sin, optimism and cynicism, soft hearts and hard times.” The approximately 90 guests, were encouraged to dress in period costume and they posed for mug shots. Then, a 1930’s-style fedora perched on his head, Mr. Laite stood with his bride before Jen Laskey, a Universal Life minister, and recited his vows in gangster-ese: “You make me smile with my heart.”

Commenting on the bride — her tattoos winking out from her vintage-style wedding gown, her hair piled high like Lucille Ball — Lisa Beebe, a colleague of Ms. Feldman’s, said, “She has a look that’s very brash, but she’s the sweetest, gentlest person.”

“I see beyond the nerd in him, he sees beneath the gaudy in me,” the bride said. “For the first time in my life, Jeff makes me feel fully seen, fully accepted, fully loved.”

Saturday, April 11, 2009

Los Angeles Times Editorial on Foreclosure and Refinancing

So economists, what should be done with homeowners who are "under water" (i.e current home price - outstanding mortgage<0)? A reasonable thinker might say; "My answer depends on what is the underlying fundamentals of the economy." So here are some scenarios to think about;

Case #1: Matt's home price is low because local job demand growth in metropolitan area has gone sharply negative. IF, my local market is negatively correlated with other local markets and there are other cities hiring people with my skills, then in the name of efficiency --- don't we want Matt to sell or hand the keys to the bank and move to the other city and get a job? Isn't it inefficient for me not to default and remain unemployed in my current house? Would refinancing "solve" this labor market mismatch? I don't think so.

CASE #2: Matt thinks that home prices will soon rise because he believes in Larry Summers and the power of positive thinking offsetting the scare that Ben Bernanke gave us in 2008. In this case, while Matt is currently "under water" --- he will cut back on pizza and beer and keep paying his mortgage because of the option value of owning a valuable asset if home prices do rise again.

Case #3: Today Matt is under-water but he expects that Obama "jaw-boning" will force banks to re-write his loan and this will make them bear the incidence of price declines and put Matt back in a positive-equity state of the world. Here the probability of this event hinges on Matt knowing that there are plenty of other "victims" like him who are all yelling about how much they are suffering from their past "mistakes".

Economists must also make a decision on whether we want more renting and less home ownership in the U.S. For households just at the margin of paying their home payments, should they be renting? By foreclosing --- doesn't this accelerate their transition back to being a renter? Ultimately, is this what a benevolent planner would want this group to be doing given their income stream and asset position? A reasonable question here is; if we want many home owners to transition to being renters; do we force them all to make this transition immediately or do we have an orderly transition? If banks held mortgages of multiple homes in the same physical area such as in the movie Wonderful Life, then the bank would internalize the pecuniary externality that selling a lot of stuff at once will depress prices and may encourage other marginal homeowners to default.

Los Angeles Times
Keeping those keys
Allowing more homeowners who face deep losses to refinance would help ease the foreclosure rates.
April 11, 2009

Recent glimmers of hope about the economy may be lifting the stock market, but there's no sign yet of a let-up in the foreclosures that lie at the root of the problems. The coming weeks could provide more encouraging news about housing too, depending on the success of two new federal programs to avert defaults. Yet one of those initiatives, which helps borrowers refinance their federally owned or guaranteed loans, offers less help than it could -- and should -- to homeowners in California and other states with steep drops in property values.

There are numerous factors behind the stunning increase in foreclosures, including reckless borrowing, predatory lending and increasing unemployment. And in some cases, homeowners simply walked away from homes that were no longer worth the amount borrowed (so-called underwater mortgages). Those who made small down payments are particularly susceptible to this temptation, preferring a few years of bad credit to a long-term investment in a house that's fallen far off its purchase price.

Persuading them not to abandon their homes would slow the pace of foreclosures, easing the downward pressure on housing and the complex mortgage-backed assets that are gumming up the credit markets. One of the administration's new programs attempts to do that, but only for borrowers who have defaulted or may do so soon. It's a costly effort that offers to pay lenders and mortgage-servicing companies to reduce borrowers' monthly payments while rewarding them with up to $5,000 in free home equity if they stay current. In essence, the Treasury would give troubled borrowers a bigger stake in their homes.

The other new program eases Fannie Mae and Freddie Mac rules so that borrowers who aren’t behind on their payments can get government-backed refinancing. This help, which involves no special federal subsidies, is available to borrowers whose mortgages are owned or backed by Freddie or Fannie. Those whose property has depreciated significantly, however, may not qualify -- the firms won't provide refinancing for more than 105% of the current value. That's because the two firms finance many of their loan purchases through mortgage-backed securities that don't permit higher loan-to-value ratios.

Yet borrowers whose homes are the furthest underwater are the ones most likely to mail in their keys and walk away, with Fannie and Freddie -- and the taxpayers who bailed out the firms -- stuck with the loss. Enabling them to refinance into less costly mortgages gives them more incentive to stick with their investments until the housing market rebounds. And it doesn't pose the moral hazard that the other administration initiative does because it's not using tax dollars to ease part of the pain of the bad bets borrowers and lenders made during the housing bubble. The administration should find ways to make refinancings available soon to borrowers who are more deeply underwater, while low mortgage rates could serve as a powerful incentive not to give up on those homes.

Thursday, April 09, 2009

Dateline Beijing

Our reporter in Beijing knows how to meet a deadline.

Hi Matt and Dora:

Arrived in Beijing today. The flight was perfect. I went through the security area so fast (leave your shoes on) that I lost my usual rhythm and nearly left by back pack behind. Everyone at the airport was very helpful, calm, unrushed and pleasant. Beijing is very different from Shanghai. Slower pace, less jarring, architecture makes you feel your are in a community, no apartment high-rises surrounded by nothing, I read your paper concerning housing costs on the flight and I verify the part about building height. Today we wander, tomorrow we tour.

Today, Enrico Moretti will be back at his old UCLA to present this paper.
My Insitute has mananged to schedule a meeting at the same time as his seminar. This is the type of issue I run into because I don't have a 100% economics appointment.

Part of what Moretti will argue that people in big cities who have high nominal pay do not have that high real wages because real estate is expensive in big cities.

Mike Cragg and I in our classic 1999 RSUE piece thought about this issue. Suppose that in 1980 we all live in North Dakota in a house valued at $25,000 and then by the year 2000, we move to California and live in homes valued at $300,000.

Would a BLS researcher say; "Well sharp inflation here; a home's price went up 275/25 over 20 years".

A compensating differentials guy would say that the two homes have different characteristics and if you do a hedonic adjustment for differential local public goods such as climate in California and North Dakota, once you adjust for these factors there may have been no "inflation" at all. just different prices along the same hedonic pricing surface. So, Cragg and I estimate the repeat hedonic climate pricing regressions to test this claim.

Wednesday, April 08, 2009

Are Greens Misunderstood?

I once had access to a California micro data set that included each vehicle's license plate. I wondered if the propensity to have a vanity license plate such as "EconRules" or "UCLARocks" would predict any behavior? I gave up on that brilliant project but this article reminds me of the deep idea there. People have private information about their type. Vanity plates are one way for exhibitionists to reveal themselves.

Woman's tofu license plate curdles in Colo.

DENVER – One Colorado woman's love for tofu has been judged X-rated by state officials. Kelly Coffman-Lee wanted to tell the world about her fondness for bean curd by picking certain letters for her SUV's license plate. Her suggestion for the plate: "ILVTOFU." But the Division of Motor Vehicles blocked her plan because they thought the combination of letters could be interpreted as profane.

Says Department of Revenue spokesman Mark Couch: "We don't allow 'FU' because some people could read that as street language for sex."

Officials meet periodically to ensure state plates stay free of letters that abbreviate gang slang, drug terms or obscene phrases.

The 38-year-old Coffman-Lee says tofu is a staple of her family's diet because they are vegan and that the DMV misinterpreted her message.

More on Shanghai

The embedded reporters are still in Shanghai and they offer more insights on growth and concrete in one of China's major cities. I plan to take their diary entries and write a travel book around them. I'm hoping that Harvard Press will publish this. I am willing to write the preface.

Dateline: Wednesday, April 8.

We had dinner last night at Jean George. The food was as good as the restaurant in NYC by the same name. The service, lots of it, was impeccable, the decor rich sort of clubby and dark opulent huge space, sort speak-easy chic. Location near the Bund a promenade near the river. The promenade is not so great because of all the nearby construction, but when cleaned up will rival the view of lower Manhattan from the promenade in Brooklyn Heights. The view from the restaurant was perfect looking out over the river to the financial district with its large futuristic buildings on the other side. We were surprised that the staff badly outnumbered the dinners and that only a small percentage of the tables were occupied. I hope the weekend is better for them, they deserve it.

This morning we awoke to much clearer air and we could actually see clearly for some distance. We decided to tour the financial district: The amount of construction is unbelievable. The second tallest building in the world hardly seems to stand out from the crowd of tall buildings. Interesting the tall buildings were interspersed in some areas with old buildings likened to poor tenements with wash hanging our of each apartment, A huge space has been cleared for the next tallest Building I think it will be called the Shanghai Tower. I noticed that the usual temporary space for workers had clothing hanging out to dry, as most of the apartment houses do. This must mean that the construction teams are actually living on-site as the building is going up. How about that for efficiency. I found my camera charger did not work yesterday. So we were off to explore the problem. First stop a Best Buy in a half finished mall in the financial district. The Best Buy was huge with every known electrical device. Several pleasant, attractive helpful sales people gathered around us seemingly very interested in my problem. The studied my charger carefully a Panasonic. Alas, it was an old charger that was no longer made. But I bought it last year. They could not help. From the number of people in the store, they missed there only chance for a sale this morning. Again personnel outnumbered shoppers. We went on to Pacific. A local store. Again, pleasant, attractive, helpful people with little to do but to solve my problem. Off to the storeroom but confirmed the charger is no longer made. An urgent call to a supervisor: a somewhat older, intelligent thoughtful man who was not adverse to wielding a box cutter on every package that contained a charger on the floor to solve the problem. He did several experiments on my charger, declared it beyond resuscitation and found me a suitable replacement. Sale price about 350 Yuan. Everyone was pleased, their morning seemed complete. Off the to the Shanghai History museum. Very well done. A series of photos and dioramas that tell the history of Shanghaii. It was a busy museum. Chinese tour groups were everywhere. I did note that world war 2 and the Japanese occupation, which did have some impact on the city, was not mentioned. This is interesting because they are still bummed out over the Opium War with its resultant concessions and colonialism. At first I was critical, but on reflection I think the Chinese are teaching something to consider.

Back in the car, bicycles, cars, motor scooters, pedestrians all competing without the unusual restraints and I thought NYC cabbies were difficult. Then we saw him. Among the smartly dressed, busy attractive young people on the street, there was an old man on a bicycle that was carrying an impressive amount of cardboard. Our guide said he was a sanitation worker. My wife dubbed him a recycler and did not even realize, she successfully punned. Off to a restaurant in the old French concession. Lovely lunch. Walk on a pleasant mall. Bought some small stuff for the secretaries and back to the hotel to nurse a case of travelers diarrhea. At the hotel, I was struck by the large number of well appointed young people hired by the hotel to stand in the lobby, look attractive, pleasant and helpful and smile and greet as you passed.

Tomorrow we are off to Beijing and more to report.

HE IS THERE WITH ANOTHER REPORTER, here is her independent report

China is not your grandparents China! Twenty five year olds in Shanghai look like Japanese Club kids, are frequently as tall as Americans and live in airconditioned skyscrapers. We still can't figure out what people do for a living but they are talkative and mellow. We visited a five hundred year old river town where they sell twenty varieties of chinese pickles, live shrimp swim around with carp and catfish for sale, and saying "bo" meaning "no" doesn't help much to ward off sellers of dragon kites, fans, and fake rolexes.

Although the government is tearing down everything in sight to build skyscrapers the residents aren't sentimental about ditching the past as the population of the Shanghai region is 17 million and there would be no place to house everyone if they lived in traditional three story four generation farm houses. They have ribbon parks between the skyscrapers. The new development looks a lot like Guyaquil Ecuador which may not be surprising as there are a lot of Chinese investors in Ecuador and the climate is similar in Guyaquil and Shanghai.

We saw a terriffic troupe of Chinese acrobats that we had seen twenty years ago in Disney World, Florida. We went to the Shanghai art museum and historical museum and toured the modern art gallery district. Eating is terriffic also. Tomorrow we are off to Beijing.

Tuesday, April 07, 2009

The Future of Columbia's SIPA

This will be a boring blog entry so don't read it. Universities face tradeoffs. They want faculty to have nice offices (and this takes place in new buildings) but they want faculty to be close to each other and the main campus. Proximity helps to maximize intellectual synergies between reseachers (i.e the Paul Romer/Lucas/Jane Jacobs learning stuff). So a University is like a city. The city/university wants to sprawl but it may lose some of its intellectual growth engine when it does this.

First a disclosure. I was on the Columbia Economics/SIPA faculty from 1993 to 2000. When Dora was tenured by MIT, I moved to Tufts and our son was born in fall 2001. I was very happy at Columbia. The teaching was easy, I got a lot of work done and I enjoyed being in a great city.

Today SIPA has horrible real estate in the disgusting International Affairs building. Econ faculty were mugged there and it all was gross. But, we were all together with the political scientists, economics, and SIPA all in one terrible building. There were plenty of interactions. It helped SIPA and Econ that they could jointly hire faculty. I was a split FTE with .5 in each place.

But with this planned migration , this will all end. Columbia doesn't have the resources that Princeton or the Kennedy School has. The "new" SIPA will have a nice new building and a bored faculty. This is not a recipe for intellectual growth. The suburbs are boring.

SIPA's newfound autonomy, impending M'ville move, leave questions about future
by Scott Levi

As Columbia’s School of International and Public Affairs moves towards greater financial autonomy within the Faculty of Arts and Sciences this July, few at the school doubt that the transition will bring anything but positive results. Yet the next chapter in SIPA’s intellectual future remains hazy.

Yet the next chapter in SIPA’s intellectual future remains hazy.

According to John Coatsworth, SIPA dean and a professor of history, the school is slated to relocate in 2015 from Morningside’s International Affairs Building, a crowded home for a hodgepodge of academic departments and programs, to a roomier space on the planned Manhattanville campus. But the move—which Coatsworth said will coincide with the end of the first phase of expansion—could change the academic character of SIPA if the 27 professors that hold joint appointments in SIPA and other academic apartments move as well.

For these professors, many of whom teach courses in the departments of political science and economics, accompanying SIPA to Manhattanville would entail more than just spatial distance from their colleagues who stay in Morningside. Removed from the influence of other departments, the deep-seated connections between SIPA and these departments could trickle down to affect the undergraduate and graduate students they serve.

“The links between political science, economics, and SIPA are very, very deep,” said Adlai E. Stevenson Professor of International Affairs Robert Jervis. “If econ and poli sci do move, that will, over the long run, change the intellectual nature of SIPA.”

Out of 71 full-time faculty, 10 are from political science and seven are based in economics with the remainder hailing from such departments as history, sociology, and Middle Eastern and Asian Languages and Cultures. Among this faculty, a variety of arrangements exist for determining salaries, but the majority of professors receive portions of their income from both of their employing departments.

SIPA’s status shift is not directly related to the Manhattanville expansion plans. “They’re completely separate issues,” Coatsworth said. “The issue of space arose independently of SIPA’s autonomy, although the two fit well together.” Under the current arrangement, SIPA contributes about 37 percent of its revenue to the Arts and Sciences. Tuition goes straight to administrators in the Arts and Sciences, who then choose how to allot funds to each of SIPA’s degree programs, a system critics say results in inefficient micromanagement by a remote body.

In the future, SIPA will pay a consistent tax but will gain the ability to manage its own finances, thinning out the thicket of arrows on budgetary organization charts. “Most important for this school is predictability in our budgets from year to year,” said Rob Garris, senior associate dean. “This clarifies the school’s financial situation for alumni and potential donors the dean might speak to,” thereby augmenting SIPA’s fundraising power.

By avoiding complete separation from the Arts and Sciences, the revised setup preserves valuable relationships across the University, such as the foreign language and social sciences courses taken by SIPA students, joint hiring, and the interdisciplinary institutes housed in IAB. The streamlined approach also guarantees that faculty salaries continue to work on the same principles. Nonetheless, faculty are mostly in the dark about future logistical changes.

“Over the course of the next 12 months, we’ll know a lot more than we know now,” Coatsworth said, assuring that professors will be provided with information about changes in office and institute space.

Physical removal is a double-edged sword—while it could put the interpersonal interactions that give SIPA access to Morningside’s plentiful intellectual assets at risk, the increase in space could also enhance intellectual productivity.

“Space is such an impediment to collaboration,” John Huber, chair of the political science department and a former member of SIPA’s executive committee, said. He added that, while professors could easily alternate between locations on both campuses, certain programs that intertwine SIPA and social science resources could suffer from decreased convenience. “If you live far away, you are less likely to go to conferences,” he said.

On the other hand, with floors in IAB vacant, undergraduate and graduate academic programs could host more events that might now be cancelled due to space constraints. Institutes and centers, which include regional hubs like the Weatherhead East Asian Institute and the Harriman Institute for Russian, Eurasian, and Eastern European Studies along with research establishments “will have many more options for space in which to schedule events that they would like to have,” Coatsworth said.

Given intellectual separation, Huber said, “SIPA will develop its own faculty and do less collaboration with the social sciences.” This format would resemble that of Harvard’s John F. Kennedy School of Government, which relies on dedicated faculty rather than taking the integrated approach implemented by both Columbia and the Woodrow Wilson School of Public and International Affairs at Princeton.

Is Shanghai a "Consumer City"?

As you know, I've recently been writing some papers on the optimistic hypothesis that the demand for local amenities (i.e green) is rising in China's cities. Read this and this .

A close friend of mine is in China right now and here is his report from Shanghai.

Hi Matt

Hope all is well. we are having fun. Yesterday we went to the Shanghai Urban Planning Museum. Big plans vast amounts of building for the next ten years. The City is already huge and smog is a problem. Smog interferes with background imaging in our photos and my wife is coughing. It is odd you do not see many birds. Looks like a solid middle class and pockets of wealth are in place. Public transportation. seems adequate. Plenty of VW cabs are inexpensive. The art museum was great. Today, we went to an old village built on canals. A primitive place with lots of tourists. The kids look well-fed. We are eating in great restaurants. Visiting beautiful gardens and fighting off Rolex salesman. Took in a great acrobat show last night. The hotel is beyond luxury, but not well filled.

Saturday, April 04, 2009

Economists in the News

Today's New York Times has a good economics article in the Arts Section (I thought it might appear in the business or sports section) on skeptical economists who question whether FDR's well meaning actions ended or exacerbated the Great Depression. This debate has lead to great economists doing funny things. For example, consider John Cochrane's Darth Vader imitation.

In other news in today's Times, we learn how much $ Larry Summers made last year. Summers' $ Disclosure .

A cynic might ask, "Why was Wall Street willing to pay such high speaking fees to him?" Now if it is based on his ample stock of insights from his cumulative QJE publications, this is fine with me. I would be less happy if Wall Street engaged in the following dynamic logic before the November 2008 election.

Wall Street

1. We think that a Democrat will win the White House in 11-2008
2. We think that Larry Summers will be a King in the New Administration
3. We'd like him to be our friend.

Capture theory is not a new idea in economics. see http://en.wikipedia.org/wiki/George_Stigler

Are economists susceptible to capture or are we the only ones who do not act in accord with our theories? It is only human nature to be nice to those who have been nice to us.

I am accusing nobody of corruption other bloggers are talking about strong conflict of interest here. Taking so much $ from Wall Street does give a bad smell. I would have been happier if he had given 400 talks at $10,000 a pop at Universities such as Yale.

The Obama Team is making dozens of decisions that have efficiency and distributional consequences. What is their criteria function for how they rank their policy choices?

Here are the nitty gritty details of Dr. Summers' huge earnings from last year. You judge for yourself.

Thursday, April 02, 2009

The Price Mechanism at Work

Declining asset prices create new opportunities for asset buyers. This NYT article highlights how declining home prices in Florida have led patient renters to enter the market to buy their first house for a bargain. As the Obama Team thinks about the future of banking finance, I hope these smart guys come up with ways such that the financing sector does not take correlated gambles again. The new issue of the Journal of Economic Perspectives has some very interesting articles on the financial crisis.


Wednesday, April 01, 2009

Can Google Invent an Autopilot Economics Professor?

The folks at Google are creative. If I'm reading this correctly, they are claiming that they have a new service where they will reply to your email by impersonating you and do a better job of being "you" than you do as you. This would save me time and people would like the new "me" more than the original.

But, my Google friends --- I would ask you to think bigger. What about a new "Autopilot Professor" such that Google will send someone to lecture for me who talks like me (and has more hair)? What about a new google product that eats for me? There are a variety of other tasks that I would like to outsource. Watering our lawn; taking out the trash, talking to my friends. I'm hoping that Google will soon have products that allow me to automate these tasks as well.

I liked the part in the google autopilot where it discusses what happens if both communicating parties have their "autopilot" flying so that the robots are having their own private dialogue with no "real" humans participating at all. Perhaps faculty meetings could be replaced with this stuff? This sounds like the start of a bad sci-fi movie but maybe Google should think about taking over Hollywood by generating random scripts --- so this isn't about Monkies typing Shakespeare --- now its about autopilots run wild.

POSTSCRIPT; a friend has pointed out that I've been suckered. I am a April Fool!

Why are Teen Age Vegetarians Unhealthy? Selection Effects vs. Treatment Effects

Dr. Woody Allen stated a long time ago that red meat consumption is the key to good health. Yahoo News has a headline today appearing to confirm this. Teenage vegetarians have some health problems. This is a nice case of selection versus treatment --- see the The Dark Side of Vegetarianism .