Thursday, May 28, 2009

Clash of the Titans

Have you wondered what my dining room looks like? I have and now I know. When I was a kid, I was shipped out for clarinet lessons and sunday school lessons. We have taken a different path with the new generation. Here he is matched up with one of the best chess players in Los Angeles. He is focused like his mom.

Next week is the final week of the academic year. I can almost smell summer time.

Wednesday, May 27, 2009

Book Review: Cooking is the Key to our Triumph Over Other Creatures

Back in the "bad old days" before we discovered how to cook, ape/humans had to spend a fair bit of energy digesting the raw food and meat we ate. Once we learned/lucked into starting to cook ---- we didn't need to use as much energy to digest our food. The cooking took care of that. The cooking must have knocked out some nasty diseases as well. The energy we used to use to digest now went to our brains and we were able to develop above the neck. Since there are economies of scale of having a single fire, cooking forced us to socialize and to hang out together and this may have soothed the "savage beast". THUS, cooking is the key to our evolutionary rise to the top! This nice story is at the heart of this new book. I haven't read it but the New York Times book review tells a compelling story.

Tuesday, May 26, 2009

Drought and Smart Water Pricing

Dear Los Angeles DWP,

I would like to suggest a new incentive structure that will simultaneously
raise revenue for your organization and end the "water shortage" in Los Angeles.

Scrap your strange current tiered water pricing system and replace it with the
following simpler tiered water pricing system.

Choose a bimonthly quantity of water that each household should be allowed
to purchase cheaply. This will protect the poor. Suppose that each person
"needs" 10 gallons of water a day. A family of 4 will need 10*30*4*2 = 2400 gallons every two months. Charge them .05 per gallon, so they will pay $120 every 2 months for water.

For anyone who wants to consume more than 10 gallons a day, they pay 40 cents a gallon for every gallon once the household meter exceeds 2400 gallons on a 2 month billing cycle.

Unlike your current pricing scheme, my scheme treats everyone equally. It guarantees that the poor do not lose their right to water and it creates the right marginal incentives for "water hogs" to think about ripping out their grass and economizing on their water consumption. Your current incentive system encourages sprawl, big lots and lots of grass and golf. As a green economist, I certainly don't like any of these.

I believe that my proposal would be a progressive public policy that would redistribute income from the rich to the poor and would protect the environment.

With your current incentive scheme, the average price of water per gallon per square foot of land is lower than the average price per gallon per household.

Consider the following weighted average. Suppose that there are two households who each live in 8 thousand square foot yards. Calculate their total water bill if each consumes X gallons of water. Now suppose that one household lives on a 16,000 square foot yard and consumes X gallons of water while the other household consumes 0. Given your current formula, total water expenditure would decline despite the fact that the same amount of water (X) is consumed in each case.

I realize that you want to encourage sprawl and big grassy yards but I understand your formula!

best regards, mk

Sunday, May 24, 2009

LADWP's Insane Water Pricing

There is serious drought in the West. Higher prices could encourage a demand side conservation. Los Angeles Department of Water & Power is not doing its part to "solve" the problem. What if I told you that the LADWP charges households different prices for a gallon of water depending on what season it is, how large their lot size is and how many people live in their home? The first criteria sounds reasonable. The next two are insane. For the evidence, click Los Angeles DWP's Residential Water Pricing Schedule

LA DWP has a multi-tiered water pricing schedule such that if you use less then your marginal price per gallon is lower than if you use more. Because of the drought, the tier II water prices will go up by 45% in June 2009 while the tier I prices will stay constant.

Now here is what is interesting. According to the data, consider two families who live in zip code 90024;

Matt Kahn lives in a home with a lot size less than 7,500 and there are 3 people in his house; he stays on the first tier of the water schedule if he consumes
less than 28*748 gallons every two months.

Consider Candy Spelling (Aaron's widow) who lives in the same zip code. Suppose there were 10 people in her home (her staff) and because she has a lot of more than 43,000 square feet. She stays on the first tier of the water schedule if she consumes less than (76+14)*748 gallons every two months! I am paying for a lot of watering of her grass!

LA DWP just proudly announced that it has raised Tier II water prices by 44% but hasn't raised Tier I prices (to protect the poor). But, if the rich who live on big lots all have a sufficiently large Tier I access (the (76+14)*748 gallon segment) then they may never reach the Tier II. In this case, the "new incentive" won't affect anyone's behavior and the drought will continue.

As an economist, I'm used to "state dependent pricing" but I'm not used to this "individual characteristics pricing".

Isn't this discrimination? She faces a different (cheaper) marginal pricing schedule than I do because she has a big staff and a big lot. Is this the right incentive structure to encourage conservation?

I encourage you to draw out our respective "step functions" on a sheet of paper with gallons on the x-axis and marginal cost ($ per gallon) on the vertical axis.

Saturday, May 23, 2009

A Great UCLA in 2019

Planning ahead is always a wise move. In this spirit, UCLA has announced its new 10 Year Plan . I suggest taking a look at the comments being posted there by faculty. Bill Zame offers some smart thoughts. I would like to offer a few thoughts for the Campus Leaders to consider.

There is a fundamental incentive problem related to intellectual "sprawl". Every leader when his/her time is done wants to be able to point to something lasting and say; "My legacy is that I created the "XX" and the "YY"." The problem is that this creates mission creep. A more modest legacy would be; "When I took over UCLA ; the Economics Department was the 12th best in the world and I helped to keep it ranked 11th in the face of free agency and private schools attempting to lure our top faculty." That isn't a "sexy" legacy but it is a very important.

In a time of cuts, what should be cut? People are using the words "selective excellence". I don't know who or how those words will be defined. In a diverse setting, everyone will have a different definition of "excellence". A business school dean might honestly say; "well, who is bringing in the most $?" (new drug development, new engineering breakthroughs). A publicity minded Dean might say; "who generates the most external buzz about our campus? (i.e Jared Diamond, Coach Wooden etc).

Compare UCLA's History Department and its Economics Department. Today, the history department appears to have roughly 80 faculty while the economics department (after the departures that will happen this summer and in the summer of 2010) will have roughly 35 faculty. How did this imbalance occur? In a "fair" society, each department should have 50 but out of my own self-interest, I wish the numbers were reversed. Choices made in the 1970s appear to have very long run consequences.

Friday, May 22, 2009

The Economics of Superstars

The Internet offers some interesting information. Do you get paid $10,000+ to give a talk? This website "names names" and prices to see some of the big stars on your stage! Here is one data point of a well known economist making Good $ per talk . Has the recent recession cooled off this "superstar" market?

Thursday, May 21, 2009

Every Day is Take Your Child to Work Day

My son lives quite a life. He spends a fair bit of time with adults, nerdy adults. Below, I reproduce a photo of Russ Walker (Grist), myself and my heir at an environmental conference where we were having a discussion in front of 250 people. I was in charge of the kid that day and was worried that I would lose him. So, I brought him up on stage.

Wednesday, May 20, 2009

The Silver Lining of Recessions: Artists Focus on Creativity Rather than "The Client"

When I was a graduate student, my famous macro teachers would say that a recession is a good time to take a vacation. We laughed but we wondered what the "real unemployed" were doing during recessions. Since the key models featured no geography and zero migration costs across islands (i.e. cities), it was puzzling why anybody was actually unemployed. But in the real world of undiversified local labor markets, home ownership where home prices and wages are positively correlated and social capital and family tying you to a given area (and thus you can't cheaply move to a booming island), we knew that unemployment can happen. As factories close, what happens to the displaced? Derek Neal taught us that they took a big pay cut moving to the low wage service sector. But for those who don't find work, what are they doing? Are they searching? Are they "chilling"? Are they investing in their skills or drinking and smoking and depreciating? Are they starving as they face period by period budget constraints (i.e consumption today = income today) or do they face dynamic PDV budget constraints and are able to take a nice vacation before the economy heats up again?

Today's New York Times hints that artists actually like recessions. During a downturn , there are fewer corporate clients asking the artists to make full sculpture nudes of the CEO of the firm. With the opportunity cost low, artists can focus on their "real passion" and not sell out to the man.

On the environmental front, I hope that firms are thinking about how to reorganize themselves as the next boom starts up and as they anticipate carbon pricing. Such pro-active investments during a downturn would ease the adjustment. Now you might say that they are liquidity constrained and can't make these investments but that is a testable claim.

Tuesday, May 19, 2009

The Tragedy of the Commons and Quasi-Public Property

I live 100 yards away from an elementary school. Each morning frantic parents pull up and park their cars in front of my house to deliver kids to school. The precious children impose an externality on my household. The kids and their drivers stomp on the nice plants we have planted in the soil between the street and the sidewalk. This is a fairly large rectangle measuring perhaps 70 feet by 10 feet. In the name of reducing our carbon footprint, we pulled out all of the grass and planted low water "cute" plants. To our surprise, the soccer moms and dads and their great children appear to take pride in stomping on our plants. I caught myself getting ready to pick up an 11 year old today and tossing him. The parents are worse. They lie as they "apologize" and then do the same thing the next day. I am tempted to cut their tires. This would be an accident of course. In Los Angeles, I do have a secret goal of becoming rich as I star in the new reality video series "Professors Gone Wild".

There is an interesting property rights issue here that keeps popping up. The LA Times wrote this about this issue.

Sunday, May 17, 2009

Our First Los Angeles Earthquake

That was exciting. We were having a family disagreement about my son's effort on his homework when the house shook
pretty sharply. It felt like a subway train was arriving at our house. This stopped the family squabble as I yelled "earthquake" and hid under my desk (I'm kidding). We survived the "big one" and I may actually show up and teach tomorrow again at UCLA. I am "UCLA Unabashed".

Moderate Earthquake Shakes Los Angeles

Published: May 18, 2009
Filed at 11:59 p.m. ET

LOS ANGELES (AP) -- A moderate earthquake has shaken the Los Angeles area. There are no immediate reports of any major injuries or damage.

A preliminary report by the U.S. Geological Survey says a magnitude-5.0 quake hit at 8:39 p.m., about 10 miles southwest of downtown Los Angeles, near Inglewood.

The quake jiggled the greater Los Angeles region and was felt as far south as Long Beach.

Brian Humphrey of the Los Angeles Fire Department says there were no reports of any major damage.

Credit Card Purchase Patterns Can Predict Future Behavior

When I was a younger man, I was taught that a good social scientist should be able to "explain and predict" human behavior. Now that people are questioning whether economists can predict human behavior, it may be time to read the 5/17/2009 New York Times Magazine .

The Credit card companies should win a nobel prize for their ability to predict human behavior. While this picture below is hard to read, it shows that people who buy carbon monoxide detectors for their homes are much less likely to default on future bills.

This consistency of human behavior by heterogeneous households is reassuring. So what is going on here? There is an unobservable personal characteristic such as "cautiousness" and "adherence to discipline". We do not observe this trait in socio-economic data but we reveal this unobservable through the purchases we make. So carbon monoxide detector purchases do not cause you to pay your bills; instead it signals your "type" and the type of people who buy the safety products live a safe low risk life style. This is what I mean by "internal consistency". I have studied this in the case of green products. The people who buy green products also vote "green" in the political arena. This common factor model of behavior should have broad application.

In other news, UCLA raps up teaching in 2 weeks. Monday is the last time I will speak in class. We are heading into "student presentations". I love that part of the class.

This summer I have deep hopes of making an enormous push on a number of different research projects. Right now, I feel like an Asst. Prof again but this time I know what I'm doing. By October 2009, I will end my research career and start to write detective novels.

Saturday, May 16, 2009

Los Angeles Seeks Water: But Owens Valley Doesn't Like Coase

Los Angeles needs more water ( The Mayor has even agreed to increase the block tier rate in the second pricing tier. To protect the poor, he has not raised the first tier (the lowest) rate. The price is still not high. In the second tier, a 748 gallon increase in water consumption costs you $5.48. That's a pretty low price per ounce. At that price, a six pack of beer would cost (548/(748*128))*72 = 41 cents. My students would be a lot more interesting in class if they faced that marginal price. Set the price at 10 cents a gallon and we would see some serious water efficiency in California. No more grass, no more "water shortages". Suppose the state received 1 cent per gallon in new tax revenue. 35 million people using 25 gallons of water a day (I know this is too low but post efficiency innovation) would yield $7 million dollars of tax revenue a day or over $2 billion per year. This would be fine with me. That would be a "double dividend".

But, since politicians do not believe in demand side solutions --- we turn to the supply side. LA is purchasing up more land in Owens Valley. Is this for vacation homes? No. Without knowing all of the details, there must be water rights attached ot this land. LA Times article on water imports . While the Coase Theorem tells us that this purchase makes good sense, the locals are not happy. Los Angeles is accused of "imperialism" and a natural resource grab in a colony sense.

Friday, May 15, 2009

Grist Article on Carbon Geography work by Cragg/Kahn

Cragg and I have tried to do our part to inform public policy as the Carbon legislation takes shape. Here is our paper and here is a Grist article discussing it.

Thursday, May 14, 2009

Lead Contamination in Urban Gardens

The legacy of the dirty urban past lingers. I did not love reading this NY Times article on lead in urban soil . If you grow your food locally in an area that featured lead paint and leaded gasoline landing on your soil, what happens to the consumers of this "green" produce? For some clues, take a look at this .

Tuesday, May 12, 2009

How to build a Bigger Brain?

Have you ever wanted to be Larry Summers? Now, this is your chance. For a limited time only, UCLA research will show you how you can upgrade your processing chip.

How to build a bigger brain?

Study shows that meditation may increase gray matter

Push-ups, crunches, gyms, personal trainers — people have many strategies for building bigger muscles and stronger bones. But what can one do to build a bigger brain?


That's the finding from a group of researchers at UCLA who used high-resolution magnetic resonance imaging (MRI) to scan the brains of people who meditate. In a study published in the journal NeuroImage and currently available online (by subscription), the researchers report that certain regions in the brains of long-term meditators were larger than in a similar control group.

Specifically, meditators showed significantly larger volumes of the hippocampus and areas within the orbito-frontal cortex, the thalamus and the inferior temporal gyrus — all regions known for regulating emotions.

"We know that people who consistently meditate have a singular ability to cultivate positive emotions, retain emotional stability and engage in mindful behavior," said Eileen Luders, lead author and a postdoctoral research fellow at the UCLA Laboratory of Neuro Imaging. "The observed differences in brain anatomy might give us a clue why meditators have these exceptional abilities."

Research has confirmed the beneficial aspects of meditation. In addition to having better focus and control over their emotions, many people who meditate regularly have reduced levels of stress and bolstered immune systems. But less is known about the link between meditation and brain structure.

In the study, Luders and her colleagues examined 44 people — 22 control subjects and 22 who had practiced various forms of meditation, including Zazen, Samatha and Vipassana, among others. The amount of time they had practiced ranged from five to 46 years, with an average of 24 years.

More than half of all the meditators said that deep concentration was an essential part of their practice, and most meditated between 10 and 90 minutes every day.

The researchers used a high-resolution, three-dimensional form of MRI and two different approaches to measure differences in brain structure. One approach automatically divides the brain into several regions of interest, allowing researchers to compare the size of certain brain structures. The other segments the brain into different tissue types, allowing researchers to compare the amount of gray matter within specific regions of the brain.

The researchers found significantly larger cerebral measurements in meditators compared with controls, including larger volumes of the right hippocampus and increased gray matter in the right orbito-frontal cortex, the right thalamus and the left inferior temporal lobe. There were no regions where controls had significantly larger volumes or more gray matter than meditators.

Because these areas of the brain are closely linked to emotion, Luders said, "these might be the neuronal underpinnings that give meditators' the outstanding ability to regulate their emotions and allow for well-adjusted responses to whatever life throws their way."

What's not known, she said, and will require further study, are what the specific correlates are on a microscopic level — that is, whether it's an increased number of neurons, the larger size of the neurons or a particular "wiring" pattern meditators may develop that other people don't.

Because this was not a longitudinal study — which would have tracked meditators from the time they began meditating onward — it's possible that the meditators already had more regional gray matter and volume in specific areas; that may have attracted them to meditation in the first place, Luders said.

However, she also noted that numerous previous studies have pointed to the brain's remarkable plasticity and how environmental enrichment has been shown to change brain structure.

Other authors of the study included Arthur Toga, director of the UCLA Laboratory of Neuro Imaging; Natasha Lepore of UCLA; and Christian Gaser of the University of Jena in Germany. Funding for the study was provided by the National Institutes of Health. The authors report no conflicts of interest.

The UCLA Laboratory of Neuro Imaging, which seeks to improve understanding of the brain in health and disease, is a leader in the development of advanced computational algorithms and scientific approaches for the comprehensive and quantitative mapping of brain structure and function. The laboratory is part of the UCLA Department of Neurology, which encompasses more than a dozen research, clinical and teaching programs. The department has ranked No. 1 among its peers nationwide in National Institutes of Health funding for the last seven years (2002–08).

For more news, visit the UCLA Newsroom.

Monday, May 11, 2009

Celebrity Foreclosure: The Case of Victoria Gotti

Salient, shocking events such as Chernobyl or 9/11/2001 can lead to a surge of demand for regulation as the distracted populace wakes up and starts to focus on an issue as the news reports on it 24/7. Could celebrity foreclosure have a similar effect? I doubt it but I am worried about Victoria Gotti. Here is the The New York Post Story and here is Zillow entry on the Celebrity foreclosure list.

Friday, May 08, 2009

Stuff I read in the Newspapers

Let's contrast today's New York Post, New York Times and LA Times. I will show you why I moved from New York to Los Angeles.

Exhibit #1 "Sexy" NYU Economists (You decide)

Exhibit #2: The New York Times thought that Cyn was a dude but I knew. Here is their retraction.

Business Day

A picture caption on Thursday with an article about an agreement between The New York Times Company and workers at The Boston Globe misstated the gender of Cyn Goodenough, shown reading the Boston newspaper. She is a woman. (Go to Article)

Exhibit #3: LA Times --- This guy Scott below is my kind of guy.,0,7980669.story

Fuming over emissions

Re “Motorcycles next up for smog tests?” May 5

Because motorcycles are motor vehicles, they should be held to the same emissions standards as cars.

And while we're at it, what about making them quieter too? I've had Harleys pass my house that are so loud they set off my car alarm. If a car made this much noise it would be ticketed, but somehow the motorcycle owners get away with it.

Robert Marcos

La Quinta

No gas or diesel engine should be exempt from air pollution controls. We all pay the price for their usage.

And let's enforce the ban on gas leaf blowers as well. Homeowners, don't wait for the law to do it, tell your gardener to use electric devices. Fire them if they don't comply; there are plenty out there who will.

You, with the hybrid in the driveway and the gardener with the gas blower, you should be ashamed of yourself.

Scott Mandell

Studio City

New Carbon Geography Paper Now Posted

This new political economy paper examines how Congressional District carbon emissions, ideology and per-capita income correlate with Congressional voting on carbon mitigation legislation. We show that President Obama will have trouble finding anti-carbon votes in the same places where Hilary Clinton showed strength during the 2008 primaries. Not San Francisco. Poor, conservative, carbon intensive areas feature Congressional Reps and Senators who are not voting for a carbon tax.

Wednesday, May 06, 2009

Do Los Angeles Celebrities Collect More $ When They Sell Their Homes than Matt the Economist?

What is the price of fame? If a famous person has lived in a house, does it sell for a price premium? Is this a selection effect? The famous live in nicer neighborhoods and homes? Or, are we status conscious and want to use a bathroom that was once used by Burt Reynolds?

Each Week, the Los Angeles Times publishes data on celebrities who are selling their homes. I took these data and turned it into an .xls data set. Because, I like you and I believe in open source; here are the data; L.A Celebrity Real Estate data .

I have a second data set that contains all 54,000 real estate sales in Los Angeles county. I pool the two data sets and estimate some hedonic price regressions.

For 40878 home sales in Los Angeles county where the home is a single detached house,
the dependent variable = log(sales price/interior square footage of the house)

This is regressed on zip code fixed effects and a quadratic of what month the home sold (these terms proxy for the recession of 2008 and time series effects). The key variable in the regression is the "celebrity" dummy. This variable equals one if the seller is a celebrity listed in the data set above and equals zero otherwise. The omitted category are nobodies like you and me.

Note the key finding; the celebrity premium is 11%. That's not big and remember it bundles the fame effect and the fact that the home is likely to have better unobservables. So , I conclude that there isn't a big "fame" premium in status obsessed LA.

40,878 observations and R2=.743

log(price/per square foot) = 5.73 + .115*Celebrity

274 zip code fixed effects and the month quadratic are suppressed.

Who Should Speak at UCLA's Graduation?

To my great surprise, UCLA has picked Oliver Stone and the ex-leader of Spain (James Franco) to be the graduation speakers. As usual, I had high hopes that I would be selected. I won't forget this insult.

Huffington, Stone, Franco top list of UCLA commencement speakers

Elizabeth Kivowitz Boatright-Simon

Political columnist Arianna Huffington, filmmaker Oliver Stone, actor James Franco and a host of other distinguished speakers will deliver keynote remarks at UCLA's commencement ceremonies, which begin May 8 and run through June 13.

This spring, UCLA will award approximately 10,000 bachelor's, master's, doctoral and professional degrees.

Arianna Huffington will deliver remarks at the School of Public Affairs commencement ceremony on Friday, June 12, at 9 a.m. in Royce Hall. Huffington, co-founder and editor-in-chief of the Huffington Post, is a nationally syndicated columnist and the author of 11 books. She is also a co-host of "Left, Right & Center," KCRW-89.9 FM's popular political roundtable program. In 2006, she was named one of the world's 100 most influential people by Time magazine.

Oliver Stone will deliver keynote remarks at the commencement ceremony for the School of Theater, Film and Television on Friday, June 12, at 4 p.m. in Dickson Court North. Stone is credited with writing and/or directing more than 20 feature-length films. Before attending film school at New York University, he served a 15-month tour of duty in Vietnam. His critically acclaimed films include "Platoon," "Wall Street," "Born on the Fourth of July," "The Doors," "JFK," "Natural Born Killers," "Nixon" and "W," among others.

James Franco, who graduated from UCLA in 2008, will deliver keynote remarks at the College of Letters and Science commencement ceremony on Friday, June 12, at 5 p.m. in Pauley Pavilion. Franco's acting career began with a starring role on the television show "Freaks and Geeks," which became a cult hit. He is more recently known for his roles in the "Spider-Man" films, "Pineapple Express" and "Milk." Franco attended UCLA for a year beginning in 1996, left school to pursue his acting career and returned 10 years later to successfully complete his bachelor's degree in creative writing.

At other UCLA commencement ceremonies (listed in order of occurrence):

· Kamala D. Harris, district attorney for the city and county of San Francisco, will deliver the commencement address at the School of Law ceremony on Friday, May 8, at 3:30 p.m. in Dickson Court North.

· Richard Valachovic, executive director of the American Dental Education Association, will deliver keynote remarks to graduates of the School of Dentistry on Sunday, May 31, at 10 a.m. in Royce Hall.

· Pauline Chen, a surgeon, author and online columnist for the New York Times, will deliver remarks at the Hippocratic Oath ceremony for graduates of the David Geffen School of Medicine on Friday, June 5, at 5 p.m. in Dickson Court North.

· Anne Sweeney, co-chair of Disney Media Networks and president of the Disney/ABC Television Group, will address graduates of the Anderson School of Management on Friday, June 12, at 4 p.m. in Wilson Plaza.

· Benjamin Chu, regional president of Kaiser Permanente Southern California, will address graduates of the School of Public Health on Friday, June 12, at 5:30 p.m. in Royce Hall.

· Beverly Malone, CEO of the National League for Nursing, will address graduates of the School of Nursing on Saturday, June 13, at 8 a.m. in Royce Hall.

· John J. Tracy, chief technology officer for Boeing Co., will address graduates of the Henry Samueli School of Engineering and Applied Science on Saturday, June 13, at 12:30 p.m. in Pauley Pavilion.

· Catherine Opie, artist and professor of photography in UCLA's Department of Photography, will address graduates of the School of the Arts and Architecture on Saturday, June 13, at 4 p.m. in Dickson Court North.

For general commencement information, updates, and details on ceremonies for particular schools and programs, visit

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, May 04, 2009

UCLA's Lee Ohanian Asks a Good Question

My UCLA colleague has put out a piece in Forbes that you should read. Lee Ohanian's Why Did the Great Depression Last So Long?

eBay's Role in the Sale of "Ancient (i.e fake)" Artifacts

This new UCLA research looks like a twist on Michael Kremer's work on elephants. Increasing supply lowers equilibrium price and this discourages degradation of the commons. Maybe I should take a course in archaeology. My son keeps talking about the University of Chicago's Indiana Jones.

eBay has unexpected, chilling effect on looting of antiquities, archaeologist finds

by Meg Sullivan

Having worked for 25 years at fragile archaeological sites in Peru, UCLA archaeologist Charles "Chip" Stanish held his breath when the online auction house eBay launched more than a decade ago.

"My greatest fear was that the Internet would democratize antiquities trafficking, which previously had been a wealthy person's vice, and lead to widespread looting," said the UCLA professor of anthropology, who directs the UCLA Cotsen Institute of Archaeology.

Indeed, eBay has drastically altered the transporting and selling of illegal artifacts, Stanish writes in an article in the May/June issue of Archaeology, but not in the way he and other archaeologists had feared.

By improving access to a worldwide market, eBay has inadvertently created a vast market for copies of antiquities, diverting whole villages from looting to producing fake artifacts, Stanish writes. The proliferation of these copies also has added new risks to buying objects billed as artifacts, which in turn has worked to depress the market for these items, further reducing incentives to loot.

"For most of us, the Web has forever distorted the antiquities trafficking market in a positive way," Stanish said.

Looting, which is illegal, is widely recognized as destructive to cultural heritage because it can remove from public ownership tangible links to a people's past. In addition, looting is perceived as the enemy of scholarship because it typically is done without regard to any appropriate methods that allow scientists to date objects and to place them in a larger, more meaningful context.

One of the world's premiere authorities on Andean archaeology and supervisor, at UCLA, of the one of the world's largest collections of working archaeologists, Stanish has been tracking objects billed as antiquities on eBay for more than nine years. His conclusions also are informed by experiences with the U.S. customs service, which occasionally asks him to authenticate objects. In addition, Stanish has visited a number of workshops in Peru and Bolivia that specialize in reproductions of pottery and has interviewed these artisans. While his background is in South American archaeology, he has tracked eBay listings of antiquities from many cultures.

"Chinese, Bulgarian, Egyptian, Peruvian and Mexican workshops are now producing fakes at a frenetic pace," he writes.

When he first started tracking eBay's sales of antiquities, Stanish focused mainly on objects related to his field. At the time, the ratio of real artifacts to fakes was about 50-50, he estimates. About five years later, 95 percent were fakes. Now, he admits, he can't always tell, because the quality of the fakes has improved so much.

He estimates that about 30 percent of "antiquities" currently for sale on eBay are obvious fakes, in so much as creators mix up iconography and choose colors and shapes for visual effect rather than authenticity. Another 5 percent or so are genuine treasures. The rest fall in the ambiguous "I would have to hold it in my hand to be able to make an informed decision" category, he writes. Stanish admits himself to occasionally being duped by fakes encountered in shops in areas where both looted items and fakes are sold.

The advent of eBay has had the biggest impact on the antiquities market by reducing the incentive to unearth precious treasures in the first place, Stanish has found.

"People who used to make a few dollars selling a looted artifact to a middleman in their village can now produce their own 'almost-as-good-as-old' objects and go directly to a person in a nearby town who has an eBay account," he said. "They will receive the same amount or even more than they could have received for actual antiquities."

As a result of the rise of a ready market, many of the primary purveyors have shifted from looting sites to faking antiquities.

In addition to linking craftsmen with a market for cheap fakes, eBay has tended to have a depressing effect on prices for real looted artifacts, further discouraging locals from pillaging precious sites.

"The value of ... illicit digging decreases every time someone buys a 'genuine' Moche pot for $35, plus shipping and handling," he writes. (An authentic antiquity would sell for upwards of $15,000.)

So far, authentication techniques have struggled to keep abreast of increasingly sophisticated fakes, Stanish said. Pottery can still be authenticated reliably, although the process is costly. In addition, forgers tend to only guarantee the authenticity of their pieces as long as no form of "destructive" analysis is used. While just a tiny flake of pottery is required for thermoluminescence dating — the gold standard for pottery — the process is technically considered destructive, Stanish points out, so the test invalidates such warrantees, no matter its conclusion.

Thanks to laser technology and chemical processes for forming antique-appearing patinas, stone and metal, reproductions are "almost impossible" to authenticate using today's technology, Stanish writes. However, the prospect of authentication techniques eventually catching up with today's fakes is also having a chilling effect on the market for antiquities, by dramatically adding to the risk of illicit, high-end trafficking.

"Who wants to spend $50,000 on an object 'guaranteed' to be ancient by today's standards, when someone can come along in five years with a new technology that definitively proves it to be a fake," he asks.

Archaeology is a publication of the Archaeological Institute of America, North America's oldest and largest organization devoted to the world of archaeology.

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Fed Independence and Ben Bernanke's Incentives: How to be Re-Appointed?

Allan Meltzer has a thought provoking editorial in today's New York Times. He accuses Ben Bernanke of being "too close" to the Treasury Department and not "independent" enough. A microeconomist might ask; "what are Ben's incentives here?" If his sole goal is to be re-appointed as Fed Chair in 2010 then of course he will follow his Boss's orders. If he has more long run social preferences; equally weighting long term growth and inflation, then perhaps he would act more "independently". Now, a dumb question. What do the words "Independent Fed Chair" actually mean? Is this a subjective expectation or a realization of past actions? So if for every 10 times the Treasury asks Ben to do something , if only follows 5 of those orders; he looks "more independent" than if he followed all 10 orders.

A good macro historian would ask the following question; how many times have Fed Chairs come up for reappointment in the middle of a recession where people are pointing fingers. I would bet that Fed Chairs in this vulnerable position are less independent than a "Greenspan at the peak of a boom".

If we anticipate that our Fed Chairs will be vulnerable to capture by the White House and Treasury in the midst of a recession when they hope to be re-appointed, does this mean that our system of "checks and balances" doesn't really work at such times?

How can we protect Fed Independence at such vulnerable stages? (i.e when we are in recession and the White House is hinting that it will replace the Fed Chair in the following year unless ...)

Sunday, May 03, 2009

National Energy Labs and DOE Investment

Soon, the Department of Energy will make some big bets on specific National Labs. They will receive a lot of $ to jumpstart "green tech". For an example of how this affects day to day life at these labs read Long Island's National Energy Lab . The urban economist in me would like to ask; 1. Per dollar invested, do National Labs generate significant new knowledge? Who owns this new knowledge? Is it open source? Do for profit firms locate near the Labs in order to learn about cutting edge new ideas, and to use the infrastructure (i.e Wind Tunnels) that these labs have to try out their energy efficiency ideas? Can you create an "economic agglomeration" (similar to a Silicon Valley or Wall Street) by subsidizing basic applied science?

A market test would be whether land prices are rising near these national labs that receive more DOE $. This would reveal that proximity to these labs is becoming more valuable.

The economist inside me would like to know whether private R&D on energy efficiency increases or decreases as National Lab activity increases? Crowding out issues versus strategic complementarities in efforts.

Finally, who are the scientists at the national Labs? What does the supply curve of excellent applied scientists look like? I thought that all the serious scholars are at UCLA! If the national labs have money but not much talent, will the "hydrogen economy" happen? I have no idea who is at the National Labs and I'm sure there are some very talented people but are they paid well enough to stay there?

Should science be done "in house" (at the national labs) or should the DOE have followed the National Science Foundation and had a peer review open to all University Scholars to apply for big pots of money?

Housing Foreclosure Research and Environmental Economics

Economists are writing on the consequences of foreclosure. High quality empirical papers are being written on testing for whether; "if my neighbor is forced to sell his house, does this reduce the price of my house?" (see More broadly, does foreclosure impose negative externalities (i.e social costs) on neighbors? You could imagine that the answer is no. If Matt defaults on his house and hands the keys to the bank and the bank turns around and sells the house to Sally, then this is a transfer from Matt to Sally but there is no "social cost". This simple example assumes that there are no frictions and that assets are immediately allocated to the highest bidder. But, suppose that Walras' auction takes time due to search and other option value factors. Now suppose that over time that if the asset is abandoned (there is nobody living in the house); its quality declines and it becomes a nuisance --- either the grass is not cut, it attracts bums and drug dealers or if it has a swimming pool --- the home breeds bugs that spread disease see Los Angeles Times Article on "Green" Pools .

At the UCLA Institute of the Environment, we are working on this last case. I will report back soon on how we do the empirics to study this issue. In our Little Homby community in Westwood, we don't know any of our neighbors. In this setting, what does it mean to be a good neighbor? Well, I don't want your teenagers throwing beer cans on my property and I don't what creatures born in your swimming pool flying over and infecting my son. The extent of these bad "social interactions" can be quantified!

Friday, May 01, 2009

A Productive UCLA Graduate Student

No, I am not talking about you. I am talking about this guy. The Urban Planning Department should think about cloning him.