UC Santa Barbara has some impressive coastal amenities. It is amazing that the faculty do such high quality research when the opportunity cost is so high! This photo was taken after a 1/4 mile walk from the Bren School.



After sitting and staring at the ocean from a nearby path, I now understand why Brad Pitt and friends seek to sit stoned and tranquil and just watch the ocean from dawn to dusk. The market agrees that this is a valuable amenity. Here is Malibu $10 Million dollar beach house for sale

I missed this announcement 2 weeks ago that the Air Resources Board will take the revenue collected from California's Carbon Cap and Trade and give the $20 billion dollar a year flow back "to the people".

A couple of points:

1. California has a $20 billion dollar deficit.

2. As "the people" enjoy this windfall of 20 bill/35 mill = $600 each, if we share fairly, why can't the state reinstate the Car Registration Tax? Why is the state tagging only those polluters who fall under the cap and trade with paying for carbon. I know that car drivers will face the Pavley standards but that doesn't raise any revenue.

So , my big point is that a rational public finance team would bundle several policies here and not simply enact "cap and trade". As California seeks budget sanity, this is a good opportunity to make a couple of changes as a package to ensure political support for the bundled package. In english, let's have the car tax fee and cap and trade and recycle the revenue to the public. Take this package or leave it.

3. How will industry respond to this pricing incentive? Who can cheaply substitute away from carbon production and who can't? Of course, if all polluters under the cap and substitute then the government will collect no revenue from this new market.

Who owns the older capital (whose emissions are likely to be higher and due to expected depreciation is less likely to be retrofitted)? This group will bear the incidence of this regulation.

Will "leakage" take place? I can't see how this effect can be large. I can't foresee a situation in which the state's unemployment rate goes up because of this regulation.

The PUC will face a decision on whether it allows the electric utilities to raise electricity prices to consumers as their natural gas power plants will have a higher cost structure of producing power.

I was not aware that Larry Summers, Susan Athey and Brad Delong were leading environmental economists but REPEC knows all and Dr. Summers is #1. As #41 on the list, I have to believe that I would jump into the top ten if REPEC would count kahn book #1 or starting in fall 2010 kahn book #3 . I am a victim of this system. Please feel sympathy for this devil.

Now that my self esteem has been injured, I must admit that I had great time today giving this speech . When the podcast is posted, you will enjoy a good laugh watching this hour. Folks were surprised and only slightly shocked by what unfolded.

We all know that if we were identical, then President Obama would have an easy time shaping public policy. He could poll one person and ask her for her policy priorities and everyone would love the resulting public goods agenda.

During a time of recession, and a time when the U.S keeps growing more diverse along every dimension (religion, geography, income inequality, ethnicity, green ideology) --- how does a President build a working majority coalition? In english, with a very diverse group of people, what will they all agree to? What is the basic "bill of rights" and who should pay for it? David Brooks discusses this a little bit here .

We celebrate diversity and I'm glad that my UCLA is a diverse place but there is no free lunch. When multiple interest groups disagree about new policy initiatives, this leads to paralysis. So, the question is how costly is such an inability to enact new legislation. In the case of health care? Costly, in the case of climate change mitigation, costly.

Does this photo below look like NYC's Upper West Side or Medford, MA? UCSB has unique geography.



The office walls here at the Bren School are rather thin and thus I'm learning a little bit too much about the faculty member whose office is next to mine but I have had a very productive first morning here.

Now that I know that I won't be named to be Chair of the Federal Reserve Bank nor will I be named as the Head Coach of the Oakland Raiders, I have decided to teach this one week course at the UCSB Bren School. I go tomorrow night and monday I will meet my 50 students. I haven't taught for several weeks now and I may be rusty but I'm looking forward to this.

Given that the University of California has 10 campuses, I think that the faculty should be allowed to freely roam across the sister campuses. I could start the week in LA, then migrate to UCSB give a lecture and have lunch with friends, and then meet some cool people at UCSC before having a power dinner at UC Berkeley and finish the week at UC Davis and the Sacramento Air Resources Board before flying back to LA.

Returning to my short run job at UCSB, this short course will allow me to launch some trial balloons related to my new book. There is still time to improve this book and I'm eager to see if these smart Masters students find the material to be interesting and thought provoking.

As promised from a few days ago, here is a great letter to the editor published
by Matthew Duggan. he should be our Mayor.


A mellow mayor

Re “Villaraigosa’s personal life is ‘at a great place,’ ” Jan. 17

Thank you for the informative and heartwarming article chronicling Mayor Antonio Villaraigosa's home and social life.

All this time I have been worried about failing schools and the irresponsible manner in which our elected officials waste tax money. This "news" about the mayor makes it clear to me that my priorities are backward.

Please do not report on how the mayor plans on doing anything that may benefit Angelenos. As long as I know he is losing weight and his social life is on the mend, I will be content.

Matthew Duggan
Long Beach
Copyright © 2010, The Los Angeles Times


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My son should read People Magazine more carefully. He said that some dude had come by his class to talk about Haiti. After receiving this email from the School's Principal, I now know that my kid should have asked for an autograph.

"Yesterday actor Josh Duhamel visited the lab school to talk to students about "Runnin 4 Haiti," a unique fundraising event to support Haiti that will take place tomorrow in Santa Monica. Information about the event follows in the message below and in the attached flyer. Although Josh was only able to speak to students in a limited number of classes, all interested students and families are invited to attend the event.


Many parents and school staff have asked me how we as a school can support the people of Haiti during this time of tremendous need and suffering. We are finalizing our plans now, and we will be communicating with you in the week ahead about the details of our efforts and and how you can participate. We all look forward to making a collaborative contribution that expresses the care and generosity of our community."


Here is a "tweet" on this event.

In this age of quantification, how do we judge a politician's performance? By doing before/after comparisons of public opinion dynamics? That sounds silly. By, calculating the change in the "misery index or murder rate"? In that case, you're assuming that the politician is very powerful in shaping events. Ronald Reagan asked "are you better off than you were 4 years ago?" So, random macro economic events determine a politicians' fate? Economists have written many empirical papers on whether CEO's are rewarded in terms of high pay for luck or high performance.

Now, how do we judge Big City Mayors. Is it all about personality (Koch, Rudi)? Unfortunately, the LA Times letters to the editor appear on a 1 day lag but Matthew Duggan has a very funny letter that will appear tomorrow on line. I will update.

Given that politicians make thousands of decisions and given the diversity of the voter base and our individual priorities over these voting decisions on a wide range of issues ranging from abortion, to climate change, to welfare to China, how do we rank them?

A structural IO economist would map these decisions into attribute space (this is sort of what Keith Poole does with his factor analysis of voting in Voteview). His approach essentially returns to Hotelling's ice cream selling on a long narrow beach as all politicians are mapped into a liberal to conservative continuum.

Now in the case of IO, I know the attributes of a Ford versus a GM car before I make my purchase decision. In the case of politicians; the attributes are staggered. I see the choices that the incumbent made but I don't observe what choices his challenger would have made in the same situation.

The politicians who run for re-election know this and can make choices over how to market themselves to the public during the election season. So, my point is that the political market is pretty funky.

This New Yorker piece bemoans the death of "old-school" Walter Cronkite journalism. Back in the day (pre-Internet), reporters had all day long to drink and think and eventually file their story for the next day's paper. Such "time to build" has value added and this has been lost in the "24 hour continuous news cycle". While there is some truth to this claim, the author seems to have forgotton that nature hates a vacuum.

If news reporters are now running around blogging and commenting on Cable TV and not having the time to think (as this long New Yorker piece argues), then who will fill this void? The answer is obvious--- tenured academic nerds. Has anyone noticed the proliferation of academics who are now doing some serious writing for mainstream media? Glaeser and Mulligan at Economix, Simon Johnston for the Atlantic and there are dozens of other examples including Stavins for the Financial Times and soon Kahn for the Christian Science Monitor.

Is it obvious that journalists have a comparative advantage in doing policy analysis over academic nerds? While my opinion is biased, I don't think so. For years I would read the business section of the NY Times and would be amazed at how little connection there was between what serious academic researcher thought about issues such as takeovers and mergers and what was written in the Times. Same thing with business cycles. Today, I see a promising trend that barriers to entry are falling and academics are competing with journalists for scarce newsspace and the blogs have expanded the access that academics have for writing directly to the public.

Just as some PHDs can have a great career teaching at a Business School, there are some academics who can write for the public and we all gain when they do so.

Now, where this New Yorker piece makes an interesting point is when it argues that Obama's policy may be influenced by the 24 hour cycle that a vicious cycle can arise such that he makes a bad decision because he didn't wait to think things out. To the President's credit , he showed in the case of Afghanistan a great deal of patience so this plausible thesis may not be right.

There is a good QJE paper to be written on explaining public opinion dynamics. I envision a paper that looks a little bit like the Fox News paper . Recall that when Rupert Murdoch arrives on your TV, your probability of voting Republican rises. But, returning to public opinion dynamics -- I'm especially interested in the case when there is set of policy issues that we must prioritize. To keep this simple, consider the 2 dimensional case of "jobs" and "climate change". "jobs" represents a short run issue while "climate change" represents a long run issue. Under what circumstances will different people's rankings of which is the more important policy priority flip flop? Now, I realize that a tenured ivy league professor may have different rankings than an unemployed Detroit car maker --- but under what circumstances would the same person's rankings flip over time? What explanatory variables could cause such flipping? Possible candidates include; national recessions, cultural events (new Al Gore movie?), climate shocks.

The social interactions literature has made great strides in recent years. How much of policy priorities are determined by group discussions generating learning and peer pressure?

The LA Times tackles some of these issues here .

For those of you who need a laugh, check out these wacky greens . As a green myself, I don't think that all "greens" are wacky --- but these guys count.