I'm proud of this story so I want Google to file this somewhere.

Do you remember that Beatles song "When I'm 85"?   At the tender age of 85,  Bob Fogel is too busy writing to hum Paul's songs.  Fogel and his co-authors are about to publish a new book and it's main findings are written up today in the NY Times' Arts Section .  I guess that economics is 1/2 art and 1/2 science.   The Times writes a very nice review discussing Fogel's metrics of progress in our long run standard of living.  Angus Deaton is quoted making some smart comments on how he interprets the facts and what they mean for developing countries today.  The Nobel Laureate Fogel is an optimist that our world is making progress.   I have known him for 20 years now.  He was a hard working older guy in 1991 and in 2011 he still is a hard working older guy.

Fogel represents an outlier in the profession.  The Current Dean of Yale's business school (Sharon Oster) and Dan Hamermesh wrote this paper 13 years ago.

Abstract

West Los Angeles is always the place to be but this Friday and Saturday, the UCLA Ziman Center for Real Estate and the UCLA Economics Department will be raising the stakes by hosting this real estate conference.  Moshe Buchinsky, Stuart Gabriel and I have worked hard to put together an exciting research conference that focuses on real estate issues at the intersection between micro and macro economics.   Los Angeles attracts talent.  Only one scholar declined my conference invite and that's because he is on leave in England right now.   We are building up the research component of the Ziman Center and I have big plans for expanding its data collection and research efforts.

If this conference is a success, then we will do it again next year and you can join us in the sun and blue skies (with no humidity).  My Chicago teachers were wrong about one key point.  You can get work done in the sunshine.  I work harder here than I did when I was a graduate student in Chicago, or when I worked in New York City or when I worked in "glamorous" Cambridge.  The state's budget crisis will end, UCLA will become "self-sufficient" (i.e privatize) and order will be restored to the Star Wars galaxy.  This is paradise.  Life is too short to be miserable 9 months of the year (we did like Boston's May, September and October).

This is the golden age of field experiments.  Forget natural experiments, lags, propensity score "twins" and other corny ways to test hypotheses.   I have told my wife that the future of economic history is to run field experiments with her 19th century subjects (She agrees with you that my joke isn't funny but that actually makes it funnier).  With this point in mind, I am not surprised that the President of UC Riverside has gone deep undercover to find out what really goes on at his campus.  I think that Timothy P. White is a wise man.  I have argued that the UCLA Administration should walk the beat --- joining students in the classroom ,  joining lunch groups at the faculty club, calling me up to chat about the state of the school.  

This "auditing" would be useful.  When information is costly to collect within a complex organization, how do you collect it? Do you rely on Department Chairs to collect the info and report it to the Deans who in turn report it to the Provost?  In this game of telephone, valuable information will be lost and spun.  

A few years ago, I interviewed Edward Hums about his book "Eco-Barons" on Book TV.  Now, I will get my chance to discuss my Climatopolis on Book TV.  I hope my mom watches!

While it is self-serving, I've been frustrated that people have not engaged with the key themes of Climatopolis.
Conservatives don't care about climate change because they view it as a "Al Gore" issue and liberals are worried that even starting to discuss adaptation is to admit "defeat" in the war on carbon. So, my readership has been my son, my mom and some angry critics who don't think I'm funny and who haven't taken intro econ.

To repeat the book's key themes;

1. The world is moving to cities
2. In these cities, people participate in the market economy
3. Urban growth has caused climate change because billions are achieving the American Dream and the global free rider problem precludes internalizing the nasty externality.
4.  Thus, climate change will take place and the key question is how it will affect urban quality of life in rich and poor cities.

5.  Most people on the political left look to "government" to protect us from climate change.

6. In contrast, I look to individuals and entrepreneurs and capitalism in general to help us to adapt to climate change.  We have strong incentives out of self interest to anticipate the challenges we will face and to look for individual solutions and market solutions to help to protect us against scary future scenarios.

7.  Government will only be part of the adaptation solution if politicians have incentives to help their cities to adapt. For example raising water prices in drought areas to reflect true resource scarcity.

My book highlights how a free market environmentalist thinks through how capitalism evolves in the face of an ambiguous and scary threat.  We know that we do not know and this creates opportunities to protect ourselves. My optimism is based on my confidence in human ingenuity and freedom of choice. Freedom to migrate, and participate in the multiple urban markets available to us.

My book seeks to show intelligent readers how a free market economist views the world and the basis for our "magical thinking" that our standard of living is rising over time and will continue to do so despite the very real threat of climate change.

I look forward to participating on Book TV.

Did you short shares of airlines when you read about the Obama Administration's investment in high speed rail?  I didn't and it seems clear that Richard White didn't either.  In this NY Times OP-ED, he makes a number of interesting points and mentions the work of one of my heroes; Robert Fogel from the University of Chicago.

To quote the article; "Yet here we are again. The Obama administration proposed a substantial subsidy, $53 billion over six years, to induce investors to take on risk that they are otherwise unwilling to assume. Such subsidies create what the economist Robert Fogel has called “hothouse capitalism”: government assumes much of the risk, while private contractors and financiers take the profit."

In the first sentence of his piece, Richard White tells  you that he is a liberal who lives in California but he goes on to say that he is happy that the deep subsidies for HSR will be cut off due to federal budget cuts.

White argues that the intellectual case for using public $ to subsidize such an infrastructure project is weak;

To quote his historical case study, "Proponents of the transcontinental railroads promised all kinds of benefits they did not deliver. They claimed that the railroads were needed to save the Union, but the Union was already saved before the first line was completed. The best Western farmlands would have been settled without the railroads; their impact on other lands was often environmentally disastrous. For three decades California commodities could move more cheaply, and virtually as quickly, by sea. The subsidies the railroads received enriched contractors and financiers, but nearly all the railroads went into receivership, some multiple times; the government rescued others."

Environmental accountants can be brought in to quantify how much greenhouse gas emissions and local air pollution will not occur if the train substitutes for driving and plane use.  This should be quantified.  Such externality reductions (if large enough) would provide a justification for government subsidies.

Professor White understands the importance of having budget priorities.  During a time of scarcity, we can't "have it all".   He writes;

"Without bond guarantees, private investors, which so far seem more prone to due diligence than the California High-Speed Rail Authority, have yet to put up money. The most astonishing thing is that even as financial problems force California to dismantle its social safety net, eviscerate its educational system, and watch its roads crumble, it has agreed on a plan for high-speed rail that demands substantial local subsidies and certainly will involve further concessions by the state to attract private investment."

So, my intuition here is that HSR advocates viewed their projects as "too big to fail" and that they assumed they could rely on the federal government for more cash injections if private financing dried up.  But, the Republicans sound pretty credible these days concerning their eagerness to cut off the sugar.

What did Professor Fogel write about the railroads?  Here is a quick overview and some references.  He studied whether railroad investments had a major impact on the development of the U.S  economy and he challenged the conventional wisdom that they did.

How does reading newspapers, blogs and watching television shape our world view?   Do we read for pleasure or to learn?  Once we leave school, we can choose what we want to read. Do people solely engage with material that confirms their prior world view?  Does anyone ever update their beliefs based on new information?  Do you have an open mind?

In the case of public policies intended to mitigate climate change, what information would nudge you to embrace costly carbon mitigation policies (such as supporting a $3 per gallon gas tax)?  Information that convinces you that climate change is a major challenge?  Information that convinces you that mitigating carbon emissions can be achieved at a low cost and thus is a cheap "insurance policy"?   The environmental community has argued that battling climate change is a policy imperative and that our economy will face relatively low costs in doing so.    These claims have not achieved much traction.  At the Federal level, there will be no carbon push.  The good news is that California's AB32 is going forward and I am optimistic that it will be a "green guinea pig".

How do we explain the failure of smart environmentalists to convince the majority to join the "climate hawks"?
An easy answer is to blame the "Vast Right Wing conspiracy" and to point to the causal polluting effects of Fox News and Friends on the American middle class.  Anyone who challenges this consensus view is going to feel some heat so I'm not surprised that  Joe Romm has some tough things to say about Prof. Matthew Nisbet's  new study of the media's role in influencing  the climate change mitigation debate.

Why has Matthew Nisbet's report generated such heat?   It appears to me that his core thesis challenges the rationale for the existence of blogs such as Joe Romm's "Climate Progress".

Some environmentalists claim that the reason that the median voter hasn't supported climate change mitigation legislation is due to biased media coverage. If this diagnosis were true, then the appropriate "medicine" is countervailing force.  Joe Romm has taken on this role with a gusto. I read Joe Romm's blog. It is both informative and funny (the comments people post are unintentionally extremely funny).   He appears to believe that he is a "David" in a righteous fight against the Goliath better known as Fox TV and the Koch Brothers and all of their lesser brethren.   His writing style suggests that he views the typical "Joe the Plumber" as having been artificially manipulated by the media.   This narrative assumes that Joe the Plumber has been brainwashed by an unrelenting campaign of misinformation.

If this logic were true, then a "liberal/green/scientific" coalition of Joe Romm and other truth tellers could save the world if they could collect the money to invest in an influential activist media campaign that could counter-act these special interests, by deprogramming the silent majority who do not know what to think about the costs and benefits of carbon mitigation.

But Nisbet questions whether environmentalists can fall back on the excuse that they are under-resourced and out gunned; to quote Nisbet's conclusion;

"As detailed in this report, the major environmental organizations are a $1.7 billion-a-year movement, with revenue streams that rival the most expensive presidential campaigns in history and the combined earnings of the world’s richest sports franchises.  In their efforts to pass cap and trade legislation, they spent heavily on general education efforts, engaging policymakers, journalists and the public.  They also invested considerable resources in mobilizing their more than 12 million members and in brokering alliances with some of the world’s largest companies, partners intended to augment their efforts at direct lobbying.  Through these means and others, environmental groups have closed the gap with their traditional opponents in terms of spending and influence.  Indeed, the effort to pass cap and trade legislation may be the best financed political cause in American history.

The organizations that led the effort on cap and trade legislation are unique among Beltway groups for their decade-spanning, linear growth in revenue and size.  Dominated by senior leaders and staff from the Baby Boomer generation, these organizations together employ a highly credentialed and professional elite numbering in the several thousands.  Yet the very nature and size of the environmental movement may pose challenges in adapting strategy and achieving success over the next decade."

So, if Nisbet is right that this interest group fight was a "fair fight" between two equally endowed foes --- what are we to conclude?

If we could sit down with Millions of Joe the Plumbers, how would they answer questions about why the scary issue of climate change doesn't move them?  Are they technological optimists? Risk lovers?  Unaltruistic towards people in poor nations? Impatient and not caring about the future?  By how much do they under-estimate the likely probabilities of future scenarios that a James Hansen is concerned about?  Do they acknowledge the risks but don't want to give Al Gore and friends the credit for leading the effort and having to admit that Al was right?

We need the recession to end and we need to make climate change a national security issue rather than an "Al Gore" issue.

The recession has hollowed out demand for green products that you consume in private.  So, solar panels and the Prius are consumed in public but many other green products are not.  These inconspicuous products appear to be suffering from a sharp decline in sales.  Are economic booms "good" or "bad" for the environment?

A cross post about the challenges of fighting climate change during a recession.

Switching subjects, the Wall Street Journal has published an editorial that mocks the UN for making a big deal in 2005 about the possibility of millions of "climate refugees" by 2010. The WSJ argues that this is "proof" that climate "alarmists" overstate the impacts of climate change.

As I discuss at length in Climatopolis, I think that it is prudent for forecasters to announce possible climate change scenarios to act as a "heads up" for households, firms and governments.  The ironic item here is that by providing an early warning system, this actually lowers the probability that the events in question actually take place.  Expectations can cause investments that mitigate the damage that might have been caused had no pro-active steps been taken. In English, if the Titanic had seen the iceberg earlier -- it could have changed course.

So, the UN won't win a Nobel Prize in science and it would be great if they rely on the best consensus climate science but I have no problem with them issuing alerts about likely new challenges we will face in the future.  Investment under uncertainty will continue to be a major issue in economics, climate change adaptation and public policy.

Forget the hare, the tortoise faces a new foe in the arena called the Mojave Desert.  The people of California are in a deep discussion about this topic and when in doubt the experts are called in. With my deep wisdom about the desert and about the tortoise, I have been asked to participate in this San Francisco radio show.    While I may not know much here, this won't stop me.  I do have opinions.

Fortunately, economics offers some insights.

Point #1:  There is no "free lunch".  Scarce land should be allocated to its highest and best use.  A rational planner will compare the present value of the green power that will be generated from carpeting the Mojave Desert with solar panels.  Such green power will mean that California will need to generate less electricity using natural gas and this should reduce our greenhouse gas emissions.  We need to calculate the total tons of annual reduced GHG emissions and we need to multiply this by the price per ton of carbon dioxide avoided.  Where should this number come from? Should we use $35 per ton like in the Stern Report?

Point #2:  If tortoises lose their habitat, how much damage is caused? How do we price the priceless?  This discussion will be identical to the discussion of how much damage did the Exxon Valdez Oil Spill cause to the Prince William Sound in Alaska and how much damage did the BP Oil Spill cause to the Gulf of Mexico?  When non-market goods (i.e tortoises) suffer due to economic activity, how do we impute a cost measured in $ to this?    Why are economists so tacky and insist on measuring the costs in $?  We can only compare benefits (measured in $) to costs if they are in the same units (i.e $). You can measure each in slices of pizza but the units of comparison must be the same.

Point #3:  Can a "King Solomon" find a win-win here?  In this case, I will talk about mitigation banking. and the potential for offsetting the damage caused by the introduction of solar panels.